UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  For the quarterly period ended June 30, 2000

                                       OR

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

                        For the transition period from to

                         Commission File Number 1-10390

                           BERLITZ INTERNATIONAL, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

     NEW YORK                                                 13-355-0016
-------------------------------                           -------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification Number)

              400 ALEXANDER PARK, PRINCETON, NEW JERSEY 08540-6306
            --------------------------------------------------------
                    (Address of principal executive offices)

                                 (609) 514-9650
                      -------------------------------------
               Registrant's telephone number, including area code

                                       N/A
               Former name, former address and former fiscal year,
                          if changed since last report

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

The number of shares outstanding of the registrant's common stock, at the close
of business on August 11, 2000, were 9,546,536.

                                  Page 1 of 32

<PAGE>

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                           BERLITZ INTERNATIONAL, INC.
           CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                       FOR THE THREE MONTHS ENDED JUNE 30
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          2000                       1999
                                                              ------------------        -----------------
<S>                                                           <C>                       <C>
Sales of services and products                                $        119,463          $         111,194
                                                              ------------------        -----------------

Operating costs and expenses:
   Cost of services and products sold                                   71,834                     65,023
   Selling, general and administrative                                  38,924                     37,605
   Amortization of publishing rights, excess of cost
      over net assets acquired, and other intangibles                    4,554                      4,369
                                                              ------------------        -----------------

Operating profit                                                         4,151                      4,197
Interest expense on long-term debt                                          10                         20
Interest expense on convertible debentures
   with related parties                                                  1,994                      2,004
Interest expense on notes to affiliates                                    641                        648
Other expense, net                                                         204                         80
                                                              ------------------        -----------------

Income before income taxes, minority interest in
   loss (earnings) of subsidiary, and
   extraordinary item                                                    1,302                      1,445
Income tax expense                                                      (2,038)                    (1,811)
Minority interest in (earnings) loss
   of subsidiaries                                                         (71)                        60
                                                              ------------------        -----------------

Loss before extraordinary item                                            (807)                      (306)
Extraordinary loss from extinguishment of debt                               -                         (4)
                                                              ------------------        -----------------
Net loss                                                      $           (807)         $            (310)
                                                              ==================        =================
Loss per share - basic and diluted:
   Loss before extraordinary item                             $          (0.08)         $          (0.03)
   Extraordinary loss                                                        -                     (0.00)
                                                              ------------------        -----------------
   Loss per share                                             $          (0.08)         $          (0.03)
                                                              =================         =================

Average number of shares outstanding (000's)                             9,546                      9,530
                                                              ==================        =================
</TABLE>

See accompanying Notes to the Consolidated Condensed Financial Statements.

                                        2

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
           CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                        FOR THE SIX MONTHS ENDED JUNE 30
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          2000                       1999
                                                              ------------------        -----------------
<S>                                                           <C>                       <C>
Sales of services and products                                $        232,007          $       215,640
                                                              ----------------          ---------------
Operating costs and expenses:
   Cost of services and products sold                                  139,457                  128,864
   Selling, general and administrative                                  76,523                   74,511
   Amortization of publishing rights, excess of cost
      over net assets acquired, and other intangibles                    9,179                    8,722
                                                              ----------------          ---------------

Operating profit                                                         6,848                    3,543
Interest expense on long-term debt                                          33                    1,873
Interest expense on convertible debentures
   with related parties                                                  3,989                    2,435
Interest expense on notes to affiliates                                  1,296                    1,236
Other expense (income), net                                                299                     (885)
                                                              ----------------          ---------------

Income (loss) before income taxes, minority interest in
   loss (earnings) of subsidiary, and
   extraordinary item                                                    1,231                   (1,116)
Income tax expense                                                      (3,773)                  (1,973)
Minority interest in (earnings) loss
   of subsidiaries                                                        (242)                     179
                                                              ----------------          ---------------

Loss before extraordinary item and cumulative
   effect of accounting change                                          (2,784)                  (2,910)
Extraordinary loss from extinguishment of debt,
   net of income tax benefit of  $44                                         -                   (2,144)
Cumulative effect of accounting change, net of
   income tax benefit of $2,900
   and minority interest expense of $189                                     -                   (5,605)
                                                              ----------------          ---------------
Net loss                                                      $         (2,784)         $       (10,659)
                                                              ================          ===============
Loss per share - basic and diluted:
   Loss before extraordinary item and cumulative
     effect of accounting change                              $          (0.29)         $         (0.31)
   Extraordinary loss                                                        -                    (0.22)
   Cumulative effect of accounting change                                    -                    (0.59)
                                                              ----------------          ---------------
   Loss per share                                             $          (0.29)         $         (1.12)
                                                              ================          ===============
Average number of shares outstanding (000's)                             9,546                    9,530
                                                              ================          ===============
</TABLE>

See accompanying Notes to the Consolidated Condensed Financial Statements.

                                        3

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   (UNAUDITED)
                                                                      JUNE 30,         DECEMBER 31,
                                                                          2000                 1999
                                                                ----------------      --------------
<S>                                                             <C>                  <C>
ASSETS
CURRENT ASSETS:
Cash and temporary investments                                  $       38,757       $       34,426
Accounts receivable, less allowance for
  doubtful accounts of $3,902 and $3,102                                48,104               54,185
Unbilled receivables                                                    11,968                7,514
Inventories, net                                                        10,222               10,405
Prepaid expenses and other current assets                                9,499                8,628
                                                                ---------------      --------------
  TOTAL CURRENT ASSETS                                                 118,550              115,158
Property and equipment, net of accumulated
  depreciation of $27,591 and $26,100                                   49,135               47,749
Publishing rights, net of accumulated
  amortization of $6,522 and $6,083                                     15,463               15,902
Excess of cost over net assets acquired and other intangibles,
  net of accumulated amortization of $100,619 and $92,936              467,341              480,967
Other assets                                                            37,162               37,244
                                                                --------------       --------------
  TOTAL ASSETS                                                  $      687,651       $      697,020
                                                                ==============       ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt                               $        1,232       $        5,118
Accounts payable                                                        10,372               12,026
Deferred revenues                                                       61,516               57,266
Payrolls and commissions                                                16,984               16,458
Income taxes payable                                                     1,584                  971
Interest payable on convertible debentures                               1,938                1,938
Accrued expenses and other current liabilities                          18,488               19,495
                                                                --------------       --------------
  TOTAL CURRENT LIABILITIES                                            112,114              113,272
Long-term debt                                                           1,772                1,887
Convertible debentures with related parties                            155,000              155,000
Notes payable to affiliates                                             50,000               50,000
Other liabilities                                                       27,391               28,399
Minority interest                                                       10,040                9,775
                                                                --------------       --------------
  TOTAL LIABILITIES                                                    356,317              358,333
                                                                --------------       --------------
SHAREHOLDERS' EQUITY:
Common stock                                                             1,005                1,003
Additional paid-in capital                                             372,791              372,518
Accumulated deficit                                                    (11,294)              (8,510)
Accumulated other comprehensive loss:
  Cumulative translation adjustment                                    (24,807)             (19,963)
Treasury stock at cost                                                  (6,361)              (6,361)
                                                                --------------       --------------
  TOTAL SHAREHOLDERS' EQUITY                                           331,334              338,687
                                                                --------------       --------------
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $      687,651       $      697,020
                                                                ==============       ==============
</TABLE>

See accompanying Notes to the Consolidated Condensed Financial Statements.

                                        4

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
             CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
                                   (UNAUDITED)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED JUNE 30,
                                                            ----------------------------------------------
                                                                            2000                      1999
                                                            --------------------       -------------------
<S>                                                         <C>                        <C>
Net loss                                                    $               (807)      $              (310)

Other comprehensive loss, net of tax:
   Foreign currency items, including translation
     adjustments, and the effects of certain
     hedges and intercompany transactions                                   (132)                   (1,766)
                                                            --------------------       -------------------
Comprehensive loss                                            $             (939)      $            (2,076)
                                                            ====================       ===================


The tax expense allocated to each component of other comprehensive loss is as
follows:

Foreign currency items                                      $                509       $               433
                                                            ====================       ===================


                                                                        SIX MONTHS ENDED JUNE 30,
                                                            ----------------------------------------------
                                                                            2000                      1999
                                                            --------------------       -------------------
<S>                                                         <C>                        <C>

Net loss                                                    $             (2,784)      $           (10,659)

Other comprehensive loss, net of tax:
   Foreign currency items, including translation
     adjustments, and the effects of certain
     hedges and intercompany transactions                                 (4,844)                   (8,031)
                                                            --------------------       -------------------
Comprehensive loss                                          $             (7,628)      $           (18,690)
                                                            ====================       ===================


The tax expense allocated to each component of other comprehensive loss is as
follows:

Foreign currency items                                      $                785       $             1,185
                                                            ====================       ===================
</TABLE>

See accompanying Notes to the Consolidated Condensed Financial Statements.

                                        5

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                        FOR THE SIX MONTHS ENDED JUNE 30,
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      2000                1999
                                                                           ---------------     ---------------
<S>                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                $        (2,784)    $       (10,659)
   Adjustments to reconcile net loss to net cash
    provided by operating activities:
     Depreciation and amortization                                                  15,110              14,086
     Cumulative effect of accounting change, net                                         -               5,605
     Extraordinary item, net                                                             -               1,072
     Other (primarily provision for bad debts and foreign exchange
      (gains) losses)                                                                1,986                (648)
     Changes in operating assets and liabilities                                     2,576              (3,061)
                                                                           ---------------     ---------------
       Net cash provided by operating activities                                    16,888               6,395
                                                                           ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                             (9,494)            (10,565)
   Acquisition of businesses                                                             -              (8,373)
   Intangible expenditures                                                             (31)                  -
                                                                           ---------------     ---------------
       Net cash used in investing activities                                        (9,525)            (18,938)
                                                                           ---------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of convertible debentures                                      -             155,000
   Proceeds from issuance of note payable to affiliate                                   -              50,000
   Proceeds from termination of currency swap agreements                             1,735                   -
   Net borrowings under revolving credit facility                                   (4,000)              4,000
   Repayment of long-term debt                                                           -            (146,899)
   Repayment of notes to affiliates                                                      -             (42,366)
   Payment of deferred finance costs                                                     -              (2,782)
                                                                           ---------------     ---------------
       Net cash (used in) provided by financing activities                          (2,265)             16,953
                                                                           ---------------     ---------------

Effect of exchange rate changes on cash and
  temporary investments                                                               (767)             (1,522)
                                                                           ---------------     ---------------

Net increase in cash and temporary investments                                       4,331               2,888
Cash and temporary investments, beginning of period                                 34,426              25,327
                                                                           ---------------     ---------------
Cash and temporary investments, end of period                              $        38,757      $       28,215
                                                                           ===============      ==============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash payments for:
         Interest                                                          $         5,216      $        3,084
                                                                           ===============      ==============
         Income taxes                                                      $         4,295      $        2,898
                                                                           ===============      ==============
  Cash refunds of income taxes                                             $           308      $          417
                                                                           ===============      ==============
</TABLE>

See accompanying Notes to the Consolidated Condensed Financial Statements.

