UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

     (Mark One)
     [X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1997

                                       OR
     [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the transition period from              to
                                         ------------    ------------.

                         Commission file number: 0-26420
                                                 -------

                         AMBASSADORS INTERNATIONAL, INC.
                         -------------------------------
             (Exact Name of Registrant As Specified In Its Charter)

                  Delaware                       91-1688605
      --------------------------------    ------------------------
       (State or Other Jurisdiction of        (I.R.S. Employer
       Incorporation or Organization)       Identification  No.)

        Dwight D. Eisenhower Building
            110 S. Ferrall Street
                Spokane, WA                         99202
     ---------------------------------    ------------------------
            (Address of Principal                (Zip Code)
             Executive Offices)

     Registrant's Telephone Number, Including Area Code:  (509) 534-6200

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

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



                               Title of Each Class
                        --------------------------------
                          Common Stock, $.01 Par Value
     <PAGE>
     Indicate by check mark whether the registrant:  (1) 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 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. [X]

     The aggregate market value of the voting stock of the registrant held
     by non-affiliates of the Registrant, based upon the closing sales
     price of the Common Stock on the Nasdaq Stock Market on March 16,
     1998, was $82,249,629.

     The number of shares of the registrant's Common Stock outstanding as
     of March 16, 1998 was 7,012,029.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive Proxy Statement relating to
     the 1998 Annual Meeting of Stockholders (to be filed subsequently) are
     incorporated by reference into Part III.
     <PAGE>



                                TABLE OF CONTENTS



     PART I

          Item 1.   Business
          Item 2.   Properties
          Item 3.   Legal Proceedings
          Item 4.   Submission of Matters to a Vote of Security Holders

     PART II

          Item 5.   Market for the Registrant's Common Equity and Related
                      Stockholder Matters
          Item 6.   Selected Financial Data
          Item 7.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations
          Item 8.   Financial Statements and Supplementary Data
          Item 9.   Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure

     PART III

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


     PART IV

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

     SIGNATURES
     <PAGE>
     PART I

     Item 1.  BUSINESS

     OVERVIEW
     --------
     Ambassadors International, Inc., a Delaware corporation (the
     "Company"), is a holding company which, through its wholly owned
     subsidiaries, is engaged primarily in the business of (i) organizing,
     marketing and operating international educational travel programs on a
     worldwide basis for students and adults (the "Education Group"); and
     (ii) developing, marketing and managing performance improvement
     programs for a nationwide roster of corporate clients that utilize
     merchandise awards, consumer promotions and incentive travel, as well
     as providing comprehensive housing, registration and travel services
     for major meetings, conventions, expositions and trade shows (the
     "Performance Group").

     The Company's Education Group is comprised of its wholly owned
     subsidiary, Ambassador Education Group, Inc., a Delaware corporation
     ("AEG"), and AEG's wholly owned subsidiaries, Ambassador Programs,
     Inc., a Delaware corporation ("API"), and Ambassador Specialty Group,
     Inc., a Delaware corporation.  The Company's Performance Group is
     comprised of its wholly owned subsidiaries, Ambassador Performance
     Group, Inc., a Delaware corporation ("APG"), and The Helin
     Organization, a California corporation ("Helin").  References to the
     Company herein includes Ambassadors International, Inc. and its
     subsidiaries, unless the context otherwise requires.

     The Company's Education Group has been active since the Company's
     inception in 1967.  The Education Group consists of several
     specialized private-label travel programs, including (i) the "People
     to People Student Ambassador Programs," which provide opportunities
     for junior high and high school students to visit foreign countries to
     learn about the politics, economy and culture of such countries and
     (ii) the "People to People Ambassador Programs," which provides
     foreign travel experiences for adults, with emphasis on meetings and
     seminars between participants and persons in similar jobs abroad. See
     "Business--Education Group."

     During 1996, the Company commenced operations of its Performance Group
     through the acquisition of two existing entities engaged in this
     business.  See "Business--Performance Group."  In February 1998,
     through its acquisition of the assets of Rogal America, Co. ("Rogal"),
     the Company further expanded its Performance Group to include
     integrated housing, registration and travel services for meetings and
     conventions.  See "Recent Acquisitions."

     The Company intends to continue its strategy of growth by making
     selective acquisitions of travel and travel-related businesses which
     are either compatible with the Company's existing businesses or
     represent a developing specialty travel or travel-related segment not
     currently addressed by the Company's operations.
     <PAGE>
     The Company was originally incorporated in the State of Washington in
     1967 under the name International Ambassador Programs, Inc. to provide
     international educational travel programs for students and adults.
     The Company was reincorporated in the State of Delaware in 1995.  The
     Company's principal executive offices are located at Dwight D.
     Eisenhower Building, 110 S. Ferrall Street, Spokane, Washington
     99202, and its telephone number is (509) 534-6200.


     BUSINESS
     --------
     EDUCATION GROUP

     The Company's Education Group organizes, markets and operates
     international educational travel programs on a worldwide basis for
     students and adults.  Since its founding in 1967, the Company has
     offered its programs to both students and adults through its People to
     People Student Ambassador Programs ("Student Ambassador Programs") and
     People to People Adult Ambassador Programs ("Adult Ambassador
     Programs"), respectively.  The principal offices of the Company's
     Education Group are located in Spokane, Washington.

     STUDENT AMBASSADOR PROGRAMS.  The Company's Student Ambassador
     Programs provide an opportunity for junior high school and high school
     students to visit one or more foreign countries to learn about the
     politics, economy and culture of such countries.  Student Ambassador
     Program delegations depart during the summer and generally travel for
     approximately 21 days, during which time each delegation visits one or
     more foreign countries.  Each delegation generally consists of
     approximately 35 students and several teachers, who act as the
     delegation's leaders.  Teachers and students comprising a delegation
     generally come from the same locale.  Local guides assist the
     delegation in their travels.  Programs are designed by the Company's
     staff of international planners and researchers to provide an
     educational and entertaining travel experience by exposing students to
     the history, government, economy and culture of the country or
     countries visited.  In most instances, the Company also arranges to
     provide students the opportunity for a "homestay" (a brief stay with a
     host family), which gives students a glimpse of daily life in the
     visited country.  Students who complete certain written assignments
     and other projects can receive high school and university credit for
     their participation in the program.  Universities throughout the
     United States, including Stanford University, University of California
     at Los Angeles, and Georgetown University, recognize the Company's
     programs by awarding academic credit to the participating students.

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

     A substantial percentage of the Company's programs are organized in
     connection with People to People International ("People to People"), a
     private, non-profit organization dedicated to the promotion of world
     peace through cultural exchange.  People to People was founded by
     President Dwight D. Eisenhower in 1956 and was originally administered
     by the U.S. State Department.  Over its history, eight U.S. presidents
     have served as Honorary Chairmen of People to People, including
     President Bill Clinton, who currently holds that position.

     The Company acquired additional People to People adult business
     through an acquisition in February 1996, which included, among other
     things, the right to operate adult educational and exchange travel
     programs under the tradenames "American People Ambassador Programs"
     and "Missions in Understanding" (with certain exceptions) and rights
     under an agreement with People to People to operate additional travel
     programs.  See "Recent Acquisitions."

     The Company has two agreements with People to People, both of which
     expire March 31, 2005.  The agreement with respect to the Company's
     Student Ambassador Programs gives the Company the exclusive right to
     develop and conduct programs for kindergarten through college age
     students using the People to People name.  The agreement with respect
     to the Adult Ambassador Programs gives the Company the non-exclusive
     right to develop, market and operate programs for adults using People
     to People name; however, at the present time the Company is the only
     entity that has been given this right by People to People.  The
     agreements are automatically renewed for an additional 10 years unless
     either party elects otherwise.  In connection with the acquisition in
     1996 of additional adult-related People to People business, the
     Company agreed it would not operate adult travel programs in
     connection with those persons who permanently reside in and travel
     outside of Russia and/or the republics of the former Soviet Union.

     The Company also operates travel programs for the Yosemite Institute,
     a non-profit organization with operations in Yosemite National Park,
     Olympic National Park and Golden Gate National Park; and Eddie Bauer,
     Inc., a direct mail and retail company.  The agreement with Eddie
     Bauer is exclusive, and the agreement with the Yosemite Institute is
     exclusive, except that Yosemite may conduct programs itself.
     <PAGE>
     PERFORMANCE GROUP

     The Company's Performance Group is engaged in developing, marketing
     and managing performance improvement programs for a nationwide roster
     of corporate clients that utilize merchandise awards, consumer
     promotions and incentive travel, as well as providing comprehensive
     housing, registration and travel services for major meetings,
     conventions, expositions and trade shows.  The employees of the
     Performance Group have substantial experience in merchandise programs,
     marketing/communication programs and business meetings.  The principal
     offices of the Performance Group are located in Newport Beach,
     California.

     The Company coordinates with the client's employees to best determine
     the type of program that complements and furthers the client's image.
     The Company believes that it is essential that it keep costs in mind
     when reviewing different options and seeks to identify the best
     locations and services given the amount budgeted by the client.  In
     this regard, the Company takes advantage of its relationships with
     hotels, airlines, and visiting bureaus.

     In operating the Performance Group, the Company follows a strategy
     aimed at developing and implementing a unique performance improvement
     program for each of its clients.  First, the Company's employees meet
     with its clients and potential clients to determine their business
     objectives and their performance enhancement opportunities.  The next
     step involves working with the client's employees to develop the
     program concepts and parameters in terms of purpose, costs, time and
     employee participation.  Then, the Company's employees research and
     develop a completely customized improvement program that falls within
     the parameters established by the client.

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

     The Company often arranges air transportation to each event.  The
     Company's air travel specialists analyze and arrange flights according
     to the client's program schedule, negotiate preferred airline rates,
     and provide participants with their individual seating requirements
     and boarding passes.  In-house central reservation systems provide
     current flight availability, the lowest fares between cities,
     immediate issuance of airline tickets and the printing of flight
     itineraries.
     <PAGE>
     Finally, when a particular program begins, the Company's travel
     directors are on-site to provide concierge levels of service and to
     facilitate the completion of the program on schedule.

     For all of these services, the Company usually is paid a percentage
     markup of the program components including, but not limited to, air
     and ground transportation, promotional gifts, meals, and hotel
     accommodations.  In addition, the Company is reimbursed for all of its
     expenses incurred in organizing the program.

     The Company also provides comprehensive, integrated housing,
     registration and travel services for major meetings, conventions,
     expositions and trade shows for business clients.  The client service
     contracts for these services generally cover an annual meeting or
     event and are for a term of one to several years.  Pursuant to these
     agreements, the Company handles a wide range of services associated
     with booking hotel space and guest registration including securing
     sufficient and appropriate hotel room inventories, coordinating
     blocking and booking of all hotel rooms, monitoring the status and
     volume of reservations, accepting individual and group reservations,
     mailing reservation confirmations and providing an on-site housing
     services desk at a meeting site to coordinate attendees' housing
     requests and questions.   For providing these and other services, the
     Company generally receives a fixed commission, which is paid directly
     by the hotels.

     RECENT ACQUISITIONS

     In January 1996, the Company acquired all of the capital stock of
     Helin, a company engaged in the corporate incentive performance
     business.

     In February 1996, API completed the acquisition of certain assets from
     Marc L. Bright, d/b/a M.L. Bright Associates ("MLB"), American People
     Ambassador Programs and Missions in Understanding.  MLB operated adult
     education and exchange travel programs under the tradenames "American
     People Ambassador Programs" and "Missions in Understanding" pursuant
     to a General Contract between MLB and People to People dated July 1,
     1995, the term of which expires June 30, 2005.

