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

                                    FORM 10-K

  [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED DECEMBER 31, 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 issuer as specified in its charter)


            New York                                      13-3550016
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                      Identification Number)

400 ALEXANDER PARK, PRINCETON, NEW JERSEY                     08540
(Address of principal executive offices)                   (Zip code)

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


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

Title of Each Class                   Name of Each Exchange On Which Registered:
Common Stock, $.10 par value          New York Stock Exchange


           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                                (Title and class)

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

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

Based on the average bid and ask price at March 13, 2001, the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$31,034,193.

The number of shares of the Registrant's common stock outstanding as of March
13, 2001 was 9,546,536.

                   DOCUMENTS INCORPORATED BY REFERENCE: None

                               Page 1 of 96 Pages
                        Exhibit Index Appears on Page 91
<PAGE>

                                     PART I


ITEM 1.  BUSINESS

INTRODUCTION

Berlitz International, Inc. (the "Company" or "Berlitz") is the world's premier
language services firm, with market leading positions in language instruction
and translation services. The Company also publishes the well-known Berlitz
travel guides, foreign language phrase books, dictionaries and a variety of
other related products. Since its founding, the Company has established a highly
recognized brand name and superior reputation throughout the world as a result
of the Company's tradition of teaching excellence.

The Company, through its predecessors, was founded over 120 years ago and
completed its initial public offering in 1989. Since February 1993, Benesse
Corporation ("Benesse") has beneficially owned, through Benesse Holdings
International, Inc. ("Benesse Holdings"), a majority of the Company's common
stock and it currently holds approximately 7.2 million shares, or 75.6% of the
shares outstanding. Public shareholders of the Company hold the remaining
outstanding common stock. Since 1990, Benesse has also owned a 20% interest in
Berlitz Japan, Inc., ("Berlitz Japan"), the Company's Japanese subsidiary.

On December 29, 2000, the Company announced that Benesse and Benesse Holdings
had made a proposal to the directors of Berlitz to acquire all of the
outstanding shares of common stock of Berlitz not held by Benesse or Benesse
Holdings for a cash price of $12.00 per share. The proposal has been referred to
a special committee of disinterested directors of Berlitz. The special committee
has retained Banc of America Securities LLC to advise it in evaluating the
proposal. Benesse's proposal is, among other things, subject to the special
committee making a favorable recommendation with respect to the proposal. The
proposal is not subject to any financing conditions. Benesse also informed the
directors of Berlitz that it reserved the right to amend or withdraw its
proposal at any time in its sole discretion.

Berlitz is the only company to operate a language services business on a
worldwide basis. This worldwide presence enables Berlitz to provide a full range
of language services to multi-national customers and to take advantage of new
business opportunities. The Company is organized into two separate business
segments: Language Services (which consists of the Instruction, ELS, Publishing,
Franchising, and Cross Cultural sub-segments) and Berlitz GlobalNET, the
Company's translation, interpretation and data management services unit.
Financial information about segments and geographic areas is provided in the
Notes to Consolidated Financial Statements within Item 8, Financial Statements
and Supplementary Data, under Note 18.

                                       2
<PAGE>

LANGUAGE SERVICES

GENERAL.
As of December 31, 2000, the Company operated 344 Berlitz language centers in 41
countries and Puerto Rico using the Berlitz Method(R), hereinafter described,
and the Company's proprietary instruction material, to provide instruction in
virtually all spoken languages. All of these operations were wholly-owned by the
Company, except for Japan (which is subject to Benesse's 20% interest in Berlitz
Japan) and joint venture operations in Korea and Taiwan. Approximately 6.4
million Language Instruction lessons were given by these Berlitz language
centers in 2000, the most frequently taught languages being English, Spanish,
French and German. A lesson consists of a single 45-minute session (regardless
of the number of students).

In addition to lessons given at Berlitz language centers, the Company provides
intensive English language instruction programs at 33 additional locations,
primarily U.S. college campuses and similar educational settings, through ELS
Educational Services, Inc. ("ELS"), a wholly-owned subsidiary. Together with an
additional 99 franchised Berlitz and ELS centers, the Company has a presence in
57 countries and Puerto Rico.

The following table sets forth the number of language facilities in each of the
countries in which the Company and its subsidiaries or franchisees operated
centers as of December 31, 2000:

<TABLE>
<CAPTION>
                           BERLITZ
                           LANGUAGE                           ELS
                            CENTERS                        FACILITIES
                           (COMPANY        BERLITZ          (COMPANY            ELS
                           OPERATED)      FRANCHISES        OPERATED)        FRANCHISES         TOTAL
                         ------------     ----------       ----------        ----------         -----
<S>                      <C>              <C>              <C>               <C>                <C>
NORTH AMERICA
  United States               57                6             32                  -                95
  Canada                       9                -              -                  1                10
                         ------------     ----------       ----------        ----------         -----
         Subtotal             66                6             32                  1               105
                         ------------     ----------       ----------        ----------         -----
ASIA
  Australia                    -                -              -                  1                 1
  China                        1                -              -                  2                 3
  Hong Kong                    2                -              -                  -                 2
  Indonesia                    -                1              -                  3                 4
  Japan                       49                2              -                  2                53
  Korea                        2                -              -                  5                 7
  Malaysia                     1                -              -                  5                 6
  Singapore                    1                -              -                  -                 1
  Taiwan                       1                -              -                 18                19
  Thailand                     4                -              -                  -                 4
                         ------------     ----------       ----------        ----------         -----
         Subtotal             61                3              -                 36               100
                         ------------     ----------       ----------        ----------         -----
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                           BERLITZ
                           LANGUAGE                           ELS
                            CENTERS                        FACILITIES
                           (COMPANY        BERLITZ          (COMPANY            ELS
                           OPERATED)      FRANCHISES        OPERATED)        FRANCHISES         TOTAL
                         ------------     ----------       ----------        ----------         -----
<S>                      <C>              <C>              <C>               <C>                <C>
LATIN AMERICA
  Argentina                    5              1                -                  -               6
  Brazil                      19              2                -                  -              21
  Chile                        5              1                -                  -               6
  Colombia                     9              -                -                  6              15
  Costa Rica                   -              2                -                  -               2
  Dominican Republic           -              1                -                  -               1
  Guatemala                    -              1                -                  -               1
  Mexico                      21              4                -                  -              25
  Panama                       -              -                -                  1               1
  Paraguay                     -              1                -                  -               1
  Peru                         2              -                -                  -               2
  Puerto Rico                  4              -                -                  -               4
  Uruguay                      1              -                -                  -               1
  Venezuela                    7              -                -                  -               7
                         ------------     ----------       ----------        ----------         -----
         Subtotal             73             13                -                  7              93
                         ------------     ----------       ----------        ----------         -----
EUROPE
   Austria                     7              3                -                  -              10
   Belgium                    11              -                -                  -              11
   Croatia                     -              1                -                  -               1
   Czech Republic              5              -                -                  -               5
   Denmark                     2              -                -                  -               2
   Egypt                       -              2                -                  1               3
   Finland                     1              -                -                  -               1
   France                     18              1                -                  -              19
   Germany                    46              2                -                  -              48
   Greece                      1              -                -                  -               1
   Holland                     2              -                -                  -               2
   Hungary                     3              -                -                  -               3
   Ireland                     1                               -                  -               1
   Israel                      6              -                -                  -               6
   Italy                       6              1                -                  -               7
   Jordan                      -              -                -                  1               1
   Kuwait                      -              1                -                  1               2
   Malta                       -              1                -                  -               1
   Norway                      1              -                -                  -               1
   Oman                        -              -                -                  1               1
   Poland                      9              -                -                  -               9
   Portugal                    1              -                -                  -               1
   Qatar                       -              -                -                  1               1
   Saudi Arabia                -              3                -                  3               6
   Slovak Republic             1              1                -                  -               2
   Slovenia                    1              -                -                  -               1
   Spain                      10              -                -                  -              10
   Sweden                      1              -                -                  -               1
   Switzerland                 8              -                -                  -               8
   Turkey                      -              1                -                  -               1
   United Arab Emirates        -              2                -                  3               5
   United Kingdom              3              3                1                  -               7
                         ------------     ----------       ----------        ----------         -----
         Subtotal            144             22                1                 11             178
                         ------------     ----------       ----------        ----------         -----
    Total                    344             44               33                 55             476
                         ============     ==========       ==========        ==========         =====
</TABLE>

                                       4
<PAGE>

INSTRUCTION SUB-SEGMENT
Revenues from Language Instruction accounted for approximately 62%, 62% and 61%
of total Company revenues in 2000, 1999 and 1998, respectively. In 2000, the
United States, Japan, and Germany accounted for approximately 15%, 17% and 11%
of lessons given and 15%, 27% and 12% of Language Instruction sales,
respectively.

BERLITZ METHOD(R). The Company's main pedagogical technique is the Berlitz
Method(R), a proven technique that enables students to acquire a working
knowledge of a foreign language in a short period of time. Through the exclusive
use of the target language in the classroom, students learn to think and speak
naturally in the new language, without translation. The Berlitz Method(R)
combines the use of live instruction with proprietary written, audio-visual and
CD-ROM support materials to ensure a fast, effective and enjoyable learning
experience for conversational comprehension and speaking skills.

Berlitz instructors generally teach in their national language and are required
to complete a seven to ten-day initial training course in the Berlitz Method(R),
followed by periodic refresher courses. Upon successful completion of the
initial training course, instructors work either full-time or part-time. The
Berlitz Method(R) does not require that an instructor be proficient in any
language other than the language being taught. This feature of the Berlitz
Method(R) greatly increases the number of potential instructors and tends to
lower instructor costs.

The Company's centralized management and ownership of the majority of its
language centers, and requirements for franchise operators, permits
standardization of instructional method and materials. This standardization also
allows a client to begin a Berlitz course in one location and complete it
anywhere in the worldwide network of Berlitz language centers. Through
application of uniform standards to instructor training, development and usage
of materials, and classroom instruction, the Company seeks to achieve consistent
and predictable performance results.

INSTRUCTION PROGRAMS. The Company offers several types of language instruction
programs, which vary in cost, length, and intensity of study. Approximately 48%
of all tuition revenues in 2000 were from private lessons (excluding Total
Immersion(R) courses). Private instruction is typically provided in blocks of
three or more 45-minute lessons, with a short break after each lesson. Total
Immersion(R) courses, an intensive form of private instruction, accounted for
approximately 4% of tuition revenues in 2000. Total Immersion(R) programs last a
full day and generally continue for two to six weeks. The Company also offers
semi-private lessons designed for two to three clients, as well as group
instruction, where classes include four or more students. Group classes
generally meet over a period of weeks. Semi-private and group programs together
represented 48% of tuition revenues in 2000.

A majority of the Company's clients are from the corporate segment of the market
and are enrolled for business or professional reasons. Consequently, the level
of international trade and economic activity affects the Company's business. In
addition to individuals seeking work-related language skills, Berlitz clients
also include travelers and high school and university students.

MARKETING AND PRICING POLICY. The Company sells Berlitz language courses to
individuals, businesses and governments. The Company uses newspaper, magazine
and yellow page advertising, and the Berlitz Website, in addition to direct
contacts, to promote Berlitz programs and centers. Local marketing efforts are
coordinated on a divisional and country-by-country basis.

                                       5
<PAGE>

Center directors and district and regional managers are responsible for sales
development with existing and new clients. Sales forces are also maintained in
the Company's major markets to supplement other marketing methods.

Tuition, which is paid in advance by most individual clients and some corporate
clients, includes a registration fee, a charge for printed and recorded course
materials, and a per lesson fee. The per lesson fee varies depending on the
language being taught, type and quantity of lessons, and country. Total
Immersion(R) courses are more expensive than standard individual instruction,
while semi-private and group instruction are less expensive.

The Company generally negotiates fees with its corporate clients based on
anticipated volume. Concentration on the intensive, individualized segment of
the market has enabled the Company to maintain a pricing structure consistent
with a premium service.

COMPETITION. The language instruction industry is fragmented, varying
significantly among different geographic locations. Other providers of language
instruction include individual tutors, small language schools operated by
individuals and public institutions, and franchisees of large language
instruction companies. The smaller operations typically offer large group
instruction and self-teaching materials for home study. Rather than compete with
these smaller operators, the Company concentrates on its leading position in the
higher-priced, business-oriented segment of the language instruction market
through its offering of intensive and individualized instruction. No competitors
in this market offer language instruction through wholly owned operations on a
worldwide basis. However, the Company does have a number of competitors
organized on a franchise basis which, although not as geographically diverse as
the Company, compete with it internationally. The Company also faces significant
competition in a number of local markets.

ELS SUB-SEGMENT
The ELS business sub-segment provides English language instruction through
intensive on-campus programs designed to appeal to international students and
professionals who require English proficiency for academic, personal or career
development purposes. These programs, which are offered under the ELS
Educational Services name and, until January 2000, were offered through the
Berlitz on Campus ("BOC") program, prepare students to take the Test of English
as a Foreign Language ("TOEFL") examination, and for other situations where an
intensive, extended course of study is required. Intensive instruction is
typically provided in four-week blocks of twenty or thirty hours of instruction
per week for a four-week period. The average student studies for approximately 2
1/2 months.

Approximately 94% of ELS revenues in 2000 were from intensive lessons and
related services. Approximately 5% of ELS revenues were derived from programs
such as summer youth programs for younger students that combine language
instruction with leisure and social activities; specially designed programs for
corporate clients; and private instruction. Royalties from ELS franchises
comprise approximately 1% of ELS revenue.

MARKETING AND PRICING POLICY. ELS devotes significant resources toward promoting
its various programs to prospective students, both within the U.S. and overseas.
In-house sales and marketing personnel focus their efforts on establishing and
maintaining relationships with a worldwide network of external sales agents that
provide students to the ELS program. These agents in turn

                                       6
<PAGE>

receive commissions from ELS. Center personnel are responsible for sales
development with existing and new clients.

ELS uses a combination of brochure, cooperative advertising, professional
publications, trade shows, yellow pages, the ELS Website and other promotional
activities to promote its services.

Tuition, accommodation fees and other related program fees are paid in advance
by most students. ELS offers a variety of discounted pricing options based on
the length of course that a student takes.

COMPETITION. The intensive English instruction industry is fragmented and varies
significantly among geographic regions. In addition to the Company, providers of
intensive English instruction include individual tutors, language schools of
varying size that are operated by individuals, as well as those operated by
other companies and institutions such as colleges and universities.

PUBLISHING SUB-SEGMENT
The Company publishes pocketsize travel guides, language phrase books, bilingual
dictionaries, children's language products, self-teaching language audio and
language reference products. It is also involved in several licensing
arrangements for products that use Berlitz content and trademarks and for which
the Company receives royalties. The Publishing business accounted for
approximately 2% of total Company revenues in 2000 and 3% in each of 1999 and
1998.

BERLITZ BOOKS AND GUIDES. Pocket-size, smaller format travel guides include
full-color pictures, maps, brief histories, points of interest, food and
shopping information and a practical A to Z section. The Company's phrase books
include common expressions, words, and phrases most often used by travelers.
These appear in color-coded sections covering such topics as accommodations,
eating, sightseeing, shopping, transportation and medical reference. Additional
travel-related language products include Cassette Packs and Compact Disc Packs,
which consist of a 90-minute cassette tape or a 75-minute compact disc ("CD")
and phrase book packaged and sold together. Retail distribution of books and
audio products is generally handled by distributors appointed by Berlitz,
independent sales representatives, and by direct selling efforts, including
e-commerce.

BERLITZ SELF-TEACHING. The audiocassette and CD products produced by the Company
are intended for the self-instruction language market and draw on the experience
gained through operating language centers. In addition to a general language
instruction curriculum, these products include items for children and courses
for business people.

In addition to the audio-cassette and CD products, the Company is presently
involved in several licensing arrangements for products that use published
Berlitz materials and/or Berlitz trademarks as the basis for consumer publishing
products for which the Company receives royalties.

COMPETITION. The market for the Company's publications and self-teaching
language products is sensitive to factors that influence the level of
international travel, tourism and business. There is intense competition in
nearly all markets in which the Company sells its published products. The
Company's market share and Berlitz brand name recognition vary considerably
depending on market and product line.

                                       7
<PAGE>

FRANCHISING SUB-SEGMENT
Franchisees are granted franchises to operate Berlitz language centers in a
specific territory, the size of which depends on demographic and geographic
factors. Such sites are selected to extend the Company's geographic reach beyond
areas in which the Company and other franchisees operate. Franchisees initially
pay Berlitz an application fee of $5,000, and a franchise fee of $25,000
($45,000 in Asia). Thereafter, franchisees pay Berlitz 10% (7.5% in Europe) of
the language center's gross revenues in royalties, and 2% of gross revenues for
advertising participation. The Franchising business accounted for less than 1%
of total Company revenues in each of 2000, 1999, and 1998.

The Company actively monitors the operations and lesson quality of its
franchisees, and has developed an extensive confidential operations manual
which, together with the Company's Berlitz Method(R), forms the core of the
Berlitz franchise system. All franchisees are required to complete a two-week
training program at the Company's Princeton headquarters and the Company also
provides two additional weeks of on-site teacher training. Franchisees
participate in the Berlitz Language Center Management System, a management
information system tied to Berlitz headquarters, and are subject to periodic
financial audit and quality inspection.

CROSS CULTURAL SUB-SEGMENT
Berlitz Cross Cultural(R), which typically provides cross-cultural training on a
fee basis to corporate employees, complements language study by providing
expatriates with detailed practical and cultural information about the countries
to which they are relocating. The cross cultural business accounted for less
than 1% of total Company revenues in each of 2000, 1999, and 1998.

BERLITZ GLOBALNET

Berlitz GlobalNET helps customers prepare their products and services for the
world market faster and at lower cost. Berlitz GlobalNET provides high quality
technical document translation and interpretation and is 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, and from designing and implementing to 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.

Berlitz GlobalNET represented approximately 22%, 21%, and 19% of total Company
revenues in 2000, 1999, and 1998, respectively. Its sales focus is on large,
complex projects in multiple languages for global markets, particularly, but not
exclusively, where Web publishing and eBusiness are the delivery media. Its
customer base is primarily in the following sectors: information technology,
automotive, manufacturing, engineering, telecommunications, medical technology,
pharmaceuticals, and publishing.

The Company has an international network of production and technology centers.
Materials are electronically transferred between locations to utilize
specialized in-country translation and production facilities in order to produce
the highest quality products and reduce costs. The Company has developed an
international network of contract translators who provide a broad range

                                       8
<PAGE>

of technical and linguistic resources, with an internal qualification program to
assure a high level of linguistic expertise, and a production process that
incorporates several editing phases designed to maximize the accuracy of its
translations. The Company has also developed a consulting and systems
integration capability, to deliver strategic planning and solutions to its
customers. The staff at production facilities generally consist of production
managers, project managers, translators, editors, desktop publishing ("DTP")
specialists, software engineers, and software testers. Managers and editors are
generally full-time staff members, while the translator and DTP staffs include
both full-time employees and freelance workers. Freelance translators provide
the specialized skills necessary for technical translations at lower rates than
full-time employees.

COMPETITION. The translation services industry is being transformed into a
globalization services sector, with suppliers increasing the value they add to
customer engagements. The historic fragmentation of the market is beginning to
disappear as a few large suppliers consolidate. In addition, a number of
technology-focused new entrants have recently appeared. Berlitz GlobalNET has
taken steps to build its technology base and services for the new market
environment, and expects to remain the largest company in the sector.

EMPLOYEES

As of December 31, 2000, the Company employed 5,983 full-time employees and
employee equivalents. Due to the nature of its businesses, the Company retains a
large number of teachers and translators on a part-time or freelance basis.
Full-time employee equivalents are calculated by aggregating all part-time hours
(excluding freelance translators) and dividing these by the average number of
hours worked by a full-time employee.

The Company is party to collective bargaining agreements in Canada, Denmark,
France, Austria, Germany, Italy and Japan. The Company believes it has
satisfactory employee relations in the countries in which it operates. Certain
countries in which the Company operates impose obligations on the Company with
respect to employee benefits. None of these obligations materially affects the
Company's ability to operate its business.

TRADEMARKS AND TRADENAMES

The material trademarks used by the Company and its subsidiaries are BERLITZ(R),
TOTAL IMMERSION(R) (including foreign language variations used in certain
foreign markets), BERLITZ METHOD(R), BERLITZ JR.(R), BERLITZ STUDY ABROAD(R),
BERLITZ ON CAMPUS(R), BERLITZ KIDS(R), BERLITZ CROSS CULTURAL(R),
BERLITZ.COM(R), BERLITZITTM, ELS(R), ELS LANGUAGE CENTERS(R), ELS
INTERNATIONAL(R), and WE TEACH ENGLISH TO THE WORLD(R). The Company or its
subsidiaries hold registrations for these trademarks, where possible, in all
countries in which: (i) material use is made of the trademarks by the Company or
its subsidiaries; and (ii), failure to hold such a registration is reasonably
likely to have a material adverse effect on the Company or its subsidiaries. The
duration of the registrations varies from country to country. However, all
registrations are renewable upon a showing of use. The effect of the
registrations is to enhance the Company's ability to prevent certain uses of the
trademarks by competitors and other third parties. In certain countries, the
registrations create a presumption of exclusive ownership of the trademarks.

                                       9
<PAGE>

REGULATORY ISSUES

Although the Company is not generally regulated as an educational institution in
the jurisdictions in which it does business, it is subject to general business
regulation and taxation. The Company's foreign operations are subject to the
effects of changes in the economic and regulatory environments of the countries
in which the Company operates. In certain countries and states of the U.S., laws
and regulations restrict the operation of language schools.