                                        6

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1.       GENERAL

         The Consolidated Condensed Financial Statements of Berlitz
         International, Inc. (the "Company") have been prepared in accordance
         with the instructions to Form 10-Q and are unaudited. The information
         reflects all adjustments of a normal recurring nature which are, in the
         opinion of management, necessary for a fair presentation of such
         financial statements. The financial statements should be read in
         conjunction with the financial statements and related notes to the
         Company's 1999 Annual Report on Form 10-K, as filed with the Securities
         and Exchange Commission.

         Certain reclassifications have been made in prior years' financial
         statements and notes to conform to the 2000 presentation.

2.       LONG-TERM DEBT

         Long-term debt consists of the following:

                                                 JUNE 30,           DECEMBER 31,
                                                     2000                   1999
                                             ------------          ------------
         Revolving credit facility           $          -          $      4,000
         Other                                      3,004                 3,005
                                             ------------          ------------
             Total                                  3,004                 7,005
         Less current maturities                   (1,232)               (5,118)
                                             ------------          ------------
             Long-term debt                  $      1,772          $      1,887
                                             ============          ============

         On March 31, 1999, the Company entered into a $25,000 revolving credit
         facility (the "Revolving Facility"), which expires in February 2002. At
         the option of the Company, outstanding borrowings under the Revolving
         Facility bear interest at variable rates equal to either: (i) a base
         rate approximating the U.S. prime rate; or (ii) the rate offered by
         certain reference banks to prime banks in the interbank Eurodollar
         market, fully adjusted for reserves plus a margin ranging from 0.375%
         to 0.5%; such margin is dependent on a specified leverage ratio of the
         Company. In addition, a commitment fee ranging from 0.125% to 0.20%
         will be charged on the available but unused amounts under the Revolving
         Facility, depending on a specified leverage ratio. There are no
         outstanding borrowings under the Revolving Facility at June 30, 2000.

         The Revolving Facility is subject to standard affirmative covenants,
         including financial and other informational reporting, compliance with
         laws, maintenance of insurance, maintenance of properties, payment of
         taxes, and preservation of corporate existence. The Revolving Facility
         also includes limitations on the ability of the Company and its
         subsidiaries to: (i) enter into mergers, acquisitions or sales of
         assets; (ii) incur, create or permit to exist liens; (iii) incur
         indebtedness and guarantee obligations; (iv) make loans or investments;
         (v) enter into transactions with affiliates; (vi) prepay subordinated
         indebtedness; and (vii) change the nature of the business conducted.
         Financial covenants included within the Revolving Facility require the
         Company to maintain certain levels of cash flow and impose limitations
         on total and senior debt.

                                        7

<PAGE>

 3.      CONVERTIBLE DEBENTURES WITH RELATED PARTIES

         On March 11, 1999 (the "Issue Date"), the Company's shareholders
         approved the issuance of, and the Company issued, $155,000 aggregate
         principal amount of 12-year convertible debentures (the "Convertible
         Debentures") in a private placement, pursuant to definitive investment
         agreements (the "Investment Agreements") dated as of October 2, 1998.
         Such debentures were issued as follows: (i) $100,000 aggregate
         principal amount (the "Apollo Debentures") to two affiliates of Apollo
         Management IV, L.P. ("Apollo"), a private investment firm; and (ii)
         $55,000 aggregate principal amount (the "Benesse Debentures") to
         Benesse Holdings International, Inc. ("BHI"), the Company's majority
         shareholder. The Convertible Debentures bear interest at 5% per annum,
         payable semi-annually. Principal amounts outstanding under such
         debentures are not due until March 2011, and the Company is not
         required to establish a bond sinking fund for repayment of this
         principal.

         The Convertible Debentures are convertible at any time into shares of
         the Company's common stock at a conversion price of $33.05 per share,
         subject to anti-dilution related adjustments to offset the effects of
         stock dividends and other changes in equity. The Company will, at all
         times, reserve out of its authorized but unissued common stock the full
         number of shares then issuable upon conversion of all outstanding
         Convertible Debentures.

         The Apollo Debentures and Benesse Debentures each independently provide
         for optional redemption by the Company, in whole but not in part, any
         time three years and two months following the Issue Date. If the
         average closing price of the Company's common stock for the 30 trading
         days following the third anniversary of the Issue Date exceeds $39.66
         per share, the Company may redeem at par. Otherwise, if the Convertible
         Debentures are redeemed, the Company must pay a redemption premium,
         expressed as a percentage of outstanding principal, as follows: (i) 4%
         for redemptions occurring in the fourth year after issue; (ii) 2% for
         redemptions occurring in the fifth year after issue; and (iii) 0% for
         redemptions occurring thereafter. All such redemptions are subject to
         the holders' rights to first convert their Convertible Debentures into
         common stock of the Company.

         The Convertible Debentures also allow Apollo and BHI to elect to
         exchange their convertible debentures, in whole, into non-convertible,
         seven-year fixed rate debt (the "Fixed Rate Debentures"). Such election
         may only be made if the average closing price of the Company's common
         stock during the 30 trading days immediately preceding the third
         anniversary of the Issue Date does not exceed $33.05. Furthermore, BHI
         may only effect an exchange if Apollo does so. Upon the determination,
         by an independent financial institution, of fixed interest rates that
         accurately price the Fixed Rate Debentures at par under specified
         circumstances at the time of the exchange, Apollo and BHI shall
         irrevocably decide whether to proceed with their exchanges. If only
         Apollo proceeds with such an exchange, the Company, no later than 150
         days from the third anniversary of the Issue Date, must either: (i)
         redeem all of the Apollo Debentures at par; or (ii) deliver the Fixed
         Rate Debentures to Apollo. If both Apollo and BHI proceed with their
         exchanges, the Company, within the same 150 day period, must either:
         (i) redeem both the Apollo Debentures and Benesse Debentures; or (ii)
         deliver the Fixed Rate Debentures to both Apollo and BHI.

                                        8

<PAGE>

         Principal amounts outstanding under the Fixed Rate Debentures would not
         be payable until maturity, while interest payments would be made
         semi-annually. The Fixed Rate Debentures' interest rate is subject to a
         cap of: (i) the applicable U.S. treasury rate + 5% (not to exceed 13%)
         if only Apollo receives Fixed Rate Debentures; or (ii) the applicable
         U.S. treasury rate + 7% (not to exceed 14%) if both Apollo and BHI
         receive Fixed Rate Debentures. The Fixed Rate Debentures may be
         redeemed by the Company after the third anniversary of their issuance
         upon payment of the principal amounts outstanding under the Fixed Rate
         Debentures and the following redemption premiums, expressed as a
         percentage of the outstanding principal amount: (i) one half of the per
         annum interest rate for redemptions occurring in the fourth year after
         issue; (ii) one quarter of the per annum interest rate for redemptions
         occurring in the fifth year after issue; and (iii) no premium for
         redemptions occurring thereafter.

         Prior to the third anniversary of the Issue Date, if BHI sells 80% or
         more of the shares of Berlitz common stock owned directly or indirectly
         by it on the Issue Date, the Company shall be required to make an offer
         to repurchase for cash: (i) the Apollo Debentures at a value equal to
         110% of the principal amount then outstanding; and (ii) the Benesse
         Debentures at a value equal to 101% of the principal amount then
         outstanding. In addition, if at any time on or after the Issue Date a
         change of control, as defined in the Investment Agreements, occurs but
         BHI sells less than 80% of its shares, or if BHI sells 80% of its
         shares on or after the third anniversary of the Issue Date, the Company
         shall be required to make an offer to repurchase for cash the
         Convertible Debentures (but not the Fixed Rate Debentures) at a value
         equal to 101% of the principal amount of the Convertible Debentures.

         The Convertible Debentures are subject to standard affirmative
         covenants, including financial and other informational reporting,
         compliance with laws, maintenance of insurance, maintenance of
         properties, payment of taxes, and preservation of corporate existence.
         Negative covenants that the Convertible Debentures are subject to
         include: (i) prohibitions on certain mergers, consolidations and asset
         transfers; (ii) forbearance from restrictions on rights of holders to
         convert or exchange the Convertible Debentures; and (iii), in the case
         of the Apollo Debentures, forbearance from amending certain
         understandings between the Company, Berlitz Japan, Inc. and BHI .

         The Investment Agreements include a number of other provisions,
         including: (i) the granting of certain demand and piggyback
         registration rights to the holders of the Convertible Debentures; (ii)
         the granting of a certain number of board seats to Apollo on the
         Company's Board of Directors; (iii) the granting of approval rights to
         Apollo, at the Company's Board level, over certain transactions; and
         (iv) certain restrictions on the transferability of the Apollo
         Debentures. The Company expanded its Board of Directors from 10 seats
         to 12 seats effective March 11, 1999, and granted two board seats to
         Apollo.

4.       NOTES PAYABLE TO AFFILIATES

         On March 11, 1999, BHI loaned $50,000 to the Company, evidenced by a
         12-year fixed rate subordinated promissory note (the "BHI Note"). Such
         note bears interest for

                                        9

<PAGE>

         the first five years at 5.2% per annum, and, thereafter, at a
         renegotiated fixed rate approximating LIBOR plus a margin based on the
         Company's then existing leverage. Interest is payable semiannually in
         cash while principal repayment is deferred until maturity. The BHI Note
         includes standard covenants similar to those included in the Benesse
         Debentures. In the event of a change in control, the BHI Note provides
         for redemption by the Company, at the option of BHI, at a price equal
         to 101% of the note's principal amount.

         The Company has used a portion of the proceeds from the issuance of the
         BHI Note and Convertible Debentures to repay in full the existing notes
         payable to affiliates.