     In December 1996, APG acquired all of the issued and outstanding
     shares of capital stock of Bitterman & Associates Inc. ("Bitterman"),
     a corporate incentive/performance improvement company.

     In September 1997, APG acquired Debol & Associates ("Debol").  Debol
     is a marketing incentive business based in Waconia, Minnesota, and
     serves a number of clients throughout the Midwest.

     On February 5, 1998, APG acquired certain of the assets (the "Rogal
     Assets") of Rogal.  Rogal provides comprehensive, integrated housing,
     registration and travel services for major meetings, conventions,
     expositions and trade shows for business clients.  The Rogal Assets
     <PAGE>
     include two office leases for premises in Massachusetts and Virginia,
     computer equipment and Rogal's existing client service contracts.  The
     Company intends to continue to service the existing client contracts
     of Rogal and to expand further this area of its business.  Additional
     information regarding this transaction is included in the Company's
     Current Report on Form 8-K dated February 20, 1998, which report is
     incorporated herein by reference.

     On February 20, 1998, the Company further expanded the operations of
     its Performance Group through the acquisition by APG of the stock of
     Travel Incentives, Inc. ("TII").  TII is engaged in the corporate
     incentive performance business.

     BUSINESS STRATEGY

     The Company believes that high quality programs and excellent customer
     service are vital to the Company's future success.  The Company's
     strategy is to maintain its quality standards while increasing its
     volume of business.  To increase its business, the Company intends to
     (i) expand the scope and efficiency of its student travel program
     marketing efforts, (ii) develop new adult travel programs designed to
     appeal to a broader customer base and to expand its existing
     specialized adult programs, (iii) develop further and improve upon its
     travel incentive programs, and (iv) making selective acquisitions of
     travel and travel-related businesses which are either compatible with
     the Company's existing business or represent a developing specialty
     travel segment not currently addressed by the Company's operations.

     COMPETITION

     The travel industry in general, and the educational segment of the
     travel industry in particular, is highly competitive.  The Company's
     student programs compete with other companies that provide similar
     educational travel programs for students as well as independent
     programs organized and sponsored by local teachers with the assistance
     of local travel agents and with semester or year-long out-bound
     university programs designed to provide college age students an
     opportunity to study abroad. The Company's adult programs also compete
     with independent professional associations that sponsor and organize
     their own travel programs through the assistance of local travel
     agents with tour operators and other organizations that design travel
     programs for adults.

     The Company believes that the barriers to entry for any future
     competitors are relatively low.  Certain companies engaged in the
     travel business have substantially greater financial, marketing and
     sales resources than the Company.  There can be no assurance that the
     Company's present competitors or competitors that choose to enter the
     marketplace in the future will not exert significant competitive
     pressures on the Company.
     <PAGE>
     The Company believes that the principal bases of competition in the
     educational segment of the market are the quality and uniqueness of
     the educational program offered, customer service and program cost.
     The Company believes that its connection with People to People, as
     well as its years of experience organizing student educational
     programs and established connections with public officials,
     organizations and residents in countries in which it provides
     programs, allows the Company to provide an educational opportunity
     that is not easily duplicated by competitors' programs.

     The Performance Group also competes in a segment of the travel
     industry that is highly competitive.  It competes with companies which
     are larger and have greater resources than the Company and which
     specialize in the corporate promotions market.  The Company believes
     that although some potential clients will focus on price alone, other
     clients will also be interested in the quality of the programs
     developed by the Performance Group and customer service.  The Company
     believes that its experience in developing performance improvement
     programs, its commitment to work with the client's employees to
     determine the best program for each client and be involved with each
     program through to completion, and its vendor relations, allow it to
     provide programs that are not easily duplicated by competitors.

     SERVICEMARKS

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

     INSURANCE

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

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


     Item 2.  PROPERTIES

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

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

     The Company also leases 900 square feet of office space in Winnebago,
     Illinois pursuant to a lease that expires in August 2000.  The Company
     also leases 4,500 square feet of office space in Newport Beach,
     California.  The lease expires in June 2000, and currently provides
     for monthly rental payments of $4,742.  In addition, the Company
     leases approximately 10,690 square feet of office and warehouse space
     in Plymouth, Minnesota, pursuant to a lease which expires in 1999 and
     provides for current monthly rental payments of $9,101.
     <PAGE>
     In February 1998, the Company assumed two additional leases for office
     space in connection with its acquisition of the Rogal Assets.  One
     lease is for approximately 15,900 square feet in Watertown,
     Massachusetts, with a current monthly rental of $15,640, which lease
     expires in 2003, and a second lease is for approximately 1,805 square
     feet in Alexandria, Virginia, with a currently monthly rental of
     $2,074, which lease expires in November 1998; however, the Company has
     an option to extend the term for three years.

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

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


     Item 3.  LEGAL PROCEEDINGS

     On September 22, 1997, Sarah Buffington and certain other individuals,
     for themselves and on behalf of their children, six teenage students
     (the "Plaintiffs"), filed a lawsuit in the District Court of Harris
     County, Texas, against People to People and three individual tour
     leaders.  In February, 1998, the lawsuit was amended to include the
     Company (the original named defendants and the Company are
     collectively referred to as the "Defendants").  The basis for the
     Plaintiffs' claim is their allegation that, while the six teenagers
     were in Europe in June 1997 as part of a tour involving 31 students,
     three of the tour leaders behaved in an inappropriate manner toward
     the six teenagers.  The Plaintiffs allege breach of contract,
     negligence, negligent hiring and retention of the tour leaders,
     slander, intentional infliction of emotional distress, and assault and
     battery.  The Plaintiffs seek $15,000,000 in punitive and exemplary
     damages against the Defendants, together with unspecified actual
     damages, attorneys' fees, court costs and other incidental costs.  The
     Company intends to defend vigorously the lawsuit. The Company believes
     that the suit is without merit.

     Except for the foregoing, the Company is not a party to any material
     pending legal proceedings other than ordinary routine litigation
     incidental to its business.


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

     None.
     <PAGE>
     PART II

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

     STOCK MARKET AND OTHER INFORMATION

     The Company's common stock is traded on the Nasdaq Stock Market under
     the symbol "AMIE" and has been so traded since August 3, 1995.  Prior
     to such date, there was no public trading market for the Company's
     equity securities.  As of March 16, 1998, there were 43 holders of
     record of the Company's Common Stock.

     The following table sets forth the high ask and low bid prices of a
     share of the Company's Common Stock as reported by the Nasdaq Stock
     Market on a quarterly basis for the Company's fiscal years ended
     December 31, 1996 and December 31, 1997.  The prices reported
     represent prices between dealers but do not include retail markups,
     markdowns, or commissions and do not necessarily represent actual
     transactions.


                                                        High Ask   Low Bid
                                                        --------   -------
     1996:
       Quarter ended March 31, 1996                      $13.25    $ 8.50
       Quarter ended June 30, 1996                       $16.13    $ 9.88
       Quarter ended September 30, 1996                  $14.25    $ 7.88
       Quarter ended December 31, 1996                   $11.00    $ 8.00

     1997:
       Quarter ended March 31, 1997                      $12.50    $ 9.00
       Quarter ended June 30, 1997                       $13.63    $ 8.75
       Quarter ended September 30, 1997                  $22.00    $12.25
       Quarter ended December 31, 1997                   $26.75    $17.25


     DIVIDEND POLICY

     The Company intends to retain earnings for use in the operation and
     expansion of its business and therefore does not anticipate declaring
     any cash dividends in the foreseeable future.  The payment of
     dividends in the future will be at the discretion of the Board of
     Directors and will be dependent upon the Company's financial
     condition, results of operations, capital requirements and such other
     factors as the Board of Directors, in its discretion, deems relevant.

     TRANSFER AGENT AND REGISTRAR

     Chase Mellon Shareholder Services of Los Angeles, California serves as
     transfer agent and registrar of the Company's Common Stock.
     <PAGE>
     CHANGES IN SECURITIES

     In February 1998, the Company issued 140,187 shares of its Common
     Stock in connection with its acquisition of the Rogal Assets, and
     52,068 shares of its Common Stock in connection with its acquisition
     of TII.

     In August 1997, in connection with the employment of Ronald L.
     Merriman, the Company agreed to issue to Mr. Merriman an aggregate of
     50,000 shares of Common Stock, which vest in four equal annual
     installments commencing January 1, 1998.

     In December 1996, the Company issued 137,857 shares of its Common
     Stock in connection with the acquisition of Bitterman.

     In January 1996, the Company issued 80,000 shares of its Common Stock
     in exchange for all of the issued and outstanding shares of Helin in
     connection with the Company's acquisition of Helin.

     Each of the foregoing issuances was made directly by the officers and
     directors of the Company and no underwriting discounts or commissions
     were paid.  Each of the foregoing transactions was exempt from the
     registration provisions of the Securities Act of 1933, as amended (the
     "Securities Act"), pursuant to Section 4(2) thereof for issuances of
     securities not involving a public offering and exempt from
     registration under applicable state securities laws.

     Each of the persons with whom the Company's Common Stock was issued
     represented to the Company, substantially as follows:  that he or it
     acquired the securities for his or its own account, for investment
     purposes only and not with a view to or for sale in connection with
     any distribution thereof.  Certificates evidencing the Common Stock
     issued in these transactions bear restrictive legends to such effect
     and state further that the securities have not been registered under
     the Securities Act or state securities laws and may not be sold,
     pledged or otherwise transferred without registration under the
     Securities Act or an exemption therefrom.

     USE OF PROCEEDS

     The Company's Registration Statement for its initial public offering
     of securities (File No. 33-93586) became effective on August 3, 1995.
     Of the total net proceeds to the Company from the offering in the
     amount of $11,983,103, the following amounts were used from the date
     of the offering through the date of this report.
     <PAGE>
     Category of Use                                          Amount
     ----------------------------------------------           -----------
     Construction of plant, building and facilities            $        0
     Purchase and installation of machinery and
       equipment                                                        0
     Purchase of real estate                                            0
     Acquisition of other businesses                            9,850,000
     Repayment of indebtedness                                          0
     Working capital                                            1,385,000
     Temporary investments in Bank of America money
       market and investment accounts                             748,103
     Other purposes                                                     0
                                                              -----------
         Total                                                $11,983,103
                                                              ===========

     Item 6.  SELECTED FINANCIAL DATA

      <TABLE>
      <CAPTION>
                                  Year Ended December 31,
                                  ---------------------------------------------------------------
                                  1997         1996         1995         1994         1993
                                  -----------  -----------  -----------  -----------  -----------
                                  (dollars in thousands, except per share data)
      <S>                         <C>          <C>          <C>          <C>          <C>
      Statement of Income
        Data (A):
      Operating revenues          $    26,541  $    18,843  $    17,133  $    16,990  $    14,334

      Operating expenses:
        Selling and tour
          promotion                     9,826        8,420        8,694        9,407        8,361
        General and
          administrative                8,210        5,770        4,676        5,380        4,983
      Operating income                  8,505        4,653        3,763        2,203          990
      Net income                        5,637        3,947        5,157        2,127        1,142
      Pro forma net income (B)             --           --        3,179        3,152           --
      Net income per share -
        basic (B)                 $      0.83  $      0.60  $      0.57  $      0.63         (C)
      Net income per share -
        diluted (B)               $      0.82  $      0.59  $      0.56  $      0.63         (C)

      Balance Sheet Data (D):
      Cash and cash equivalents   $    22,871  $    18,281  $    12,974  $     6,634  $       674
      Total current assets             27,283       21,950       14,857        7,415        4,239
      Total assets                     34,449       27,269       16,016        9,637        6,247
      Long-term debt                      329            0            6           17           25
      Total liabilities (includ-
        ing current portion)           11,893       10,486        4,881        7,877        4,418
      Total stockholders' equity       22,556       16,783       11,135        1,829        1,829

      </TABLE>

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

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

     (C)  Historical net income per share for the year ended December 31,
          1993 has not been presented as it is not meaningful in the
          presentation of the financial statements due to the Company's
          reorganization prior to its initial public offering.