The Uniform Offering Circular ("UFOC") of Berlitz Franchising Corporation and
ELS Educational Services, Inc., each a wholly owned subsidiary of the Company,
have been registered with various states as required. An "internationalized"
version of the UFOC is modified to comply with foreign law requirements where
applicable.





                                       10
<PAGE>

ITEM 2.  PROPERTIES

The Company has its headquarters in Princeton, New Jersey and maintains
facilities throughout the world. The majority of the Company's facilities
(including the Company's headquarters) are leased. Total annual rental expense
for the twelve months ended December 31, 2000, principally for leased
facilities, was $37.8 million. No one facility is material to the operation of
the Company. A typical Berlitz language center has private classrooms designed
for individual instruction, as well as some larger rooms suitable for group
instruction. ELS locations typically consist of classroom and administrative
space that is rented at various colleges and universities.

The following tables set forth, the number of facilities maintained in each
geographic region, the primary use of the Company's facility, whether owned or
leased, and the aggregate square footage, all as of December 31, 2000. No
properties are subject to material encumbrances.

                                OWNED FACILITIES

<TABLE>
<CAPTION>
                                                                              Other (principally
                           Language                  Translation               headquarters and
                            Centers                    Centers                  administrative)                   Total
                    ------------------------     ---------------------       ---------------------       ----------------------
                    Number of     Square         Number of     Square        Number of     Square        Number of     Square
                    facilities    footage        facilities    footage       facilities    footage       facilities    footage
                    ------------------------     ---------------------       ---------------------       ----------------------
<S>                 <C>           <C>            <C>           <C>           <C>           <C>           <C>           <C>
REGION
Europe                   6        11,882             1         3,755              -          -                7        15,637
Latin America            5        19,396             -             -              -          -                5        19,396
                    ------------------------     ---------------------       ---------------------       ----------------------
Total                   11        31,278             1         3,755              -          -               12        35,033
                    ========================     =====================       =====================       ======================


<CAPTION>
                                LEASED FACILITIES

                                                                              Other (principally
                           Language                  Translation               headquarters and
                            Centers                    Centers                  administrative)                   Total
                    ------------------------     ----------------------      -----------------------        ---------------------
                    Number of      Square        Number of     Square        Number of      Square          Number of      Square
                    facilities     footage       facilities    footage       facilities     footage         facilities    footage
                    ------------------------     ----------------------      -----------------------        ---------------------
<S>                 <C>           <C>            <C>           <C>           <C>           <C>           <C>           <C>
REGION
North America            92        418,682           14        61,346             5          87,200            111       567,228
Asia                     69        197,427            3         5,906             5           9,758             77       213,091
Latin America            72        301,361            4        10,916             4          16,441             80       328,718
Europe                  157        459,098           15        97,140             8          36,918            180       593,156
                    ------------------------     ----------------------      -----------------------        ---------------------
Total                   390      1,376,568           36       175,308            22         150,317            448     1,702,193
                    ========================     ======================      =======================        =====================
</TABLE>

                                       11
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

The Company and its Directors are parties to several actions brought by
shareholders who object to the terms of the proposed purchase by Benesse of the
common stock of the Company not owned by Benesse. The Company does not believe
that these actions state valid claims against Berlitz or any of its directors.

The Company is also party to several actions arising out of the ordinary course
of its business. Management believes that none of these actions, individually or
in the aggregate, will have a material adverse effect on the financial
condition, results of operations, or cash flows of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.

Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3) to Form 10-K, the following information is included in Part I
of this Form 10-K.

EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

The following table sets forth-certain information concerning the Executive
Officers and Directors of the Company as of March 6, 2001.

NAME, AGE, POSITION
   WITH REGISTRANT                 BUSINESS EXPERIENCE
-------------------                -------------------
Soichiro Fukutake, 55              Mr. Fukutake has served as Chairman of the
Chairman of the Board;             Board of the Company since February 1993. Mr.
Director (A) (E)                   Fukutake joined Benesse in 1973, and since
                                   May 1986 has served as its President and
                                   Representative Director. He also serves on
                                   the Board of Directors of a number of
                                   companies, private foundations and
                                   associations in Japan. Mr. Fukutake became a
                                   Director of the Company in February 1993. His
                                   term will expire in 2001.

James Kahl, 59                     Mr. Kahl has served as Vice Chairman of the
Vice Chairman of the Board         Board of the Company since July 1, 2000, and
Director (A) (E)                   also serves on the Board of Directors of
                                   Benesse Holdings. Previously he was Chief
                                   Executive Officer and President of La Petite
                                   Academy, a provider of preschool and
                                   childcare services from 1993 until December
                                   31, 1999, and was also the Chairman of its
                                   Board from 1998 until December 31, 1999. From
                                   1991 until 1993, he was a Senior Vice
                                   President of Knott's Berry Farm. From 1983
                                   until 1991, he held a number of senior
                                   executive positions at Marriott Corporation,
                                   including Senior Vice President of
                                   Administration, Chief Financial Officer, and
                                   Senior Vice President, Operations of the
                                   Contract Services Division. From 1964 until
                                   1982, he held a variety of positions

                                       12
<PAGE>

                                   at Arthur Andersen & Co., including Managing
                                   Partner of the San Diego office. Mr. Kahl
                                   became a Director of the Company in March
                                   2000 and his term will expire in 2002.

James Lewis, 43                    Mr. Lewis has served as an Executive Vice
Executive Vice President,          President of the Company and Chief Executive
Director (A)                       Officer, Berlitz GlobalNET, since January 1,
                                   1999, prior to which he was Vice President,
                                   Worldwide Translations since September 1,
                                   1997. Previously, Mr. Lewis most recently
                                   served in a number of executive level
                                   positions with Globalink, Inc., including
                                   President and Director (1995 to 1997) and
                                   Vice President, Worldwide Sales and Marketing
                                   (1995). Prior to that he served as Vice
                                   President, Marketing of MAXM Systems
                                   Corporation (1994 to 1995); and Vice
                                   President, International Operations, Landmark
                                   Systems Corporation (1992 to 1994). During
                                   the period of 1983 to 1992, Mr. Lewis held a
                                   number of management positions with
                                   Ashton-Tate Corporation, and Peter Norton
                                   Computing. Mr. Lewis has served as a director
                                   for the Company since March 1999. His term
                                   will expire in 2002.

Ryoichi Tanaka, 44                 Mr. Tanaka has served as a Vice President of
Vice President, Director           the Company since September 2000. Previously,
                                   he served in a number of management positions
                                   with Benesse, including General Manager of
                                   the Benesse Child Care division (1997 to
                                   1999), Benesse's Investment Officer (1996 to
                                   1997); CEO and General Manager of Fukutake
                                   Publishing Co., Ltd., of North America (1993
                                   to 1996); and CEO of the New York and Los
                                   Angeles offices of Benesse (1990 to 1993).
                                   Mr. Tanaka also currently serves on the Board
                                   of Directors of Benesse Holdings. He began
                                   his career with Benesse in 1981. Mr. Tanaka
                                   became a director of Berlitz in September
                                   2000 and his term will expire in 2002.

Hiroshi Kitada, 45                 Mr. Kitada is President and Chief Executive
Director                           Officer of Benesse Holdings. Prior to joining
                                   Benesse Holdings in 1999, Mr. Kitada was
                                   General Manager of the New York Corporate
                                   Finance Department of The Long-Term Credit
                                   Bank of Japan, Ltd., which he joined in 1979.
                                   Mr. Kitada currently serves as a Director of
                                   Technology Education Network and Benesse
                                   Holdings. Mr. Kitada earned his MBA from the
                                   Wharton School at the University of
                                   Pennsylvania and his BA in Economics from
                                   Keio University. He has served as a Director
                                   of the Company since September 2000 and his
                                   term will expire in 2002.

                                       13
<PAGE>

Laurence M. Berg, 34;              Mr. Berg has been associated with Apollo
Director                           Advisors, L.P. since 1992 and a partner since
                                   1995, which, together with its affiliates,
                                   including Apollo Management IV, L.P.,
                                   ("Apollo"), act as managing general partner
                                   of Apollo Investment Fund, L.P., AIF II,
                                   L.P., Apollo Investment Fund III, L.P. and
                                   Apollo Investment Fund IV, L.P. which are
                                   private securities investment funds. Prior
                                   thereto, Mr. Berg was a member of the Mergers
                                   and Acquisitions Department of Drexel Burnham
                                   Lambert Incorporated. Mr. Berg is a director
                                   of Rent-A-Center, Inc., Sylvan Learning
                                   Systems and Resolution Performance Products.
                                   Mr. Berg received his MBA from the Harvard
                                   Business School and received his BS in
                                   economics from the University of
                                   Pennsylvania's Wharton School of Business.
                                   Mr. Berg has served as a Director of the
                                   Company since March 1999 and his term will
                                   expire in 2001.

Antony P. Ressler, 40;             Mr. Ressler co-founded Apollo in 1990. Mr.
                                   Director Ressler also founded Ares
                                   Management, L.P. in 1997, the general partner
                                   of the Ares Funds, including Ares Leveraged
                                   Investment Funds I, II and III, each of which
                                   are private securities investment funds
                                   focused primarily on debt and
                                   mezzanine/equity investments. Prior to 1990,
                                   Mr. Ressler served as a Senior Vice President
                                   in the High Yield Bond Department of Drexel
                                   Burnham Lambert Incorporated, with
                                   responsibility for the New Issue/Syndicate
                                   Desk. Mr. Ressler serves on several boards of
                                   directors including: Allied Waste Industries,
                                   Inc.; Communications Corporation of America;
                                   and Vail Resorts, Inc., as well as on the
                                   Supervisory Board of Directors of Buhrmann
                                   NV. Mr. Ressler is on the Board of Directors
                                   of Alliance for Student Achievement, one of
                                   the largest public school reform movements in
                                   the U.S., a member of the Board of Advisors
                                   of the UCLA Medical Center, a member of the
                                   Executive Committee of the Board of Directors
                                   of the Jonsson Comprehensive Cancer Center at
                                   UCLA and a member of the Board of Trustees of
                                   the Center for Early Education. Mr. Ressler
                                   is also one of the founding members of the
                                   Board of the Painted Turtle Camp, the
                                   Southern California chapter of The Hole in
                                   the Wall Gang Camps created to serve children
                                   dealing with chronic and life threatening
                                   illnesses by creating memorable,
                                   old-fashioned camping experiences. Mr.
                                   Ressler received his B.S.F.S. from Georgetown
                                   University's School of Foreign Service and
                                   received his MBA from Columbia University's
                                   Graduate School of Business. Mr. Ressler has
                                   served as a Director of the Company since
                                   March 1999 and his term will expire in 2002.

                                       14
<PAGE>

Takuro Isoda, 65                   Since July 1999, Mr. Isoda has been the
Director                           President of Isoda & Associates, Inc., of
(B)(C)(D)                          Tokyo and President of Rich Capital, Inc., of
                                   Osaka. He was a Senior Advisor for Nippon
                                   Investment & Finance Co., Ltd., a Daiwa
                                   Securities group company, until June 1999 and
                                   was its Chairman from June 1994 to July 1998
                                   and its President from January 1990 to May
                                   1994. Prior to that, Mr. Isoda served in
                                   various positions with Daiwa Securities since
                                   first joining the Company in 1959, including,
                                   most recently, Chairman & CEO of Daiwa
                                   Securities of America, Inc., New York
                                   (January 1984 to January 1990), and Senior
                                   Managing Director of Daiwa Securities Co.,
                                   Ltd., Tokyo (December 1988 to January 1990).
                                   Mr. Isoda is Vice Chairman and a Director of
                                   the New Business Conference, Tokyo, and a
                                   Director of the Japan Academic Society of
                                   Ventures and Entrepreneurs, each of which is
                                   a non-profit governmental policy advisory and
                                   new venture support group. He also serves as
                                   a Director of U's BMB Entertainment, Osaka;
                                   Just Co., Omiya; BMB.com, Tokyo; Ochiai Sogo
                                   Kikaku, Tokyo; Inter.Office, Ltd., Tokyo and
                                   Effectto Holding, Tokyo. Mr. Isoda is an
                                   Advisor to ILC, Inc., Hiroshima; Harvey Labo,
                                   Tokyo; Imagawa-Misawaya Securities, Tokyo;
                                   atJapan Medeia.com, Tokyo and ICG Japan K.K.,
                                   Tokyo. He is the Statutory Auditor for
                                   Universal Home, Tokyo and Asteric, Inc.,
                                   Tokyo. Mr. Isoda has served as a Director of
                                   the Company since June 1998. His term will
                                   expire in 2001.

Edward G. Nelson, 69               Since January 1985, Mr. Nelson has served as
Director                           Chairman and President of Nelson Capital
(B)(C)(D)(E)                       Corporation. From 1983 to 1985, he was
                                   Chairman and Chief Executive Officer of
                                   Commerce Union Corporation. He also serves on
                                   the Board of Directors of ClinTrials
                                   Research, Inc., Central Parking System and
                                   Advocat, Inc. He is a trustee of Vanderbilt
                                   University. Mr. Nelson became a Director of
                                   the Company in February 1993. His term will
                                   expire in 2002.

Robert L. Purdum, 65               Mr. Purdum is the retired Chairman of the
Director (B)(C)(D)(E)              Board of Armco, Inc. and currently a partner
                                   with American Industrial Partners, a private
                                   investment company located in New York and
                                   San Francisco. During his Armco career, he
                                   served in various positions since first
                                   joining Armco in 1962, including Chairman and
                                   Chief Executive Officer (November 1990 to
                                   December 1993), President and Chief Executive
                                   Officer (April 1990 to November 1990),
                                   President (October 1986 to April 1990), Chief
                                   Operating Officer (February 1985 to October
                                   1986) and Chief Executive Officer - Steel
                                   Group (November 1982 to February 1985). Mr.
                                   Purdum has also served on the Board of
                                   Directors of Holophane Corporation. Mr.
                                   Purdum has served as a Director of the
                                   Company since August 1994. His term will
                                   expire in 2002.

                                       15
<PAGE>

Mark Harris, 47                    Mr. Harris has served as an Executive Vice
Executive Vice President           President of the Company since December 5,
                                   2000, and prior to that, Vice President,
                                   North America Language Services, since
                                   January 1, 1999, prior to which he was Vice
                                   President, North America Division of the
                                   Company since October 1, 1997. In addition
                                   Mr. Harris has served as President and Chief
                                   Executive Officer of ELS Educational Services
                                   Inc. since October 1998. Prior thereto, he
                                   served in various positions with Berlitz
                                   since first joining in 1978, including
                                   Managing Director of Berlitz on Campus
                                   (September 1993 to September 1997). Mr.
                                   Harris was first employed by Berlitz in 1978.

Paul H. Weinstein, 50              Mr. Weinstein has served as Vice President,
Vice President, General Counsel    General Counsel and Secretary since March 6,
and Secretary                      2001, prior to which he was General Counsel
                                   and Secretary of the Company since January 2,
                                   2000. Prior thereto, he served in various
                                   positions with the Company in the Legal
                                   Department, including Deputy General Counsel
                                   (January 1999 to January 2000) and Associate
                                   General Counsel. Mr. Weinstein was first
                                   employed by Berlitz in July 1995.

Ellen Adler, 45                    Ms. Adler has served as Vice President,
Vice President                     Worldwide Publishing since October 1, 1997.
                                   Prior thereto, she served in various
                                   management positions in the Publishing
                                   sub-segment since first joining the Company
                                   in 1998, including Managing Director, North
                                   America Publishing (January 1996 to September
                                   1997).

Jose Alvarino, 61                  Mr. Alvarino has been Vice President, Latin
Vice President                     America Languages Services, since January 1,
                                   1999, prior to which he was Vice President,
                                   Latin American Division of Berlitz since
                                   1985. Mr. Alvarino was first employed by
                                   Berlitz in 1970.

Susumu Kojima, 58                  Mr. Kojima has served as Vice President, Asia
Vice President                     Language Services, since March 2, 1999. Prior
                                   thereto he held various management positions
                                   with Berlitz since joining in 1993, including
                                   Executive Vice President, Asia Division
                                   (since January 1, 1996). Mr. Kojima also
                                   served as a Director of Benesse Corporation
                                   from March 1993 until June 1998.

Wolfgang Wiedeler, 56              Mr. Wiedeler has been Vice President, Europe
Vice President                     Language Services, since January 1, 1999,
                                   prior to which he was Vice President,
                                   Central/Eastern Europe Division of the
                                   Company since January 1, 1995. Previously Mr.
                                   Wiedeler served in various management
                                   positions since his initial employment with
                                   Berlitz in 1984.

                                       16
<PAGE>

Brian Kelly, 54                    Mr. Kelly has served as Vice President,
Vice President                     Berlitz GlobalNET Europe since January 1,
                                   1999, and as Vice President, Western Europe
                                   Division of the Company from January 1996
                                   until January 1, 1999, and as General
                                   Manager, Translations Services Europe since
                                   first joining Berlitz in January 1993.

Ronald Stark, 36                   Mr. Stark has served as Vice President,
Vice President, Finance            Finance, of the Company since September 2000.
                                   He previously served in a variety of
                                   financial positions with Berlitz, including
                                   Director of Accounting from 1996 to 2000,
                                   since first joining the Company in 1989.

Frank Garton, 54                   Mr. Garton has served as Vice President,
Vice President                     Franchising, since first joining Berlitz in
                                   March 1995.


(A)      member of the Executive Committee of the Board of Directors
(B)      member of the Audit Committee
(C)      member of the Compensation Committee
(D)      member of the Disinterested Directors Committee
(E)      member of the Nominating Committee


The Company's Disinterested Directors Committee evaluates all significant
transactions between the Company and Benesse. There is no family relationship
between any of the Directors or Executive Officers of the Company.




                                       17
<PAGE>

                                     PART II

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

The Company's common stock is traded on the New York Stock Exchange ("NYSE")
under the symbol BTZ. Holders of shares of common stock are entitled to receive
such dividends as may from time to time be declared by the Board of Directors;
however, the Company does not have any present intention to commence paying
dividends. Holders of common stock are entitled to one vote per share on all
matters submitted to the vote of such holders, including the election of
directors. There were 62 holders of record of common stock as of March 12, 2001
(one of which was Cede & Company, at which 2.3 million shares were held by
brokers in street name.)

The closing sales prices per share of common stock as reported by the NYSE for
each quarter during the period from January 1, 1999, until December 31, 2000,
ranged as follows:

                                                      PRICE PER SHARE
                                                 --------------------------
                                                  HIGH                LOW
                                                 --------          --------
         First Quarter 2000                      $18 1/2           $15 3/16
         Second Quarter 2000                     $13 3/8           $ 8
         Third Quarter 2000                      $10 9/16          $ 7 13/16
         Fourth Quarter 2000                     $ 8 1/2           $ 5 7/8

         First Quarter 1999                      $29               $22 1/2
         Second Quarter 1999                     $22 15/16         $17 13/16
         Third Quarter 1999                      $21 1/16          $18
         Fourth Quarter 1999                     $21 1/8           $16 7/16

No common stock dividends were declared or paid for 2000 or 1999.

On March 11, 1999, the Company issued $155 million aggregate principal amount
12-year convertible debentures (the "Convertible Debentures") in a private
placement to two affiliates of Apollo and to Benesse Holdings. This transaction
was completed as a private placement exempt from registration under Section 4(2)
of the Securities Act of 1933. Principal amounts outstanding under such
debentures are not due until March 2011. 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. The Company used the proceeds from the sale of the Convertible
Debentures to: (i), repay in full existing long term indebtedness; and (ii), for
general corporate purposes.

                                       18
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

                           BERLITZ INTERNATIONAL, INC.
                           FIVE-YEAR FINANCIAL SUMMARY
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                  ----------------------------------------------------------------
                                                                     2000         1999          1998         1997          1996
                                                                  ---------     ---------     ---------    ---------     ---------
<S>                                                               <C>           <C>           <C>          <C>           <C>
INCOME STATEMENT DATA:
---------------------
Sales of services and
products sold                                                     $ 480,208     $ 446,181     $ 436,303    $ 397,209     $ 369,622
                                                                  ---------     ---------     ---------    ---------     ---------
Cost and expenses:
  Cost of services and
       products sold                                                292,246       267,176       253,842      235,020       222,313
  Selling, general and
      administrative                                                153,949       148,803       142,147      124,945       113,695
  Restructuring and other unusual charges(1)                         12,296            --            --           --            --
  Amortization of publishing rights,
      excess of cost over net assets
      acquired and other intangibles                                 18,432        18,024        17,265       14,183        12,746
   Other expense, net                                                11,395        10,456        15,370       10,008         8,054
                                                                  ---------     ---------     ---------    ---------     ---------
     Total costs and expenses                                       488,318       444,459       428,624      384,156       356,808
                                                                  ---------     ---------     ---------    ---------     ---------
 (Loss) income before income taxes, minority
     interest, extraordinary item and cumulative
     effect of accounting change                                  $  (8,110)    $   1,722     $   7,679    $  13,053     $  12,814
                                                                  =========     =========     =========    =========     =========
  Minority interest income (expense)                              $     408     $     668     $      68    $    (613)    $  (1,503)
                                                                  =========     =========     =========    =========     =========
 (Loss) income before extraordinary item and
    cumulative effect of accounting change                        $ (12,760)    $  (5,325)    $   2,082    $   5,351     $   3,803
  Extraordinary loss(2)(3)                                               --        (2,154)           --       (6,285)           --
  Cumulative effect of accounting change(4)                              --        (5,605)           --           --            --
                                                                  ---------     ---------     ---------    ---------     ---------
  Net (loss) income                                               $ (12,760)    $ (13,084)    $   2,082    $    (934)    $   3,803
                                                                  =========     =========     =========    =========     =========

(Loss) earnings per share (both basic and diluted):
  (Loss) income before extraordinary item and
    cumulative effect of accounting change                        $   (1.34)    $   (0.56)    $    0.22    $    0.56     $    0.40
  Extraordinary loss                                                     --         (0.22)           --        (0.66)           --
  Cumulative effect of accounting change                                 --         (0.59)           --           --            --
                                                                  ---------     ---------     ---------    ---------     ---------
  Earnings (loss) per share                                       $   (1.34)    $   (1.37)    $    0.22    $   (0.10)    $    0.40
                                                                  =========     =========     =========    =========     =========

Average number of shares (000)                                        9,546         9,530         9,530        9,550         9,569
                                                                  =========     =========     =========    =========     =========

BALANCE SHEET DATA (AT YEAR END):
Total assets(2)                                                   $ 686,419     $ 697,020     $ 663,461    $ 661,515     $ 561,245
Long-term debt (including convertible
     debentures) (2)(3)                                           $ 155,077     $ 156,887     $ 129,387    $ 142,369     $  56,353
Shareholders' equity                                              $ 316,737     $ 338,687     $ 354,986    $ 346,978     $ 357,407

OTHER DATA:

Dividends declared                                                $      --     $      --     $      --    $      --     $      --
                                                                  =========     =========     =========    =========     =========
Language lessons given
     during year (000)                                                6,438         5,992         5,826        5,548         5,139
Company-operated language
     centers at year end                                                344           338           332          334           325
Growth in same center
     sales from year to year(5)                                        10.4%          5.0%          4.8%         7.5%          6.0%
</TABLE>

                                       19
<PAGE>

(1)   During the fourth quarter of 2000, the Company's management formally
      committed to various strategic initiatives. As a result of these
      initiatives, the Company recorded restructuring and other unusual charges
      of $12.3 million for the year ended December 31, 2000, and additional
      charges of $2.0 million are expected in 2001. The restructuring
      initiatives were aimed at reorganizing the core business, improving
      management quality and process, and building on business fundamentals
      through focus on growth initiatives. These initiatives primarily affected
      the Company's Language Services segment. The restructuring is expected to
      be substantially complete by June 2001.