         The Company incurred approximately $2,800 in deferred finance costs
         associated with the issuance of the Convertible Debentures and BHI
         Note. Such costs will be amortized over the 12-year life of the
         Convertible Debentures and BHI Note.

5.       EXTRAORDINARY LOSS

         On March 11, 1999, in connection with the issuance of the Convertible
         Debentures and BHI Notes and the extinguishment of the Company's
         long-term debt under its 1997 credit agreement (the "Bank Facility"),
         the Company terminated its interest rate swap agreement, which hedged
         the floating rate Bank Facility, for a cash payment of approximately
         $1,100. For the six months ended June 30, 1999, the Company recorded an
         extraordinary loss, net of tax benefit, of $2,144, consisting of the
         interest rate swap's fair market value and existing unamortized
         deferred finance costs at the time of extinguishment of the underlying
         debt.

6.       CUMULATIVE EFFECT OF ACCOUNTING CHANGE

         On December 3, 1999, the Securities and Exchange Commission ("SEC")
         issued its Staff Accounting Bulletin No. 101, "Revenue Recognition in
         Financial Statements" ("SAB 101"), which provides its views on applying
         generally accepted accounting principles to selected revenue
         recognition issues. The Company adopted the provisions of SAB 101
         effective January 1, 1999, and, as a result, changed its method of
         accounting for deferred revenues on lessons paid for but not expected
         to be taken due to a period of student inactivity. Through December
         1998, such amounts had been recognized in income based on historical
         experience by country, generally after a student had not attended a
         class for at least 60 days (or six months in the case of a corporate
         contract). Refunds subsequently issued were not material. Beginning in
         1999, deferred revenues on lessons paid for but not expected to be
         taken due to student inactivity (generally at least 60 days or six
         months, as applicable) are recognized in income when the obligation to
         issue a refund has expired. In certain countries where the refund
         obligation effectively never expires under local law, such deferred
         revenues are recognized into income no earlier than one year from the
         date of enrollment. The cumulative effect of the accounting change
         resulted in a charge to 1999 earnings of $5,605 (net of income tax
         benefit of $2,900 and minority interest expense of $189).

         The SEC is currently developing additional guidance with respect to SAB
         101. Until such time as the SEC staff issues such guidance, it is
         unclear what, if any, impact such guidance will have on the Company's
         current revenue recognition accounting policies.

                                       10

<PAGE>

7.      OTHER EXPENSE (INCOME), NET

<TABLE>
<CAPTION>
                                                          THREE MONTHS       THREE MONTHS
                                                         JUNE 30, 2000      JUNE 30, 1999
                                                         -------------      -------------
<S>                                                      <C>                <C>
         Interest income on temporary investments        $        (218)     $        (166)
         Foreign exchange losses (gains), net                      224               (294)
         Other non-operating taxes                                   2                111
         Loss on disposal of fixed assets                          188                103
         Other investment (income) expense, net                    (53)                72
         Other income, net                                          61                254
                                                         -------------     --------------
              Total other expense, net                   $         204     $           80
                                                         =============     ==============

                                                            SIX MONTHS        SIX MONTHS
                                                         JUNE 30, 2000     JUNE 30, 1999
                                                         -------------     -------------

         Interest income on temporary investments        $        (407)     $       (257)
         Foreign exchange losses (gains), net                      282            (1,202)
         Other non-operating taxes                                  87               231
         Loss on disposal of fixed assets                          296               122
         Other investment (income) expense, net                    (55)               14
         Other income, net                                          96               207
                                                         -------------     -------------
              Total other expense (income), net          $         299     $        (885)
                                                         =============     =============
</TABLE>

8.       EARNINGS (LOSS) PER SHARE

         Basic and Diluted earnings (loss) per share ("EPS") computations for
         "loss before extraordinary item and cumulative effect of accounting
         change" are the same for the three and six months ended June 30, 2000,
         and 1999. For the three months ended June 30, 2000, and 1999 they are
         $(0.08) and $(0.03), respectively, and for the six months ended June
         30, 2000 and 1999 they are $(0.29) and $(0.31), respectively.

9.       OPERATING SEGMENTS

         The Company's operations are principally conducted through two
         segments: Language Services (consisting of the Instruction, ELS
         Educational Services, Inc. ("ELS"), Publishing, Franchising, and Cross
         Cultural sub-segments), and Berlitz GlobalNET. ELS formerly included
         centers operating under the Berlitz on Campus ("BOC") brand name.
         Effective January 1, 2000, the BOC centers were renamed ELS. These are
         strategic business units that offer different products and services and
         that are managed separately by senior management due to different
         technology and marketing strategies.

         Within Language Services, the Instruction sub-segment (through the use
         of proprietary methods and materials) provides predominantly live
         language education in virtually all spoken languages. The ELS
         sub-segment provides intensive English education programs primarily in
         a campus setting. The Publishing sub-segment offers a wide range of
         publishing products such as dictionaries, phrase books, travel guides
         and self-study language materials, including CD-ROMs and
         audiocassettes. The Franchising sub-segment sells Berlitz language
         center franchises to independent franchisees in certain locations. The
         Cross Cultural sub-segment complements language study by providing
         expatriates with detailed practical and cultural information about the
         countries to which they are relocating.

                                       11

<PAGE>

         Berlitz GlobalNET helps customers prepare their products and services
         for the world market faster and at less cost. Berlitz GlobalNET
         provides high quality technical documentation translation, interpreting
         and rapidly expanding offerings in eBusiness Globalization services
         including Web localization and multilingual content management.
         Language-related services are offered for the entire business cycle,
         from globalization strategy and consulting to creating and translating
         content, designing, implementing and maintaining multilingual Websites.
         These services are based on the Company's skills in project management,
         high quality translation, software localization, software quality
         assurance and testing, and electronic publishing.

         The Company evaluates operating segment performance based on EBITA,
         defined as sales less cost of services and products sold, and selling,
         general and administrative expenses. It is calculated using amounts
         determined in accordance with U.S. generally accepted accounting
         principles ("U.S. GAAP"). EBITA is not a defined term under U.S. GAAP
         and is not necessarily indicative of operating income or cash flows
         from operations as determined under U.S. GAAP.

         The following tables present information about reported segment profit
         or loss and segment assets, and reconcile reportable segment revenues,
         profit or loss, and assets to the Company's consolidated totals:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                       ---------------------------         -------------------------
                                                          2000              1999             2000              1999
                                                          ----              ----             ----              ----
<S>                                                   <C>               <C>              <C>               <C>
REVENUES:
  Revenues from external customers:
     Language Services:
       Instruction                                    $    75,480       $    69,875      $   148,126       $   136,360
       ELS                                                 14,903            12,403           26,803            24,876
       Publishing                                           3,176             4,126            5,984             7,214
       Franchising                                            442               469              765               709
       Cross Cultural                                         748               645            1,462             1,232
       Other                                                    -               (1)                -               (1)
                                                      -------------     -------------    -------------     -------------
     Total Language Services                               94,749            87,517          183,140           170,390
     Berlitz GlobalNET                                     24,714            23,677           48,867            45,250
                                                      -------------     -------------    -------------     -------------
       Total external revenues                            119,463           111,194          232,007           215,640
                                                      -------------     -------------    -------------     -------------

  Intersegment revenues:
     Language Services:
       Instruction                                              1                 -                1                 -
       Publishing                                               3                 -               13                 -
       Franchising                                             48               125              106               238
                                                      -------------     -------------    -------------     -------------
     Total Language Services                                   52               125              120               238
     Berlitz GlobalNET                                       (71)                35                5                44
                                                      -------------     -------------    -------------     -------------
       Total  intersegment revenues                          (19)               160              125               282
                                                      -------------     -------------    -------------     -------------

  Total revenues for reportable segments                  119,444           111,354          232,132           215,922
  Elimination of intersegment revenues                         19              (160)            (125)             (282)
                                                      -------------     -------------    -------------     -------------
     Total consolidated revenues                      $   119,463       $   111,194      $   232,007       $   215,640
                                                      =============     =============    =============     =============
</TABLE>

                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                       ---------------------------         -------------------------
                                                          2000              1999             2000              1999
                                                          ----              ----             ----              ----
<S>                                                   <C>               <C>              <C>               <C>
INCOME (LOSS) BEFORE TAXES,  MINORITY INTEREST,  AND
EXTRAORDINARY ITEM:
  Segment EBITA:
     Language Services:
       Instruction                                    $    15,495       $    14,788      $    30,975       $    26,754
       ELS                                                    495               123              413             (264)
       Publishing                                             177               755              104               563
       Franchising                                            185               124              244                86
       Cross Cultural                                         107                85              364               238
       Language Service overhead expenses and other        (5,537)           (5,423)         (11,475)          (10,560)
                                                      -------------     -------------    -------------     -------------
     Total Language Services                               10,922            10,452           20,625            16,817
     Berlitz GlobalNET                                      1,400             1,644            2,532             2,289
     General corporate HQ expenses                         (3,617)           (3,530)          (7,130)           (6,841)
                                                      -------------     -------------    -------------     -------------
   Total EBITA                                              8,705             8,566           16,027            12,265
                                                      -------------     -------------    -------------     -------------
   Amortization of publishing rights, excess of cost over net assets acquired,
     and other intangibles:
     Language Services:
       Instruction                                         (2,552)           (2,525)          (5,118)           (5,070)
       ELS                                                 (1,365)           (1,348)          (2,728)           (2,695)
       Publishing                                            (100)              (99)            (200)             (199)
       Cross Cultural                                          (2)               (2)              (5)               (5)
                                                      -------------     -------------    -------------     -------------
     Total Language Services                               (4,019)           (3,974)          (8,051)           (7,969)
     Berlitz GlobalNET                                       (535)             (395)          (1,128)             (753)
                                                      -------------     -------------    -------------     -------------
     Total intangible amortization                         (4,554)           (4,369)          (9,179)           (8,722)
                                                      -------------     -------------    -------------     -------------

Total operating profit                                      4,151             4,197            6,848             3,543
Interest expense on long-term debt                            (10)              (20)             (33)           (1,873)
Interest expense on Convertible Debentures                 (1,994)           (2,004)          (3,989)           (2,435)
Interest expense to affiliates                               (641)             (648)          (1,296)           (1,236)
Other (expense) income, net                                  (204)              (80)            (299)              885
                                                      -------------     -------------    -------------     -------------
Total consolidated income (loss) before taxes,
minority interest, and extraordinary item             $     1,302       $     1,445      $     1,231       $    (1,116)
                                                      =============     =============    =============     =============
</TABLE>