     (D)  All of the Company's acquisitions have been accounted for under
          the purchase method of accounting.  Therefore, the balance sheet
          data include the accounts of the acquired entities as of their
          respective dates of acquisition.  Since one of the acquisitions
          occurred effective December 31, 1996, the balance sheet data
          includes the accounts of this entity as of December 31, 1996;
          however, the results of operations of this entity are not
          included in the statement of income data until the year ended
          December 31, 1997.
     <PAGE>
     Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the
     Company's consolidated financial statements and the notes thereto
     appearing elsewhere in this Annual Report on Form 10-K.  Certain
     statements contained herein that are not related to historical
     results, including, without limitation, statements regarding the
     Company's business strategy and objectives, future financial position,
     expectations about pending litigation and estimated cost savings, are
     forward-looking statements within the meaning of Section 27A of the
     Securities Act and Section 21E of the Securities Exchange Act of 1934,
     as amended (the "Securities Exchange Act") and involve risks and
     uncertainties.  Although the Company believes that the assumptions on
     which these forward-looking statements are based are reasonable, there
     can be no assurance that such assumptions will prove to be accurate
     and actual results could differ materially from those discussed in the
     forward-looking statements. Factors that could cause or contribute to
     such differences include, but are not limited to, regulation,
     regulatory policies in the United States and other countries, foreign
     currency fluctuations, competition from other travel-related
     businesses, and market and general economic factors.  All forward-
     looking statements contained in this Annual Report on Form 10-K are
     qualified in their entirety by this statement.

     GENERAL
     -------
     The Company is engaged in the business of (i) organizing, marketing
     and operating international education travel programs on a worldwide
     basis for students and adults and (ii) developing, marketing and
     managing performance improvement programs for a nationwide roster of
     corporate clients that utilize merchandise awards, consumer promotions
     and incentive travel, as well as providing comprehensive housing,
     registration and travel services for major meetings, conventions,
     expositions and trade shows.

     Since its initial public offering in August 1995, the Company has
     expanded its operations primarily through a series of acquisitions,
     all within the travel industry and businesses complementary thereto.
     Prior to 1996, the Company's principal business was the business
     conducted through the Company's Education Group, through its "Student
     Ambassador Programs" and "Adult Ambassador Programs."

     In January 1996, the Company completed the acquisition of Helin and
     commenced operations of the Performance Group.  The acquisition of
     Helin was followed in February 1996 by the acquisition of certain
     assets of MLB (the "People to People Acquisition"), which expanded the
     business of the Company's already existing Education Group.  In
     December 1996, the Company acquired Bitterman, in September 1997, the
     Company acquired Debol, and in February 1998, the Company acquired the
     Rogal Assets and TII, further expanding its Performance Group.
     <PAGE>
     RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, the
     Company's historical and pro forma results of operations for the
     periods indicated (in millions):

     HISTORICAL RESULTS OF OPERATIONS

                                                  Year Ended December 31,
                                                  -----------------------
                                                  (in millions)
                                                  1997     1996     1995
                                                  -----    -----    -----
     Gross Program Receipts                       $80.3    $56.7    $46.7
     Revenue                                       26.5     18.8     17.1
     Operating Expenses:
         Selling and tour promotion expenses        9.8      8.4      8.7
         General and administrative expenses        8.2      5.7      4.6
                                                  -----    -----    -----
           Total operating expenses                18.0     14.1     13.3
                                                  -----    -----    -----

     Operating income                               8.5      4.7      3.8
     Other income (expense)                         0.5      1.3      1.0
                                                  -----    -----    -----
     Income before income taxes                     9.0      6.0      4.8
     Income tax provision (benefit)                 3.3      2.0     (0.4)
                                                  -----    -----    -----
         Net income                               $ 5.7    $ 4.0    $ 5.2
                                                  =====    =====    =====

     Pro forma information:
                                                  Year Ended December 31,
                                                  -----------------------
                                                  (in millions)
                                                  1997     1996     1995
                                                  -----    -----    -----
     Gross Program Receipts                       $80.3    $56.7    $46.7
     Revenues                                      26.5     18.8     17.1
     Operating Expenses:
       Selling and tour promotion expenses          9.8      8.4      8.7
       General and administrative expenses          8.2      5.7      4.6
                                                  -----    -----    -----
         Total operating expenses                  18.0     14.1     13.3
                                                  -----    -----    -----
     Operating income                               8.5      4.7      3.8
     Other income (expense)                         0.5      1.3      1.0
                                                  -----    -----    -----
     Income before income taxes                     9.0      6.0      4.8
     Income tax provision                           3.3      2.0      1.6
                                                  -----    -----    -----
         Net income                               $ 5.7    $ 4.0    $ 3.2
                                                  =====    =====    =====
     <PAGE>
     During 1995, the Company's results of operations only reflect the
     Education Group.  In early 1996, the Company commenced operations of
     its Performance Group through the acquisition of an entity engaged in
     this business.  In December 1996 and September 1997, the Company
     continued the expansion of its Performance Group through two
     additional acquisitions.  All of these acquisitions were accounted for
     under the purchase method of accounting.  Therefore, the results of
     their operations are included in the Company's results of operations
     since their respective dates of acquisition.

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

     The Company increased operating income by 83% and income before taxes
     by 50% in the year ended December 31, 1997 compared to the year ended
     December 31, 1996.  The Company is organized in two operating
     divisions:  the Education Group and the Performance Group.  For the
     year ended December 31, 1997, the Education Group increased its
     productivity by growth within the core product lines while realizing
     efficiencies through the sales and marketing process.  The Performance
     Group contribution resulted from its acquisitions and additional sales
     of incentive travel program and business meeting management services.

     The 42% increase in gross program receipts, from $56.7 million in 1996
     to $80.3 million in 1997, was driven by an increase in the number of
     program participants, the addition of new acquisitions, and improved
     cross-selling in the Performance Group.  The increase in gross program
     receipts resulted in a 41% increase in net revenue, from $18.8 million
     in 1996 to $26.5 million in 1997, which was the result of additional
     Education Group program participants, new sales offices in the
     Performance Group and increased sales of incentive travel programs and
     business meeting management services from both existing operations and
     acquired businesses.

     The overall gross margins for the 1997 year remained consistent with
     the prior year at 33%.  This reflects a strengthening of the Education
     Group margins, as well as continuing stability in the margins of the
     Performance Group.

     Selling and tour promotion expenses increased during 1997 when
     compared to 1996 by $1.4 million, or 17%.  Most of this increase
     results from an acquisition in late 1996 within the Performance Group.
     The Education Group held selling and tour expenses constant as a
     result of realizing sales and marketing efficiencies as well as a cost
     management program.

     General and administrative expenses increased from $5.7 million to
     $8.2 million between 1996 and 1997.  Most of this increase is the
     result of Performance Group acquisitions.
     <PAGE>
     Other income includes interest income and unrealized foreign currency
     gains or losses.  For the 1997 year, other income decreased from $1.3
     million to $0.5 million.  The cash component of other income, interest
     income, increased to $1.6 million from $1.1 million, a 47% increase on
     a 25% increase in year-end cash balances.  This increase in interest
     income is the effect of improved cash management practices implemented
     in 1997.

     The overall net decrease in other income can be attributed to the non-
     cash component of other income, unrealized foreign exchange losses.
     In 1997, the Company incurred $0.7 million of unrealized losses
     compared to an insignificant amount in 1996.

     The Company enters into forward foreign exchange contracts and foreign
     currency option contracts to protect planned program operating margins
     by offsetting certain operational exposures from changes in foreign
     currency exchange rates.  These foreign exchange contracts and options
     are entered into to support normal recurring purchases, and
     accordingly, are not entered into for speculative purposes.  Forward
     foreign exchange contracts are utilized to manage the risk associated
     with currency fluctuations on certain anticipated expenditures.  The
     Company is exposed to credit risk under the forward contracts and
     options to the extent that the counterparty is unable to perform under
     the agreement.  The Company anticipates hedging the majority of its
     foreign currency risk in future periods.  There can be no assurance
     that the Company's hedging strategies will be successful in mitigating
     the impact of foreign currency fluctuations.  The face amount of
     forward foreign exchange contracts outstanding at December 31, 1997,
     was $17.4 million.  See "Foreign Currency; Hedging Policy" below.

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

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

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

     The Company maintained a 33% gross margin for the year, even with the
     addition of the expected lower margins of the Performance Group.
     <PAGE>
     Selling and tour promotion expenses decreased approximately $0.3
     million in 1996 when compared to 1995. The Company's marketing efforts
     continue to be more effective and efficient than in prior years.  This
     more targeted effort contributed to the increase in revenues for 1996.
     Company policy is to expense all promotional expenses as they are
     incurred.

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

     General and administrative expenses increased from $4.6 million in
     1995 to $5.7 million in 1996 primarily due to the acquisitions of
     Helin and American People Ambassador Programs in early 1996.

     Other income includes interest income and foreign currency gains or
     losses. During 1996, other income increased 26% from $1.0 million to
     $1.3 million.  This increase was due to improved cash management
     systems, as well as a full year's benefit of investing the proceeds
     from the initial public offering.  These two factors increased
     interest income from $0.8 million in 1995 to $1.1 million in 1996.

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

     The Company has recorded an income tax provision of $2.0 million for
     1996 which represents an effective tax rate of 34%.  The income tax
     benefit of $0.4 million in 1995 reflected the benefit of the net
     operating loss incurred by the Company which was generated after the
     Company became a C Corporation in mid-1995.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's business is not capital intensive.  However, the Company
     does retain funds for operating purposes in order to conduct sales and
     marketing efforts for future programs and to facilitate acquisitions
     of other companies.
     <PAGE>
     Net cash provided by operations for the year ended December 31, 1997
     increased to $6.2 million from $6.1 million at the end of 1996.  The
     increase in cash flow from operations results primarily from the
     increase in net income of $1.7 million.

     Net cash used by investing activities increased from $0.8 million in
     1996 to $1.5 million in 1997.  The investing activities during the
     current year are primarily due to leasehold improvements in the
     corporate headquarters facilities as well as the purchase of a company
     in the third quarter of the year.  The Company does not have any
     material capital expenditure commitments for the ensuing year.
     However, the Company is continuing to pursue further acquisitions of
     related travel businesses that will require use of cash and cash
     equivalents.  The Company had no significant long or short term debt
     as of December 31, 1996; however, at December 31, 1997, the Company
     had $0.3 million in long-term debt as a result of an acquisition
     during 1997.

     The Company has a credit facility available with Seafirst Bank for
     $23.0 million U.S. dollars for foreign currency purchases and forward
     contracts.

     At December 31, 1997, the Company had approximately $22.9 million of
     cash and cash equivalents.  Management believes existing cash and cash
     equivalents and cash flows from operations will be sufficient to fund
     the Company's anticipated operating needs, capital expenditures and
     acquisitions for the ensuing year.