(2)   Included in the increase in total assets from December 31, 1996 to
      December 31, 1997 was $103 million in intangibles related to the Company's
      August 28, 1997 acquisition of ELS. Financing for this acquisition, and
      simultaneous refinancing of the Company's existing long-term debt, and
      related prepayment penalties and costs, was provided through a bank loan
      facility (the "Bank Facility"). In connection with this refinancing, the
      Company incurred in 1997 an extraordinary charge, net of taxes, of $6.3
      million, consisting of prepayment penalties on the existing long-term debt
      and the write-off of unamortized deferred financing costs. Long-term debt
      increased from 1996 to 1997 due to amounts outstanding under the Bank
      Facility at December 31, 1997.

(3)   On March 11, 1999, the Company issued the "Convertible Debentures in a
      private placement to two affiliates of Apollo and to Benesse Holdings.
      Principal amounts outstanding under such debentures are not due until
      March 2011. 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. Simultaneously with
      this transaction, the Company extinguished all outstanding indebtedness
      pursuant to the Bank Facility and terminated its interest rate swap
      agreement, which hedged the floating rate Bank Facility. Consequently, in
      1999, the Company recorded an extraordinary loss, net of tax benefit, of
      approximately $2.2 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.

(4)   On December 3, 1999, the Securities and Exchange Commission ("SEC") issued
      its Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
      Statements" ("SAB 101") to provide 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
      changed its method of recognizing income from deferred revenues on lessons
      paid for but not expected to be taken.

(5)   Indicates year-over-year increase, excluding the impact of foreign
      currency rate fluctuations, in sales by language centers, which were
      operating during the entirety of both years being compared.


                                       20
<PAGE>

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

The following discussion should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements and Notes thereto
contained elsewhere in this Annual Report on Form 10-K. Certain statements
contained within this discussion constitute forward-looking statements. See
"Special Note Regarding Forward Looking Statements."

GENERAL OVERVIEW

The Company is organized into two separate autonomous business segments: (i),
Language Services, consisting of the Instruction, ELS, Publishing, Franchising,
and Cross Cultural sub-segments; and (ii), Berlitz GlobalNET. These are
strategic business units that offer different products and services and 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 on-campus English education programs. 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.

Berlitz GlobalNET provides high quality technical document translation and
interpretation and is 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, and
from designing and implementing to maintaining multilingual Websites.

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.

The Company's sales grew from $436.3 million in 1998 to $480.2 million in 2000,
a compounded annual growth rate of 6.8% for the three year period. This growth
was primarily attributable to increased volume in certain geographic regions,
partially offset by unfavorable exchange rate fluctuations. Earnings before
extraordinary items and the cumulative effect of an accounting change dropped
from income of $2.1 million ($0.22 basic and diluted earnings per share) to a
loss of $12.8 million ($1.34 basic and diluted loss per share) in the same three
year period. Earnings were adversely affected by a number of factors, including:
(i), restructuring and other unusual charges of $12.3 million taken in 2000;
(ii), reduced margins for ELS, whose sales were hurt by economic conditions in
Asia and Latin America in 1998 and 1999, as well as by certain organizational
changes; (iii), lower operating profits for Berlitz GlobalNET arising from
tighter margins on interpretation services for the U.S. government, investment
in sales and technology resources, and

                                       21
<PAGE>

integration costs associated with acquisitions in 1999; and (iv), increases in
salary and related costs and other administrative costs. The factors impacting
sales and earnings are discussed in greater detail in the pages that follow.

The following table shows the Company's income and expense data as a percentage
of sales:

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                             2000            1999            1998
                                                                             -------------------------------------
<S>                                                                          <C>             <C>             <C>
Sales of Services and Products                                               100.0%          100.0%          100.0%
                                                                             -----           -----           -----

Costs of services and products sold (1)                                       60.9            59.9            58.1
Selling, general and administrative (2)                                       32.1            33.4            32.6
Restructuring and other unusual charges (3)                                    2.6              --              --
Amortization of publishing rights, excess of cost over net
   assets acquired, and other intangibles                                      3.8             4.0             4.0
Interest expense on long-term debt                                              --             0.4             2.5
Interest expense on convertible debentures                                     1.7             1.4              --
Interest expense to affiliate                                                  0.5             0.6             0.5
Other expense (income), net                                                    0.1            (0.1)            0.5
                                                                             -----           -----           -----
   Total costs and expenses                                                  101.7            99.6            98.2
                                                                             -----           -----           -----

(Loss) income before income taxes, minority interest in earnings
  of subsidiary, extraordinary item and the cumulative effect of
  accounting change                                                           (1.7)            0.4             1.8
Income tax expense                                                             1.1             1.7             1.3
Minority interest in operations of subsidiary                                 (0.1)           (0.1)             --
                                                                             -----           -----           -----
(Loss) income before extraordinary item and cumulative effect
  of accounting change                                                        (2.7)           (1.2)            0.5
Extraordinary loss from extinguishment of debt, net of tax benefit              --            (0.5)             --
Cumulative effect of accounting change                                          --            (1.2)             --
                                                                             -----           -----           -----
Net (loss) income                                                             (2.7)%          (2.9)%           0.5%
                                                                             =====           =====           =====
</TABLE>

(1)   Consists primarily of teachers', translators', and certain administrative
      salaries, as well as cost of materials, rent, maintenance, depreciation
      and other center operating expenses.

(2)   Consists primarily of administrative salaries, marketing and advertising
      expenses, and other headquarters related expenses.

(3)   During the fourth quarter of 2000, the Company's management formally
      committed to various strategic initiatives. As a result of such
      initiatives, the Company recorded restructuring and other unusual charges
      ("Unusual Charges") of $12.3 million for the year ended December 31, 2000
      and additional charges of $2.0 million are expected in 2001. The
      restructuring initiatives were aimed at reorganizing the core business,
      improving management quality and process, and building on business
      fundamentals through focus on growth initiatives. These initiatives
      primarily affected the Company's Language Services segment. The
      restructuring is expected to be substantially complete by June 2001.

The Company's recent revenue growth has occurred through both expansion of
existing business and through acquisitions, primarily by Berlitz GlobalNET. The
Company's operations also benefit from a number of global trends: (i), the
globalization of many sectors of the world economy; (ii), the rapid expansion of
the Internet; and (iii), the increasing number of Internet/Web users whose
native language is not English. Globalization increases the demand for
cross-language communication within and between companies, driving the market
for corporate language training, and the Company's Berlitz GlobalNET division is
a leader in the market for services to support the language aspects of
globalization, Internet publishing and eBusiness.

                                       22
<PAGE>

Internal actions over the three-year period have also helped the Company grow.
For example, in Instruction, the Company continued to expand several niche
programs, including Berlitz Jr(R), and BerlitZ Study Abroad(R), enabling it to
operate even more effectively as a "one-stop" language service provider. More
recently, in April 2000, the Company began the rollout of a new children's
program centered on the television series Sesame English(TM), developed by
Children's Television Workshop, with whom the Company has a licenSE arrangement.
To complement its live instruction, the Company has increasingly used
technology, such as CD-ROM, video and audio tools, to enhance its traditional
teaching programs while reducing teaching costs. The Company has also increased
its emphasis on more profitable semi-private and group lessons. To further
increase its market presence, the Company has utilized franchising and joint
ventures in emerging and secondary markets.

In the Berlitz GlobalNET segment, there has been a continued focus on large
corporate relationships, development of new customer accounts, superior customer
satisfaction, and the expansion of services, including 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 and from designing and implementing to maintaining
multilingual Websites. As Berlitz GlobalNET grows, the Company will seek to
continue improving the profitability of the segment through: (i), the deployment
of the latest technology, including the use of the Internet, to optimize
internal operational efficiency; (ii), increasing productivity through the use
of more advanced computer-aided translation tools; (iii), continuing to
centralize certain non-linguistic functions, such as software engineering,
software quality assurance and desktop publishing; and (iv), hiring, training
and retaining the highest quality talent available in the industry.

Geographically, the majority of the Company's subsidiaries are located outside
the United States, with operations conducted in their respective local
currencies. For the three years ended December 31, 2000, the percentage of total
revenues denominated in currencies other than U.S. dollars averaged 66%,
including the Japanese yen, German mark, Irish punt, Brazilian real, Mexican
peso, British pound, and French and Swiss francs. As a result, changes in
exchange rates affected the comparisons of the Company's earnings from period to
period, adversely affecting 1998's through 2000's financial results when the
dollar generally strengthened. The following table shows the impact of foreign
currency rate fluctuations on the annual growth rate of sales and EBITA(1)
during the periods presented:

                                           PERCENTAGE GROWTH (DECLINE)
                                                  FROM PRIOR YEAR
                                       ------------------------------------
                                               YEAR ENDED DECEMBER 31,
                                       ------------------------------------
                                        2000           1999           1998
                                       ------         ------         ------
         Sales:
            Operations (2)              11.8%           4.2%          14.2%
            Exchange                    (4.2)          (1.9)          (4.4)
                                       ------         ------         ------
                  Total                  7.6%           2.3%           9.8%
                                       ======         ======         ======

         EBITA(1):
            Operations (2)              18.3%         (22.4)%         15.7%
            Exchange                    (5.7)          (2.7)          (7.5)
                                       ------         ------         ------
                  Total                 12.6%         (25.1)%          8.2%
                                       ======         ======         ======

                                       23
<PAGE>

(1)   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 indicative of operating income or cash flows
      from operations as determined under U.S. GAAP.
(2)   Adjusted to eliminate fluctuations in foreign currency exchange rates from
      year-to-year by assuming a constant exchange rate over two years, using as
      the base the first year of the periods being compared.

The year to year comparison of the results of operations are discussed in
further detail in the following sections:

YEAR ENDED DECEMBER 31, 2000, VS. YEAR ENDED DECEMBER 31, 1999

Sales for the twelve months ended December 31, 2000, were $480.2 million, 7.6%
above the prior year. The sales growth was primarily due to activity generated
from the Instruction and Berlitz GlobalNET business units, which was partially
offset by reduced sales volume from Publishing, and unfavorable foreign exchange
rate fluctuations. Excluding the effects of unfavorable exchange rate
fluctuations of $18.6 million, sales increased from the prior year by 11.8%. The
following table compares revenues by business segment:

<TABLE>
<CAPTION>
BUSINESS SEGMENT REVENUES:                                     (Dollars in millions)
                                   ------------------------------------------------------------------------------
                                          December 31,                   Growth (Decline) from Prior Year
                                   ---------------------------    -----------------------------------------------
                                      2000            1999          Exchange       Operations (1)       Total
                                   -----------     -----------    ------------     --------------    ------------
<S>                                <C>             <C>            <C>              <C>               <C>
Language Services:
   Instruction                     $   296.4       $   277.7      $   (11.8)       $    30.5         $    18.7
   ELS                                  64.5            56.3            0.1              8.1               8.2
   Publishing                           10.5            12.9           (0.1)            (2.3)             (2.4)
   Franchising                           2.3             1.8           (0.1)             0.6               0.5
   Cross  Cultural                       2.9             2.4            -                0.5               0.5
   Eliminations and other               (0.1)           (0.3)           -                0.2               0.2
                                   -----------     -----------    ------------     --------------    ------------
Total Language Services                376.5           350.8          (11.9)            37.6              25.7
Berlitz GlobalNET                      103.9            95.4           (6.7)            15.2               8.5
Eliminations and other                  (0.2)            -              -               (0.2)             (0.2)
                                   -----------     -----------    ------------     --------------    ------------
Total                              $   480.2       $   446.2      $   (18.6) (2)   $    52.6         $    34.0
                                   ===========     ===========    ============     ==============    ============
</TABLE>

----------
(1)   Adjusted to eliminate fluctuations in foreign currency exchange rates 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 fluctuation ($18.6 million) primarily
      resulted from a strengthened U.S. dollar against the Euro, partially
      offset by a weaker U.S. dollar against the Japanese yen.

Within Language Services, Instruction sales for 2000 rose 11.0% from the prior
year, excluding the effect of unfavorable exchange rate fluctuations. This
improvement was primarily due to volume and average revenue per lesson ("ARPL")
increases in most countries. Total Instruction lesson volume increased 7.4% from
the prior year with notable volume increases in Japan, Germany, Brazil, Canada
and Mexico.

                                       24
<PAGE>

Geographically, Instruction revenue and lesson volume were dispersed as follows:

<TABLE>
<CAPTION>
INSTRUCTION REVENUE:                                            (Dollars in millions)
                                      --------------------------------------------------------------------------
                                            December 31,                 Growth (Decline) from Prior Year
                                      --------------------------    --------------------------------------------
                                         2000           1999         Exchange       Operations         Total
                                      -----------    -----------    -----------    -------------    ------------
<S>                                   <C>            <C>            <C>            <C>              <C>
   North America                      $    51.7      $    47.9      $     -        $     3.8        $     3.8 (1)
   Asia                                    88.5           73.2            3.9           11.4             15.3 (2)
   Latin America                           51.6           46.4           (1.3)           6.5              5.2 (3)
   Europe                                 104.1          109.8          (14.3)           8.6             (5.7)(4)
   Eliminations and other                   0.5            0.4           (0.1)           0.2              0.1
                                      -----------    -----------    -----------    -------------    ------------
   Total revenue                      $   296.4      $   277.7      $   (11.8)     $    30.5        $    18.7
                                      ===========    ===========    ===========    =============    ============
</TABLE>

----------
(1)   Primarily reflects volume increases in Canada and ARPL increase in USA.
(2)   Primarily reflects volume increases in Japan and the effect of a weaker US
      dollar against the Japanese yen.
(3)   Primarily reflects ARPL increases in Mexico and volume increases in Mexico
      and Brazil, offset by a stronger U.S. dollar against most Latin America
      currencies.
(4)   Primarily reflects unfavorable exchange rate fluctuations due to a strong
      U.S dollar against the Euro, partially offset by improved volume and ARPL
      in most countries, and in particular Germany.

<TABLE>
<CAPTION>
INSTRUCTION LESSON VOLUME:                                      (LESSONS IN THOUSANDS)
                                      ---------------------------------------------------------------------------
                                                December 31,                  Growth (Decline) from Prior Year
                                      ----------------------------------    -------------------------------------
                                                                              Number of
                                           2000               1999             lessons            Percentage
                                      ---------------    ---------------    --------------     ------------------
<S>                                   <C>                <C>                <C>                <C>
   North America                         1,150.7            1,090.3              60.4                5.5% (1)
   Asia                                  1,343.6            1,106.9             236.7               21.4% (2)
   Latin America                         1,405.5            1,333.8              71.7                5.4% (3)
   Europe                                2,538.1            2,461.0              77.1                3.1% (4)
                                      ---------------    ---------------    --------------     ------------------
   Total lesson volume                   6,437.9            5,992.0             445.9                7.4%
                                      ===============    ===============    ==============     ==================
</TABLE>

----------
(1)   North America volume increased in part due to the positive effect of
      relaunched programs.
(2)   Asia volume increased due in part to the positive effect of special sales
      campaigns in Japan and expansion into new markets.
(3)   Latin America volume increased primarily due to strong sales in Brazil and
      Mexico.
(4)   Europe's improvement is primarily due to increased volume in Germany and
      Israel.


In 2000, ARPL was $40.80, as compared to $40.84 in 1999. The decrease reflected
the effects of unfavorable exchange rate fluctuations (i.e., $1.66), partially
offset by the favorable impact of product mix and price increases (i.e., $1.62).
ARPL ranged from a high of approximately $64.61 in Japan to a low of $15.03 in
Thailand, reflecting the effects of foreign exchange rates and differences in
the local economic value of the services provided.

Within Language Services, ELS revenues increased 14.6% from the prior year. This
is primarily attributable to the launch of a new program, as well as the brand
merger of ELS and BOC and the restructuring of operations resulting in the
closing of several centers.

                                       25
<PAGE>

Publishing revenues declined 18.7% from the comparable prior year period, due
primarily to decreased licensing revenue.

Berlitz GlobalNET sales for 2000 were $103.9 million, up 16.0% from 1999,
excluding the effect of unfavorable exchange rate fluctuations of $6.7 million.
The following table compares Berlitz GlobalNET revenues by region:

<TABLE>
<CAPTION>
BERLITZ GLOBALNET REVENUE:                                    (Dollars in millions)
                                     ----------------------------------------------------------------------------
                                           December 31,                  Growth (Decline) from Prior Year
                                     --------------------------    ----------------------------------------------
                                        2000           1999         Exchange         Operations         Total
                                     -----------    -----------    ------------     -------------    ------------
<S>                                  <C>            <C>            <C>              <C>              <C>
     Americas                        $    47.8      $    43.7      $     -          $     4.1        $     4.1 (1)
     Asia                                  7.6            6.0            0.2              1.4              1.6
     Europe                               56.5           50.6           (7.5)            13.4              5.9 (2)
     Eliminations and other               (8.0)          (4.9)           0.6             (3.7)            (3.1)
                                     -----------    -----------    ------------     -------------    ------------
     Total revenue                   $   103.9      $    95.4      $    (6.7)       $    15.2        $     8.5
                                     ===========    ===========    ============     =============    ============
</TABLE>

----------
(1)   The sales increase in the U.S. 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 strong volume in Ireland and France
      and an acquisition completed in the last quarter of 1999, offset by a
      strong U.S. dollar against the Euro.

The Company's total cost of services and products sold as a percentage of sales
was 60.9% in 2000, compared to 59.9% in the prior year. The higher percentage
was in part attributable to increased commissions and other expenses related to
improvements in the business volume. Selling, general and administrative
expenses as a percentage of sales were 32.1% in 2000, compared with 33.4% in the
prior year. This improvement reflects an increase in business volume over the
prior year as well as reduced costs from the closure of several ELS centers.

The Company's total EBITA for 2000 was $34.0 million, or 7.1% of sales, compared
to $30.2 million, or 6.8% of sales in the prior year. The following table
displays the comparative EBITA by business segment:

                                       26
<PAGE>

<TABLE>
<CAPTION>
BUSINESS SEGMENT
----------------
EBITA:
------                                                          (Dollars in millions)
                                      ------------------------------------------------------------------------------
                                            December 31,                   Growth (Decline) from Prior Year
                                      --------------------------    ------------------------------------------------
                                         2000           1999          Exchange        Operations          Total
                                      -----------    -----------    -------------    -------------    --------------
<S>                                   <C>            <C>            <C>              <C>              <C>
   Language Services:
      Instruction                     $    59.0      $    55.1      $    (2.2) (1)   $     6.1 (2)    $     3.9
      ELS                                   4.1            2.3            -                1.8              1.8 (3)
      Publishing                           (0.5)           0.7            -               (1.2)            (1.2)(4)
      Franchising                           1.0            0.4            -                0.6              0.6
      Cross Cultural                        0.8            0.5            -                0.3              0.3
      Overhead and other                  (22.6)         (20.7)           1.1             (3.0)            (1.9)(5)
                                      -----------    -----------    -------------    -------------    --------------
   Total Language Services                 41.8           38.3           (1.1)             4.6              3.5
   Berlitz GlobalNET                        7.2            6.0           (0.5)             1.7              1.2 (6)
   Corporate overhead and other           (15.0)         (14.1)           -               (0.9)            (0.9)
                                      -----------    -----------    -------------    -------------    --------------
   Total                              $    34.0      $    30.2      $    (1.6)       $     5.4        $     3.8
                                      ===========    ===========    =============    =============    ==============

<CAPTION>

                           EBITA MARGIN %:                             December 31,
                           ---------------                    -------------------------------
                                                                  2000            1999
                                                              ------------    ---------------
<S>                                                           <C>             <C>
                           Language Services:
                              Instruction                          19.9%           19.8%
                              ELS (3)                               6.3%            4.1%
                              Publishing (4)                       (5.2)%           5.3%
                              Franchising                          42.7%           25.5%
                              Cross Cultural                       26.6%           21.2%
                           Total Language Services                 11.1%           10.9%
                           Berlitz GlobalNET (6)                    7.0%            6.3%
                           Total                                    7.1%      `     6.8%
                           ----------------------------------
</TABLE>

----------
(1)   The net unfavorable exchange impact in Instruction is primarily
      attributable to the weakened Euro, partially offset by the strength of the
      Japanese yen.
(2)   The increase in Instruction EBITA is due mainly to volume increases in
      Japan and Germany.
(3)   The increase in ELS EBITA is due in part to improved volume and decreased
      costs, due to the closure of several centers.
(4)   Publishing EBITA decreased primarily due to decreased licensing revenues.
(5)   Language Services overhead and other expense rose primarily due to the
      increase in business volume.
(6)   The increase in EBITA for Berlitz GlobalNET is due in part to strong
      volume in France and Ireland and acquisitions completed in the second half
      of 1999, lower salary related costs, including translator costs, partially
      offset by a strong U.S. dollar against the Euro.