     ASSETS:                                          JUNE 30,      DECEMBER 31,
                                                         2000              1999
                                                 -----------        -----------
      Language Services:
         Instruction                             $   433,617        $   433,526
         ELS                                         106,297            106,210
         Publishing                                   21,918             23,122
         Franchising                                   8,297              8,031
         Cross Cultural                                  402                440
         Other                                           767              1,069
                                                 -----------        -----------
      Total Language Services                        571,298            572,398
      Berlitz GlobalNET                               97,281            102,684
      General corporate                               26,013             27,365
      Eliminations of intersegment receivables       (6,941)             (5,427)
                                                 -----------        -----------
         Total consolidated assets               $   687,651        $   697,020
                                                 ===========        ===========

                                       13

<PAGE>

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                    ---------------------------         -------------------------
                                                       2000             1999              2000             1999
                                                       ----             ----              ----             ----
<S>                                                <C>              <C>               <C>              <C>
       DEPRECIATION:
         Language Services:
            Instruction                            $     1,244      $     1,297       $     2,507      $     2,452
            ELS                                            252              209               459              490
            Publishing                                     555              417             1,050              841
            Franchising                                      4                6                 8               10
            Language Services overhead and other           140              121               269              237
                                                   -------------    --------------    -------------    --------------
         Total  Language Services                        2,195            2,050             4,293            4,030
         Berlitz GlobalNET                                 523              474             1,075            1,041
         General corporate                                 278              122               563              293
                                                   -------------    --------------    -------------    --------------
            Total consolidated depreciation        $     2,996      $     2,646       $     5,931      $     5,364
                                                   =============    ==============    =============    ==============

       CAPITAL EXPENDITURES:
         Language Services:
            Instruction                            $     4,604      $     3,754       $     6,323      $     7,051
            ELS                                            250              197               481              577
            Publishing                                     219              881               592            1,370
            Franchising                                      -               25                 -               30
                                                   -------------    --------------    -------------    --------------
         Total  Language Services                        5,073            4,857             7,396            9,028
         Berlitz GlobalNET                                 782              475             1,810              666
         General corporate                                 198              522               288              871
                                                   -------------    --------------    -------------    --------------
            Total consolidated capital
              expenditures                         $     6,053      $     5,854       $     9,494      $    10,565
                                                   =============    ==============    =============    ==============
</TABLE>

         The following tables present certain information about the geographic
         areas in which the Company operates:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                                    ---------------------------         -------------------------
                                                       2000             1999              2000             1999
                                                       ----             ----              ----             ----
<S>                                                <C>              <C>               <C>              <C>
         REVENUES FROM EXTERNAL CUSTOMERS:
           United States                           $    37,652      $    36,195       $    71,575      $    68,731
           Japan                                        22,380           16,667            42,587           32,372
           Germany                                       9,732           10,576            20,374           21,355
           Ireland                                       6,214            5,779            11,176           10,532
           France                                        4,924            5,508             9,939           10,743
           Brazil                                        5,155            3,955             9,243            6,865
           Other foreign countries                      33,406           32,514            67,113           65,042
                                                   -------------    --------------    -------------    --------------
              Total                                $   119,463      $   111,194       $   232,007      $   215,640
                                                   =============    ==============    =============    ==============
</TABLE>

                                       14

<PAGE>

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,
                                           ---------------------------         -------------------------
                                                 2000             1999              2000             1999
                                                 ----             ----              ----             ----
<S>                                       <C>              <C>               <C>              <C>
OPERATING PROFIT:
  EBITA :
     United States                        $     2,816      $     3,903       $     4,365      $     5,604
     Japan                                      3,156            1,335             6,130            1,979
     Germany                                      711            1,121             2,118            2,299
     Ireland                                      415              284               432              277
     France                                       396              648               963            1,047
     Brazil                                     1,269              617             2,098              903
     Other foreign countries                    4,822            5,412             9,594            9,262
     General corporate expenses                (4,880)          (4,754)           (9,673)          (9,106)
                                          -------------    --------------    -------------    --------------
       Total EBITA                              8,705            8,566            16,027           12,265
                                          -------------    --------------    -------------    --------------

  Amortization of publishing rights, Excess of cost over net assets
   Acquired, and other intangibles:
     United States                             (3,830)          (3,664)           (7,715)          (7,287)
     Japan                                       (384)            (326)             (767)            (660)
     Germany                                      (57)             (63)             (118)            (129)
     Ireland                                      (10)             (11)              (21)             (24)
     France                                       (61)             (71)             (125)            (146)
     Brazil                                       (16)             (16)              (32)             (32)
     Other foreign countries                     (196)            (218)             (401)            (444)
                                          -------------    --------------    -------------    --------------
       Total  intangible amortization          (4,554)          (4,369)           (9,179)          (8,722)
                                          -------------    --------------    -------------    --------------

  Intercompany royalties:
     United States                              5,674            3,995            10,295            7,583
     Japan                                     (2,324)            (956)           (3,892)          (1,522)
     Germany                                     (364)            (400)             (771)            (815)
     Ireland                                     (310)            (289)             (557)            (525)
     France                                      (320)            (224)             (571)            (531)
     Other foreign countries                   (2,356)          (2,126)           (4,504)          (4,190)
                                          -------------    --------------    -------------    --------------
       Total intercompany royalties                 -                -                 -                -
                                          -------------    --------------    -------------    --------------

Total operating profit                    $     4,151      $     4,197       $     6,848      $     3,543
                                          =============    ==============    =============    ==============
</TABLE>

<TABLE>
<CAPTION>
LONG LIVED ASSETS:                         PROPERTY &
                                           EQUIPMENT           OTHER          INTANGIBLE
                                              NET             ASSETS*           ASSETS            TOTAL
                                          -------------    --------------    -------------    --------------
<S>                                       <C>              <C>               <C>              <C>
JUNE 30, 2000:
  United States                           $     9,571      $     4,792       $   385,628      $   399,991
  Japan                                        11,107              142            49,655           60,904
  Germany                                       3,664                -             7,527           11,191
  France                                        1,822                -             5,498            7,320
  Brazil                                        3,589                -             3,625            7,214
  Ireland                                       1,611                -             1,411            3,022
  Other foreign countries                      13,274            3,133            28,004           44,411
  General corporate                             4,497           14,458             1,456           20,411
                                          -------------    --------------    -------------    --------------
     Total                                $    49,135      $    22,525       $   482,804      $   554,464
                                          =============    ==============    =============    ==============

DECEMBER  31, 1999:
  United States                           $    10,202      $     7,801       $   397,674      $   415,677
  Japan                                        11,186              152            51,989           63,327
  Germany                                       3,448                -             8,089           11,537
  France                                        1,853                -             5,949            7,802
  Brazil                                        2,843                -             2,492            5,335
  Ireland                                       1,276                1             1,510            2,787
  Other foreign countries                      12,362              529            27,710           40,601
  General corporate                             4,579           13,910             1,456           19,945
                                          -------------    --------------    -------------    --------------
     Total                                $    47,749      $    22,393       $   496,869      $   567,011
                                          =============    ==============    =============    ==============

*Excludes financial instruments and deferred tax assets.
</TABLE>

                                       15

<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                          PART I. FINANCIAL INFORMATION


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion should be read in conjunction with the accompanying
Consolidated Condensed Financial Statements and notes thereto and with the
Company's audited Consolidated Financial Statements and notes thereto for the
fiscal year ended December 31, 1999. Certain statements contained within this
discussion constitute forward-looking statements. See "Special Note Regarding
Forward Looking Statements."

The Company's operations are principally conducted through two segments:
Language Services (consisting of the Instruction, ELS Educational Services, Inc.
("ELS"), Publishing, Franchising, and Cross Cultural sub-segments), and Berlitz
GlobalNET. ELS formerly included centers operating under the Berlitz on Campus
("BOC") brand name. Effective January 1, 2000, the BOC centers were renamed ELS.
Language Services is organized geographically into four operating divisions
(North America, Asia, Latin America and Europe) while Berlitz GlobalNET is
organized into three geographic divisions: the Americas (North America and Latin
America), Asia and Europe.

RESULTS OF OPERATIONS - QUARTER ENDED JUNE 30, 2000, VS. JUNE 30, 1999

Sales for the quarter ended June 30, 2000, were $119.4 million, a 7.4% increase
from 1999 sales of $111.2 million. This increase is attributable to increases in
operating activity for Instruction, ELS and Berlitz GlobalNET that were
partially offset by unfavorable exchange rate fluctuations. Excluding the
effects of unfavorable exchange rate fluctuations of $2.7 million, sales
increased from the prior year by 9.8%. The following table compares revenues by
business segment for the second quarter.

<TABLE>
<CAPTION>

BUSINESS SEGMENT REVENUES:                                     (Dollars in millions)
--------------------------
                                   ------------------------------------------------------------------------------
                                            June 30,                     Growth (Decline) from Prior Year
                                   ---------------------------    -----------------------------------------------
                                      2000            1999         Exchange         Operations          Total
                                                                                        (1)
                                   -----------     -----------    ------------     --------------    ------------
<S>                                <C>             <C>            <C>              <C>               <C>
Language Services:
   Instruction                     $    75.5       $    69.9      $    (1.4)       $     7.0         $     5.6
   ELS                                  14.9            12.4            -                2.5               2.5
   Publishing                            3.1             4.1            -               (1.0)             (1.0)
   Franchising                           0.5             0.6            -               (0.1)             (0.1)
   Cross Cultural                        0.7             0.6            -                0.1               0.1
   Intercompany eliminations             -              (0.1)           -                0.1               0.1
                                   -----------     -----------    ------------     --------------    ------------
Total Language Services                 94.7            87.5           (1.4)             8.6               7.2
Berlitz GlobalNET                       24.7            23.7           (1.3)             2.3               1.0
                                   -----------     -----------    ------------     --------------    ------------
Total                              $   119.4       $   111.2      $    (2.7)(2)    $    10.9         $     8.2
                                   ===========     ===========    ============     ==============    ============
</TABLE>
------------------------
(1)  Adjusted to eliminate fluctuations in foreign currency from year-to-year by
     assuming a constant exchange rate over two years, using as the base the
     first year of the periods being presented.
(2)  The unfavorable exchange rate fluctuations ($2.7 million) primarily
     resulted from a strengthened

                                       16

<PAGE>

     dollar against European currencies, most significantly the German mark and
     the Irish punt, partially offset by a weaker dollar against the Japanese
     yen.