     FOREIGN CURRENCY; HEDGING POLICY

     The substantial majority of the Company's programs take place outside
     of the United States and most foreign suppliers require payment in
     their own currency rather than U.S. dollars.  Accordingly, the Company
     is exposed to foreign currency risks in certain countries as foreign
     currency exchange rates between those currencies and the U.S. dollar
     fluctuate.  In 1993, the Company initiated a program to hedge against
     these foreign currency risks in the currencies of countries in which
     the largest amount of program pass through expenses are denominated in
     foreign currency.  To hedge against foreign currency risks, the
     Company has used forward contracts which allow the Company to acquire
     the foreign currency at a fixed price for a specified period of time.
     The Company also uses foreign currency call options which provide the
     Company with the option to acquire certain foreign currencies at a
     fixed exchange rate and time period.  Concurrent with the purchase of
     a foreign currency call option, the Company sells a foreign currency
     put option to minimize the net premium paid for the call option.  The
     strike prices on these options generally straddle the exchange rate at
     the time the options are purchased and sold.  Additionally, in 1994
     and 1995, the Company purchased futures contracts to similarly hedge
     its foreign currency risk.  The Company is exposed to credit risk
     <PAGE>
     under the forward contracts and options to the extent that the
     counterparty is unable to perform under the agreement.  The Company
     anticipates hedging the majority of its foreign currency risk in
     future periods.  There can be no assurance that the Company's hedging
     strategies will be successful in mitigating the impact of foreign
     currency fluctuations.

     YEAR 2000 ISSUES

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

     NEW ACCOUNTING PRONOUNCEMENTS

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

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

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


     Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Financial Statements of the Company are submitted as a separate
     section of this Form 10-K on pages F-1 through F-26.

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

     None
     <PAGE>
     PART III

     Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1997, which Proxy Statement will be
     filed with the Securities and Exchange Commission on or about
     April 15, 1998.

     Item 11.  EXECUTIVE COMPENSATION

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1997, which Proxy Statement will be
     filed with the Securities and Exchange Commission on or about
     April 15, 1998.

     Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1997, which Proxy Statement will be
     filed with the Securities and Exchange Commission on or about
     April 15, 1998.

     Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1997, which Proxy Statement will be
     filed with the Securities and Exchange Commission on or about
     April 15, 1998.
     <PAGE>
     PART IV

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

     (a)  List of documents filed as part of Report

          (1)  FINANCIAL STATEMENTS INCLUDED IN ITEM 8:

               Report of Independent Accountants
               Consolidated Balance Sheets at December 31, 1997 and 1996
               Consolidated Statements of Income for the years ended
                  December 31, 1997, 1996 and 1995
               Consolidated Statements of Changes in Shareholders' Equity
                  for the years ended December 31, 1997, 1996 and 1995
               Consolidated Statements of Cash Flows for the years ended
                  December 31, 1997, 1996 and 1995
               Notes to Consolidated Financial Statements

          (2)  FINANCIAL STATEMENT SCHEDULES INCLUDED IN ITEM 8:

               No financial statement schedules are presented as the
               required information is either not applicable or included in
               the Consolidated Financial Statements or notes thereto.

          (3)  EXHIBITS

               The exhibits listed on the accompanying Exhibit Index are
               filed as part of this Annual Report.

     (b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended
     December 31, 1997.
     <PAGE>
     SIGNATURES

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

                              AMBASSADORS INTERNATIONAL, INC.
                              (Registrant)

     Date:  March 26, 1998    By:  /s/ Jeffrey D. Thomas
                                   ---------------------------------------
                                   Jeffrey D. Thomas, Chief Financial
                                     Officer

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

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

      By:  /s/ John A. Ueberroth          President and Chief Executive Officer    March 26, 1998
           ----------------------------   (Principal Executive Officer)
           John A. Ueberroth


      *By: /s/ Peter V. Ueberroth         Chairman of the Board of Directors       March 26, 1998
           ----------------------------
           Peter V. Ueberroth


      *By: /s/ Jeffrey D. Thomas          Chief Financial Officer                  March 26, 1998
           ----------------------------   (Principal Financial and Accounting
           Jeffrey D. Thomas              Officer)


      *By: /s/ James L. Easton            Director                                 March 26, 1998
           ----------------------------
           James L. Easton


      *By: /s/ Richard D.C. Whilden       Director                                 March 26, 1998
           ----------------------------
           Richard D.C. Whilden


      *By: /s/ John C. Spence             Director                                 March 26, 1998
           ----------------------------
           John C. Spence

      </TABLE>
      <PAGE>
      SIGNATURES, CONTINUED

      <TABLE>
      <CAPTION>
      Signature                           Title                                    Date
      ---------------------------------   -------------------------------------    --------------
      <S>                                 <C>                                      <C>
      *By: /s/ Rafer L. Johnson           Director                                 March 26, 1998
           ----------------------------
           Rafer L. Johnson


      *By: /s/ John A. Ueberroth          Attorney-in-Fact                         March 26, 1998
           ----------------------------
           John A. Ueberroth

      </TABLE>
      <PAGE>
     INDEX TO EXHIBITS

     2.1    Form of Reincorporation Agreement(1)
     2.2    Rescission Agreement(1)
     2.3    Stock Purchase Agreement(1)
     2.4    Redemption Agreement(1)
     3.1    Certificate of Incorporation of Ambassadors International,
              Inc.(1)
     3.2    By-Laws of Ambassadors International, Inc.(1)
     4.1    Specimen Stock Certificate(1)
     10.1   People to People Contract - Student Ambassador Program(1)
     10.2   People to People Contract - Citizen Ambassador Program(1)
     10.3   Form of Equity Participation Plan of Ambassadors International,
              Inc.(1)
     10.4   Form of Registration Rights Agreement among the Company,
              John and Peter Ueberroth, and certain other stockholders(1)
     10.5   Form of Indemnification Agreement for officers and
              directors(1)
     10.6   Commercial Lease dated December 21, 1992 between Portolese
              and Sample Investments and International Ambassador Programs,
              Inc.(1)
     10.7   First Amendment to Commercial Lease dated January 3, 1995
              between Portolese and Sample Investments and International
              Ambassador Programs, Inc.(1)
     10.8   Form of Employment Agreement with Executive Officers(1)
     10.9   Form of Note between the Company and the Ueberroths relating
              to the Distribution(1)
     10.10  General Contract between People to People and M.L. Bright
              Associates dated July 1, 1995 and Assignment documents to
              the Company dated February 6, 1996(2)
     10.11  Agreement and Plan of Merger, effective as of December 11,
              1996 by and among Ambassadors International, Inc., a
              Delaware corporation, Ambassadors Performance Improvement,
              Inc., a Delaware corporation and wholly owned subsidiary of
              Ambassadors, Bitterman & Associates, Inc., a Minnesota
              corporation, and Michael H. Bitterman.(3)
     10.12  Asset Purchase Agreement dated as of February 5, 1998
              by and among the company, Ambassador Performance Group, Inc.,
              Rogal America, Co. and Andrew Rogal.(4)
     10.13  Lease dated December 20, 1996 between Rogal America, Inc. and
              Ark-Les Corp.(5)
     10.14  Industrial Lease dated ________, 19__ between the Company
              and the Irvine Company (5)
     21.1   Subsidiaries of Ambassadors International, Inc.(5)
     23.1   Consent of Coopers & Lybrand L.L.P.(5)
     24.1   Powers of Attorney and certified copy of the related
              resolutions of the board of directors.(5)
     27.1   Financial Data Schedule--1997(5)
     27.2   Financial Data Schedule--1996(5)
     99.1   Item 2 of the Company's Current Report on Form 8-K dated
              February 20, 1998.(6)
     <PAGE>
     (1)    Filed as an exhibit of the same number to the Company's
            Registration Statement on Form S-1 (Registration No. 33-93586)
            and incorporated herein by reference.
     (2)    Filed as an exhibit of the same number to the Company's Form
            10-KSB for the year ended December 31, 1995 and incorporated
            herein by reference.
     (3)    Filed with the Securities and Exchange Commission as Exhibit
            2.5 to Form 8-K dated January 3, 1997, and incorporated herein
            by reference.
     (4)    Filed with the Securities and Exchange Commission as Exhibit
            2.6 to Form 8-K dated February 5, 1998, and incorporated herein
            by reference.
     (5)    Filed herewith.
     (6)    Filed with the Securities and Exchange Commission as part of a
            Current Report on Form 8-K on February 5, 1998 and incorporated
            herein by reference.
     <PAGE>
     REPORT OF INDEPENDENT ACCOUNTANTS



     Board of Directors and Shareholders
     Ambassadors International, Inc.
     Spokane, Washington


     We have audited the accompanying consolidated balance sheets of
     Ambassadors International, Inc. and subsidiaries as of December 31,
     1997 and 1996, and the related consolidated statements of income,
     changes in shareholders' equity and cash flows for each of the three
     years in the period ended December 31, 1997. These financial
     statements are the responsibility of the Company's management. Our
     responsibility is to express an opinion on these financial statements
     based on our audits.

     We conducted our audits in accordance with generally accepted auditing
     standards. Those standards require that we plan and perform 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 financial statements referred to above present
     fairly, in all material respects, the consolidated financial position
     of Ambassadors International, Inc. as of December 31, 1997 and 1996,
     and the consolidated results of their operations and their cash flows
     for each of the three years in the period ended December 31, 1997 in
     conformity with generally accepted accounting principles.

     As discussed in Note 1 to the financial statements, the Company
     changed its method of accounting for impairment of long-lived assets
     in 1996.


                                       COOPERS & LYBRAND L.L.P.

     Spokane, Washington
     February 9, 1998, except for the first
        paragraph of Note 12 as to which the
        date is February 19, 1998
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED BALANCE SHEETS
     December 31, 1997 and 1996


                                                 1997         1996
                                                 -----------  -----------

               ASSETS

     Current assets:
       Cash and cash equivalents                 $22,870,546  $18,281,433
       Restricted cash equivalents                   125,000       55,000
       Available-for-sale investments                             590,111
       Accounts receivable                         1,753,369    1,469,053
       Inventory                                      76,033      157,234
       Prepaid program costs and expenses          2,004,995    1,359,950
       Deferred income taxes                          31,229       24,584
       Other assets                                  422,096       12,892
                                                 -----------  -----------
           Total current assets                   27,283,268   21,950,257

     Property and equipment, net                   2,148,305    1,575,486
     Other investments                               462,500      262,500
     Goodwill, net of $290,711 and $115,567
       of accumulated amortization                 4,247,219    3,308,224
     Covenants-not-to-compete, net of
       $179,485 and $19,209 of accumulated
       amortization                                  195,515      135,791
     Other assets                                     85,573       36,792
     Deferred income taxes                            26,608
                                                 -----------  -----------
           Total assets                          $34,448,988  $27,269,050
                                                 ===========  ===========
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED BALANCE SHEETS, CONTINUED
     December 31, 1997 and 1996


                                                 1997         1996
                                                 -----------  -----------

       LIABILITIES AND SHAREHOLDERS' EQUITY

     Current liabilities:
       Accounts payable                          $ 1,616,120  $ 1,764,002
       Accrued expenses                              724,008      822,927
       Participants' deposits                      7,397,924    6,199,982
       Customer advances                             980,834    1,335,368
       Notes payable, current portion                171,241      201,146
       Unrealized loss on foreign currency
       exchange contracts                            674,625
                                                 -----------  -----------
           Total current liabilities              11,564,752   10,323,425

     Deferred income taxes                                        163,044
     Notes payable due after one year                328,696
                                                 -----------  -----------
           Total liabilities                      11,893,448   10,486,469
                                                 -----------  -----------

     Commitments and contingencies
       (Notes 6, 7, 8 and 12)

     Shareholders' equity:
       Preferred stock, $.01 par value;
         2,000,000 shares authorized;
         none issued and outstanding
       Common stock, $.01 par value;
         authorized, 20,000,000 shares;
         issued and outstanding, 6,768,223
         and 6,753,887 shares                         67,682       67,539
       Additional paid-in capital                 13,760,963   13,625,279
       Retained earnings                           8,726,895    3,089,763
                                                 -----------  -----------
           Total shareholders' equity             22,555,540   16,782,581
                                                 -----------  -----------
           Total liabilities and
             shareholders' equity                $34,448,988  $27,269,050
                                                 ===========  ===========