The Company recorded income tax expense of $5.1 million and $7.7 million in 2000
and 1999, respectively. 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.

                                       27
<PAGE>

YEAR ENDED DECEMBER 31, 1999, VS. YEAR ENDED DECEMBER 31, 1998

Sales for the twelve months ended December 31, 1999 were $446.2 million, 2.3%
above the prior year. The sales growth was primarily due to activity generated
from the Instruction and Berlitz GlobalNET business units, which was partially
offset by reduced sales volume from ELS programs, and unfavorable foreign
exchange rate fluctuations. Excluding the effects of unfavorable exchange rate
fluctuations of $8.4 million, sales increased from the prior year by 4.2%. The
following table compares revenues by business segment:

<TABLE>
<CAPTION>
BUSINESS SEGMENT REVENUES:                                     (Dollars in millions)
                                   ------------------------------------------------------------------------------
                                          December 31,                   Growth (Decline) from Prior Year
                                   ---------------------------    -----------------------------------------------
                                      1999            1998          Exchange       Operations (1)       Total
                                   -----------     -----------    ------------     --------------    ------------
<S>                                <C>             <C>            <C>              <C>               <C>
Language Services:
   Instruction                     $   277.7       $   267.9      $    (6.5)       $    16.3         $     9.8
   ELS                                  56.3            65.7            0.1             (9.5)             (9.4)
   Publishing                           12.9            14.8           (0.1)            (1.8)             (1.9)
   Franchising                           1.8             1.8            -                -                 -
   Cross Cultural                        2.4             2.4            -                -                 -
   Eliminations and other               (0.3)           (0.5)          (0.1)             0.3               0.2
                                   -----------     -----------    ------------     --------------    ------------
Total Language Services                350.8           352.1           (6.6)             5.3              (1.3)
Berlitz GlobalNET                       95.4            84.3           (1.8)            12.9              11.1
Eliminations and other                   -              (0.1)           -                0.1               0.1
                                   -----------     -----------    ------------     --------------    ------------
Total                              $   446.2       $   436.3      $    (8.4) (2)   $    18.3         $     9.9
                                   ===========     ===========    ============     ==============    ============
</TABLE>

----------
(1)   Adjusted to eliminate fluctuations in foreign currency exchange rates 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 fluctuation ($8.4 million) primarily
      resulted from a strengthened dollar against the Latin American currencies
      (most significantly the Brazilian real) and all European currencies,
      offset by a weaker dollar against the Japanese yen.

Within Language Services, Instruction sales for 1999 rose 6.1% from the prior
year, excluding unfavorable exchange rate fluctuations of $6.5 million. This
improvement was primarily due to volume and ARPL increases in most countries.
Total Instruction lesson volume increased 2.8% from the prior year, primarily as
strength in Mexico, Germany, Israel, and France was offset by weakness in the
USA, Venezuela and Argentina.

Geographically, Instruction revenue and lesson volume were dispersed as follows:

                                       28
<PAGE>

<TABLE>
<CAPTION>
INSTRUCTION REVENUE:                                            (Dollars in millions)
                                      --------------------------------------------------------------------------
                                            December 31,                 Growth (Decline) from Prior Year
                                      --------------------------    --------------------------------------------
                                         1999           1998         Exchange       Operations         Total
                                      -----------    -----------    -----------    -------------    ------------
<S>                                   <C>            <C>            <C>            <C>              <C>
   North America                      $    47.9      $    49.9      $     -        $    (2.0)       $    (2.0) (1)
   Asia                                    73.2           59.9            9.3            4.0             13.3  (2)
   Latin America                           46.4           52.3          (10.3)           4.4             (5.9) (3)
   Europe                                 109.8          105.6           (5.5)           9.7              4.2  (4)
   Eliminations and other                   0.4            0.2            -              0.2              0.2
                                      -----------    -----------    -----------    -------------    ------------
   Total revenue                      $   277.7      $   267.9      $    (6.5)     $    16.3        $     9.8
                                      ===========    ===========    ===========    =============    ============
</TABLE>
----------
(1)   Decline was due to lesson volume shortfalls in the USA.
(2)   Primarily reflected the effect of a weaker US dollar against the Japanese
      yen, and increased volume from Korea and Japan.
(3)   Primarily reflected the effect of a stronger dollar against all Latin
      America currencies (primarily the Brazilian real), partially offset by
      volume and ARPL increases in Mexico.
(4)   Primarily reflected improved volume and ARPL in most countries (in
      particular Belgium, France, Germany, Israel, and Poland), as well as
      unfavorable exchange rate fluctuations in France, Germany, Israel and
      Poland.

<TABLE>
<CAPTION>
INSTRUCTION LESSON VOLUME:                                      (LESSONS IN THOUSANDS)
                                      ---------------------------------------------------------------------------
                                                December 31,                  Growth (Decline) from Prior Year
                                      ----------------------------------    -------------------------------------
                                                                              Number of
                                           1999               1998             lessons            Percentage
                                      ---------------    ---------------    --------------     ------------------
<S>                                   <C>                <C>                <C>                <C>
   North America                         1,090.3            1,157.0             (66.7)              (5.8)%(1)
   Asia                                  1,106.9            1,039.8              67.1                6.5% (2)
   Latin America                         1,333.8            1,300.6              33.2                2.6% (3)
   Europe                                2,461.0            2,328.9             132.1                5.7% (4)
                                      ---------------    ---------------    --------------     ------------------
   Total lesson volume                   5,992.0            5,826.3             165.7                2.8%
                                      ===============    ===============    ==============     ==================
</TABLE>
----------
(1)   North America's volume decline primarily reflected reduced institutional
      training volume due to mergers and acquisitions in the petroleum and
      financial service sectors, resulting in reduced lesson demand due to
      downsizing, a decrease in expatriations, and the freezing of training
      budgets by these companies.
(2)   Almost two thirds of Asia's increase is due to the inclusion in 1999 data
      of volume from the Korea joint venture, which in 1998 was not consolidated
      into operating results due to a minority interest ownership at that time.
      The remaining increase is attributable to special program promotions in
      Japan and growth in Malaysia.
(3)   Overall lesson volume increased in Latin America primarily due to strong
      sales and growth in Mexico and Peru. However, lesson volume was down in
      Venezuela, Argentina, Chile and Colombia due to uncertain economies in
      these countries.
(4)   Europe's volume improvement reflected continued growth in the region, with
      the largest increases generated by Germany, Israel, France, and Poland.
      Two new school openings in Israel and one in France and Poland helped
      contribute to the improved volume in those countries.

                                       29
<PAGE>

In 1999, ARPL was $40.84, as compared to $40.87 in 1998. The decrease reflected
the effects of unfavorable exchange rate fluctuations (i.e., $1.08), partially
offset by the favorable impact of product mix and price increases (i.e., $1.05).
ARPL ranged from a high of approximately $62.58 in Japan to a low of $15.08 in
Thailand, reflecting the effects of foreign exchange rates and differences in
the local economic value of the services provided.

Within Language Services, ELS revenues declined 14.3% from the prior year. ELS
was affected by weakened Asian student enrollments due to the economic
conditions in the Far East. Enrollments from Latin America were also down due to
economic instability in Venezuela and Brazil, and the increased strength of the
dollar over the currencies in these countries. Aggressive pricing and agent
commission structures by competitors also adversely affected results. In
addition, due to organization changes and the relocation of the ELS headquarters
from Los Angeles to Princeton in the latter part of 1998, many overseas sales
agents did not sell the ELS programs aggressively in the latter months of 1998
and early part of 1999 due to perceived uncertainties about the future of ELS
programs. This adversely affected student arrivals during 1999. ELS acted to
address these matters by filling vacant sales positions and articulating a new
business plan to its agents, monitoring and reducing overhead expenses,
undertaking significant sales and promotional activities to inform new and
existing sales agents about the new consolidated ELS Language Centers network
and initiating a Website project to support agent sales, direct marketing and
relationship marketing efforts.

Publishing revenues declined $1.9 million, or 12.5%, from the prior year due to
the cancellation of direct response sale programs in the second half of 1999,
and a large sale to a German distributor in 1998 which benefited the 1998
results.

Berlitz GlobalNET sales increased 13.2% over 1998, and, excluding the
unfavorable effects of exchange rate fluctuations, rose 15.4% from 1998.
Geographically, sales were above prior year in all regions. The following table
compares Berlitz GlobalNET revenues by region:

                                       30
<PAGE>

<TABLE>
<CAPTION>
BERLITZ GLOBALNET REVENUE:                                    (Dollars in millions)
                                     ----------------------------------------------------------------------------
                                           December 31,                  Growth (Decline) from Prior Year
                                     --------------------------    ----------------------------------------------
                                        1999           1998         Exchange         Operations         Total
                                     -----------    -----------    ------------     -------------    ------------
<S>                                  <C>            <C>            <C>              <C>              <C>
     Americas                        $    43.7      $    40.8      $    (0.1)       $     3.0        $     2.9 (1)
     Asia                                  6.0            4.3            0.5              1.2              1.7 (2)
     Europe                               50.6           43.5           (2.4)             9.5              7.1 (3)
     Eliminations and other               (4.9)          (4.3)           0.2             (0.8)            (0.6)
                                     -----------    -----------    ------------     -------------    ------------
     Total revenue                   $    95.4      $    84.3      $    (1.8)       $    12.9        $    11.1
                                     ===========    ===========    ============     =============    ============
</TABLE>
----------
(1)   Sales were higher than prior year in the Americas due to results from
      businesses acquired in June and August of 1999, and continued strength in
      traditional business.
(2)   The sales increase in Asia reflected volume increases in Japan, and an
      acquired business in Singapore.
(3)   The sales increase in Europe reflected volume increases in Norway, Ireland
      and Denmark, and sales from acquisitions made in France and Poland in the
      second and fourth quarters of 1998, respectively.

The total Company's cost of services and products sold as a percentage of sales
was 59.9% in 1999, compared to 58.1% in the prior period. The higher percentage
was mainly attributable to a decline in GlobalNET production margins, higher
teacher salaries, and higher rent expense. Selling, general and administrative
expenses as a percentage of sales were 33.4% in 1999, compared with 32.6% in the
prior year. The increase was due primarily to higher administrative salaries.

The Company's total EBITA for 1999 was $30.2 million, or 6.8% of sales, compared
to $40.3 million, or 9.2% of sales, in the prior year . The following table
displays the comparative EBITA by business segment:

<TABLE>
<CAPTION>
BUSINESS SEGMENT EBITA:
                                                                  (Dollars in millions)
                                      ------------------------------------------------------------------------------
                                            December 31,                   Growth (Decline) from Prior Year
                                      --------------------------    ------------------------------------------------
                                         1999           1998          Exchange        Operations          Total
                                      -----------    -----------    -------------    -------------    --------------
<S>                                   <C>            <C>            <C>              <C>              <C>
   Language Services:
      Instruction                     $    55.1      $    56.7      $    (1.3)       $    (0.3) (2)   $    (1.6)
      ELS                                   2.3            6.2            -               (3.9) (3)        (3.9)
      Publishing                            0.7            1.3            -               (0.6) (4)        (0.6)
      Franchising                           0.4            -              -                0.4              0.4
      Cross Cultural                        0.5            0.6            -               (0.1)            (0.1)
      Overhead and other                  (20.7)         (19.3)           0.5             (1.9) (5)        (1.4)
                                      -----------    -----------    -------------    -------------    --------------
   Total Language Services                 38.3           45.5           (0.8)            (6.4)            (7.2)
   Berlitz GlobalNET                        6.0            8.3           (0.3)            (2.0) (6)        (2.3)
   Corporate overhead and other           (14.1)         (13.5)           -               (0.6) (7)        (0.6)
                                      -----------    -----------    -------------    -------------    --------------
   Total                              $    30.2      $    40.3      $    (1.1) (1)   $    (9.0)       $   (10.1)
                                      ===========    ===========    =============    =============    ==============
</TABLE>

(Footnotes on next page)

                                       31
<PAGE>

                EBITA MARGIN %:                            December 31,
                ---------------
                                                   -----------------------------
                                                       1999           1998
                                                   -----------    --------------
                Language Services:
                   Instruction (8)                      19.8%          21.2%
                   ELS (3)                               4.1%           9.5%
                   Publishing (4)                        5.3%           9.0%
                   Franchising                          25.5%           2.1%
                   Cross Cultural                       21.2%          23.9%
                Total Language Services                 10.9%          12.9%
                Berlitz GlobalNET (6)                    6.3%           9.8%
                Total                                    6.8%           9.2%

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


(1)   The net unfavorable foreign exchange impact was attributable mainly to the
      Latin American countries.
(2)   The decline in Instruction EBITA was due mainly to weakness in the U.S.,
      Poland, and certain Latin American countries. In the U.S., growth in
      teacher salaries, rent and certain other fixed costs, coupled with a
      lesson volume decline, led to lower EBITA and EBITA margins. In Latin
      America, economic uncertainty in Argentina, Brazil, Colombia and Venezuela
      led to EBITA declines in these countries. In Poland, the EBITA was
      negatively affected by new legislation on teachers' social security. The
      decreases in these countries were partially offset by EBITA increases
      primarily in Mexico, Japan and most European countries; notably, France,
      UK, Denmark, and Spain.
(3)   Despite reductions in its overall costs from the prior year, ELS's EBITA
      and EBITA margin decreased because the percentage decline in ELS' revenues
      outpaced the percentage decline of certain costs (most notably teachers'
      salaries, advertising and certain fixed expenses). In addition, an ELS
      joint venture in Japan, which commenced operations in October 1998 and
      opened a second center in April of 1999, generated an EBITA loss of $1.1
      million in 1999 due to its start-up nature.
(4)   Publishing's 1998 EBITA and EBITA margin benefited from certain items
      (including a large sale to a German distributor and a bad debt recovery)
      which were absent in 1999. Increases in amortization of prepublication
      costs also negatively impacted 1999 EBITA.
(5)   Language Services' overhead cost increase over prior year was attributable
      to fixed employee costs, advertising and travel expenses.
(6)   The decline in EBITA for Berlitz GlobalNET was due mainly to decreases in
      the Americas, Ireland and UK, arising from tighter margins on
      interpretation services for the U.S. government, investment in sales and
      technology resources, and integration costs associated with current year
      acquisitions. These declines were partially offset by increased production
      in Norway, and increased activity in France and Poland from acquisitions
      made in the second and fourth quarters of 1998, respectively.
(7)   Corporate expenses rose due to increases in salary and related costs, and
      other sundry expenses.
(8)   The reduction in Instruction's 1999 EBITA Margin occurred primarily as
      teacher costs, rent and salary related costs grew faster than revenues.

As a result of the March 1999 issuance of Convertible Debentures and an
affiliate note, and the related extinguishment of existing long-term debt, the
Company's combined interest expense on

                                       32
<PAGE>

long-term debt and convertible debentures for 1999 decreased $2.5 million from
the prior year. This decrease was due principally to a reduced effective
interest rate.

The Company recorded income tax expense of $7.7 million and $5.7 million in 1999
and 1998, respectively. The effective tax rates in both 1999 and 1998 were above
the U.S. Federal statutory tax rate, primarily as a result of nondeductible
amortization charges.

In connection with the March 1999 extinguishment of long-term debt, the Company
terminated its interest rate swap agreement, which hedged its floating rate Bank
Facility, for a cash payment of approximately $1.1 million. Consequently, in
1999, the Company recorded an extraordinary loss, net of tax benefit, of
approximately $2.2 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 has 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).

LIQUIDITY AND CAPITAL RESOURCES

Historically, the primary source of the Company's liquidity has been the cash
provided by operations, and capital expenditures, working capital requirements
and acquisitions (except the 1997 ELS acquisition) 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 $32.8 million, $24.3 million and
$34.4 million for the years ended December 31, 2000, 1999 and 1998,
respectively. In comparing 2000 with 1999, the increase of $8.5 million resulted
from an increased EBITA and an increase in deferred revenues offset by an
increase in accounts and unbilled receivables. In comparing 1999 with 1998, the
decline of $10.1 million resulted from: (i), a reduced EBITA; (ii), an increase
in accounts receivable; (iii), payments made pursuant to the long-term incentive
plan; (iv), a payment to terminate the Company's interest rate swap; and (v),
the payment of $4 million to Children's Television Workshop, discussed below.

Net cash used in investing activities totaled $21.2 million, $31.5 million and
$22.9 million in 2000, 1999 and 1998, respectively. Included in 2000, 1999 and
1998 were acquisitions of businesses of $2.2 million, $11.1 million and $3.9
million, respectively, relating mainly to acquisitions made for the GlobalNET
segment. The balance of net cash used largely consisted of capital expenditures,
aggregating $19.0 million, $20.3 million and $18.9 million in 2000, 1999 and
1998, respectively.

                                       33
<PAGE>

Such capital expenditures were primarily for the opening of new facilities and
the refurbishing of existing facilities. Capital expenditures have increased
over the three-year period due to growth related expansion in the Language
Services and GlobalNET segments.

Net cash used by financing activities totaled $2.0 million and $13.6 million in
2000 and 1998, compared with net cash provided by financing activities of $17.3
million in 1999. The activity in 2000 primarily reflected the repayment of
borrowings whereas 1999 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. The activity for 1998 primarily reflected
repayments of long-term debt.

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

o    Of the $12.3 million of Unusual Charges, $5.3 million remains as a
     "Liability for restructuring and other unusual charges" at December 31,
     2000.

o    On July 1, 1999, Berlitz 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 52 15-minute episodes and which will be complemented by instruction
     curricula and materials developed by Berlitz. Berlitz 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 to CTW of $4 million at inception and an aggregate of
     $6.0 million in minimum guaranteed royalties paid in installments over the
     initial term of the agreement. The $4.0 million paid at inception may be
     applied against future royalties due in excess of the minimum guarantee. In
     the event that Berlitz 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 $2.0 million from CTW's share of payments from such Japanese
     sublicensees. If certain conditions are met, Berlitz may extend the license
     agreement for another five years in exchange for annual minimum guaranteed
     royalties equal to the greater of $2.0 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.

     At December 31, 1999, a commitment of $6.0 million was recorded within
     "Other liabilities", and a deferred asset of $10.0 million within "Other
     assets". At December 31, 2000, $0.4 million of this commitment was
     reclassified to "Accrued expenses and other current liabilities" and $0.1
     million was charged to earnings, relating to the April 2000 rollout of the
     new children's program centered on the Sesame English television series.

     The Company is currently re-negotiating this agreement with CTW seeking
     more favorable terms to the Company.

                                       34
<PAGE>

o    On September 7, 2000, the compensation committee terminated the Company's
     1999 Long Term Incentive Plan (the "1999 LTIP"), which had provided for
     cash awards to be paid to senior management in 2002 based on revenue,
     earnings and cash flow targets achieved during the three year period from
     1999 to 2001. Consequently, the Company paid executive officers $0.7
     million in 2000, which is the amount that had been accrued in 1999.

     The 1999 LTIP was replaced with a phantom stock appreciation plan covering
     Berlitz International, Inc. and Berlitz Languages, Inc. (the "2000 PSAP")
     and a non-qualified stock option plan for Berlitz GlobalNET (the "2000
     GlobalNET Plan"), both approved by the compensation committee on September
     7, 2000. No specific grants have been made as of December 31, 2000 under
     either the 2000 PSAP or the 2000 GlobalNET Plan.

o    On March 31, 1999, the Company entered into a $25 million revolving credit
     facility which expires in February 2002. At the option of the Company,
     outstanding borrowings under the revolving credit 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 specified 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 credit facility, depending on a specified
     leverage ratio. There were no outstanding borrowings under the revolving
     credit facility at December 31, 2000.

o    The Company's Supplemental Executive Retirement Plan ("SERP") and Executive
     Retirement Plan ("ERP") 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/ERP through a combination of funds generated from operations and
     life insurance policies on the participants.

o    The Company is party to currency 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 December 31, 2000, representing the amount that
     could be settled based on estimates obtained from a dealer, was a net
     liability of approximately $0.5 million, which is recorded within "Other
     liabilities".

o    The Company has outstanding Convertible Debentures with two affiliates of
     Apollo and with Benesse Holdings. 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. The Convertible Debentures also allow
     Apollo and Benesse Holdings to elect to exchange their debentures into
     non-convertible seven-year fixed rate debt if certain conditions are met.