Within Language Services, Instruction benefited from increases in both volume
and average revenue per lesson ("ARPL"). Total lesson volume increased 6.4% from
the prior year, reflecting improvements in all geographic regions.
Geographically, Instruction revenue and lesson volume was dispersed as follows:

<TABLE>
<CAPTION>
INSTRUCTION REVENUE:                                            (Dollars in millions)
--------------------
                                      --------------------------------------------------------------------------
                                              June 30,                   Growth (Decline) from Prior Year
                                      --------------------------    --------------------------------------------
                                         2000           1999         Exchange      Operations          Total
                                      -----------    -----------    -----------    -------------    ------------
<S>                                   <C>            <C>            <C>            <C>              <C>
   North America                      $    13.2      $    12.5      $     -        $     0.7        $     0.7
   Asia                                    22.6           16.4            2.3            3.9              6.2  (1)
   Latin America                           13.8           12.9           (0.7)           1.6              0.9  (2)
   Europe                                  25.9           28.1           (3.0)           0.8             (2.2) (3)
                                      -----------    -----------    -----------    -------------    ------------
   Total revenue                      $    75.5      $    69.9      $    (1.4)     $     7.0        $     5.6
                                      ===========    ===========    ===========    =============    ============
</TABLE>
------------------------
(1)  Primarily reflects the effect of volume increases in Japan and a weaker US
     dollar against the Japanese yen.
(2)  Primarily reflects the effect of ARPL and volume increases in Brazil and
     Mexico and an ARPL increase in Colombia.
(3) Primarily reflects a strengthened US dollar against European currencies, in
     particular Germany.

<TABLE>
<CAPTION>
INSTRUCTION LESSON VOLUME:                                     (Lessons in thousands)
--------------------------
                                      --------------------------------------------------------------------------
                                                  June 30,                        Growth from Prior Year
                                      ----------------------------------    ------------------------------------
                                                                              Number of
                                           2000               1999             lessons            Percentage
                                      ---------------    ---------------    --------------     -----------------
<S>                                      <C>                <C>                 <C>                  <C>
   North America                           297.8              288.3               9.5                3.3%
   Asia                                    330.3              256.4              73.9               28.8%  (1)
   Latin America                           377.1              366.5              10.6                2.9%  (2)
   Europe                                  649.0              642.9               6.1                0.9%
                                      ---------------    ---------------    --------------     -----------------
   Total lesson volume                   1,654.2            1,554.1             100.1                6.4%
                                      ===============    ===============    ==============     =================
</TABLE>
------------------------
(1)  Asia's volume has increased due primarily to the apparent positive effect
     of special sales campaigns in Japan and expansion in new markets.
(2)  Lesson volume increased in Latin America primarily due to strong sales in
     Brazil and Mexico, partially offset by reduced volume in Venezuela as a
     result of economic uncertainty.

For the second quarter of 2000, ARPL was $40.81, as compared to $39.88 in the
comparable prior year period. The increase reflected the favorable impact of
product mix and price increases ($1.82), partly offset by the effects of
unfavorable exchange rate fluctuations ($0.89). ARPL ranged from a high of
approximately $65.34 in Japan to a low of $15.27 in Hungary, reflecting effects
of foreign exchange rates and differences in the economic value of the services
provided or sold.

ELS second quarter revenues increased 20.2% from the prior year, primarily
attributable to the

                                       17

<PAGE>

launch of a 20 hour Semi-Intensive Program, the brand merger of ELS and BOC and
the restructuring of operations resulting in the closing of five centers.

Publishing revenues declined 23.0% over the comparable prior year period, due
primarily to decreased licensing royalty revenue.

Berlitz GlobalNET sales for the quarter ended June 30, 2000, were $24.7 million,
up 9.7% from the comparable period in 1999, excluding the effect of unfavorable
exchange rate fluctuations of $1.3 million. The following table compares Berlitz
GlobalNET revenues by region for the first quarter:

<TABLE>
<CAPTION>
  BERLITZ GLOBALNET REVENUE:                                   (Dollars in millions)
  --------------------------
                                     --------------------------------------------------------------------------
                                             June 30,                   Growth (Decline) from Prior Year
                                     --------------------------    --------------------------------------------
                                        2000           1999         Exchange      Operations          Total
                                     -----------    -----------    -----------    -------------    ------------
<S>                                  <C>            <C>            <C>            <C>              <C>
     America                         $    10.9      $    11.5      $     -        $    (0.6)       $    (0.6)
     Asia                                  1.7            1.2            0.1            0.4              0.5
     Europe                               13.6           12.3           (1.5)           2.8              1.3 (1)
     Intercompany eliminations            (1.5)          (1.3)           0.1           (0.3)            (0.2)
                                     -----------    -----------    -----------    -------------    ------------
     Total revenue                   $    24.7      $    23.7      $    (1.3)     $     2.3        $     1.0
                                     ===========    ===========    ===========    =============    ============
</TABLE>
------------------------
(1)  Growth in Europe was due primarily to an acquisition completed in the last
     quarter of 1999 and strong volume in France and Ireland offset by a strong
     US dollar against European currencies, primarily the Irish punt

The Company's total cost of services and products sold as a percentage of sales
was 60.1% in the second quarter of 2000, compared with 58.5% in the comparable
prior year period. The higher percentage was mainly attributable to higher
teacher salaries. Selling, general and administrative expenses as a percentage
of sales were 32.6% in the second quarter of 2000, compared with 33.8% in the
comparable prior year period. This improvement reflects an increase in business
volume over the prior year as well as reduced costs from the closure of five ELS
centers in the second half of 1999.

EBITA* for the 2000 first quarter was $8.7 million, or 7.3% of sales, compared
to $8.6 million, or 7.7% of sales, in the comparable prior year period. The
following table displays the comparative second quarter EBITA by business
segment:

--------------------------------------------------------------------------------
*EBITA as used herein is defined as sales less cost of services and products
sold, and selling, general and administrative expenses. It is calculated using
amounts determined in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"). EBITA is not a defined term under U.S. GAAP and is not
necessarily indicative of operating income or cash flows from operations as
determined under U.S. GAAP.

                                       18

<PAGE>

<TABLE>
<CAPTION>
   BUSINESS SEGMENT EBITA:                                      (Dollars in millions)
   -----------------------
                                      --------------------------------------------------------------------------
                                             June 30,                   Growth (Decline) from Prior Year
                                      ------------------------    ----------------------------------------------
                                        2000          1999         Exchange         Operations         Total
                                      ----------    ----------    ------------     -------------    ------------
<S>                                   <C>           <C>           <C>              <C>              <C>
   Language Services:
      Instruction                     $    15.5     $    14.8     $    (0.3)(1)    $     1.0 (2)    $     0.7
      ELS                                   0.5           0.1           -                0.4              0.4  (3)
      Publishing                            0.2           0.8           -               (0.6)            (0.6) (4)
      Franchising                           0.2           0.1           -                0.1              0.1
      Cross Cultural                        0.1           0.1           -                -                 -
      Overhead and other                   (5.6)         (5.4)          0.1             (0.3)            (0.2)
                                      ----------    ----------    ------------     -------------    ------------
   Total Language Services                 10.9          10.5          (0.2)             0.6              0.4
   Berlitz GlobalNET                        1.4           1.6          (0.1)            (0.1)            (0.2) (5)
   Corporate overhead and other            (3.6)         (3.5)          -               (0.1)            (0.1) (6)
                                      ----------    ----------    ------------     -------------    ------------
   Total                              $     8.7     $     8.6     $    (0.3)       $     0.4        $     0.1
                                      ==========    ==========    ============     =============    ============
</TABLE>


         EBITA MARGIN %:                             June 30,
         ---------------
                                           ------------------------------
                                               2000            1999
                                           ------------    --------------
         Language Services:
            Instruction (7)                     20.5%           21.2%
            ELS (8)                              3.3%            1.0%
            Publishing                           5.6%           18.3%
            Franchising                         37.8%           20.9%
            Cross Cultural                      14.3%           13.2%
         Total Language Services                11.5%           11.9%
         Berlitz GlobalNET (9)                   5.7%            6.9%
         Total                                   7.3%            7.7%

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

(1)  The net unfavorable exchange impact in Instruction is primarily
     attributable to European countries, in particular Germany, partially offset
     by the strength of the Japanese yen.
(2)  The increase in Instruction operating EBITA is due mainly to volume
     increases in Japan and ARPL increases in Latin America, in particular
     Colombia.
(3)  The increase in ELS operating EBITA is due in part to improved volume and
     decreased costs due primarily to the closure of five centers.
(4)  Publishing EBITA decreased primarily due to a lack of licensing revenues.
(5)  The decrease in EBITA for Berlitz GlobalNET is due in part to exchange and
     to decreased margins in the U.S due in part to increased sales and
     marketing costs.
(6)  Corporate expenses rose due to increases in salary related operating costs.
(7)  The decrease in Instruction's EBITA margin occurred primarily in the U.S.
     due in part to increased sales costs and rent.
(8)  See ELS discussion in footnote 3.
(9)  See Berlitz GlobalNET discussion in footnote 5.


"Other expense, net" for the three months ended June 30, 2000 was $0.2 million,
compared with $0.1 million in the comparable prior year period, due to lower
foreign exchange gains in the current quarter.

                                       19

<PAGE>

The Company recorded income tax expenses of $2.0 million in the second quarter
of 2000, compared with $1.8 million in the second quarter of 1999. The effective
tax rates in both 2000 and 1999 were above the U.S. Federal statutory tax rate
primarily as a result of nondeductible amortization charges.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000, VS. JUNE 30, 1999

Sales for the six months ended June 30, 2000, were $232.0 million, a 7.6%
increase from 1999 sales of $215.6 million. This increase is attributable to
increases in operating activity for Instruction, Berlitz GlobalNET and ELS that
were partially offset by unfavorable exchange rate fluctuations. Excluding the
effects of unfavorable exchange rate fluctuations of $5.9 million, sales
increased from the prior year by 10.4%. The following table compares revenues by
business segment for the first six months.