     The accompanying notes are an integral part of the consolidated
     financial statements.
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF INCOME
     for the years ended December 31, 1997, 1996 and 1995

                                    1997         1996         1995
                                    -----------  -----------  -----------
     Revenue                        $26,540,897  $18,843,422  $17,132,920
                                    -----------  -----------  -----------
     Operating expenses:
       Selling and tour promotion     9,825,916    8,420,151    8,693,600
       General and administrative     8,210,378    5,769,874    4,676,494
                                    -----------  -----------  -----------
                                     18,036,294   14,190,025   13,370,094
                                    -----------  -----------  -----------
     Operating income                 8,504,603    4,653,397    3,762,826
                                    -----------  -----------  -----------
     Other income (expense):
       Interest expense                  (9,535)      (1,515)      (2,404)
       Interest and dividend income   1,588,408    1,079,855      785,561
       Realized and unrealized gain
         (loss) on investments       (1,101,526)     290,253      278,471
       Other, net                           647      (41,060)      (7,868)
                                    -----------  -----------  -----------
                                        477,994    1,327,533    1,053,760
                                    -----------  -----------  -----------
     Income before income taxes       8,982,597    5,980,930    4,816,586
     Income tax provision (benefit)   3,345,465    2,034,395     (340,708)
                                    -----------  -----------  -----------
     Net income                     $ 5,637,132  $ 3,946,535  $ 5,157,294
                                    ===========  ===========  ===========
     Unaudited proforma information:
       Income before income taxes                             $ 4,816,586
       Income tax provision                                     1,637,639
                                                              -----------
                                                              $ 3,178,947
                                                              ===========
       Net income per share -
         basic                      $      0.83  $      0.60  $      0.57
                                    ===========  ===========  ===========
       Weighted-average shares
         outstanding - basic          6,759,541    6,618,454    5,623,688
                                    ===========  ===========  ===========
       Net income per share -
         diluted                    $      0.82  $      0.59  $      0.56
                                    ===========  ===========  ===========
       Weighted-average shares
         outstanding - diluted        6,893,231    6,649,884    5,647,882
                                    ===========  ===========  ===========

     The accompanying notes are an integral part of the consolidated
     financial statements.
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
     for the years ended December 31, 1997, 1996 and 1995
     <TABLE>
     <CAPTION>

                                                                                 Retained
                                            Common Stock            Additional   Earnings     Receivables
                                            ----------------------  Paid-In      (Accumulat-  From
                                            Shares     Amount       Capital      ed Deficit   Shareholders Total
                                            ---------  -----------  -----------  -----------  ------------ -----------
      <S>                                   <C>        <C>          <C>          <C>          <C>          <C>
      Balances, December 31, 1994               6,636  $     6,636  $   133,540  $ 1,688,539               $ 1,828,715
        Origination of receivables
           from shareholders                                                                  $(1,820,000)  (1,820,000)
        Redemption and retire-
           ment of common stock                (2,823)      (2,823)    (133,540)  (1,683,637)   1,820,000
        Contribution of S corporation
           retained earnings with change
           to C corporation status                                        4,902       (4,902)
        Effect of reorganization and
           sale of common stock, net
           of issuance costs                6,531,217       61,537   11,921,566                             11,983,103
        Distributions to shareholders                                             (6,014,066)               (6,014,066)
        Origination of notes receivable
           from shareholders                                                                   (2,000,000)  (2,000,000)
        Repayment of notes receivable
           from shareholders                                                                    2,000,000    2,000,000
        Net income                                                                 5,157,294                 5,157,294
                                            ---------  -----------  -----------  -----------  -----------  -----------
      Balances, December 31, 1995           6,535,030       65,350   11,926,468     (856,772)           0   11,135,046
        Stock issued for acquisition
           of subsidiaries                    218,857        2,189    1,698,811                              1,701,000
        Net income                                                                 3,946,535                 3,946,535
                                            ---------  -----------  -----------  -----------  -----------  -----------
      Balances, December 31, 1996           6,753,887       67,539   13,625,279    3,089,763            0   16,782,581
        Stock options exercised                14,336          143      135,684                                135,827
        Net income                                                                 5,637,132                 5,637,132
                                            ---------  -----------  -----------  -----------  -----------  -----------
      Balances, December 31, 1997           6,768,223  $    67,682  $13,760,963  $ 8,726,895  $         0  $22,555,540
                                            =========  ===========  ===========  ===========  ===========  ===========
      </TABLE>

      The accompanying notes are an integral part of the consolidated
      financial statements.
      <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF CASH FLOWS
     for the years ended December 31, 1997, 1996 and 1995


                                    1997         1996         1995
                                    -----------  -----------  ------------
     Cash flows from operating
       activities:
         Net income                 $ 5,637,132  $ 3,946,535  $ 5,157,294
         Adjustments to reconcile
           net income to net cash
           provided by operating
           activities:
             Depreciation and
               amortization             894,963      392,403      227,039
             Deferred income tax
               provision (benefit)     (196,297)     458,235     (340,708)
             (Gain) loss on
               investments            1,101,526     (290,253)    (278,471)
             Loss on sale of prop-
               erty and equipment        15,245          880
             Purchase of trading
               securities            (6,699,420)  (7,765,969)  (1,005,000)
             Proceeds from sale of
               trading securities     6,225,946    8,330,781    1,076,575
             Change in assets and
               liabilities, net of
               effects of purchase
               of subsidiaries:
                 Restricted cash
                   equivalents          (70,000)     (10,000)      (5,000)
                 Accounts
                   receivable          (284,316)     882,787     (468,126)
                 Inventory               81,201
                 Prepaid program
                   costs and
                   expenses             179,635       62,447     (159,397)
                 Accounts payable
                   and accrued
                   expenses            (246,801)    (564,821)    (695,502)
                 Accrued incentive
                 compensation                                  (2,403,600)
                 Participants'
                   deposits            (116,226)     684,834      697,937
                 Customer advances     (354,534)
                                    -----------  -----------  -----------
                     Net cash
                       provided by
                       operating
                       activities     6,168,054    6,127,859    1,803,041
                                    -----------  -----------  -----------
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
     for the years ended December 31, 1997, 1996 and 1995

                                    1997         1996         1995
                                    -----------  -----------  ------------
     Cash flows from investing
       activities:
         Purchase of property and
           equipment                $(1,032,040) $  (338,072) $  (454,778)
         Proceeds from sale of
           property and equipment                      1,220        2,500
         Proceeds from sale of
           available-for-sale
           securities                   636,684
         Purchase of other
           investments                 (200,000)    (262,500)
         Cash paid for acquisition
           of subsidiaries, net of
           cash received               (199,075)    (105,340)
         Payment for covenant-not-
           to-compete agreement        (220,000)    (125,000)
         Redemption of life
           insurance                                               28,950
         Change in other assets        (295,631)      19,766        2,147
         Issuance of note
           receivable                  (162,354)
                                    -----------  -----------  -----------
                     Net cash used
                       in investing
                       activities    (1,472,416)    (809,926)    (421,181)
                                    -----------  -----------  -----------
     Cash flows from financing
       activities:
         Payments on long-term
           debt                        (242,352)     (10,752)      (9,596)
         Proceeds from exercise
           of stock options             135,827
         Net proceeds from initial
           public offering                                     11,983,103
         Redemption and retirement
           of common stock                                       (923,937)
         Shareholder distributions                             (6,090,756)
         Repayments of notes
           receivable from
           shareholders                                         2,000,000
         Origination of notes
           receivable from share-
           holders                                            (2,000,000)
                                    -----------  -----------  ----------
                     Net cash
                       provided by
                       (used in)
                       financing
                       activities      (106,525)     (10,752)   4,958,814
                                    -----------  -----------  -----------
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
     for the years ended December 31, 1997, 1996 and 1995


                                    1997         1996         1995
                                    -----------  -----------  ------------

     Net increase in cash and
       cash equivalents             $ 4,589,113  $ 5,307,181  $ 6,340,674
     Cash and cash equivalents,
       beginning of year             18,281,433   12,974,252    6,633,578
                                    -----------  -----------  -----------
     Cash and cash equivalents,
       end of year                  $22,870,546  $18,281,433  $12,974,252
                                    ===========  ===========  ===========
     Supplemental disclosure of
       cash flow information:
         Cash paid for interest     $     9,535  $     1,515  $     2,404
         Cash paid for income
           taxes                      3,688,507    1,440,000
         Noncash investing and
           financing activities:
             Issuance of stock
               for acquisition
               of subsidiaries                     1,701,000
           Net reduction of assets
             and liabilities
             associated with
             deferred sale of land
             and building through
             redemption of common
             stock                                                896,063
           Origination of note payable
             for acquisition of
             subsidiary                 541,143


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

     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          ORGANIZATION AND BASIS OF CONSOLIDATION
          ---------------------------------------
          On August 4, 1995, Ambassadors International, Inc. (the Company),
          was reincorporated in the state of Delaware and changed its name
          from International Ambassador Programs, Inc. (see Note 10). The
          Company's predecessor, International Ambassadors Programs, Inc.,
          was incorporated in the state of Washington in 1967. Subsequent
          to the reincorporation, the Company contributed all of its assets
          and liabilities to Ambassador Programs, Inc., a wholly owned
          subsidiary.

          The consolidated financial statements include the accounts of
          Ambassadors International, Inc., and its subsidiaries, Ambassador
          Education Group, Inc. (AEG) and Ambassador Performance Group,
          Inc. (APG). AEG and APG have several wholly owned operating
          subsidiaries including those described in Note 12. All
          significant intercompany accounts and transactions are eliminated
          in consolidation. Through AEG, the Company organizes, markets and
          operates international educational travel programs on a worldwide
          basis for students and adults. Through APG, the Company develops,
          markets and manages performance improvement programs for a
          nationwide roster of corporate clients that utilize merchandise
          awards, consumer promotions and incentive travel, as well as
          provides comprehensive housing, registration and travel services
          for major meetings, conventions, expositions and trade shows.

          During the years ended December 31, 1997, 1996 and 1995, the
          Company's revenues as a percentage of total revenues were derived
          from travel programs in the following geographic areas:

                                             1996   1997   1995
                                             ----   ----   ----
            Europe                           34%    41%    38%
            South Pacific                    24%    28%    32%
            China                            11%    11%    19%
            Other                            17%    19%    7%

          CREDIT RISK
          -----------
          The Company's financial instruments that are exposed to
          concentrations of credit risk consist primarily of cash and cash
          equivalents, investments and trade accounts receivable. The
          Company places its cash and temporary cash investments with high
          credit quality institutions. At times, such investments may be in
          excess of the federal  insurance limit or at institutions which
          are not covered by this insurance. The Company believes that its
          primary trade accounts receivable credit risk exposure is limited
          as travel program participants are required to pay for their
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

          CREDIT RISK, CONTINUED
          ----------------------
          entire program costs prior to the program departure and trade
          accounts receivable for non-travel related programs are
          principally with large credit-worthy corporations.

          CASH AND CASH EQUIVALENTS
          -------------------------
          The Company invests cash in excess of operating requirements in
          short-term time deposits, money market instruments, government
          mutual bond funds and marketable securities. The Company
          considers investments with remaining maturities at date of
          purchase of three months or less to be cash equivalents.

          The Company's restricted cash equivalents represent certificates
          of deposit held by four airline companies as collateral for
          airfare purchase agreements. The certificates of deposit are
          issued in the Company's name with the respective airline company
          listed as the beneficiary.