                                       35
<PAGE>

     The Company also has a 12-year fixed rate, subordinated promissory note
     payable to Benesse Holdings in the principle amount of $50 million (the
     "Benesse Holding 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 deferred until maturity. In the event of a change in control,
     the Benesse Holdings Note provides for redemption by the Company, at the
     option of Benesse Holdings, at price equal to 101% of the note's principal
     amount.

At December 31, 2000, the Company's liquid assets of $42.8 million consisted of
cash and temporary investments. The Company does not currently have any material
commitments for capital expenditures. In the future, the Company 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 Berlitz GlobalNET segment, and technological expansion. The Company
plans to meet its debt service requirements and future working capital needs
through funds generated from operations.

RECENT ACCOUNTING PRONOUNCEMENTS

During June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). The new standard requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS 133, as amended, will be
effective for the calendar year beginning January 1, 2001, the adoption of which
will not have a significant impact on the financial position, results of
operation and cash flows of the Company.

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 Annual Report on Form 10-K, including information
appearing under the captions "Business", "Legal Proceedings", and "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),

                                       36
<PAGE>

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; (ii), demand for the
Company's products and services; (iii), the impact of competition; (iv), the
effect of changing economic and political conditions; (v), the level of success
and timing in implementing corporate strategies and new technologies; and (vi),
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 and
achievements.

ITEM 7A. 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, 2000, the
percentage of total revenues denominated in currencies other than U.S. dollars
averaged 66%, 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 and to help manage the effect of foreign currency fluctuations on
the Company's ability to repay its U.S. dollar debt. 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 December 31, 2000, were as follows:

<TABLE>
<CAPTION>
                                                                               INTEREST RECEIPTS FROM
                              INTEREST PAYMENT TO FINANCIAL INSTITUTION         FINANCIAL INSTITUTION
                              --------------------------------------------    --------------------------
                                                                                NOTIONAL                 FAIR VALUE
    EFFECTIVE                                                  INTEREST          AMOUNT      INTEREST    AT 12/31/00
    ----------                                                 ---------         -------     ---------   -----------
       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%       $ (570)
      1/4/99      12/31/02    British Pound            4,841     6.56%         $   7,974       6.27%       $   48

</TABLE>

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

For additional information relating to the financial instruments, see Note 14 to
the Consolidated Financial Statements.

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 intentions 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 the
Bank Facility:

                                       37
<PAGE>

a)   bids and proposals were obtained from only major financial institutions;

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 Directors approval;

c)   the Company entered into simple agreements; and

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





                                       38
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Consolidated Financial Statements, Supplementary Data and
Financial Statement Schedule are filed as part of this Annual Report on Form
10-K:

                                                                            PAGE

REPORT OF INDEPENDENT AUDITORS                                               40

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED
    FINANCIAL STATEMENTS                                                     41

CONSOLIDATED FINANCIAL STATEMENTS:

    Consolidated Statements of Operations, years ended
         December 31, 2000, 1999 and 1998                                    42

    Consolidated Balance Sheets, December 31, 2000 and 1999                  43

    Consolidated Statements of Comprehensive (Loss) Income, years
         ended December 31, 2000, 1999 and 1998                              44

    Consolidated Statements of Shareholders' Equity, years ended
         December 31, 2000, 1999 and 1998                                    45

    Consolidated Statements of Cash Flows, years ended
         December 31, 2000, 1999 and 1998                                    46

    Notes to Consolidated Financial Statements                               47

FINANCIAL STATEMENT SCHEDULE:

         Schedule II.  Valuation and Qualifying Accounts                     76

         All other schedules are omitted because they are not applicable or the
         required information is shown in the Consolidated Financial Statements
         or the Notes thereto.

                                       39
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS




To the Shareholders and Board of Directors
of Berlitz International, Inc.:

We have audited the accompanying consolidated balance sheets of Berlitz
International, Inc. and its subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of operations, comprehensive (loss) income,
shareholders' equity, and cash flows for the years ended December 31, 2000, 1999
and 1998. Our audits also included the financial statement schedule listed in
the Index at Item 8 for the years ended December 31, 2000, 1999 and 1998. These
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based on our
audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Berlitz International, Inc. and its
subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for the years ended December 31, 2000, 1999 and
1998, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the financial statement schedule for
the years ended December 31, 2000, 1999 and 1998, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

As discussed in Note 1(k) to the consolidated financial statements, effective
January 1, 1999 the Company changed its method of accounting for the recognition
in income of deferred revenues in accordance with Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements".


/s/  DELOITTE & TOUCHE LLP
------------------------------
New York, New York
March 5, 2001

                                       40
<PAGE>

                    STATEMENT OF MANAGEMENT'S RESPONSIBILITY
                      FOR CONSOLIDATED FINANCIAL STATEMENTS




To the Shareholders of Berlitz International, Inc.:

Management of Berlitz International, Inc. has prepared and is responsible for
the accompanying Consolidated Financial Statements and related information.
These financial statements, which include amounts based on judgments of
management, have been prepared in conformity with generally accepted accounting
principles. Financial data included in other sections of this Annual Report on
Form 10-K are consistent with that in the Consolidated Financial Statements.

Management believes that the Company's internal control systems are designed to
provide reasonable assurance, at reasonable cost, that the financial records are
reliable for preparing financial statements and maintaining accountability for
assets and that, in all material respects, assets are safeguarded against loss
from unauthorized use or disposition. These systems are augmented by written
policies, an organizational structure providing division of responsibilities,
qualified personnel throughout the organization, and a program of internal
audits.

The Board of Directors, through its Audit Committee consisting of outside
Directors of the Company, is responsible for reviewing and monitoring the
Company's financial reporting and accounting practices. Deloitte & Touche LLP
and the Company's internal auditors each have full and free access to the Audit
Committee, and meet with it regularly, with and without management.


/s/  RONALD STARK
---------------------------
Ronald Stark
Vice President, Finance

                                       41
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                              -------------------------------------------------
                                                                 2000               1999                1998
                                                              -------------------------------------------------
<S>                                                           <C>                 <C>                 <C>
Sales of services and products                                $ 480,208           $ 446,181           $ 436,303
                                                              ---------           ---------           ---------
Costs and expenses:
    Cost of services and products sold                          292,246             267,176             253,842
    Selling, general and administrative                         153,949             148,803             142,147
    Restructuring and other unusual charges                      12,296                  --                  --
    Amortization of publishing rights, excess
       of cost over net assets acquired, and
       other intangibles                                         18,432              18,024              17,265
    Interest expense on long-term debt                               54               2,005              10,956
    Interest expense on convertible debentures
       with related parties                                       7,980               6,424                  --
    Interest expense on notes to affiliates                       2,607               2,547               2,226
    Other expense (income), net                                     754                (520)              2,188
                                                              ---------           ---------           ---------
         Total costs and expenses                               488,318             444,459             428,624
                                                              ---------           ---------           ---------
(Loss) income before income taxes, minority
    interest in loss of subsidiary, extraordinary
    item, and cumulative effect of accounting change             (8,110)              1,722               7,679

Income tax expense                                                5,058               7,715               5,665
Minority interest in operations of subsidiary                      (408)               (668)                (68)
                                                              ---------           ---------           ---------
(Loss) income before extraordinary item and
    cumulative effect of accounting change                      (12,760)             (5,325)              2,082

Extraordinary loss from extinguishment of debt,
    net of income tax benefits of $44                                --              (2,154)                 --

Cumulative effect of accounting change, net of
     income tax benefit of $2,900
     and minority interest expense of $189                           --              (5,605)                 --
                                                              ---------           ---------           ---------

Net (loss) income                                             $ (12,760)          $ (13,084)          $   2,082
                                                              =========           =========           =========
(Loss) earnings per share - basic and diluted:
    (Loss) income before extraordinary item
    and cumulative effect of accounting change                $   (1.34)          $   (0.56)          $    0.22
    Extraordinary loss                                               --               (0.22)                 --
    Cumulative effect of accounting change                           --               (0.59)                 --
                                                              ---------           ---------           ---------
    (Loss) earnings per share                                 $   (1.34)          $   (1.37)          $    0.22
                                                              =========           =========           =========

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

        See accompanying notes to the consolidated financial statements.

                                       42
<PAGE>
                           BERLITZ INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                             -----------------------------
                                                                                2000               1999
                                                                             -----------------------------
<S>                                                                          <C>                 <C>
ASSETS
Current assets:
Cash and temporary investments                                               $  42,815           $  34,426
Accounts receivable, less allowance for doubtful accounts
 of $4,439 and $3,102                                                           51,272              54,185
Unbilled receivables                                                            14,289               7,514
Inventories, net                                                                 9,200              10,405
Prepaid expenses and other current assets                                        8,040               8,628
                                                                             ---------           ---------
  Total current assets                                                         125,616             115,158
Property and equipment, net                                                     48,656              47,749
Publishing rights, net of accumulated
 amortization of $6,962 and $6,083                                              15,023              15,902
Excess of cost over net assets acquired and other intangibles, net of
  accumulated amortization of $116,117 and $92,936                             459,019             480,967
Other assets                                                                    38,105              37,244
                                                                             ---------           ---------
  Total assets                                                               $ 686,419           $ 697,020
                                                                             =========           =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt                                            $   1,252           $   5,118
Accounts payable                                                                11,571              12,026
Deferred revenues                                                               61,960              57,266
Payrolls and commissions                                                        19,149              16,458
Income taxes payable                                                             1,880                 971
Interest payable on convertible debentures                                       1,938               1,938
Liability for restructuring and other unusual charges                            5,271                  --
Accrued expenses and other current liabilities                                  21,260              19,495
                                                                             ---------           ---------
  Total current liabilities                                                    124,281             113,272

Long-term debt                                                                      77               1,887
Convertible debentures with related parties                                    155,000             155,000
Notes payable to affiliates                                                     50,000              50,000
Other liabilities                                                               30,242              28,399
Minority interest                                                               10,082               9,775
                                                                             ---------           ---------
  Total liabilities                                                            369,682             358,333
                                                                             ---------           ---------
Commitments and Contingencies (Note 13)

Shareholders' Equity:
Common stock
 $0.10 par value - 40,000,000 shares authorized;
10,049,761 and 10,033,013 shares issued                                          1,005               1,003
Additional paid-in capital                                                     372,791             372,518
Accumulated deficit                                                            (21,270)             (8,510)
Accumulated other comprehensive loss                                           (29,428)            (19,963)
Treasury stock at cost; 503,225 shares                                          (6,361)             (6,361)
                                                                             ---------           ---------
Total shareholders' equity                                                     316,737             338,687
                                                                             ---------           ---------
  Total liabilities and shareholders' equity                                 $ 686,419           $ 697,020
                                                                             =========           =========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       43
<PAGE>

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

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                        ----------------------------------
                                                          2000         1999         1998
                                                        ----------------------------------
<S>                                                     <C>          <C>          <C>
Net (loss) income                                       $(12,760)    $(13,084)    $  2,082
                                                        --------     --------     --------
Other comprehensive (loss) income, net of tax:
   Unrecognized benefit obligation                        (1,210)          --           --
   Foreign currency items, including translation
     adjustments, and the effects of certain
     hedges and intercompany transactions                 (8,255)      (3,215)       5,926
                                                        --------     --------     --------
 Total other comprehensive (loss) income, net of tax      (9,465)      (3,215)       5,926
                                                        --------     --------     --------

         Comprehensive (loss) income                    $(22,225)    $(16,299)    $  8,008
                                                        ========     ========     ========


<CAPTION>

The tax (expense) benefit allocated to each component of other comprehensive
(loss) income is as follows:

<S>                                                     <C>          <C>          <C>
Foreign currency items                                  $   (806)    $    (12)    $    889
                                                        ========     ========     ========
</TABLE>



        See accompanying notes to the consolidated financial statements.


                                       44
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                              ADDITIONAL    RETAINED         OTHER                      TOTAL
                                                  COMMON       PAID-IN      EARNINGS     COMPREHENSIVE   TREASURY   SHAREHOLDERS'
                                                  STOCK        CAPITAL      (DEFICIT)        LOSS         STOCK        EQUITY
                                                ---------     ----------    ---------    -------------  ---------   -------------
<S>                                             <C>           <C>           <C>          <C>            <C>         <C>
Balance at January 1, 1998                      $   1,003     $ 372,518     $   2,492     $ (22,674)    $  (6,361)    $ 346,978

Net income                                                                      2,082                                     2,082
Translation adjustment and other,
   including the effects of certain
    hedges, intercompany
    transactions and allocated taxes                                                          5,926                       5,926
                                                ---------     ---------     ---------     ---------     ---------     ---------
Balance at December 31, 1998                        1,003       372,518         4,574       (16,748)       (6,361)      354,986

Net income                                                                    (13,084)                                  (13,084)
Translation adjustment and other,
   including the effects of certain
    hedges, intercompany
    transactions and allocated taxes                                                         (3,215)                     (3,215)
                                                ---------     ---------     ---------     ---------     ---------     ---------
Balance at December 31, 1999                        1,003       372,518        (8,510)      (19,963)       (6,361)      338,687

Net loss                                                                      (12,760)                                  (12,760)
Issuance of stock                                       2           273                                                     275
Unrecognized benefit obligation                                                              (1,210)                     (1,210)
Translation adjustment and other,
   including the effects of certain
    hedges, intercompany
    transactions and allocated taxes                                                         (8,255)                     (8,255)
                                                ---------     ---------     ---------     ---------     ---------     ---------
Balance at December 31, 2000                    $   1,005     $ 372,791     $ (21,270)    $ (29,428)    $  (6,361)    $ 316,737
                                                =========     =========     =========     =========     =========     =========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       45
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                          ---------------------------------------------
                                                                              2000             1999              1998
                                                                          ---------------------------------------------
<S>                                                                       <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                                                         $ (12,760)        $ (13,084)        $   2,082
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
   Depreciation                                                              12,468            11,396             9,791
   Amortization of publishing rights, excess of cost over
     net assets acquired, and other intangibles                              18,432            18,024            17,265
   Restructuring and other unusual charges                                   11,630                --                --
   Cumulative effect of accounting change, net                                   --             5,605                --
   Extraordinary items, net                                                      --             1,072                --
   Minority interest in loss of subsidiary                                     (408)             (668)              (68)
   Deferred income tax (benefit) provision                                   (3,282)            1,594               739
   Provision for bad debts                                                    2,452             1,828               728
   Foreign exchange losses (gains), net                                         404            (1,225)            1,101
   Equity in losses  of joint ventures                                           --                65               136
   Losses on disposal of fixed assets                                         1,112               371               578
   Changes in operating assets and liabilities:
        (Increase) decrease in accounts and unbilled receivables             (6,921)          (12,545)            2,393
        Decrease (increase) in inventories                                      108               592            (2,401)
        Increase in prepaid expenses and other assets                          (132)          (14,984)             (202)
        Increase in deferred revenues                                         9,537             7,368             2,842
        Increase (decrease) in accounts payable and
          other current liabilities                                              28             7,281            (2,231)
        Increase in due to affiliates                                            26                25             2,177
        (Decrease) increase in income taxes payable                          (1,641)            3,502              (190)
        Increase (decrease) in other liabilities                              1,729             8,071              (329)
                                                                          ---------         ---------         ---------
   Net cash provided by operating activities                                 32,782            24,288            34,411
                                                                          ---------         ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                                        (19,019)          (20,334)          (18,949)
Acquisitions of businesses, net of cash acquired                             (2,202)          (11,127)           (3,905)
                                                                          ---------         ---------         ---------
   Net cash used in investing activities                                    (21,221)          (31,461)          (22,854)
                                                                          ---------         ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debentures                                 --           155,000                --
Proceeds of notes payable to affiliates                                          --            50,000                --
Proceeds from sale of currency swap agreements                                1,735                --                --
Repayment of notes payable to affiliates                                         --           (42,366)               --
Proceeds from bank long-term debt                                                --               905                --
Payment of long-term debt                                                        --          (147,477)          (17,713)
(Repayments) borrowings under revolving credit facility                      (4,000)            4,000             4,000
Proceeds from minority shareholder in joint venture                             268                --               361
Payment of deferred financing costs                                              --            (2,782)             (233)
                                                                          ---------         ---------         ---------
    Net cash (used in) provided by financing activities                      (1,997)           17,280           (13,585)
                                                                          ---------         ---------         ---------
Effect of exchange rate changes
   on cash and temporary investments                                         (1,175)           (1,008)              690
                                                                          ---------         ---------         ---------
Net increase (decrease) in cash and
    temporary investments                                                     8,389             9,099            (1,338)
Cash and temporary investments at beginning of period                        34,426            25,327            26,665
                                                                          ---------         ---------         ---------
Cash and temporary investments at end of period                           $  42,815         $  34,426         $  25,327
                                                                          =========         =========         =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash payments for:
        Interest                                                          $  10,412         $   8,393         $  10,525
                                                                          =========         =========         =========
        Income taxes                                                      $   8,781         $   7,007         $   8,345
                                                                          =========         =========         =========
    Cash refunds of income taxes                                          $   1,277         $     998         $     842
                                                                          =========         =========         =========
    Noncash activities:
        Installment agreement payable for internal
        use software:
           Operating activity (prepaid maintenance contract)              $      --         $      --         $   1,455
                                                                          =========         =========         =========
           Investing activity  (capitalized software)                     $      --         $      --         $   1,014
                                                                          =========         =========         =========
        Obligation under capital lease (investing activity)               $      --         $      --         $     127
                                                                          =========         =========         =========
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       46
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a)       Nature of Operations - Berlitz International, Inc. (the
                  "Company" or "Berlitz") is a New York corporation organized in
                  1989. Its operations are conducted on a worldwide basis
                  through two business segments: Language Services (which
                  includes the Instruction, ELS, Publishing, Franchising, and
                  Cross Cultural sub-segments) and Berlitz GlobalNET.
                  Approximately 67% of its 2000 revenues are denominated in
                  currencies other than the U.S. dollar.

                  In February 1993, Benesse Corporation ("Benesse") acquired,
                  through a merger of the Company with an indirect wholly-owned
                  U.S. subsidiary of Benesse, approximately 6.7 million shares
                  of the common stock, par value $.10 per share ("Common") of
                  the Company. Benesse currently beneficially owns 7,213,138, or
                  75.6% of the outstanding Common. Public shareholders of the
                  Company hold the remaining outstanding Common.

                  Since 1990, Benesse has also owned a 20% minority interest in
                  the equity of the Company's Japanese subsidiary, Berlitz
                  Japan, Inc. ("Berlitz Japan").

         b)       Principles of Consolidation - The Consolidated Financial
                  Statements include those of the Company and its subsidiaries.
                  The effects of all significant intercompany transactions have
                  been eliminated.

         c)       Foreign Currency Translation - Generally, balance sheet
                  amounts have been translated using exchange rates in effect at
                  the balance sheet dates and the translation adjustment has
                  been included in the cumulative translation adjustment, a
                  separate component of shareholders' equity, with the exception
                  of hyperinflationary countries. Income statement amounts have
                  been translated using the average exchange rates in effect for
                  each period. Revaluation gains and losses on certain
                  intercompany accounts in all countries and translation gains
                  and losses in hyperinflationary countries have been included
                  in "Other expense (income), net". Revaluation gains and losses
                  on intercompany balances for which settlement is not
                  anticipated in the foreseeable future are included in the
                  cumulative translation adjustment.

         d)       Revenue Recognition and Unbilled Receivables - Revenues are
                  generally recognized in the Instruction and Publishing
                  business sub-segments when services are rendered to the
                  customer or when products are shipped, as applicable. Berlitz
                  GlobalNET contracts are accounted for under the percentage of
                  completion method of accounting, whereby sales and costs are
                  recognized as work on contracts progresses. Changes in
                  estimates for sales, costs and profits are recognized in the
                  period in which they are determinable. Unbilled receivables
                  represent the difference between revenue recognized for
                  financial reporting purposes and amounts contractually
                  permitted to be billed to customers. Unbilled amounts will be
                  invoiced in subsequent periods upon reaching certain
                  milestones.

                                       47
<PAGE>

         e)       Inventories - Inventories, which consist primarily of finished
                  goods, are valued at the lower of average cost or market. Cost
                  is determined using the weighted average cost method.

         f)       Deferred Financing Costs - Direct costs relating to
                  indebtedness are capitalized and amortized by the interest
                  method over the terms of the related debt. In 1999, the
                  Company incurred approximately $2,800 in deferred financing
                  costs associated with the issuance of the Convertible
                  Debentures and Benesse Holdings Note (see Notes 10 and 11).
                  Such costs will be amortized over the 12-year life of the
                  Convertible Debentures and Benesse Holdings Note.

         g)       Long-lived Assets - In accordance with Statement of Financial
                  Accounting Standards No. 121, "Accounting for the Impairment
                  of Long-lived Assets and for Long-lived Assets to be Disposed
                  Of" ("SFAS 121"), long-lived assets (excluding financial
                  instruments and deferred tax assets) and certain identifiable
                  intangibles to be held and used are reviewed by the Company
                  for impairment whenever events or changes in circumstances
                  indicate that the carrying amount of an asset may not be
                  recoverable. Such circumstances include, but are not limited
                  to, a significant decrease in the market value of an asset, a
                  significant change in the extent or manner in which an asset
                  is used or a significant physical change in an asset, a
                  significant adverse change in legal factors or in the business
                  climate that could affect the value of an asset or an adverse
                  action or assessment by a regulator, and the impact of
                  expected future revision dates on publishing rights.

                  If a review for recoverability is necessary, the Company
                  estimates the future cash flows expected to result from the
                  use of the asset. In performing these estimates, the Company
                  groups its assets at the lowest level for which there are
                  identifiable cash flows. If the sum of the expected future
                  cash flows (undiscounted and without interest charges) is less
                  than the carrying amount of the asset, an impairment loss is
                  recognized. Otherwise, an impairment loss is not recognized.
                  Any impairment loss recognized is measured as excess of
                  carrying amount of the asset over the fair value of the asset.
                  The fair value of an asset is the amount at which the asset
                  could be bought or sold in a current transaction between
                  willing parties, that is, other than in a forced or
                  liquidation sale.