<TABLE>
<CAPTION>
BUSINESS SEGMENT REVENUES:                                     (Dollars in millions)
--------------------------
                                   ------------------------------------------------------------------------------
                                            June 30,                     Growth (Decline) from Prior Year
                                   ---------------------------    -----------------------------------------------
                                      2000            1999         Exchange         Operations          Total
                                                                                        (1)
                                   -----------     -----------    ------------     --------------    ------------
<S>                                <C>             <C>            <C>              <C>               <C>
Language Services:
   Instruction                     $   148.1       $   136.4      $    (3.4)       $    15.1         $    11.7
   ELS                                  26.8            24.9            0.1              1.8               1.9
   Publishing                            6.0             7.2           (0.1)            (1.1)             (1.2)
   Franchising                           0.9             0.9            -                -                 -
   Cross Cultural                        1.4             1.2            -                0.2               0.2
   Intercompany eliminations            (0.1)           (0.2)           -                0.1               0.1
                                   -----------     -----------    ------------     --------------    ------------
Total Language Services                183.1           170.4           (3.4)            16.1              12.7
Berlitz GlobalNET                       48.9            45.2           (2.5)             6.2               3.7
                                   -----------     -----------    ------------     --------------    ------------
Total                              $   232.0       $   215.6      $    (5.9) (2)   $    22.3         $    16.4
                                   ===========     ===========    ============     ==============    ============
</TABLE>
------------------------
(1)  Adjusted to eliminate fluctuations in foreign currency from year-to-year by
     assuming a constant exchange rate over two years, using as the base the
     first year of the periods being presented.
(2)  The unfavorable exchange rate fluctuations ($5.9 million) primarily
     resulted from a strengthened dollar against European currencies, most
     significantly the German mark and the Irish punt, partially offset by a
     weaker dollar against the Japanese yen.

Within Language Services, Instruction benefited from increases in both volume
and average revenue per lesson ("ARPL"). Total lesson volume increased 7.6% from
the comparable prior year period, reflecting improvements in all geographic
regions. Geographically, Instruction revenue and lesson volume was dispersed as
follows:

<TABLE>
<CAPTION>
INSTRUCTION REVENUE:                                            (Dollars in millions)
--------------------
                                      --------------------------------------------------------------------------
                                              June 30,                        Growth from Prior Year
                                      --------------------------    --------------------------------------------
                                         2000           1999         Exchange      Operations          Total
                                      -----------    -----------    -----------    -------------    ------------
<S>                                   <C>            <C>            <C>            <C>              <C>
   North America                      $    25.2      $    24.4      $     0.1      $     0.7        $     0.8
   Asia                                    43.2           32.1            4.1            7.0             11.1  (1)
   Latin America                           25.5           23.1           (0.9)           3.3              2.4  (2)
   Europe                                  54.2           56.8           (6.7)           4.1             (2.6) (3)
                                      -----------    -----------    -----------    -------------    ------------
   Total revenue                      $   148.1      $   136.4      $    (3.4)     $    15.1        $    11.7
                                      ===========    ===========    ===========    =============    ============
</TABLE>
------------------------

                                       20

<PAGE>

(1)  Primarily reflects the effect of volume increases in Japan and a weaker US
     dollar against the Japanese yen.
(2)  The operations variance primarily reflects the effect of volume increases
     in Brazil and Mexico and an ARPL increase in Mexico and Colombia.
(3)  Primarily reflects a strengthened US dollar against European currencies, in
     particular Germany, partially offset by improved volume in most countries,
     in particular Germany.

<TABLE>
<CAPTION>
INSTRUCTION LESSON VOLUME:                                     (Lessons in thousands)
--------------------------
                                      --------------------------------------------------------------------------
                                                  June 30,                   Growth (Decline) from Prior Year
                                      ----------------------------------    ------------------------------------
                                                                              Number of
                                           2000               1999             lessons            Percentage
                                      ---------------    ---------------    --------------     -----------------
<S>                                      <C>                <C>                 <C>                  <C>
   North America                           574.8              567.2               7.6                1.4%
   Asia                                    634.4              500.3             134.1               26.8%  (1)
   Latin America                           687.6              656.5              31.1                4.7%  (2)
   Europe                                1,345.5            1,288.3              57.2                4.4%  (3)
                                      ---------------    ---------------    --------------     -----------------
   Total lesson volume                   3,242.3            3,012.3             230.0                7.6%
                                      ===============    ===============    ==============     =================
</TABLE>
------------------------
(1)  Asia's volume has increased due primarily to the apparent positive effect
     of special sales campaigns in Japan and expansion in new markets.
(2)  Lesson volume increased in Latin America primarily due to strong sales in
     Brazil and Mexico, partially offset by reduced volume in Venezuela as a
     result of economic uncertainty.
(3)  Europe's volume improvement is primarily due to Germany and Israel

For the first half of 2000, ARPL was $41.06, as compared to $40.42 in the
comparable prior year period. The increase reflected the favorable impact of
product mix and price increases ($1.70), partly offset by the effects of
unfavorable exchange rate fluctuations ($1.06). ARPL ranged from a high of
approximately $65.80 in Japan to a low of $15.50 in Hungary, reflecting effects
of foreign exchange rates and differences in the economic value of the services
provided or sold.

ELS's first half revenues increased 7.6% from the comparable prior year period.
This appears to be primarily attributable to the launch of a 20 hour
Semi-Intensive Program, as well as the brand merger of ELS Language Centers and
Berlitz on Campus Centers and the restructuring of operations resulting in the
closing of five centers.

Publishing revenues declined 16.9% from the comparable prior year period, due
primarily to decreased licensing royalty revenue.

Berlitz GlobalNET sales for the six months ended June 3, 2000, were $48.9
million, up 13.7% from the comparable period in 1999, excluding the effect of
unfavorable exchange rate fluctuations of $2.5 million. The following table
compares Berlitz GlobalNET revenues by region for the first six months:

                                       21

<PAGE>

<TABLE>
<CAPTION>
  BERLITZ GLOBALNET REVENUE:                                   (Dollars in millions)
  --------------------------
                                     --------------------------------------------------------------------------
                                             June 30,                   Growth (Decline) from Prior Year
                                     --------------------------    --------------------------------------------
                                        2000           1999         Exchange      Operations          Total
                                     -----------    -----------    -----------    -------------    ------------
<S>                                  <C>            <C>            <C>            <C>              <C>
     America                         $    22.7      $    20.4      $     -        $     2.3        $     2.3 (1)
     Asia                                  3.5            2.4            0.2            0.9              1.1
     Europe                               26.3           24.5           (2.9)           4.7              1.8 (2)
     Intercompany eliminations            (3.6)          (2.1)           0.2           (1.7)            (1.5)
                                     -----------    -----------    -----------    -------------    ------------
     Total revenue                   $    48.9      $    45.2      $    (2.5)     $     6.2        $     3.7
                                     ===========    ===========    ===========    =============    ============
</TABLE>

------------------------
(1)  The sales increase in the US was due primarily to the very active
     information technology segment and an increased focus on new customer
     acquisition as well as activity from acquisitions in the Americas completed
     during the second half of 1999.
(2)  Growth in Europe was due primarily to an acquisition completed in the last
     quarter of 1999 and strong volume in France and Ireland, offset by a strong
     US dollar against European currencies, primarily the Irish punt.

The Company's total cost of services and products sold as a percentage of sales
was 60.1% in the first half of 2000, compared with 59.8% in the comparable prior
year period. The higher percentage was mainly attributable to higher teacher
salaries. Selling, general and administrative expenses as a percentage of sales
were 33.0% in the first half of 2000, compared with 34.5% in the comparable
prior year period. This improvement reflects an increase in business volume over
the prior year as well as reduced costs from the closure of five ELS centers.

EBITA for the 2000 first half was $16.0 million, or 6.9% of sales, compared to
$12.2 million, or 5.7% of sales, in the comparable period in 1999. The following
table displays the comparative first quarter EBITA by business segment:

                                       22

<PAGE>

<TABLE>
<CAPTION>
   BUSINESS SEGMENT EBITA:                                      (Dollars in millions)
   -----------------------
                                      --------------------------------------------------------------------------
                                             June 30,                   Growth (Decline) from Prior Year
                                      ------------------------    ----------------------------------------------
                                        2000          1999         Exchange         Operations         Total
                                      ----------    ----------    ------------     -------------    ------------
<S>                                   <C>           <C>           <C>              <C>              <C>
   Language Services:
      Instruction                     $    31.0     $    26.8     $    (0.8)(1)    $     5.0 (2)    $     4.2
      ELS                                   0.4          (0.3)          -                0.7              0.7  (3)
      Publishing                            0.1           0.6           -               (0.5)            (0.5) (4)
      Franchising                           0.2           0.1           -                0.2              0.2
      Cross Cultural                        0.4           0.2           -                0.1              0.1
      Overhead and other                  (11.5)        (10.6)          0.4             (1.3)            (0.9)
                                      ----------    ----------    ------------     -------------    ------------
   Total Language Services                 20.6          16.8          (0.4)             4.2              3.8
   Berlitz GlobalNET                        2.5           2.2          (0.1)             0.4              0.3  (5)
   Corporate overhead and other            (7.1)         (6.8)          -               (0.3)            (0.3) (6)
                                      ----------    ----------    ------------     -------------    ------------
   Total                              $    16.0     $    12.2     $    (0.5)       $     4.3        $     3.8
                                      ==========    ==========    ============     =============    ============
</TABLE>

     EBITA MARGIN %:                             June 30,
     ---------------
                                       ------------------------------
                                           2000            1999
                                       ------------    --------------
     Language Services:
        Instruction (7)                     20.9%           19.6%
        ELS (8)                              1.5%           (1.1)%
        Publishing                           1.7%            7.8%
        Franchising                         28.0%            9.1%
        Cross Cultural                      24.9%           19.3%
     Total Language Services                11.3%            9.9%
     Berlitz GlobalNET (9)                   5.2%            5.1%
     Total                                   6.9%            5.7%
------------------------

(1)  The net unfavorable exchange impact in Instruction is primarily
     attributable to European countries, in particular Germany, partially offset
     by the strength of the Japanese yen.
(2)  The increase in Instruction operating EBITA is due mainly to volume
     increases in Japan and Germany.
(3)  The increase in ELS operating EBITA is due in part to improved volume and
     decreased costs due primarily to the closure of five centers.
(4)  Publishing EBITA decreased primarily due to a lack of licensing revenues.
(5)  The increase in EBITA for Berlitz GlobalNET is due in part to acquisitions
     completed in the second half of 1999 and improved margins, particularly in
     Japan.
(6)  Corporate expenses rose due to increases in salary related operating costs.
(7)  The increase in Instruction's EBITA margin is primarily due to volume
     increases.
(8)  See ELS discussion in footnote 3.
(9)  See Berlitz GlobalNET discussion in footnote 5.