          INVENTORY
          ---------
          Merchandise inventory that is used in connection with the
          Company's merchandise award programs is stated at the lower of
          cost, as determined by the first-in, first-out method, or net
          realizable value.

          INVESTMENTS
          -----------
          The Company classifies its marketable investments as trading or
          available-for-sale. Trading securities consist of foreign
          currency futures and forward contracts which are carried at fair
          value. The Company uses foreign currency exchange contracts as
          part of an overall risk-management strategy. These instruments
          are used as a means of mitigating exposure to foreign currency
          risk connected to anticipated travel programs. In entering into
          these contracts, the Company has assumed the risk which might
          arise from the possible inability of counterparties to meet the
          terms of their contracts. The Company does not expect any losses
          as a result of counterparty defaults. Realized and unrealized
          gains and losses on these securities are recognized in the
          statement of income.

          Available-for-sale securities are recorded at market value.
          Unrealized gains and losses are excluded from operations and
          reported as a separate component of shareholders' equity, net of
          deferred income taxes.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

          INVESTMENTS, CONTINUED
          ----------------------
          Realized gains and losses on the sale of investments are
          recognized on a specific identification basis in the statement of
          income in the period the investments are sold.

          The Company owns a 20% interest in a company which provides
          packaged tours primarily to Formula One, Indy Car and NASCAR
          races. This investment is reported on the equity method. The
          Company also owns a 15% interest in a joint venture. The joint
          venture's purpose is the acquisition of preferred stock (which
          represents 18.4% of the total outstanding stock) of a private
          company. This investment is reported at the lower of cost or
          estimated net realizable value.

          PROPERTY AND EQUIPMENT
          ----------------------
          Property and equipment are stated at cost. Cost of maintenance
          and repairs which do not improve or extend the lives of the
          respective assets are expensed currently. Major additions and
          betterments are capitalized. Depreciation and amortization are
          provided over the lesser of the estimated useful lives of the
          respective assets or the lease term (including extensions), using
          the straight-line method.

          When property and equipment are sold or retired, the related cost
          and accumulated depreciation are removed from the accounts and
          any gain or loss is recognized in operations.

          GOODWILL AND COVENANTS-NOT-TO-COMPETE
          -------------------------------------
          Goodwill recorded in connection with the Company's acquisition of
          other businesses is being amortized using the straight-line
          method over 10 to 15 years. Costs associated with obtaining
          covenants-not-to-compete are amortized using the straight-line
          method over the term of the agreements, generally 5 to 10 years.

          In 1996, the Company adopted SFAS No. 121, "Accounting for the
          Impairment of Long-Lived Assets or Long-Lived Assets to be
          Disposed Of." SFAS No. 121 requires certain long-lived assets,
          such as the Company's property and equipment and goodwill, be
          reviewed for impairment in value whenever events or circumstances
          indicate that the carrying value of an asset may not be
          recoverable. In performing the review, if expected future
          undiscounted cash flows from the use of the asset or the fair
          value, less selling costs, from the disposition of the asset is
          less than its carrying value, an impairment loss is to be
          recognized. There was no effect on the Company's results of
          operations, financial condition or cash flows of adopting SFAS
          No. 121 on January 1, 1996.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

          REVENUE RECOGNITION
          -------------------
          For travel programs, the Company bills travel participants in
          advance and records such deposits as participants' deposits.
          Additionally, the Company pays for certain direct program costs
          such as airfare, hotel, rail passes and other program costs in
          advance of the departure and records these amounts as prepaid
          program costs and expenses. The Company recognizes revenue and
          related costs associated with its programs when travel convenes.

          The Company also recognizes revenue from the sale of merchandise,
          printing and administration of customer incentive programs.
          Revenues from the sale of merchandise are recognized when the
          merchandise is shipped. Revenue from incentive programs is
          deferred as customer advances until the Company's obligations are
          fulfilled. Revenues are recognized from printing and
          administration based upon the percentage of completion of the
          related program.

          Amounts reported as customer advances associated with prepaid
          certificate-based merchandise incentive programs are subject to
          change due to estimates made by management related to the
          ultimate obligation associated with the unredeemed prepaid
          certificates. Estimates are based upon historical trends of
          issued and redeemed certificates. Due to uncertainties inherent
          in the estimation process, it is reasonably possible that changes
          could occur in the near term which could materially affect the
          estimated obligation.

          SELLING AND TOUR PROMOTION EXPENSES
          -----------------------------------
          The Company expenses all selling and tour promotion costs as
          incurred.

          NET INCOME PER SHARE
          --------------------
          In February 1997, Statement of Financial Accounting Standards No.
          128 (SFAS No. 128), "Earnings per Share" was issued. SFAS No. 128
          established standards for computing and presenting earnings per
          share (EPS). It requires the dual presentation and a
          reconciliation of basic and diluted EPS. The Company adopted the
          provisions of SFAS No. 128 in 1997, and all prior period EPS
          calculations have been restated to conform with SFAS No. 128.
          There was no effect of adopting SFAS No. 128 on EPS as previously
          reported.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

          NET INCOME PER SHARE, CONTINUED
          -------------------------------
          Net income per share - basic is computed by dividing net income
          by the weighted-average number of common shares outstanding
          during the period. Net income per share - diluted is computed by
          increasing the weighted-average number of common shares
          outstanding by the additional common shares that would have been
          outstanding if the dilutive potential common shares had been
          issued.

          Historical net income per share for the year ended December 31,
          1995 has not been presented as it is not meaningful in the
          presentation of these financial statements. Pro forma weighted
          average common shares outstanding have been calculated for the
          year ended December 31, 1995, using common shares outstanding
          after the reorganization and, including certain shares issued in
          connection with the initial public offering (see Notes 10
          and 11).

          ACCOUNTING FOR STOCK OPTIONS
          ----------------------------
          In October 1995, the Financial Accounting Standards Board issued
          SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No.
          123 establishes financial accounting and reporting standards for
          stock-based employee compensation plans. SFAS No. 123 encourages
          all entities to adopt a fair value based method of accounting,
          but allows an entity to continue to measure compensation cost for
          those plans using the intrinsic value method of accounting
          prescribed by Accounting Principles Board Opinion No. 25,
          "Accounting for Stock Issued to Employees." The Company adopted
          the disclosure only provisions of SFAS No. 123 on January 1,
          1996.

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

          RECLASSIFICATIONS
          -----------------
          Certain prior year amounts have been reclassified to conform with
          the 1997 presentation. These reclassifications had no effect on
          net income or retained earnings as previously reported.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

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

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


      2.  INVESTMENTS:

          TRADING SECURITIES
          ------------------
          At December 31, 1997, the Company had foreign currency forward
          contracts. The cost and fair values of these securities were as
          follows:

               Cost                                            $        0
               Gross unrealized gains                             374,775
               Gross unrealized losses                         (1,049,400)
                                                               ----------
               Fair value (carrying value)                     $ (674,625)
                                                               ==========

          The fair value of the Company's investments in foreign currency
          forward contracts is based upon the spot price of these
          currencies at December 31, 1997.

          There was no cost or unrealized gain or loss associated with the
          Company's foreign currency contracts at December 31, 1996. Net
          realized gains (losses) on investments of $(426,901), $290,253
          and $7,983 for the years ended December 31, 1997, 1996 and 1995,
          respectively, were included in the determination of net income.

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      2.  INVESTMENTS, CONTINUED:

          TRADING SECURITIES, CONTINUED
          -----------------------------
          AVAILABLE-FOR-SALE SECURITIES
          -----------------------------
          The Company's available-for-sale investments were all obtained
          through the acquisition of a subsidiary on December 31, 1996 (see
          Note 12). Since the acquisition was accounted for using the
          purchase method of accounting, cost and market value were the
          same at December 31, 1996 as follows:

                Taxable fixed income securities                  $224,315
                Equity securities                                 365,796
                                                                 --------
                                                                 $590,111
                                                                 ========

     3.  PROPERTY AND EQUIPMENT:

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

                                                   1997        1996
                                                   ----------  ----------
             Office furniture, fixtures and
               equipment                           $1,519,240  $1,312,516
             Computer equipment                     2,308,828   2,014,779
             Leasehold improvements                   676,065     161,301
                                                   ----------  ----------
                                                    4,504,133   3,488,596
             Less accumulated depreciation
               and amortization                    (2,355,828) (1,913,110)
                                                   ----------  ----------
                                                   $2,148,305  $1,575,486
                                                   ==========  ==========

          Depreciation and amortization expense on property and equipment
          of approximately $444,000, $327,000 and $227,000 for the years
          ended December 31, 1997, 1996 and 1995, respectively, were
          included in the determination of net income.


      4.  NOTE PAYABLE:

          During 1997, in conjunction with one of the Company's
          acquisitions, the Company agreed to pay $541,143 over three years
          with quarterly principal and interest payments of $50,000. The
          amount bears interest at 6.5% and the obligation is unsecured.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      4.  NOTE PAYABLE, CONTINUED:

          At December 31, 1997, future maturities of the note payable are
          as follows:

               Year Ended
               December 31,
               ------------
                 1998                                $171,241
                 1999                                 182,808
                 2000                                 145,888
                                                     --------
                                                     $499,937
                                                     ========

      5.  INCOME TAXES:

          Effective August 4, 1995, the Company terminated its S
          corporation status. As a result, the Company's earnings for the
          period ended August 4, 1995 were taxed at the shareholders'
          level. From August 5, 1995, the Company's earnings (losses) have
          been taxed as a C corporation and the resultant income taxes have
          been reflected in the consolidated financial statements.

          The provision (benefit) for income taxes for the years ended
          December 31, 1997, 1996 and 1995 consisted of the following:

                                       1997        1996        1995
                                       ----------  ----------  ----------
             Current:
               Federal                 $3,356,949  $1,542,186
               State                      102,866      33,974
             Deferred                    (114,350)    458,235  $ (340,708)
                                       ----------  ----------  ----------
                                       $3,345,465  $2,034,395  $ (340,708)
                                       ==========  ==========  ==========

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      5.  INCOME TAXES, CONTINUED:

           Components of the net deferred tax assets and liabilities as of
           December 31, 1997 and 1996 are as follows:

                                       December 31, 1997
                                       -----------------------------------
                                       Assets      Liabilities   Total
                                       ---------   -----------   ---------
            Accrued vacation           $  44,051                 $  44,051
            Depreciation                            $(199,614)    (199,614)
            Unrealized loss on
              futures contracts          272,565                   272,565
            Amortization of good-
              will and non-compete
              agreements                  31,782                    31,782
            Net operating loss
              carryforwards              293,045                   293,045
            Customer advances                        (415,661)    (415,661)
            Inventory valuation           29,467                    29,467
            Other                          2,202                     2,202
                                       ---------    ---------    ---------
            Total temporary
              differences and
              tax attributes           $ 673,112    $(615,275)   $  57,837
                                       =========    =========    =========

                                       December 31, 1996
                                       -----------------------------------
                                       Assets       Liabilities  Total
                                       ---------    -----------  ---------
            Accrued vacation           $  51,380                 $  51,380
            Depreciation                            $(163,044)    (163,044)
            Unrealized gain on
              available-for-sale
              investments                              (7,364)      (7,364)
            Net operating loss
              carryforwards              279,180                   279,180
            Customer advances                        (295,248)    (295,248)
            Other                          1,050       (4,414)      (3,364)
                                       ---------    ---------    ---------
            Total temporary
              differences and
              tax attributes           $ 331,610    $(470,070)   $(138,460)
                                       =========    =========    =========

           The Company does not believe a valuation allowance is necessary
           to reduce the deferred tax asset as this asset will more likely
           than not be realized through the future reversal of temporary
           taxable items. Although realization is not assured, management
           believes it is more likely than not that all of the deferred tax
           asset will be utilized.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      5.  INCOME TAXES, CONTINUED:

          The income tax provision (benefit) for the years ended
          December 31, 1997, 1996 and 1995 differ from that computed using
          the federal statutory rate applied to income before income taxes
          as follows:
     <TABLE>
     <CAPTION>
                                   1997                1996                1995
                                   -----------------   -----------------   -----------------
                                   Amount      %       Amount      %       Amount      %
                                   ----------  -----   ----------  -----   ----------  -----
      <S>                          <C>         <C>     <C>         <C>     <C>         <C>
      Provision at the federal
        statutory rate             $3,054,083  34.0%   $2,033,516  34.0%   $1,637,639  34.0%
      Tax effect of income not
        subject to federal tax
        due to Sub-chapter S
        status                                                             (2,062,273)(42.8)
      Recognition of net deferred
        tax liability in
        connection with S
        corporation termination                                                83,926   1.7
      Nondeductible goodwill           78,869   0.9
      State income tax, net of
        federal benefit                67,892   0.8
      Adjustment of prior years'
        taxes                         104,144   1.2
      Other                            40,477   0.3           879
                                   ----------  ----    ----------  ----    ---------   ----
                                   $3,345,465  37.2%   $2,034,395  34.0%   $(340,708)  (7.1)%
                                   ==========  ====    ==========  ====    =========   ====
      </TABLE>

           At December 31, 1997, the Company has acquired companies with
           federal net operating loss carryforwards of approximately
           $792,000, which can be used to offset future regular taxable
           income. These carryforwards expire in 2011. The Company's
           utilization of tax net operating loss carryforwards is currently
           limited to approximately $133,000 annually, subject to earnings
           from the acquired entity.