                  Along with other long-lived assets, the Company applies the
                  standards of SFAS 121 to its publishing rights, excess of cost
                  over net assets acquired, and other intangibles (see Note 6).

         h)       Property and Equipment - Property and equipment is stated at
                  cost and depreciated over its estimated useful life or the
                  life of any applicable leases (whichever is shorter), using
                  principally straight-line methods.

         i)       Publishing Rights - Publishing rights are associated with the
                  Company's proprietary language instruction print materials and
                  travel related titles. They are being amortized on a
                  straight-line basis over 25 years.

                                       48
<PAGE>

         j)       Excess of Cost Over Net Assets Acquired and Other Intangibles
                  - The excess of cost over net assets acquired is being
                  amortized on a straight-line basis primarily over 30 years,
                  while other intangibles are being amortized primarily on a
                  straight-line basis over five to 40 years.

         k)       Deferred Revenues - Deferred revenues primarily arise from the
                  prepayment of fees for classroom instruction and are
                  recognized in income as lessons are given.

                  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) were recognized in income when the obligation
                  to issue a refund had expired. In certain countries where the
                  refund obligation effectively never expires under local law,
                  such deferred revenues are recognized into income after one
                  year of student inactivity. 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). On a proforma basis, the Company's
                  reported net income for 1998 would have been reduced by $100
                  ($0.01 per diluted share).

         l)       Income Taxes - The Company recognizes deferred tax liabilities
                  and assets for the expected future tax consequences of events
                  that have been included in the financial statements or tax
                  returns. Under this method, deferred tax liabilities and
                  assets are determined based on the difference between the
                  financial statement and tax bases of assets and liabilities
                  using enacted tax rates expected to apply to taxable income in
                  the periods in which the differences are expected to reverse.

         m)       Cash and Temporary Investments - The Company considers all
                  highly liquid instruments purchased with an original maturity
                  of three months or less to be temporary investments.

         n)       Investment in Joint Ventures - Investments in joint ventures
                  are carried on the equity basis of accounting and the
                  Company's share of the net profits and losses of such
                  investments is reflected in "Other expense (income), net" in
                  the Consolidated Statements of Operations.

                                       49
<PAGE>

         o)       Financial Instruments - The fair values of the Company's
                  long-term debt and notes payable to affiliates are estimated
                  based on the interest rates currently available for borrowings
                  with similar terms and maturities. The fair values of the
                  Company's currency swap agreements represent the amounts that
                  could be settled based on estimates obtained from a dealer.

                  The carrying amounts reported in the balance sheets for cash
                  and temporary investments, accounts receivable and payable,
                  accrued expenses and other current liabilities, and income
                  taxes payable approximate fair value due to the short-term
                  nature of these instruments.

         p)       Derivative Financial Instruments - Those currency swap
                  agreements which have been designated by the Company as hedges
                  of its investments in certain foreign subsidiaries are
                  considered effective as hedges to the extent that quarterly
                  changes in the fair value of the agreements offset, but do not
                  exceed, the quarterly effect of exchange rate changes on the
                  underlying net investments. When these agreements are
                  effective, realized and unrealized gains and losses (including
                  realized gains and losses on terminations of effective hedges)
                  are excluded from the Company's Consolidated Statements of
                  Operations, and included, net of deferred taxes, in the
                  cumulative translation adjustment of shareholders' equity. If
                  the change in any fiscal quarter in an agreement's fair value
                  exceeds the exchange rate fluctuation's effect on the
                  underlying investment, such excess is recognized in the
                  Consolidated Statement of Operations within the "Foreign
                  exchange (gains) losses, net" component of "Other expense
                  (income), net". If, as a result of the Company's periodic
                  evaluation, it can no longer be established that an agreement
                  will prospectively be effective, the hedge accounting
                  described above is discontinued and all subsequent changes in
                  the agreement's fair value (as well as realized gains and
                  losses on subsequent terminations of such ineffective hedges)
                  are recognized within the Consolidated Statement of
                  Operations.

                  During June 1998, the Financial Accounting Standards Board
                  issued Statement of Financial Accounting Standards No. 133,
                  "Accounting for Derivative Instruments and Hedging Activities"
                  ("SFAS 133"). The new standard requires companies to record
                  derivatives on the balance sheet as assets or liabilities,
                  measured at fair value. Gains or losses resulting from changes
                  in the values of those derivatives would be accounted for
                  depending on the use of the derivative and whether it
                  qualifies for hedge accounting. SFAS 133, as amended, will be
                  effective for the calendar year beginning January 1, 2001, the
                  adoption of which will not have a significant impact on the
                  financial position, results of operation and cash flows of the
                  Company.

         q)       Internal-Use Software - Internal-use software costs are
                  capitalized pursuant to the guidance of Statement of Position
                  ("SOP") 98-1 issued by the American Institute of Certified
                  Public Accountants.

         r)       Franchises - Revenue from sales of franchises is recognized
                  when all material services and conditions relating to the sale
                  have been substantially performed, which may occur prior to
                  commencement of operations. Payments received on franchise
                  sales that have not been recognized as revenue are treated as
                  deferred revenues in the

                                       50
<PAGE>

                  consolidated balance sheet. Direct (incremental) costs related
                  to such deferred revenues are deferred until the revenue is
                  recognized.

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

         t)       Reclassifications - Certain reclassifications have been made
                  in prior years' financial statements and notes to conform to
                  the 2000 presentation.

2.       RESTRUCTURING AND OTHER UNUSUAL CHARGES

         During the fourth quarter of 2000, the Company's management, with the
         appropriate level of authority, formally committed to various strategic
         initiatives. As a result of these initiatives, the Company recorded
         restructuring and other unusual charges ("Unusual Charges") of $12,296
         for the year ended December 31, 2000, and additional charges of
         approximately $2,000 are expected in 2001. The restructuring
         initiatives were aimed at reorganizing the core business, improving
         management quality and process, and building on business fundamentals
         through focus on growth initiatives. These initiatives primarily
         affected the Company's Language Services segment. The restructuring is
         expected to be substantially completed by June 2001. The initial
         recognition of the Unusual Charges and the corresponding utilization
         from inception is summarized by category of expenditure as follows:

<TABLE>
<CAPTION>
                                                                                        Non-cash          Balance at
                                                     Unusual                           reductions          December
                                                     Charges       Cash Payments        and other          31, 2000
                                                   ------------    ---------------    --------------     -------------
<S>                                                <C>             <C>                <C>                <C>
        Employee separation                        $    5,243      $     (454)        $       63         $    4,852
        Other implementation costs                        249            (105)                 -                144
        Impaired assets:
           Product enhancement  costs                   3,779               -             (3,779)                 -
           Internal use software                        1,712               -             (1,712)                 -
           Other asset impairments                      1,313             160             (1,198)               275
                                                   ------------    ---------------    --------------     -------------
           Total                                   $   12,296      $     (399)        $   (6,626)        $    5,271
                                                   ============    ===============    ==============     =============
</TABLE>

         Employee separation costs primarily consist of severance payments
         resulting from the consolidation or elimination of certain functions.
         In December 2000 and January 2001, the Company terminated 90 employees,
         representing a wide range of employee groups, of their separation from
         the Company, and virtually all terminations were completed as of
         January 31, 2001. Amounts accrued at December 31, 2000, represent
         commitments arising from formal communications to the affected
         employees prior to year-end or from statutory obligations triggered by
         the restructuring plan.

         Asset impairment charges for product enhancement costs are primarily
         associated with product lines and capitalized content costs that have
         been abandoned in connection with a

                                       51
<PAGE>

         change in strategic focus of the Company's products. Asset impairment
         charges for internal-use software reflect costs associated with the
         abandonment of certain computer system applications. Under-performing
         operations and other asset impairments primarily include write-offs of
         goodwill and fixed assets.

3.       ACQUISITION OF BUSINESSES

         The Company records acquisitions under the purchase method of
         accounting, which contemplates an allocation of the acquisition cost to
         the acquired company's assets and liabilities based on their estimated
         fair values. The results of operations of the acquired companies are
         included in the consolidated results of Berlitz from their respective
         acquisition dates.

         The Company made several acquisitions during 2000, none of which was
         material.

         In June 1999, the Company acquired certain assets and operating
         subsidiaries of Language Management International, Inc., a translations
         services company. The purchase price was $8,000, 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.

         The Company made several other acquisitions during 1999, none of which
         was material.

         In June 1998, the Company paid $2,007 to purchase a translation
         business in France, and recorded $1,519 in excess cost over net assets
         acquired.

         The Company made several other acquisitions during 1998, none of which
         was material.


4.        EARNINGS PER SHARE

         Basic and Diluted earnings (loss) per share ("EPS") computations for
         "(loss) income before extraordinary item and cumulative effect of
         accounting change" are the same for the three years ended December 31,
         2000, 1999 and 1998. For the three years ended December 31, 2000, 1999
         and 1998 they are $(1.34), $(0.56) and $0.22, respectively.

                                       52
<PAGE>

5.       PROPERTY AND EQUIPMENT, NET

                                               USEFUL LIVES     DECEMBER 31,
                                               ---------------------------------
                                                 (YEARS)     2000        1999
                                                           --------    --------
         Buildings and leasehold improvements    5 to 30   $ 33,290    $ 30,243
         Furniture, fixtures and equipment       5 to 7      35,721      36,380
         Internal use software                   3 to 7       5,727       5,879
         Land                                                 1,318       1,347
                                                           --------    --------
                                                             76,056      73,849
         Less: accumulated depreciation
             and amortization                               (27,400)    (26,100)
                                                           --------    -------
                  Total                                    $ 48,656    $ 47,749
                                                           ========    ========


6.       EXCESS OF COST OVER NET ASSETS
         ACQUIRED, AND OTHER INTANGIBLES

                                                          DECEMBER 31,
                                                    -------------------------
                                                       2000           1999
                                                    ---------       ---------
         Excess of cost over net assets acquired    $ 230,733        $238,727
         Tradenames and trademarks                    300,050         300,018
         ELS sales agent network                       31,700          31,700
         Other                                          5,692           3,458
                                                    ---------       ---------
                                                      568,175         573,903
         Less: accumulated amortization              (109,156)        (92,936)
                                                    ---------       ---------
                  Total                             $ 459,019       $ 480,967
                                                    =========       =========


7.       OTHER EXPENSE (INCOME), NET
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                 --------------------------------
                                                                  2000         1999        1998
                                                                 -------      -------     -------
<S>                                                              <C>          <C>         <C>
         Interest income on temporary investments                $(1,087)     $  (624)    $  (750)
         Foreign exchange losses (gains), net                        404       (1,225)      1,101
         Equity in losses of joint ventures                           --           65         136
         Other non-operating taxes                                   362          730         794
         Losses and other costs of disposal of fixed assets        1,112          371         826
         Other interest (income) expense, net                       (199)          47        (173)
         Other expense, net                                          162          116         254
                                                                 -------      -------     -------
             Total other expense (income), net                   $   754      $  (520)    $ 2,188
                                                                 =======      =======     =======
</TABLE>


                                       53
<PAGE>

8.       INCOME TAXES

         The components of the deferred tax asset (liability) at December 31,
         2000, and 1999 were as follows:
                                                           2000          1999
                                                         --------      --------
         Deferred tax assets:
              Property and equipment depreciation        $    683      $    405
              Deferred revenue                              3,464         2,305
              Unrealized hedging losses                       200         1,279
              Accrued expenses                              5,250         6,022
              Restructuring and other unusual charges       2,307             -
              Foreign tax credits                           4,362           303
              Other tax credits                             1,669         1,385
              Net operating losses                          1,752         3,130
                                                         --------      --------
                Total deferred tax assets                  19,687        14,829
                                                         --------      --------
         Deferred tax liabilities:
              Inventory                                      (597)         (768)
              Joint ventures                                   (2)         (100)
              Unrealized hedging gains                        (17)         (313)
              Publishing rights amortization               (5,113)       (5,371)
              Other intangibles amortization               (2,248)       (1,598)
                                                         --------      --------
                 Total deferred tax liabilities            (7,977)       (8,150)
                                                         --------      --------

         Net deferred tax assets                           11,710         6,679
           Valuation allowance                             (6,241)       (3,690)
                                                         --------      --------
         Net deferred tax asset                          $  5,469      $  2,989
                                                         ========      ========

         The valuation allowance relates to tax benefits for net operating
         losses, foreign tax credits and accrued expenses, where the realization
         of such benefits is considered unlikely.

         The provision (benefit) for income taxes is as follows:

<TABLE>
<CAPTION>
                                               U.S.                 U.S. STATE
                                             FEDERAL     FOREIGN*    AND LOCAL      TOTAL
                                            --------     --------   -----------   ----------
<S>                                         <C>          <C>         <C>          <C>
         Year ended December 31, 2000:
             Current                        $   142      $8,086      $   112      $ 8,340
             Deferred                        (2,349)       (423)        (510)      (3,282)
                                            -------      ------      -------      --------
                 Total                      $(2,207)     $7,663      $  (398)     $ 5,058
                                            =======      ======      =======      =======
         Year ended December 31, 1999:
             Current                        $  (427)     $6.334      $   214      $ 6,121
             Deferred                           818         999         (223)       1,594
                                            -------      ------      --------     -------
                 Total                      $   391      $7,333      $    (9)     $ 7,715
                                            =======      ======      =======      =======
         Year ended December 31, 1998:
             Current                        $(1,594)     $5,833      $   687      $ 4,926
             Deferred                           495         145           99          739
                                            -------      ------      -------      -------
                 Total                      $(1,099)     $5,978      $   786      $ 5,665
                                            ========     ======      =======      =======
</TABLE>

                                       54
<PAGE>

      *  Pre-tax income from foreign operations of the Company was $15,257,
         $17,163, and $17,451 for the twelve months ended December 31, 2000,
         1999, and 1998, respectively.

        The provision (benefit) for deferred taxes is summarized as follows:

                                                     YEAR ENDED DECEMBER 31,
                                               --------------------------------
                                                 2000         1999       1998
                                               --------     -------     -------
         Accrued liabilities                   $   (697)    $(1,012)    $1,340
         Foreign exchange                           (23)         24       (351)
         Benefit of net operating loss              117       1,432       (672)
         Amortization of intangibles                392         369        717
         Inventory                                 (171)        204        631
         Tax credits                               (284)        946       (546)
         Fixed assets                              (282)       (223)      (305)
         Restructuring and other unusual
           charges                               (2,241)          -          -
         Other, net                                 (93)       (146)       (75)
                                               --------     -------     ------
             Total                             $ (3,282)    $ 1,594     $  739
                                               ========     =======     ======

         The difference between the Company's effective tax rate and the U.S.
         Federal statutory tax rate is explained as follows:

                                                   YEAR ENDED DECEMBER 31,
                                               -------------------------------
                                                 2000        1999       1998
                                               -------     -------     -------
         U.S. Federal statutory  tax rate         35.0%       35.0%      35.0%
         Foreign income taxes, net of
           Federal income tax benefits            (6.7)        3.0       (9.7)
         U.S. state and local income taxes,
           net of Federal income taxes             2.1         4.2        6.6
         Net domestic and foreign losses         (21.8)      129.7        9.3
         Amortization and write-off of
           intangibles                           (55.8)      262.5       54.9
         Takedown of reserves                      -         (29.0)     (22.7)
         Other, net                              (15.2)       42.4        0.4
                                               -------     -------     ------
                 Effective tax rate              (62.4)%     447.8%      73.8%
                                               =======     =======     ======

         The Company has net operating loss carryforwards that relate to a
         number of foreign and state jurisdictions that will expire on various
         dates.

         At December 31, 2000, accumulated earnings of foreign subsidiaries of
         $35,885 are intended to be permanently reinvested outside the U.S. and
         no tax has been provided for the remittance of these earnings. However,
         it is estimated that foreign withholding taxes of $2,166 may be payable
         if such earnings are distributed. These taxes, if ultimately paid, may
         be recoverable as foreign tax credits in the U.S. The determination of
         deferred U.S. tax liability for the undistributed earnings of
         international subsidiaries is not practicable.

                                       55
<PAGE>

9.       LONG-TERM DEBT

          Long-Term Debt consists of the following:

                                                      DECEMBER 31,
                                                -----------------------
                                                  2000           1999
                                                --------       --------
         Revolving credit facility                    -          4,000
         Other                                    1,329          3,005
                                                --------       --------
            Total debt                            1,329          7,005
         Less current maturities                 (1,252)        (5,118)
                                                --------       --------
            Long-term debt                      $    77        $ 1,887
                                                ========       ========

         Annual maturities of long-term debt outstanding as of December 31, 2000
         are as follows: 2001, $1,252; 2002, $43; 2003, $22; 2004, $12: and
         2005, $0.

         The Company may borrow up to $25,000 under its 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
         credit facility, depending on a specified leverage ratio.

         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.

10.      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 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.
         The Convertible 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. ("Benesse Holdings"), the
         Company's majority shareholder. The Convertible Debentures bear
         interest at 5% per annum, payable

                                       56
<PAGE>

         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 and Benesse Debentures each independently provide for
         optional redemption by the Company, in whole but not in part, anytime
         following 60 trading days after the third anniversary of 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 shall 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 into
         common stock of the Company.

         The Convertible Debentures also allow Apollo and Benesse Holdings to
         elect to exchange their convertible debentures, in whole, into
         non-convertible, 7-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, Benesse Holdings 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 Benesse Holdings 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 Benesse Holdings proceed with their
         exchanges, the Company, within the same 150-day period, shall either:
         (i), redeem both the Apollo and Benesse Debentures; or (ii), deliver
         the Fixed Rate Debentures to both Apollo and Benesse Holdings.

         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 plus 5% (not to exceed
         13%) if only Apollo receives Fixed Rate Debentures; or (ii), the
         applicable U.S. treasury rate plus 7% (not to exceed 14%) if both
         Apollo and Benesse Holdings 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.

                                       57
<PAGE>

         Prior to the third anniversary of the Issue Date, if Benesse 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 Benesse sells less than 80% of its shares, or if Benesse
         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: prohibitions on certain mergers, consolidations and asset
         transfers; forbearance from restrictions on rights of holders to
         convert or exchange the Convertible Debentures; and, in the case of the
         Apollo Debentures, forbearance from amending certain understandings
         between the Company, Berlitz Japan and Benesse.

         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
         (iii), 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 appointed two representatives
         of Apollo to the Board. The number of seats was reduced to 11 at the
         June 6, 2000, Board of Directors meeting.

11.      NOTES PAYABLE TO AFFILIATES

         On March 11, 1999, Benesse Holdings loaned $50,000 to the Company,
         evidenced by a 12-year fixed rate subordinated promissory note (the
         "Benesse Holdings Note"). The Benesse Holdings 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 deferred until maturity. The Benesse
         Holdings Note includes standard covenants similar to those included in
         the Benesse Debentures. In the event of a change in control, the
         Benesse Holdings Note provides for redemption by the Company, at the
         option of Benesse Holdings, at a price equal to 101% of the note's
         principal amount.

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

                                       58
<PAGE>

12.      EXTRAORDINARY LOSSES

         On March 11, 1999, in connection with the issuance of the Convertible
         Debentures and Benesse Holdings Note and the extinguishment of the
         Company's 1997 credit facility (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. As a
         consequence of the debt extinguishment, the Company has recorded an
         extraordinary loss, net of tax benefit, of $2,154, consisting primarily
         of the interest rate swap's fair market value and existing unamortized
         deferred finance costs at the time of extinguishment of the underlying
         debt.

13.      COMMITMENTS AND CONTINGENCIES

         LEASE COMMITMENTS

         The Company's operations are primarily conducted from leased
         facilities, many of which are smaller than 2,500 square feet. Operating
         leases generally expire within five years.

         Rent expense, principally for language centers, amounted to $37,800,
         $35,100 and $32,324 for the years ended December 31, 2000, 1999 and
         1998, respectively. Certain leases are subject to escalation clauses
         and/or renewal options.

         The minimum rental commitments under noncancellable operating leases
         with a remaining term of more than one year at December 31, 2000 are as
         follows: 2001-$14,156; 2002-$11,627; 2003-$9,301; 2004-$7,981;
         2005-$6,628; and an aggregate of $34,123 thereafter.

         LEGAL PROCEEDINGS

         The Company and its Directors are parties to several actions brought by
         shareholders who object to the terms of the proposed purchase by
         Benesse of the common stock of the Company not owned by Benesse. The
         Company does not believe that these actions state valid claims against
         Berlitz or any of its directors (see Note 15).

         The Company is also party to several other actions arising out of the
         ordinary course of its business. Management believes that none of these
         actions, individually or in the aggregate, will have a material adverse
         effect on the financial condition, results of operations, or cash flows
         of the Company.

         SEVERANCE AGREEMENTS

         The Company has severance agreements with three key employees, which
         take into account annual base salary and certain other benefits. The
         maximum contingent liability under such agreements is approximately
         $1,200.