Interest expense on long-term debt and convertible debentures for the six months
ended June 30, 2000 decreased $0.3 million from the comparable prior year
period, due principally to a reduced effective interest rate. "Other expense
(income), net" for the six months ended June 30, 2000 was $0.3 million of
expense, compared with $0.9 million of income in the comparable prior year
period, due to lower foreign exchange gains in the first six months of 2000.

                                       23

<PAGE>

The Company recorded income tax expenses of $3.8 million in the first half of
2000, compared with $2.0 million in the comparable period in 1999. The effective
tax rates in both 2000 and 1999 were above the U.S. Federal statutory tax rate
primarily as a result of nondeductible amortization charges.

On March 11, 1999, in connection with the issuance of the Convertible Debentures
and an affiliate note, the Company extinguished the long-term debt under its
1997 credit agreement (the "Bank Facility"). The Company also terminated its
interest rate swap agreement, which hedged the floating rate Bank Facility, for
a cash payment of approximately $1.1 million. Consequently, in the six months
ended June 30, 1999, the Company recorded an extraordinary loss, net of tax
benefit, of approximately $2.1 million, consisting of the interest rate swap's
fair market value and existing unamortized deferred finance costs at the time of
extinguishment of the underlying debt.

On December 3, 1999, the Securities and Exchange Commission ("SEC") issued its
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"), which provided its views on applying generally accepted accounting
principles to selected revenue recognition issues. The Company adopted the
provisions of SAB 101 effective January 1, 1999, and, as a result, changed its
method of accounting for deferred revenues on lessons paid for but not expected
to be taken. Through December 1998, such amounts had been recognized in income
based on historical experience by country; refunds subsequently issued were not
material. Beginning in 1999, deferred revenues on lessons paid for but not
expected to be taken were recognized in income when the obligation to issue a
refund had constructively expired. The cumulative effect of the accounting
change resulted in a charge to 1999 earnings of $5.6 million (net of income tax
benefit of $2.9 million and minority interest expense of $0.2 million). The SEC
is currently developing additional guidance with respect to SAB 101. Until such
time as the SEC staff issues such guidance, it is unclear what, if any, impact
such guidance will have on the Company's current revenue recognition accounting
policies.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the primary source of the Company's liquidity has been the cash
provided by operations; capital expenditures, working capital requirements and
acquisitions (except ELS) have been funded from internally generated cash.
Although each geographic area exhibits different patterns of lesson volume over
the course of the year, the Company's sales are generally not seasonal in the
aggregate.

Net cash provided by operating activities was $16.9 million for the six months
ended June 30, 2000, compared with $6.4 million in the comparable prior year
period. This increase of $10.5 million primarily resulted from: (i) a decrease
in accounts receivable; (ii) an increased EBITA; and (iii) termination of the
Company's previous interest rate swap agreement.

Net cash used in investing activities totaled $9.5 million for the six months
ended June 30, 2000, down $9.4 million from the comparable prior year period.
This decrease primarily reflects less expenditures on business acquisitions over
the comparable prior year period.

Net cash used in financing activities for the six months ended June 30, 2000,
was $2.3 million,

                                       24

<PAGE>

compared with net cash provided of $17.0 million in the comparable prior year
period. For 2000, the activity reflected the repayment of an amount outstanding
on the $25,000 revolving credit facility entered into on March 31, 1999 (the
"Revolving Facility", discussed below), partially offset by proceeds from the
sale of two currency swap agreements, whereas the 1999 activity primarily
reflected the excess of the net proceeds from the issuance of convertible
debentures and notes payable to an affiliate over the related extinguished debt.

Other items impacting the Company's liquidity and capital resources were as
follows:

o    $1.0 million of "Accrued expenses and other current liabilities" at June
     30, 2000, related to the ELS acquisition.

o    On July 1, 1999, the Company entered into a license agreement with
     Children's Television Workshop ("CTW"). CTW will create and produce, at its
     expense, a television series, entitled "Sesame English", which will
     initially consist of fifty-two 15-minute episodes and which will be
     complemented by instruction curricula and materials developed by the
     Company. The Company was also granted certain rights by CTW, including the
     exclusive right to use certain Sesame Street and Sesame English names,
     logos and characters in connection with language instructional products,
     services and schools.

     The license agreement with CTW, covers an initial term of five years, and
     provides for payments by the Company to CTW of $4 million at inception and
     an aggregate of $6 million in minimum guaranteed royalties paid in
     installments over the initial term of the agreement. The $4 million paid at
     inception may be applied against future royalties due in excess of the
     minimum guarantee. Furthermore, in the event that the Company enters into
     any sublicenses or other third-party arrangements with a sublicensee for
     language instruction services in Japan, the minimum guaranteed royalties
     will be reduced dollar for dollar, up to a maximum of $2 million from CTW's
     share of payments from such Japanese sublicensees. If certain conditions
     are met, the Company may extend the license agreement for another five
     years in exchange for annual minimum guaranteed royalties equal to the
     greater of $2 million, or an amount equal to 80% of the royalties earned by
     CTW under the license agreement during the fifth year of the initial term.

o    In June 1999, the Company acquired certain assets, operating subsidiaries
     and key personnel of Language Management International, Inc., a
     translations services company. The purchase price was $8.0 million, plus a
     contingent payment based on gross revenues for the twelve months ending
     June 30, 2000. As the revenue target was not achieved, no contingent
     payment was made. At June 30, 2000, in connection with this acquisition,
     the Company has recorded $10.5 million of goodwill related to this
     purchase.

o    On June 8, 1999, the Company's shareholders approved the Company's 1999
     Long-Term Executive Incentive Compensation Plan (the "1999 LTIP"). The 1999
     LTIP provides for potential cash awards to be paid to senior management in
     2002 if certain revenue, earnings and cash flow targets are achieved for
     the three year period from 1999 to 2001. The 1999 LTIP is intended to be an
     unfunded plan and the Company is not required to establish any fund or
     segregate any assets. Based on limitations contained within the 1999 LTIP,
     total awards to be paid in 2002 are currently expected to range from a
     minimum of $0.7 million to a maximum of $5.0 million.

                                       25

<PAGE>

o    On March 31, 1999, the Company entered into the $25 million Revolving
     Facility, which expires in February 2002. At the option of the Company,
     outstanding borrowings under the Revolving Facility bear interest at
     variable rates equal to either: (i) a base rate approximating the U.S.
     prime rate; or (ii) the rate offered by certain reference banks to prime
     banks in the interbank Eurodollar market, fully adjusted for reserves plus
     a margin ranging from 0.375% to 0.5%; such margin is dependent on a
     specified leverage ratio of the Company. In addition, a commitment fee
     ranging from 0.125% to 0.20% will be charged on the available but unused
     amounts under the Revolving Facility, depending on a specified leverage
     ratio. There were no outstanding borrowings under the Revolving Facility at
     June 30, 2000.

o    The Company's Supplemental Executive Retirement Plan ("SERP") provides
     retirement income / disability retirement benefits, retiree medical
     benefits and death benefits to certain designated executives and their
     designated beneficiaries. The Company intends to fund the SERP through a
     combination of funds generated from operations and life insurance policies
     on the participants.

o    The Company is party to currency coupon swap agreements with a financial
     institution to hedge the Company's net investments in certain foreign
     subsidiaries. These agreements require the Company, in exchange for U.S.
     dollar receipts, to periodically make foreign currency payments,
     denominated in the Japanese yen and the British pound. Credit loss from
     counterparty nonperformance is not anticipated. The estimated fair value of
     these swap agreements at June 30, 2000, representing the amount that could
     be settled based on estimates obtained from a dealer, was a net liability
     of approximately $2.3 million. Two previously held currency coupon swap
     agreements denominated in the Swiss franc and the German mark were
     terminated in the second quarter of 2000. Proceeds on termination were $1.7
     million.

o    On March 11, 1999, the Company's shareholders approved the issuance of, and
     the Company issued, $155 million aggregate principal amount of 12-year
     convertible debentures (the "Convertible Debentures") in a private
     placement, pursuant to definitive investment agreements (the "Investment
     Agreements") dated as of October 2, 1998. Such debentures were issued as
     follows: (i) $100 million aggregate principal amount (the "Apollo
     Debentures") to two affiliates of Apollo Management IV, L.P. ("Apollo"), a
     private investment firm; and (ii) $55 million aggregate principal amount
     (the "Benesse Debentures") to Benesse Holding International, Inc. ("BHI"),
     the Company's majority shareholder. The Convertible Debentures bear
     interest at 5% per annum, payable semi-annually. Principal amounts
     outstanding under such debentures are not due until March 2011, and the
     Company is not required to establish a bond sinking fund for repayment of
     this principal. The Convertible Debentures are convertible at any time into
     shares of the Company's common stock at a conversion price of $33.05 per
     share, subject to anti-dilution related adjustments.

     In a separate transaction on March 11, 1999, BHI loaned $50 million to the
     Company, evidenced by a 12-year fixed rate subordinated promissory note
     (the "BHI Note"). Such note bears interest for the first five years at 5.2%
     per annum, and, thereafter, at a renegotiated fixed rate approximating
     LIBOR plus a margin based on the Company's then existing leverage. Interest
     is payable semiannually in cash while principal repayment is

                                       26

<PAGE>

     deferred until maturity. In the event of a change in control, the BHI Note
     provides for redemption by the Company, at the option of BHI, at price
     equal to 101% of the note's principal amount.

     The Company used the proceeds from the sale of the Convertible Debentures,
     as well as proceeds from the BHI Note issuance, to repay in full all
     outstanding indebtedness, and for general corporate purposes. The Company
     incurred approximately $2.8 million in deferred finance costs associated
     with the issuance of the Convertible Debentures and BHI Note.

At June 30, 2000, the Company's liquid assets of $38.8 million consisted of cash
and temporary investments. The Company does not currently have any material
commitments for capital expenditures and anticipates capital expenditures to
continue to be in line with recent historical trends due to the refurbishment of
the Company's language centers, the expansion of the Company's GlobalNET
segment, and technological expansion. The Company plans to meet its debt service
requirements and future working capital needs through funds generated from
operations.