      6.   COMMITMENTS AND CONTINGENCIES:

           The substantial majority of the Company's travel programs take
           place outside of the United States and most foreign suppliers
           require payment in currency other than the U.S. dollar.
           Accordingly, the Company is exposed to foreign currency risk
           relative to changes in foreign currency exchange rates between
           those currencies and the U.S. dollar. The Company has a program
           to provide an economic hedge against certain of these foreign
           currency risks. The Company uses forward contracts which allow
           the Company to acquire the foreign currency at a fixed price for
           a specified period of time. Additionally, the Company uses
           foreign currency call options which provide the Company with the
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      6.   COMMITMENTS AND CONTINGENCIES, CONTINUED:

           option to acquire certain foreign currencies at a fixed exchange
           rate and time period. Concurrent with the purchase of a foreign
           currency call option, the Company sells a foreign currency put
           option to minimize the net premium paid for the call option. The
           strike prices on these options generally straddle the exchange
           rate at the time the options are purchased and sold. Any gains
           or losses associated with these anticipated transactions are
           recognized in the Company's operations currently based upon the
           fair value of the instruments as the Company does not have firm
           commitments to purchase goods and services denominated in
           foreign currencies. The Company also purchases future contracts
           to similarly hedge its foreign currency risk. The Company is
           exposed to credit risk under the forward contracts to the extent
           that the counterparty is unable to perform under the agreement.
           The Company has a $23,000,000 credit facility through July 1998
           to support foreign currency purchases and foreign exchange
           forward contracts.

           At December 31, 1997, the Company had outstanding forward
           exchange contracts to purchase foreign currencies as follows:

                 Currency                               Amount
                 --------                               ------
                 Australian dollar                      $ 5,273,570  (A)
                 French franc                             1,011,638  (B)
                 New Zealand dollar                       1,235,850  (C)
                 British pound                            7,879,225  (B)
                 Australian dollar                        2,036,925  (D)
                                                        -----------
                                                        $17,437,208
                                                        ===========

         (A) Matures in April-July 1998
         (B) Matures in April-June 1998
         (C) Matures in April-August 1998
         (D) Matures in May 1999

         At December 31, 1996, there were no unrealized gains or losses
         associated with the Company's foreign currency contracts. For the
         years ended December 31, 1997 and 1995, the Company recognized
         unrealized foreign currency gains (losses) associated with these
         financial instruments of $(674,625) and $270,488, respectively.

         The Company is subject to claims, suits and complaints which have
         arisen in the ordinary course of business. In the opinion of
         management and its legal counsel, all matters are adequately
         covered by insurance or, if not covered, are without merit or are
         of such a nature, or involve such amounts as would not have a
         material effect on the financial position, cash flows or results
         of operations of the Company.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      6.   COMMITMENTS AND CONTINGENCIES, CONTINUED:

           The Company leases office facilities and office equipment under
           noncancelable operating leases. At December 31, 1997, future
           noncancelable lease commitments, including the lease described
           in Note 7, are as follows:

               Year Ended
               December 31,
               ------------
                 1998                              $  653,283
                 1999                                 536,131
                 2000                                 485,964
                 2001                                 449,605
                 2002                                 447,354
                 Thereafter                           887,808
                                                   ----------
                                                   $3,460,145
                                                   ==========

           Total rent expense for the years ended December 31, 1997, 1996
           and 1995 was approximately $747,000, $503,000 and $444,000,
           respectively.

           In addition to the above lease commitments, the Company entered
           into a new lease agreement for one of its facilities commencing
           in June 1998 for $28,346 per month for seven years.
           Additionally, with an acquisition in February 1998 described in
           Note 12, the Company assumed a lease for $15,640 per month until
           2003.


      7.   RELATED-PARTY TRANSACTIONS:

           In 1992, the Company sold, financed and leased back its office
           building and land to a partnership formed by two shareholders of
           the Company, who were also officers and directors. Effective
           January 1, 1995, the Company modified its lease to provide a 10-
           year lease cancelable with notice after the initial three-year
           term. This lease is renewable for an additional 10 years after
           the initial lease term. For each of the years ended December 31,
           1997, 1996 and 1995, the Company incurred rent expense
           approximating $444,000 under this lease.

           In March 1995, the Company loaned $1,000,000 each to Messrs.
           John and Peter Ueberroth (the Ueberroths), Company shareholders,
           under notes receivable bearing interest at 7.25% per annum. In
           June 1995, both notes were repaid in full, and the Company
           recognized approximately $36,000 of interest income during 1995.

           The Company owns a 15% interest in a joint venture whose
           Chairman of the Board and Chief Executive Officer is also a
           Director of the Company.  Also, the President of the Company is
           a director of the joint venture.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.   STOCK PLANS:

           The Company adopted the 1995 Equity Participation Plan (the
           Plan) during 1995 which provides for the grant of stock options,
           awards of restricted stock, performance or other awards or stock
           appreciation rights to directors, key employees and consultants
           of the Company. The maximum number of shares which may be
           awarded under the Plan is 600,000 shares. Awards cannot exceed
           100,000 shares to any individual in a calendar year.

           Under the terms of the Plan, options to purchase shares of the
           Company's common stock are granted at a price set by the
           Compensation Committee of the Board of Directors, not to be less
           than the par value of a share of common stock and if granted as
           performance-based compensation or as incentive stock options, no
           less than the fair market value of the stock on the date of
           grant. The Compensation Committee establishes the vesting period
           of the awards. The options may be exercised any time after they
           are fully vested for a period up to 10 years from the grant
           date.

           On January 1, 1996, the Company adopted SFAS No. 123,
           "Accounting for Stock-Based Compensation." As permitted by SFAS
           No. 123, the Company has chosen to apply APB Opinion No. 25 (APB
           No. 25), "Accounting for Stock Issued to Employees" and related
           interpretations in accounting for its plans. Had compensation
           cost for the Company's plans been determined based on the fair
           value at the grant dates for awards under the plans consistent
           with the method of SFAS No. 123, the Company's pro forma net
           income and net income per share would have been changed to the
           pro forma amounts indicated below:

     <TABLE>
     <CAPTION>
                        Year Ended              Year Ended              Year Ended
                        December 31, 1997       December 31, 1996       December 31, 1995
                        ----------------------  ----------------------  ----------------------
                        As          Pro         As          Pro         As          Pro
                        Reported    Forma       Reported    Forma       Reported    Forma
                        ----------  ----------  ----------  ----------  ----------  ----------
      <S>               <C>         <C>         <C>         <C>         <C>         <C>
      Net income        $5,637,132  $5,242,093  $3,946,535  $3,783,749  $3,178,947  $3,032,901
                        ==========  ==========  ==========  ==========  ==========  ==========
      Net income
        per share -
        basic           $     0.83  $     0.78  $     0.60  $     0.57  $     0.57  $     0.54
                        ==========  ==========  ==========  ==========  ==========  ==========
      Net income
        per share -
        diluted         $     0.82  $     0.76  $     0.59  $     0.57  $     0.56  $     0.54
                        ==========  ==========  ==========  ==========  ==========  ==========
      </TABLE>
      <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  STOCK PLANS, CONTINUED:

          The fair value of each option grant is estimated on the date of
          grant using the Black-Scholes option-pricing model with the
          following weighted-average assumptions used for grants in 1997,
          1996 and 1995:

                                    1997        1996          1995
                                    ----------  ------------  ------------
             Dividend yield                0%            0%            0%
             Expected volatility          63%           84%           84%
             Risk free interest
               rates                    6.50%   6.40%-6.44%   5.57%-5.65%
             Expected option lives  9.7 years       8 years       8 years


         Stock option transactions are summarized as follows:

     <TABLE>
     <CAPTION>
                                                          Weighted-
                                                          Average    Exercise
                                              Number of   Exercise   Price           Expiration
                                              Shares      Price      Per Share       Date
                                              ---------   --------   -------------   ----------
      <S>                                     <C>         <C>        <C>             <C>
            Balance, December 31, 1994             -
              Options granted                  319,800     $ 8.92    $   8.25-9.00      2005
              Options forfeited                (42,750)      9.00             9.00
                                               -------     ------    -------------
            Balance, December 31, 1995         277,050       8.90        8.25-9.00      2005
              Options granted                  109,400      10.79       9.75-11.25      2006
              Options forfeited               (145,087)      9.06       9.00-11.00
                                               -------     ------    -------------
            Balance, December 31, 1996         241,363       9.66       8.25-11.25      2005-
                                                                                        2006
              Options granted                  269,950      10.84       8.75-15.25      2007
              Options forfeited                (49,925)      9.53       9.00-11.00
              Options exercised                (14,336)      9.47       9.00-11.25
                                               -------     ------    -------------
            Balance, December 31, 1997         447,052     $10.39    $  8.25-15.25      2005-
                                               =======     ======    =============      2007
            Exercisable, December 31, 1997      76,326     $ 9.34
                                               =======     ======
      </TABLE>

          The weighted-average fair value of options granted during 1997,
          1996 and 1995 were $8.32 per share, $7.95 per share and $8.41 per
          share, respectively.

          In addition to the stock options above, during 1997, the Company
          granted an executive 50,000 shares of the Company's stock which
          vests over four years. The Company incurred compensation expense
          of approximately $53,000 in 1997 related to these shares.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      9.  EMPLOYEE BENEFIT PLANS:

          Effective January 1, 1993, the Company established a
          noncontributory profit sharing plan which covers substantially
          all employees. The plan provides full vesting upon eligibility
          and permits employees to direct the investment of their accounts.
          Contributions by the Company are determined at the discretion of
          the Board of Directors. No contributions were made to the plan
          during the year ended December 31, 1995. During 1996, the assets
          of the plan were transferred into a new 401(k) Profit-Sharing
          Plan (the Plan).

          Employees are eligible to participate in the Plan upon one year
          of service and 21 years of age. Employees may contribute up to
          15% of their salary, subject to the maximum contribution allowed
          by the Internal Revenue Service. The Company's matching
          contribution is discretionary based upon approval by management.
          Employees are 100% vested in their contributions and vest in
          Company matching contributions equally over four years. During
          the years ended December 31, 1997 and 1996, the Company
          contributed approximately $26,000 and $57,000 to the Plan,
          respectively. No contributions were made to the Plan in 1995.