                                       59
<PAGE>

         LICENSE AGREEMENT

         On July 1, 1999, Berlitz entered into a license agreement (the
         "Agreement") with Children's Television Workshop ("CTW"). Pursuant to
         this license agreement, CTW has agreed to create and produce, at its
         expense, a television series, entitled "Sesame English", which will
         initially consist of 52 15-minute episodes which will be complemented
         by instruction curricula and materials developed by Berlitz. In
         addition, Berlitz was 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 Agreement, covering an initial term of five years, provides for
         payments to CTW of $4,000 at inception and an aggregate of $6,000 in
         minimum guaranteed royalties paid in installments over the initial term
         of the agreement. The $4,000 payment at inception may be applied
         against future royalties due in excess of the minimum guarantee. In the
         event that Berlitz enters into any sublicenses or other third-party
         arrangements with a sublicensee for language instruction services in
         Japan, such minimum guaranteed royalties shall be reduced dollar for
         dollar, up to a maximum of $2,000, from CTW's share of payments from
         such Japanese sublicensees. If certain conditions are met, Berlitz may
         extend the Agreement for another five years in exchange for annual
         minimum guaranteed royalties equal to the greater of $2,000, or an
         amount equal to 80% of the royalties earned by CTW during the fifth
         year of the initial term.

         At December 31, 1999, a commitment of $6,000 was recorded within "Other
         liabilities", and a deferred asset of $10,000 within "Other assets". At
         December 31, 2000, $375 of this commitment was reclassified to "Accrued
         expenses and other current liabilities" and $125 was charged to
         earnings, relating to the April 2000 rollout of the new children's
         program centered on the Sesame English television series.

         The Company is currently re-negotiating this Agreement with CTW seeking
         more favorable terms to the Company.

14.      FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

         a) Currency swap agreements

         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 periodically
         exchange foreign currency-denominated interest payments for U.S.
         dollar-denominated interest receipts on a semi annual basis. Credit
         loss from counterparty nonperformance is not anticipated.

         Significant terms of agreements outstanding during 2000 were as
         follows:

                                       60
<PAGE>

<TABLE>
<CAPTION>
                                            INTEREST PAYMENTS TO                      INTEREST RECEIPTS FROM
                                  INTERESTS PAYMENTS TO FINANCIAL INSTITUTION         FINANCIAL  INSTITUTION
                                 ---------------------------------------------     -----------------------------
          EFFECTIVE                          NOTIONAL              INTEREST           NOTIONAL          INTEREST
             DATE     MATURITY             AMOUNT (000'S)            RATE          AMOUNT (000'S)         RATE
         ----------   --------   -----------------------------   -------------     --------------      ---------
<S>                  <C>         <C>                <C>          <C>               <C>                 <C>
             1/1/99  12/30/02        Japanese Yen   12,311,005        5.50%          $   95,694          6.27%
             1/1/99  12/31/02         German Mark       99,546        6.12%          $   55,821          6.27%
             1/4/99  12/31/02         Swiss Franc       16,131        5.72%          $   11,164          6.27%
             1/4/99  12/31/02       British Pound        4,841        6.56%          $    7,974          6.27%
</TABLE>

         In the second quarter of 2000, the Swiss franc and the German mark
         currency swap agreements were terminated for proceeds of $1.7 million.

         The Company marks coupon swaps to fair value. When these agreements are
         effective as hedges, realized and unrealized gains and losses are
         excluded from the Company's Consolidated Statements of Operations and
         included, net of deferred taxes, in the cumulative translation
         adjustment of shareholders' equity.

         b) Interest rate swap agreement

         Pursuant to a covenant requirement under the Bank Facility, the Company
         entered into a five-year interest rate swap agreement in 1997 which
         provided for quarterly exchanges of interest on an amortizing
         "notional" (i.e., theoretical) amount originally set at $66,000. In
         exchange for U.S. dollar denominated interest receipts based on
         variable LIBOR, the Company would make U.S. dollar denominated interest
         payments based on a fixed rate of 6.30%. The notional amount amortized
         proportionately with the scheduled principal payments under the Bank
         Facility. This interest rate swap agreement was terminated on March 11,
         1999 (see Note 12).

         The Company accounted for these interest rate swap transactions under
         the accrual method of accounting, whereby: (i), each net
         receipt/payment was recognized in earnings during the period to which
         the receipt/payment related, as a yield adjustment to "Interest expense
         on long-term debt"; and (ii), there was no recognition on the balance
         sheet for the derivative's fair value.

         c) Concentration of credit risk

         Financial instruments, which potentially subject the Company to
         concentrations of credit risk, consist principally of cash and
         temporary investments and accounts receivable.

         The Company maintains cash and temporary investments with various high
         credit qualified financial institutions. The majority of these
         financial institutions are located outside of the U.S. and the
         Company's policy is designed to limit exposure to any one of these
         foreign institutions. The Company maintains U.S. concentration
         accounts, consisting of overnight investments, with up to three major
         U.S. banks. During 2000 and 1999, balances in these accounts averaged
         40% and 28% of worldwide cash. As part of its cash management process,
         the Company performs periodic evaluations of the relative credit
         standing of all financial institutions in which it maintains cash and
         temporary investments.

                                       61
<PAGE>

         Credit risk with respect to Instruction accounts receivable is
         generally diversified due to the large number of entities comprising
         the Company's customer base and their dispersion across many different
         industries and countries. For Berlitz GlobalNET, receivables are
         generally spread among a diversified client base, except for a
         concentration of receivables with two major customers subject to
         special contractual arrangements. One of these is a U.S. governmental
         agency and the other a corporation with whom the Company has been doing
         business for over 10 years. Receivables from these two major customers
         aggregated $7,174 and $6,500 at December 31, 2000, and 1999,
         respectively. Subsequent collections of the December 2000 balances have
         aggregated $2,147 through March 5, 2001. Publishing also sells to a
         substantial client base, although several of its larger receivables are
         from its distributors. Such receivables from Publishing's distributors
         comprised approximately 6% and 4% of the Company's total accounts
         receivable balance before allowances at December 31, 2000, and 1999,
         respectively.

         d) Fair values of financial instruments

         The carrying amounts and estimated fair values of the Company's
         financial instruments at December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                        2000                      1999
                                               -----------------------    ----------------------
                                               CARRYING     ESTIMATED     CARRYING    ESTIMATED
                                                AMOUNT      FAIR VALUE     AMOUNT     FAIR VALUE
                                               -----------------------    ----------------------
<S>                                            <C>          <C>           <C>         <C>
         Assets:
           Cash and temporary investments      $ 42,815     $  42,815     $ 34,426    $ 34,426
           Currency  swap agreements                 48            48          829         829
         Liabilities:
           Long-term debt, including
             current maturities                   1,329         1,329        7,005       7,005
           Convertible Debentures               155,000       144,462      155,000     145,235
           Notes payable to affiliates           50,000        33,951       50,000      30,505
           Currency swap agreements                 570           570        3,654       3,654
</TABLE>

         For cash and temporary investments and short-term borrowings, the
         carrying amount approximates fair value due to their short maturities.
         The fair values of long-term debt and notes payable to affiliates are
         estimated based on the interest rates currently available for
         borrowings with similar terms and maturities. The fair values of the
         Convertible Debentures are estimated based on the most likely
         discounted future cash flows as of December 31, 2000. The fair values
         of the currency swap agreements represent the amounts that could be
         settled based on estimates obtained from a dealer. The value of these
         swaps will be affected by future interest rates and exchange rates.

15.      OTHER RELATED PARTY TRANSACTIONS

         The Company and Benesse maintain a joint Directors and Officers ("D&O")
         insurance policy covering acts by directors and officers of both
         Benesse and the Company. The premiums on the D&O policy are allocated
         60% to Benesse and 40% to the Company. The

                                       62
<PAGE>

         Company maintains a stand-alone Employment Practices Liability ("EPL")
         insurance policy covering the Company, its officers and directors
         (including the Benesse directors who are also directors of the
         Company). Consequently, the premium on the EPL policy is allocated 30%
         to Benesse and 70% to the Company.

         The Company and Benesse participated in certain other joint business
         arrangements in the ordinary course of business, none of which had a
         material effect on the financial statements.

         Management believes that the Company has entered into all such
         agreements on terms no less favorable than it would have received in
         arms-length transactions with independent third parties. Each of the
         transactions with Benesse entered into after the Merger was approved by
         the Disinterested Directors Committee of the Company's Board of
         Directors.

         On December 29, 2000, the Company announced that Benesse and Benesse
         Holdings had made a proposal to the directors of Berlitz to acquire all
         of the outstanding shares of common stock of Berlitz not held by
         Benesse or Benesse Holdings for a cash price of $12.00 per share. The
         proposal has been referred to a special committee of disinterested
         directors of Berlitz. The special committee has retained an investment
         bank to advise it in evaluating the proposal. Benesse's proposal is,
         among other things, subject to the special committee making a favorable
         recommendation with respect to the proposal. The proposal is not
         subject to any financing conditions. Benesse also informed the
         directors of Berlitz that it reserved the right to amend or withdraw
         its proposal at any time in its sole discretion.

                                       63
<PAGE>

16.      STOCK OPTION AND INCENTIVE PLANS

         The Company's 1993 Short-Term Executive Incentive Compensation Plan
         (the "Short-Term Plan"), provides for potential cash awards to officers
         and other key employees if certain financial goals are met for the
         applicable calendar year. Approximately $3,443, $320, and $1,590 was
         paid for 2000, 1999 and 1998, respectively, pursuant to the Short-Term
         Plan.

         The Company's 1996 New Long-Term Executive Incentive Compensation Plan
         (the "1996 LTIP") provided for potential cash awards in 1999 to key
         executive employees and the Chairman of the Board of the Company if
         certain financial goals were met for the year ended December 31, 1998.
         For the twelve months ended December 31, 1999 and 1998, the Company
         recorded expenses of $55 and $1,193, respectively, related to the 1996
         LTIP. In March 1999, the Company paid $2,855 in awards under the 1996
         LTIP.

         On September 7, 2000, the compensation committee terminated the
         Company's 1999 Long Term Incentive Plan (the "1999 LTIP"), which had
         provided for cash awards to be paid to senior management in 2002 based
         on revenue, earnings and cash flow targets achieved during the three
         year period from 1999 to 2001. Consequently, the Company paid executive
         officers in 2000 $0.7 million that had been accrued in 1999.

         The 1999 LTIP was replaced with a phantom stock appreciation plan
         covering Berlitz International, Inc. and Berlitz Languages, Inc. (the
         "2000 PSAP") and a non-qualified stock option plan for Berlitz
         GlobalNET (the "2000 GlobalNET Plan"), both approved by the
         compensation committee on September 7, 2000. No specific grants have
         been made as of December 31, 2000 under either the 2000 PSAP or the
         2000 GlobalNET Plan.

         The Company's 1996 Stock Option Plan, as amended (the "Plan")
         authorizes the issuance of options to directors and key employees of
         the Company. The total number of shares for which options may be
         granted is 503,225. The Company has reserved 503,225 of its treasury
         shares for use under the Plan.

         Stock option activity is as follows:

                                       64
<PAGE>

<TABLE>
<CAPTION>
                                                                 NUMBER OF SHARES       EXERCISE PRICE
                                                                 ----------------       --------------
<S>                                                              <C>                  <C>
         Granted:
         June 30, 1997 (the "June 1997 Options")                      327,200               $24.9375
         December 9, 1997                                              46,190               $26.5625
                                                                  --------------      -------------------
         Options outstanding at January 1, 1998                      373,390          $24.9375 - $26.5625
         Granted:
           December 4, 1998                                           25,740                  $30.00
         Withdrawals                                                  (1,200)               $26.5625
                                                                  --------------      -------------------
         Options outstanding at December 31, 1998                    397,930           $24.9375 - $30.00
         Granted: January 11, 1999                                    20,000                $28.3125
         Expired Relinquishment Options                              (50,000)               $24.9375
         Options outstanding at December 31, 1999                    367,930           $24.9375 - $30.00
         Changes                                                           -                    -
                                                                  --------------      -------------------
         Options outstanding at December 31, 2000                    367,930           $24.9375 - $30.00
                                                                  ==============      ===================
         Options exercisable at December 31, 2000                    322,190          $24.9375 - $26.5625
                                                                  ==============      ===================
         Options exercisable at December 31, 1999                    288,000          $24.9375 - $26.5625
                                                                  ==============      ===================
         Options exercisable at December 31, 1998                     10,800                $26.5625
                                                                  ==============      ===================
</TABLE>

         In general, options granted under the Plan expire on the seventh
         anniversary of the grant date and may not be exercised prior to the
         third anniversary of the grant date, at which time they become fully
         exercisable. Unexercised options, for a majority of the grants, expire
         earlier upon the grantee's termination of service with the Company,
         unless a grantee's service terminates by reason of death, disability,
         retirement after age 60, or termination by the Company other than for
         cause.

         Included within the opening balance at January 1, 1998, are 100,250
         options for Soichiro Fukutake, Chairman of the Board of Directors, of
         which 50,000 have been granted (the "Relinquishment Options") in
         exchange for the complete relinquishment by Mr. Fukutake of all
         benefits under the Company's Supplemental Executive Retirement Plan
         ("SERP"). These options were not exercisable prior to January 1, 1999.
         On such date, they became fully exercisable until their normal
         expiration on June 29, 2004, except for the Relinquishment Options,
         which expired on December 31, 1999.

         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation", ("SFAS 123"), issued in October 1995,
         establishes financial accounting and reporting standards for
         stock-based employee compensation plans. As permitted by SFAS 123, the
         Company continues to apply APB Opinion No. 25, "Accounting for Stock
         Issued to Employees" and related Interpretations in accounting for its
         stock-based employee compensation plans. Accordingly, no compensation
         expense has been recognized for the grants under the Plan since their
         exercise prices have been equal to the closing price of the Company's
         common stock on the New York Stock Exchange on the date of grant. Had
         compensation expense been determined based on the fair value of awards
         at their grant date, as contemplated by SFAS 123, the pro forma effects
         on net income for the year-to-date periods ended December 31, 2000,
         1999 and 1998 would have been decreases of $141, $153 and $1,097
         respectively. This would have resulted in pro forma decreases in
         earnings per share for the year-to-date periods ended December 31,
         2000, 1999 and 1998 of $0.01, $0.02 and $0.11, respectively.

                                       65
<PAGE>

         The fair value of each option grant during 1999 and 1998, as set forth
         in the following table, is estimated on the date of grant using the
         Black-Scholes option pricing model, with the following assumptions:

                                                       DECEMBER        JANUARY
                                                      1998 GRANT      1999 GRANT
         Weighted average assumptions used
           to estimate fair value:
             Dividend yield                               0.00%          0.00%
             Expected volatility                         20.00%         20.00%
             Risk free interest rate                      4.31%          4.76%
             Expected lives in years                       5.0            5.0
         Fair value of each option granted               $8.29          $8.11

         The Company has two other stock plans: the 1989 Stock Option and
         Incentive Plan (the "1989 Plan") and the Non-Employee Directors' Stock
         Plan (the "Directors' Plan"). The 1989 Plan authorizes the issuance of
         various stock incentives to officers and key employees and the related
         issuance of up to 2,000,000 shares of common stock. The Directors' Plan
         provides non-employee Directors of the Company the opportunity to elect
         to receive a portion of their annual retainer fees in the form of
         common stock of the Company, or to defer receipt of a portion of such
         fees and have the deferred amounts treated as if invested in common
         stock. There was no activity related to these plans during 1998, 1999
         or 2000, and there are no related incentives or shares outstanding at
         December 31, 2000.

17.      THRIFT AND RETIREMENT PLANS

         The Berlitz International, Inc. Retirement Savings Plan (the "Berlitz
         Plan") is a defined contribution plan covering substantially all of the
         Company's full-time domestic employees who have completed one year of
         service. The retirement portion of the Berlitz Plan provides for the
         Company to make regular contributions based on salaries of eligible
         employees, except ELS employees. The thrift portion of the Berlitz
         Plan, in which employee participation is elective, provides for Company
         matching contributions of up to 3% of salary. Payments upon retirement
         or termination of employment are based on vested amounts credited to
         individual accounts. In addition, certain foreign operations have other
         defined contribution plans.

         Through December 31, 2000, ELS maintained a separate retirement savings
         plan. Effective January 1, 2001, this was merged into the Berlitz Plan,
         and all full-time ELS employees with one year of service are now
         eligible to participate in the thrift portion of the Berlitz Plan.

         Effective January 1, 1996, the Company established the SERP, a defined
         benefit plan which provides retirement income / disability retirement
         benefits, retiree medical benefits and death benefits to certain
         designated executives and their designated beneficiaries. As previously
         discussed (see Note 16), the Chairman of the Board of Directors
         relinquished rights to all benefits under the SERP in exchange for the
         Relinquishment Options. Monthly benefits will be available to any
         participant who retires at age 60 or above, with at least five years of
         service with the Company.

         The retirement income/disability retirement benefits ("Pension
         Benefits") are based on a percentage of an average monthly salary
         (calculated on the base salary and short-term

                                       66
<PAGE>

         bonuses paid over the last 36 months of employment) and will be paid to
         the retired participant for life, with 50% of such benefit paid to the
         participant's surviving spouse for life upon the retired participant's
         death. Such percentage for initial participants as of January 1, 1996,
         generally was 30%. For future participants, such percentage will be 2%
         (or such other percentage as the Board of Directors may determine)
         multiplied by years of service, generally not to exceed 30%. The
         Company will also provide each retired participant and their surviving
         spouse with medical coverage ("Medical Benefits") for both of their
         lives. If a participant with at least five years of service dies before
         retirement, the participant's designated beneficiary will receive, in
         lieu of the above-mentioned benefits, a one-time payment equal to the
         participant's base salary projected to age 65 at a 4% annual increase.

         In 1999, the Company's Board of Directors approved increases in the
         SERP retirement benefit percentage to 40% for certain participants
         based on current market factors. Effective in 2000, the Board of
         Directors approved the same increase to all participants in the SERP as
         of March 5, 2001.

         Effective March 7, 2000, the Company established an Executive
         Retirement Plan ("ERP") to provide retirement benefits for the Vice
         Chairman of the Board of Directors. The ERP is similar in nature to the
         SERP and monthly benefits will be available to the participant on the
         completion of two years of continuous service with the Company. The ERP
         retirement benefit percentage is 40%.

         In 1998, the Company established an irrevocable grantor trust (the
         "Trust") and contributed life insurance policies and annuity contracts
         on the SERP participants to the Trust. In 2000 the Company also
         contributed a life insurance contract on the ERP participant. Subject
         to the claims of the Company's general creditors in the event of the
         Company's insolvency, the Trust's principal and income shall be held
         therein until paid to the SERP/ERP participants in such manner and at
         such times as specified in the SERP/ERP. It is the intention of the
         Company that the Trust constitutes an unfunded arrangement and does not
         affect the status of the SERP/ERP as unfunded plans. Included within
         "Other assets" at December 31, 2000, is $4,326 held in the Trust.

         Total expense with respect to all benefit plans, excluding the SERP/ERP
         and a defined benefit plan for Berlitz-Japan, was $1,485, $1,812 and
         $1,521 for the years ended December 31, 2000, 1999 and 1998,
         respectively.