INFLATION

Historically, inflation has not had a material effect on the Company's overall
business. Management believes this is due to the fact that the Company's
business is a service business, which is not capital intensive. The Company has
historically adjusted prices to compensate for inflation.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, including information
appearing under the caption "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). The Company desires to take advantage of certain "Safe Harbor"
provisions of the Reform Act and is including this special note to enable the
Company to do so. Forward-Looking Statements involve known and unknown risks,
uncertainties, and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ materially from
the future results, performance (financial or operating) or achievements
expressed or implied by such Forward-Looking Statements. Such risks,
uncertainties and other factors include, among others: (i) the Company's success
in selling new franchises; (ii) economic conditions in the regions of the world
in which the Company operates; (iii) more general factors affecting future cash
flows and their effects on the Company's ability to meet its debt service
requirements and future working capital needs, including fluctuations in foreign
currency exchange rates; (iv) demand for the Company's products and services;
(v) the impact of competition; (vi) the effect of changing economic and
political conditions; (vii) the level of success and timing in implementing
corporate strategies and adopting new technologies; and (viii) changes in
governmental and tax laws and regulations, tax audits and other factors (known
or unknown) which may affect the Company. As a result, no assurance can be given
as to future results, levels of activity or achievements.

                                       27

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company's major market risk exposure is foreign currency fluctuations.
Geographically, the majority of the Company's subsidiaries are located outside
the United States, with operations conducted in their respective local
currencies. For example, for the three years ended December 31, 1999, the
percentage of total revenues denominated in currencies other than U.S. dollars
averaged 65%, in foreign currencies including the Japanese yen, German mark,
Irish punt, Brazilian real, Mexican peso, British pound and French and Swiss
francs. As discussed under "Management's Discussion and Analysis - Liquidity and
Capital Resources", the Company maintains currency swap agreements with a
financial institution to hedge the Company's net investments in certain foreign
subsidiaries. These agreements require the Company to exchange foreign
currency-denominated interest payments for U.S. dollar-denominated interest
receipts on a semi-annual basis. Significant terms of currency swap agreements
outstanding at June 30, 2000, were as follows:

<TABLE>
<CAPTION>
                                                                             INTEREST RECEIPTS FROM
                             INTEREST PAYMENT TO FINANCIAL INSTITUTION       FINANCIAL INSTITUTION
                            --------------------------------------------    -------------------------
                                                                              NOTIONAL                 FAIR VALUE
 EFFECTIVE                                                   INTEREST          AMOUNT     INTEREST     AT 6/30/00
 ----------                                                  ---------         -------    ---------    ----------
    DATE        MATURITY       NOTIONAL AMOUNT (000'S)         RATE            (000'S)       RATE       (000'S)
    ----        --------    -------------------------------    ----            -------       ----       -------
<S>             <C>          <C>                <C>            <C>           <C>            <C>       <C>
   1/1/99       12/30/02     Japanese Yen       12,311,005     5.50%         $   95,694     6.27%     $  (2,349)
   1/4/99       12/31/02     British Pound           4,841     6.56%         $    7,974     6.27%     $      32
</TABLE>

The fair values of the currency swap agreements represent the amounts that could
be settled based on estimates obtained from a dealer. Future interest rates and
exchange rates will affect the value of these swaps.

On March 11, 1999 (the "Issue Date"), the Company issued the Convertible
Debentures, consisting of the Apollo and Benesse Debentures (see Management's
Discussion and Analysis - Liquidity and Capital Resources).

o    The Apollo Debentures and Benesse Debentures each independently provide for
     optional redemption by the Company, in whole but not in part, anytime three
     years and two months following the Issue Date. If the average closing price
     of the Company's common stock for the 30 trading days following the third
     anniversary of the Issue Date exceeds $39.66 per share, the Company may
     redeem at par. Otherwise, if the Convertible Debentures are redeemed, the
     Company must pay a redemption premium, expressed as a percentage of
     outstanding principal, as follows: (i) 4% for redemptions occurring in the
     fourth year after issue; (ii) 2% for redemptions occurring in the fifth
     year after issue; and (iii) 0% for redemptions occurring thereafter. All
     such redemptions are subject to the holders' rights to first convert their
     Convertible Debentures into common stock of the Company.

o    The Convertible Debentures also allow Apollo and BHI to elect to exchange
     their convertible debentures, in whole, into non-convertible, seven-year
     fixed rate debt (the "Fixed Rate Debentures"). Such election may only be
     made if the average closing price of the Company's common stock during the
     30 trading days immediately preceding the third anniversary of the Issue
     Date does not exceed $33.05. Furthermore, BHI may only effect an exchange
     if Apollo does so. Upon the determination by an independent financial

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<PAGE>

     institution, of fixed interest rates that accurately price the Fixed Rate
     Debentures at par under specified circumstances at the time of the
     exchange, Apollo and BHI shall irrevocably decide whether to proceed with
     their exchanges. If only Apollo proceeds with such an exchange, the
     Company, no later than 150 days from the third anniversary of the Issue
     Date, must either: (i) redeem all of the Apollo Debentures at par; or (ii)
     deliver the Fixed Rate Debentures to Apollo. If both Apollo and BHI proceed
     with their exchanges, the Company, within the same 150 day period, must
     either: (i) redeem both the Apollo and Benesse Debentures; or (ii) deliver
     the Fixed Rate Debentures to both Apollo and BHI.

o    Principal amounts outstanding under the Fixed Rate Debentures would not be
     payable until maturity, while interest payments would be made
     semi-annually. The Fixed Rate Debentures interest rate is subject to a cap
     of: (i) the applicable U.S. treasury rate + 5% (not to exceed 13%) if only
     Apollo receives Fixed Rate Debentures; or (ii) the applicable U.S. treasury
     rate + 7% (not to exceed 14%) if both Apollo and BHI receive Fixed Rate
     Debentures. The Fixed Rate Debentures may be redeemed by the Company after
     the third anniversary of their issue upon payment of principal amounts of
     the Fixed Rate Debentures and the following redemption premiums, expressed
     as a percentage of the outstanding principal amount: (i) one half of the
     per annum interest rate for redemptions occurring in the fourth year after
     issue; (ii) one quarter of the per annum interest rate for redemptions
     occurring in the fifth year after issue; and (iii) no premium for
     redemptions occurring thereafter.

o    Prior to the third anniversary of the Issue Date, if BHI sells 80% or more
     of the shares of Berlitz common stock owned directly or indirectly by it on
     the Issue Date, the Company shall be required to make an offer to
     repurchase for cash: (i) the Apollo Debentures at a value equal to 110% of
     the principal amount then outstanding; and (ii) the Benesse Debentures at a
     value equal to 101% of the principal amount then outstanding. In addition,
     if at any time on or after the Issue Date a change of control, as defined
     in the Investment Agreements, occurs but BHI sells less than 80% of its
     shares, or if BHI sells 80% of its shares on or after the third anniversary
     of the Issue Date, the Company shall be required to make an offer to
     repurchase for cash the Convertible Debentures (but not the Fixed Rate
     Debentures) at a value equal to 101% of the principal amount of the
     Convertible Debentures.

o    The fair value of the Convertible Debentures was last estimated at December
     31, 1999. As of that date, the Convertible Debentures had an estimated fair
     value of $145.2 million. The estimate was based on current interest rates
     and the Company's stock price volatility. The Company does not believe that
     this estimate has changed materially at June 30, 2000.

The Company's derivatives are for non-trading purposes. The Company historically
has only entered into derivative contracts as required by its lenders and it has
no present intention to change this policy. Furthermore, the Company employed
the following procedures to monitor and minimize the market and credit risk
associated with its current derivative contracts entered into pursuant to its
Bank Facility:

a)   bids and proposals were obtained from major financial institutions only;
b)   prior to entering into its derivative contracts, the Company conferred with
     independent advisors to assess the reasonableness of the contracts and
     obtained Board of Director approval;
c)   the Company entered into simple agreements; and

                                       29

<PAGE>

d)   the Company provides status updates regarding its derivatives, including
     market value updates, to its Board of Directors on a regular basis.


                                       30


<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                           PART II. OTHER INFORMATION

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

The Company held its annual meeting of shareholders on June 6, 2000. At that
meeting, the following people were elected to serve as directors: James Kahl,
Edward G. Nelson, Robert L. Purdum and Antony P. Ressler. Hiromasa Yokoi, who
was named in the Company's Proxy Statement as a nominee for re-election as a
Director, declined his nomination prior to the election. Each of the remaining
four nominees received 8,697,781 votes in favor of their election and 38,532
votes against their election. The following individuals continue to serve as
directors: Soichiro Fukutake, Laurence M. Berg, Takuro Isoda and James Lewis.

At the meeting, the shareholders also ratified the selection of Deloitte &
Touche LLP as independent public accountants for the Company for the fiscal year
2000 by a vote of 8,735,765 for ratification to 100 shares against, with 448
shares abstaining.

ITEM 5. OTHER MATTERS

On July 21, 2000, the Company announced that Henry D. James, who had previously
announced his retirement, would remain as Chief Financial Officer, that Robert
Minsky would not succeed Mr. James, as had been previously announced, and would
leave the Company and its Board of Directors, effective July 21, 2000.

The Company also announced on July 21 that as part of an effort to streamline
its language services operation, it was eliminating the position of Chief
Operating Officer for language services and, accordingly, that Makoto Obara
would leave the Company and its Board of Directors, effective July 21, 2000.

At the meeting of the Board of Directors held on June 6, 2000, the Board voted
to reduce the number of Directors from 12 to 11. The resignations of Mr. Obara
and Mr. Minsky, and Mr. Yokoi's withdrawal as a nominee for election have
created three vacancies. At the next regular meeting of the Board of Directors,
scheduled to occur on September 7, 2000, the Board will consider nominations to
fill the existing vacancies. If elected, the new Directors will serve until the
next annual meeting of the shareholders of the Company, and until any successors
are elected and qualified.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

All exhibits listed below are filed with this Quarterly Report on Form 10-Q.

EXHIBIT NO.
-----------

         27       Financial Data Schedule, for the six month period ended June
                  30, 2000.

                                       31

<PAGE>

(B) REPORTS ON FORM 8-K

A report on Form 8-K, dated June 6, 2000, was filed during the quarter ended
June 30, 2000, to announce the election of new directors at the Company's annual
meeting of shareholders.

                                   SIGNATURES

Pursuant to the requirements of the Exchange Act the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                        BERLITZ INTERNATIONAL, INC.
                                        ---------------------------
                                             (Registrant)


Date:  August 14, 2000                       By:  /s/ HENRY D. JAMES
                                                  ----------------------------
                                                  Henry D. James
                                                  Executive Vice President and
                                                  Chief Financial Officer