     10.  REORGANIZATION AND INITIAL PUBLIC OFFERING:

          On January 3, 1995, the shareholders sold 3,320 shares to new
          shareholders (the Ueberroths). Simultaneously, the Company
          redeemed the remaining 3,316 shares outstanding for $1,820,000.
          The prior shareholders, all of whom were officers and directors
          of the Company, resigned from the Board of Directors effective
          January 3, 1995, and the Ueberroths were installed as the new
          officers and directors. The prior shareholders were to continue
          employment with the Company under employment contracts and
          entered into an agreement not to compete with the Company for a
          10-year period. The Company's obligations to the prior
          shareholders under these agreements aggregated $1,700,000 per
          year over the 10-year agreement terms. These transactions were
          rescinded in entirety in connection with the Company's initial
          public offering in August 1995. As a result of the rescission,
          the Company recorded a receivable from shareholders for
          $1,820,000 to reflect the reversal of the common stock
          redemption.

          In connection with the Company's initial public offering, the
          Ueberroths purchased 2,823 shares and the Company redeemed 2,823
          shares of the Company's 6,636 shares of common stock held by the
          shareholders for $1,820,000 effective January 1995. In connection
          with the Company's reincorporation (see Note 1), the Company
          increased the number of common shares to 4,995,030 (1,310 shares
          of the new corporation for each share of the old corporation).
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     10.  REORGANIZATION AND INITIAL PUBLIC OFFERING,CONTINUED:

          Also, the Company authorized 2,000,000 shares of preferred stock
          which can be issued by the Board of Directors, without
          shareholder authorization, with such preferences as determined by
          the Board of Directors.

          In August 1995, the Company completed an initial public offering
          of its common stock whereby it sold 1,540,000 shares at $9 per
          share. Proceeds, net of offering costs, were approximately
          $11,983,000.


     11.  PRO FORMA STATEMENT OF INCOME INFORMATION:

          The pro forma statement of income for the year ended December 31,
          1995 presents the pro forma effects of recording an income tax
          provision for the Company as a C corporation rather than an S
          corporation. The total pro forma adjustment to the historical
          information for the year ended December 31, 1995 was $1,978,347.


     12.  BUSINESS ACQUISITIONS:

          In February 1998, the Company acquired certain assets of a
          meeting management company specializing in comprehensive,
          integrated hotel registration and related travel services for
          major meetings, conventions and trade shows. The Company is
          located in Boston, Massachusetts. In February 1998, the Company
          acquired all of the outstanding stock of a meeting management and
          incentive travel company located in Westlake, California. The
          total purchase price for these acquisitions was $7,550,000 and
          192,255 shares of the Company's restricted common stock and
          certain contingent consideration. The common stock issued to
          effect the transactions will be recorded at fair value.

          In September 1997, the Company acquired the assets of a company
          located in Waconia, Minnesota. The Company organizes and operates
          travel and other incentive programs, professional meetings,
          conventions and seminars for businesses. The results of
          operations of this business for the year ended December 31, 1996
          and for the 1997 period prior to being acquired by the Company
          were immaterial to the consolidated operating results of the
          Company. The total purchase price of this company was $500,000 in
          cash, a $541,000 note payable and certain contingent
          consideration as described below. Goodwill related to this
          acquisition of approximately $1,054,000 is being amortized over
          15 years.

          The contingent consideration to be paid is dependent upon the
          success of the acquired companies' programs. The contingent
          consideration will be accounted for as goodwill and will be
          amortized accordingly when, and if, the contingency is removed
          and additional consideration is paid.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     12.  BUSINESS ACQUISITIONS, CONTINUED:

          In December 1996, the Company acquired all of the outstanding
          common stock of a company which is located in Minneapolis,
          Minnesota, with sales offices in Des Moines, Iowa; Newport Beach
          and San Francisco, California; Philadelphia, Pennsylvania; and
          Fairway, Kansas. The Company administers incentive travel and
          merchandise programs. In connection with this acquisition, the
          Company also entered into a ten-year covenant-not-to-compete
          agreement for a total of $1,200,000. This amount will be paid in
          equal annual payments over eight years.

          In February 1996, the Company acquired the assets of a company
          which has offices in Winnebago, Illinois and Birmingham, Alabama
          and provides adult travel programs. In connection with the
          acquisition, the Company also entered into a covenant-not-to-
          compete agreement for a total of $300,000, to be paid over 4.5
          years.

          In January 1996, the Company acquired all of the outstanding
          stock of a meeting management and incentive travel company
          located in Newport Beach, California.

          All of the above acquisitions have been accounted for using the
          purchase method of accounting. The results of operations of these
          companies have been included in the consolidated statement of
          income since their respective dates of acquisition.

          The following unaudited pro forma summary presents the
          consolidated results of operations of the Company as if the 1996
          acquisitions had occurred at January 1, 1995:

                                                 1996         1995
                                                 -----------  -----------
             Revenue                             $22,616,552  $21,922,665
                                                 ===========  ===========
             Net income                          $ 3,690,375  $ 3,045,964
                                                 ===========  ===========
             Net income per share - basic        $      0.55  $      0.52
                                                 ===========  ===========

          The above amounts are based upon certain assumptions and
          estimates which the Company believes are reasonable and do not
          reflect any benefit from economies which might be achieved from
          combined operations. The pro forma results do not necessarily
          represent results which would have occurred if the acquisitions
          had taken place on the bases assumed above, nor are they
          indicative of the results of future combined operations.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     13.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The following disclosure of the estimated fair value of financial
          instruments is made in accordance with the requirements of
          Statement of Financial Accounting Standards No. 107, "Disclosures
          about Fair Value of Financial Instruments." The estimated fair
          value amounts have been determined using available market
          information and appropriate valuation methodologies. However,
          considerable judgment is necessarily required to interpret market
          data and to develop the estimates of fair value. Accordingly, the
          estimates presented herein are not necessarily indicative of the
          amounts the Company could realize in a current market exchange.
          The use of different market assumptions and/or estimation
          methodologies may have a material effect on the estimated fair
          value amounts.

          The following methods and assumptions were used to estimate the
          fair value of each class of financial instrument for which it is
          practicable to estimate that value. Potential income tax
          ramifications related to the realization of unrealized gains and
          losses that would be incurred in an actual sale and/or settlement
          have not been taken into consideration.

             CASH AND CASH EQUIVALENTS - The carrying value of cash and
             cash equivalents approximates fair value due to the nature of
             the cash investments.

             INVESTMENTS - The fair value of the Company's investments in
             foreign currency forward contracts is based on quoted market
             prices and the spot rate of the foreign currencies subject to
             contracts at year end. The fair value of the Company's foreign
             currency put and call options is based on the estimated amount
             to  terminate  the  put  and call contracts with the
             counterparties at year end. The fair value of the Company's
             investment in debt and equity securities is based on quoted
             market prices.

             OTHER ASSETS - The fair value of the note receivable, which is
             included in other assets, is based on the discounted value of
             contractual cash flows. The discount rate is estimated using
             the rates currently offered for notes with similar remaining
             maturities and credit risks.

             OTHER INVESTMENTS - The fair value of other investments
             approximates carrying value.

             NOTES PAYABLE - The fair value of notes payable is based on
             the discounted value of contractual cash flows of the notes.
             The discount rate is estimated using the rates currently
             offered for debt with similar remaining maturities.
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     13.  FAIR VALUE OF FINANCIAL INSTRUMENTS,CONTINUED:

          The estimated fair values of the following financial instruments
          as of December 31, 1997 and 1996 are as follows:
     <TABLE>
     <CAPTION>
                                          1997                        1996
                                          -------------------------   -------------------------
                                          Carrying      Fair          Carrying      Fair
                                          Amount        Value         Amount        Value
                                          -----------   -----------   -----------   -----------
      <S>                                 <C>           <C>           <C>           <C>
      Financial assets:
        Cash and cash equivalents         $22,870,546   $22,870,546   $18,281,433   $18,281,433
        Investments                          (674,625)     (674,625)      590,111       590,111
        Other assets                          162,354       162,354        35,513        35,513
        Other investments                     462,500       462,500       262,500       262,500

      Financial liabilities:
        Notes payable                         499,937       499,937       201,146       201,146
      </TABLE>
            LIMITATIONS - The fair value estimates are made at a discrete
            point in time based on relevant market information and
            information about the financial instruments. Fair value
            estimates are based on judgments regarding current economic
            conditions, risk characteristics of various financial
            instruments and other factors. These estimates are subjective
            in nature and involve uncertainties and matters of significant
            judgment and, therefore, cannot be determined with precision.
            Changes in assumptions could significantly affect the
            estimates. Accordingly, the estimates presented herein are not
            necessarily indicative of what the Company could realize in a
            current market exchange.


     14.  EARNINGS PER SHARE:

          In accordance with SFAS No. 128, the following table presents a
          reconciliation of the numerators and denominators used in the
          basic and diluted EPS computations. Also shown is the number of
          dilutive securities (stock options) that were included in the
          dilutive EPS computation.
     <TABLE>
     <CAPTION>
                                                       1997
                                                       ----------------------------------
                                                                    Weighted-
                                                       Net          Average        Per
                                                       Income       Shares         Share
                                                       (Numerator)  (Denominator)  Amount
                                                       -----------  -------------  ------
              <S>                                      <C>          <C>            <C>
              Net income per share - basic             $5,637,132   6,759,541      $ 0.83
                                                       ==========   =========      ======
              Net income per share - diluted:
                Net income                             $5,637,132
                                                       ==========
      </TABLE>
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  EARNINGS PER SHARE, CONTINUED:

     <TABLE>
     <CAPTION>
                                                       1997
                                                       ----------------------------------
                                                                    Weighted-
                                                       Net          Average        Per
                                                       Income       Shares         Share
                                                       (Numerator)  (Denominator)  Amount
                                                       -----------  -------------  ------
              <S>                                      <C>          <C>            <C>
              Weighted-average shares outstanding                   6,759,541
                Effect of dilutive securities                         133,690
                                                                    ---------
                                                                    6,893,231      $ 0.82
                                                                    =========      ======

      <CAPTION>
                                                       1996
                                                       ----------------------------------
                                                                    Weighted-
                                                       Net          Average        Per
                                                       Income       Shares         Share
                                                       (Numerator)  (Denominator)  Amount
                                                       -----------  -------------  ------
              <S>                                      <C>          <C>            <C>
              Net income per share - basic             $3,946,535   6,618,454      $ 0.60
                                                       ==========   =========      ======
              Net income per share - diluted:
                Net income                             $3,946,535
                                                       ==========
                Weighted-average shares
                  outstanding                                       6,618,454
                Effect of dilutive securities                          31,430
                                                                    ---------
                                                                    6,649,884      $ 0.59
                                                                    =========      ======
      </TABLE>

      <TABLE>
      <CAPTION>
                                                       1995
                                                       ----------------------------------
                                                                    Weighted-
                                                       Net          Average        Per
                                                       Income       Shares         Share
                                                       (Numerator)  (Denominator)  Amount
                                                       -----------  -------------  ------
              <S>                                      <C>          <C>            <C>
              Net income per share - basic             $3,178,947   5,623,688      $ 0.57
                                                       ==========   =========      ======
              Net income per share - diluted:
                Net income                             $3,178,947
                                                       ==========
                Weighted-average shares
                  outstanding                                       5,623,688
                Effect of dilutive securities                          24,194
                                                                    ---------
                                                                    5,647,882      $ 0.56
                                                                    =========      ======
      </TABLE>