         The following tables set forth certain information for the SERP/ERP:

<TABLE>
<CAPTION>
                                                           PENSION BENEFITS                      MEDICAL BENEFITS
                                                  --------------------------------       -------------------------------
                                                    2000        1999        1998           2000       1999         1998
                                                  --------    --------    --------       -------     -------     -------
<S>                                               <C>         <C>         <C>            <C>         <C>         <C>
       Benefit obligation at beginning of year    $  5,737    $  5,069    $  3,575       $ 1,212     $ 1,006     $ 1,205
       Service cost                                  1,241         552         506           118         118          75
       Interest cost                                   621         324         290            90          76          57
       Net benefit payments                           (503)        (93)          -           (26)        (26)        (16)
       Amendments                                    2,239           -           -             -           -           -
       Actuarial loss (gain)                         1,695        (115)        698          (417)         38        (315)
                                                  --------    --------    --------       -------     -------     -------
       Benefit obligation at end of year            11,030       5,737       5,069           977       1,212       1,006
       Plan asset at fair value                          -           -           -             -           -           -
                                                  --------    --------    --------       -------     -------     -------
       Funded status                               (11,030)     (5,737)     (5,069)         (977)     (1,212)     (1,006)
       Unrecognized transition obligation            1,788       1,967       2,146           363         522         681
       Unrecognized prior service cost               2,099           -           -             -           -           -
       Unrecognized actuarial loss (gain)            1,931         245         360          (904)       (536)       (610)
                                                  --------    --------    --------       -------     -------     -------
       Net amount recognized                      $ (5,212)   $( 3,525)   $ (2,563)      $(1,518)    $(1,226)    $  (935)
                                                  ========    ========    ========       =======     =======     =======
</TABLE>

                                       67
<PAGE>

<TABLE>
<CAPTION>
                                                              PENSION BENEFITS                      MEDICAL BENEFITS
                                                     --------------------------------       -------------------------------
                                                       2000          1999        1998           2000       1999         1998
                                                     --------      --------    --------       -------     -------     -------
<S>                                                  <C>           <C>         <C>            <C>         <C>         <C>
         AMOUNTS RECOGNIZED IN THE
              CONSOLIDATED BALANCE SHEET:
         Accrued benefit liability                   $(10,309)     $(4,981)    $(4,177)       $(1,518)    $(1,226)    $  (935)
         Other comprehensive income                     1,210            -           -              -           -           -
         Intangible asset                               3,887         1,456      1,614              -           -           -
                                                     --------      --------    -------        -------     -------     -------
         Net amount recognized                       $ (5,212)     $( 3,525)   $(2,563)       $(1,518)    $(1,226)    $  (935)
                                                     ========      ========    =======        =======     =======     =======

         WEIGHTED AVERAGE ASSUMPTIONS AS OF
              DECEMBER 31:
         Discount rate                                   8.0%         7.5%        6.5%           8.0%        7.5%       6.5%
         Rate of compensation increases                  4.0%         4.0%        4.0%           n/a         n/a         n/a

         ASSUMED HEALTH CARE COST TREND USED
              IN MEASURING THE ACCUMULATED
              POSTRETIREMENT BENEFIT OBLIGATION:
         Beginning rate:                                 n/a          n/a         n/a           12.0%       12.0%       2.9%
         Leveling to an ultimate rate of:                n/a          n/a         n/a            5.0%        5.0%       5.0%
         Over:                                           n/a          n/a         n/a           8 Years    9 years    10 years
</TABLE>

         The components of net periodic benefit costs recognized for the years
         ended December 31, 2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                              PENSION BENEFITS                   MEDICAL BENEFITS
                                                         ----------------------------       ---------------------------
                                                           2000      1999      1998           2000      1999      1998
                                                         -------   -------    -------       -------    ------    ------
<S>                                                      <C>       <C>        <C>           <C>        <C>        <C>
         Service cost                                    $ 1,241   $   552    $   506       $   119    $  118    $   75
         Interest cost                                       621       324        290            90        76        57
         Amortization of transition obligation               179       179        179           159       159       159
         Amortization of prior service cost                  140         -          -             -         -         -
         Actuarial gains                                       9         -          -           (50)      (35)      (66)
                                                         -------   -------    -------       --------   -------   -------
         Net periodic postretirement benefit
              cost                                       $ 2,190   $ 1,055    $   975       $   318    $  318    $  225
                                                         =======   =======    =======       =======    ======    ======
</TABLE>

         Assumed health care cost trends rates can have a significant effect on
         amounts reported for the Medical Plan. A one-percentage-point change in
         the assumed health care cost trend rates would have the following
         effects:

                                                           1% POINT    1% POINT
                                                           INCREASE    DECREASE
                                                           --------    --------
         Effect on total of service and interest
              cost components for the period ending
              December 31, 2000                               $31        $(25)

         Effect on accumulated postretirement benefit
              obligation as of December 31, 2000              136        (112)

                                       68
<PAGE>

         Berlitz Japan also maintains a defined benefit plan, for which certain
         information is set forth in the following tables:

<TABLE>
<CAPTION>
                                                                                           2000            1999            1998
                                                                                         --------        --------        --------
<S>                                                                                      <C>             <C>             <C>
         Benefit obligation at beginning of year                                         $ 10,118        $  8,745        $  7,552
         Service cost                                                                         850             819             745
         Interest cost                                                                        462             338             276
         Net benefit payments                                                                (480)           (463)           (974)
         Actuarial (gain)                                                                      --            (330)             --
         Foreign currency exchange rate changes                                            (1,127)          1,009           1,146
                                                                                         --------        --------        --------
         Benefit obligation at end of year                                                  9,823          10,118           8,745
         Plan asset at fair value                                                           6,946           7,060           5,895
                                                                                         --------        --------        --------
         Funded status                                                                     (2,877)         (3,058)         (2,850)
         Unrecognized prior service cost                                                    1,826           2,250           2,210
         Unrecognized actuarial (gain)                                                       (367)           (412)           (234)
                                                                                         --------        --------        --------
         Net amount recognized                                                           $ (1,418)       $ (1,220)       $   (874)
                                                                                         ========        ========        ========
         RECONCILIATION OF FAIR VALUE OF PLAN ASSETS:
         Balance at beginning of period                                                  $  7,060        $  5,895        $  5,167
         Return on plan assets                                                                213             124             184
         Employer contributions                                                               945             801             745
         Benefits paid                                                                       (480)           (463)           (974)
         Foreign currency exchange rate changes                                              (791)            703             773
                                                                                         --------        --------        --------
         Balance at end of period                                                        $  6,947        $  7,060        $  5,895
                                                                                         ========        ========        ========
         AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET:
         Accrued benefit liability                                                       $ (2,210)       $ (2,208)       $ (3,034)
         Intangible asset                                                                     792             988           2,160
                                                                                         --------        --------        --------
         Net amount recognized                                                           $ (1,418)       $ (1,220)       $   (874)
                                                                                         ========        ========        ========

                                                                                           2000            1999            1998
                                                                                         --------        --------        --------
         WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
         Discount rate                                                                        4.5%            4.5%            4.0%
         Expected long-term rate of return on plan assets                                     3.4%            3.4%            3.6%
         Rate of compensation increases                                                       0.0%            0.0%            0.0%

         The components of net periodic benefit costs recognized for the years
         ended December 31, 2000, 1999 and 1998 are as follows:

                                                                                           2000            1999            1998
                                                                                         --------        --------        --------
         Service cost                                                                    $    850        $    819        $    745
         Interest cost                                                                        462             338             276
         Expected return on assets                                                           (213)           (207)           (184)
         Amortization of prior service cost                                                   193             185             160
                                                                                         --------        --------        --------
         Net periodic postretirement benefit cost                                        $  1,292        $  1,135        $    997
                                                                                         ========        ========        ========
</TABLE>

18.      OPERATING SEGMENTS

         The Company's operations are principally conducted through two
         segments: Language Services (consisting of the Instruction, ELS,
         Publishing, Franchising, and Cross Cultural sub-segments), and Berlitz
         GlobalNET. These are strategic business units that offer different
         products and services and are managed separately by senior management
         due to different technology and marketing strategies.

                                       69
<PAGE>

         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. 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.

         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.

         The Company evaluates operating segment performance based on EBITA,
         defined as sales of services and products, less costs 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 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>
                                                           TWELVE MONTHS ENDED DECEMBER 31,
                                                        -------------------------------------
         REVENUES:                                         2000         1999          1998
                                                        ---------    ---------      ---------
<S>                                                     <C>          <C>            <C>
           Revenues from external customers:
              Language Services:
                Instruction                             $ 296,424    $ 277,701      $ 267,923
                ELS                                        64,517       56,285         65,683
                Publishing                                 10,503       12,936         14,787
                Franchising                                 2,125        1,439          1,270
                Cross Cultural                              2,945        2,470          2,404
                Other                                           2            -              -
                                                        ---------    ---------      ---------
              Total Language Services                     376,516      350,831        352,067
              Berlitz GlobalNET                           103,925       95,361         84,236
              Eliminations and other                         (233)         (11)             -
                                                        ---------    ---------      ---------
                Total external revenues                   480,208      446,181        436,303
                                                        ---------    ---------      ---------
           Intersegment revenues:
              Language Services:
                Instruction                                     2           (2)            19
                Publishing                                     18            -              -
                Franchising                                   218          319            516
                                                        ---------    ---------      ---------
              Total Language Services                         238          317            535
              Berlitz GlobalNET                               233           11             20
                                                        ---------    ---------      ---------
                Total  intersegment revenues                  471          328            555
                                                        ---------    ---------      ---------

           Total revenues for reportable segments         480,679      446,509        436,858
           Elimination of intersegment revenues              (471)        (328)          (555)
                                                        ---------    ---------      ---------
              Total consolidated revenues               $ 480,208    $ 446,181      $ 436,303
                                                        =========    =========      =========
</TABLE>

                                       70
<PAGE>

<TABLE>
<CAPTION>
                                                                                 TWELVE MONTHS ENDED DECEMBER 31,
                                                                          ------------------------------------------
                                                                            2000            1999              1998
                                                                          ---------       ---------        ---------
<S>                                                                       <C>             <C>              <C>
           INCOME BEFORE TAXES, MINORITY INTEREST, EXTRAORDINARY
           ITEM, AND CUMULATIVE EFFECT CHANGE:
           Operating Profit:
           Segment EBITA:
              Language Services:
                Instruction                                               $  59,019       $  55,060        $  56,732
                ELS                                                           4,087           2,300            6,229
                Publishing                                                     (549)            681            1,334
                Franchising                                                   1,000             449               37
                Cross Cultural                                                  783             523              574
                Overhead expenses and other                                 (22,562)        (20,704)         (19,381)
                                                                          ---------       ---------        ---------
              Total Language Services                                        41,778          38,309           45,525
              Berlitz GlobalNET                                               7,274           6,022            8,260
              Corporate overhead and other                                  (15,039)        (14,129)         (13,471)
                                                                          ---------       ---------        ---------
            Total EBITA                                                      34,013          30,202           40,314
                                                                          ---------       ---------        ---------
         Amortization of publishing rights, excess of
         cost over net assets acquired, and other
         intangibles:
              Language Services:
                Instruction                                                 (10,260)        (10,236)         (10,127)
                ELS                                                          (5,382)         (5,417)          (5,393)
                Publishing                                                     (397)           (399)            (398)
                Cross Cultural                                                  (11)            (11)             (11)
                                                                          ---------       ---------        ---------
              Total Language Services                                       (16,050)        (16,063)         (15,929)
              Berlitz GlobalNET                                              (2,382)         (1,961)          (1,336)
                                                                          ---------       ---------        ---------
              Total intangible amortization                                 (18,432)        (18,024)         (17,265)
                                                                          ---------       ---------        ---------

         Restructuring and other unusual charges                            (12,296)             --               --
                                                                          ---------       ---------        ---------
         Total operating profit                                               3,285          12,178           23,049
         Interest expense on long-term debt                                     (54)         (2,005)         (10,956)
         Interest expense on Convertible Debentures                          (7,980)         (6,424)              --
         Interest expense to affiliates                                      (2,607)         (2,547)          (2,226)
         Other income (expense), net                                           (754)            520           (2,188)
                                                                          ---------       ---------        ---------
         Total consolidated (loss) income before taxes,
         minority interest, extraordinary item, and
         cumulative effect change                                         $  (8,110)      $   1,722        $   7,679
                                                                          =========       =========        =========
<CAPTION>

         ASSETS:                                                                            DECEMBER 31,
                                                                          ------------------------------------------
                                                                            2000            1999              1998
                                                                          ---------       ---------        ---------
<S>                                                                       <C>             <C>              <C>
               Language Services:
                 Instruction                                              $ 424,945       $ 433,526        $ 409,613
                 ELS                                                        102,146         106,210          111,980
                 Publishing                                                  18,426          23,122           23,982
                 Franchising                                                  9,231           8,031            6,553
                 Other                                                          999           1,509           18,092
                                                                          ---------       ---------        ---------
               Total Language Services                                      555,747         572,398          570,220
               Berlitz GlobalNET                                            109,808         102,684           85,183
               Corporate                                                     28,538          27,365           12,556
               Eliminations of intersegment receivables                      (7,674)         (5,427)          (4,498)
                                                                          ---------       ---------        ---------
                 Total consolidated assets                                $ 686,419       $ 697,020        $ 663,461
                                                                          =========       =========        =========
</TABLE>

                                       71
<PAGE>

<TABLE>
<CAPTION>
                                                                      TWELVE MONTHS ENDED DECEMBER 31,
                                                                   -------------------------------------
                                                                     2000           1999          1998
                                                                   --------       --------      --------
<S>                                                                <C>            <C>           <C>
          DEPRECIATION:
            Language Services:
               Instruction                                         $  5,339       $  5,005      $  4,431
               ELS                                                    1,093          1,032           958
               Publishing                                             2,043          1,855         1,244
               Franchising                                               14             19            11
               Language Service overhead and other                      554            476           469
                                                                   --------       --------      --------
            Total  Language Services                                  9,043          8,387         7,113
            Berlitz GlobalNET                                         2,279          2,014         2,141
            Corporate                                                 1,146            995           537
                                                                   --------       --------      --------
               Total consolidated depreciation                     $ 12,468       $ 11,396      $  9,791
                                                                   ========       ========      ========
          CAPITAL EXPENDITURES:
            Language Services:
               Instruction                                         $ 13,164       $ 14,249      $ 10,492
               ELS                                                    1,281            935           904
               Publishing                                             1,026          2,135         2,472
               Franchising                                                -             32             4
                                                                   --------       --------      --------
            Total  Language Services                                 15,471         17,351        13,872
            Berlitz GlobalNET                                         2,929          1,859         3,125
            Corporate                                                   619          1,124         1,952
                                                                   --------       --------      --------
               Total consolidated capital expenditures             $ 19,019       $ 20,334      $ 18,949
                                                                   ========       ========      ========
<CAPTION>

         The following tables present certain information about the geographic
         areas in which the Company operates:
                                                                        TWELVE MONTHS ENDED DECEMBER
                                                                   -------------------------------------
                                                                     2000           1999          1998
                                                                   --------       --------      --------
<S>                                                                <C>            <C>           <C>
          REVENUES FROM EXTERNAL CUSTOMERS:
            United States                                          $157,170       $144,153      $158,676
            Japan                                                    86,565         72,256        58,290
            Germany                                                  39,498         41,982        41,497
            Ireland                                                  24,983         23,307        23,186
            France                                                   20,416         20,788        17,754
            Brazil                                                   18,092         14,264        21,007
            Other foreign countries                                 133,484        129,431       115,893
                                                                   --------       --------      --------
               Total                                               $480,208       $446,181      $436,303
                                                                   ========       ========      ========
</TABLE>

                                       72
<PAGE>

                                               TWELVE MONTHS ENDED DECEMBER
                                          ------------------------------------
                                             2000          1999         1998
                                          ---------     ---------    ---------
 OPERATING PROFIT:
   EBITA :
      United States                       $  14,591     $  13,092    $  20,676
      Japan                                  10,132         8,127        6,105
      Germany                                 3,959         4,918        5,738
      Ireland                                 1,787         1,162        1,955
      France                                  2,085         2,154        1,296
      Brazil                                  3,722         1,433        3,192
      Other foreign countries                18,033        17,645       18,401
      Corporate                             (20,296)      (18,329)     (17,049)
                                          ---------     ---------    ---------
        Total EBITA                          34,013        30,202       40,314
                                          ---------     ---------    ---------
   Amortization of publishing rights,
    excess of cost over net assets
    acquired, and other intangibles:
      United States                         (15,279)      (15,072)     (14,352)
      Japan                                  (1,518)       (1,411)      (1,196)
      Germany                                  (229)         (259)        (259)
      Ireland                                   (42)          (47)         (74)
      France                                   (313)         (282)        (221)
      Brazil                                   (137)          (64)         (64)
      Other foreign countries                  (914)         (889)      (1,099)
                                          ---------     ---------    ---------
        Total  intangible amortization      (18,432)      (18,024)     (17,265)
                                          ---------     ---------    ---------

   Intercompany royalties:
      United States                           21,075       19,189       17,285
      Japan                                  (7,610)       (6,618)      (4,253)
      Germany                                (1,473)       (1,579)      (1,508)
      Ireland                                (1,247)       (1,163)      (1,148)
      France                                 (1,036)       (1,022)      (1,184)
      Other foreign countries                (9,709)       (8,807)      (9,192)
                                          ---------     ---------    ---------
        Total intercompany royalties              -             -            -
                                          ---------     ---------    ---------

   Restructuring and other unusual charges:
      United States                          (4,057)            -            -
      Japan                                  (1,175)            -            -
      Germany                                  (198)            -            -
      France                                   (480)            -            -
      Other foreign countries                (2,733)            -            -
      Corporate                              (3,653)            -            -
                                          ---------     ---------    ---------
        Total restructuring and other
          unusual charges                   (12,296)            -            -
                                          ---------     ---------    ---------
 Total operating profit                   $   3,285     $  12,178    $  23,049
                                          =========     =========    =========

                                       73
<PAGE>

<TABLE>
<CAPTION>

          LONG LIVED ASSETS:                    PROPERTY &
                                                EQUIPMENT,         OTHER          INTANGIBLE
                                                   NET             ASSETS*           ASSETS           TOTAL
                                               -----------      -----------       -----------      -----------
<S>                                            <C>              <C>               <C>              <C>
          DECEMBER 31, 2000:
            United States                      $    10,020      $     4,867       $   377,876      $   392,763
            Japan                                   11,123              126            44,689           55,938
            Germany                                  3,746                -             7,336           11,082
            France                                   2,032                -             7,947            9,979
            Brazil                                   3,834                -             4,014            7.848
            Ireland                                  1,725                -             1,376            3,101
            Other foreign countries                 14,022              139            26,917           41,078
            Corporate                                2,154           14,226             3,887           20,267
                                               -----------      -----------       -----------      -----------
               Total                           $    48,656      $    19,358       $   474,042      $   542,056
                                               ===========      ===========       ===========      ===========

          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
            Corporate                                4,579           13,910             1,456           19,945
                                               -----------      -----------       -----------      -----------
               Total                           $    47,749      $    22,393       $   496,869      $   567,011
                                               ===========      ===========       ===========      ===========

          DECEMBER  31, 1998:
            United States                      $     8,414      $     7,335       $   402,507      $   418,256
            Japan                                    8,685               97            49,165           57,947
            Germany                                  3,008                -             9,443           12,451
            France                                   1,783                -             7,192            8,975
            Brazil                                   3,250                -             2,145            5,395
            Ireland                                  1,562              151             1,793            3,506
            Other foreign countries                 10,533              192            29,173           39,898
            Corporate                                3,909            2,557             1,596            8,062
                                               -----------      -----------       -----------      -----------
               Total                           $    41,144      $    10,332       $   503,014      $   554,490
                                               ===========      ===========       =============    ===========
</TABLE>

         *Excludes financial instruments and deferred tax assets.

                                       74
<PAGE>

19.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                             ------------------------------------------------------------
                                              MARCH 31         JUNE 30          SEPT 30           DEC 31            YEAR
                                             ---------        ---------        ---------        ---------        ---------
<S>                                          <C>              <C>              <C>              <C>              <C>
2000:
Sales of services and products               $ 112,544        $ 119,463        $ 128,660        $ 119,541        $ 480,208
Operating profit (loss)                          2,697            4,151            6,977          (10,540)           3,285
(Loss) income before income taxes,
  minority interest, extraordinary
  item and cumulative effect change                (71)           1,302            4,988          (14,329)          (8,110)
Net (loss) income                               (1,977)            (807)           1,037          (11,013)         (12,760)
Basic and diluted loss
  per share                                  $   (0.21)       $   (0.08)       $    0.11        $   (1.16)       $   (1.34)
                                             =========        =========        =========        =========        =========
1999:
Sales of services and products               $ 104,447        $ 111,194        $ 119,357        $ 111,183        $ 446,181
Operating (loss) profit                           (654)           4,197            5,685            2,950           12,178
(Loss) income before income taxes,
  minority interest, extraordinary
  item and cumulative effect change             (2,561)           1,445            2,496              342            1,722
Extraordinary item                              (2,140)              (4)              (9)              (1)          (2,154)
Cumulative effect change                        (5,605)              --               --               --           (5,605)
Net loss                                       (10,349)            (310)          (1,103)          (1,322)         (13,084)
Basic and diluted loss
  per share                                  $   (1.08)       $   (0.03)       $   (0.12)       $   (0.14)       $   (1.37)
                                             =========        =========        =========        =========        =========
</TABLE>


                                       75
<PAGE>

                           BERLITZ INTERNATIONAL, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)



                                   SCHEDULE II


<TABLE>
<CAPTION>
                                        BALANCE AT     CHARGED TO                                       BALANCE
                                        BEGINNING       COST AND                                       AT END OF
                                         OF YEAR        EXPENSES      DEDUCTIONS (1)   OTHER (2)        OF YEAR
                                        ----------     ----------     -------------    --------        ---------
<S>                                     <C>            <C>             <C>             <C>             <C>
Allowances for doubtful accounts:

Year Ended December 31, 2000            $  3,102       $   2,513       $ (1,095)       $   (81)        $  4,439
                                        ========       =========       =========       ========        ========

Year Ended December 31, 1999            $  2,295       $   1,828       $   (884)       $  (137)        $  3,102
                                        ========       =========       =========       ========        ========

Year Ended December 31, 1998            $  2,415       $     728       $   (888)       $     40        $  2,295
                                        ========       =========       =========       ========        ========
</TABLE>

(1)   Principally represents net losses incurred in the ordinary course of
      business and chargeable against the allowance.

(2)   Principally represents foreign currency translation.





                                       76
<PAGE>


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

Not applicable.


                             PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 401 of Regulation S-K with respect to Directors
and Executive Officers of the Company is set forth in Part I of this Form 10-K.
The information required by Item 405 of Regulation S-K with respect to Directors
and Executive Officers of the Company is set forth in Item 12 to this Form 10-K.


ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following Summary Compensation Table sets forth the compensation awarded to,
earned by or paid to all individuals serving as the Company's Chief Executive
Officer ("CEO") or in a similar capacity during the fiscal year ended December
31, 2000 and certain other executive officers (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company and
its subsidiaries.

                                       77
<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                           LONG-TERM
                                                    ANNUAL COMPENSATION                   COMPENSATION
                                               -----------------------------------     -------------------
                                                                         OTHER         AWARDS OF
NAME AND                                                                 ANNUAL         OPTIONS/    LTIP       ALL OTHER
PRINCIPAL POSITION                  YEAR       SALARY       BONUS     COMPENSATION        SARS     PAYOUTS    COMPENSATION
                                                 ($)         ($)         ($)(3)            (#)       ($)          ($)(4)
-----------------------------       ----       ------       -----     ------------     ---------   -------    ------------
<S>                                 <C>       <C>          <C>        <C>              <C>         <C>        <C>
James Kahl (1)                      2000       69,111      368,900       68,200           --           --          387
Vice Chairman of the Board          1999           --           --           --           --           --           --
                                    1998           --           --           --           --           --           --

Hiromasa Yokoi (2)                  2000      287,915       60,800       32,868           --      163,084      151,192
Vice Chairman of the Board,         1999      534,539           --       65,720           --           --        9,448
CEO and President                   1998      523,912      186,700       65,724           --      530,000       10,400

James Lewis                         2000      299,469       36,200          510           --       53,375       15,058
Chief Executive Officer,            1999      249,685           --          306           --           --       10,400
Berlitz GlobalNET                   1998      229,449       82,600        9,677       10,000           --        4,281

Susumu Kojima                       2000      247,000       58,000           --           --       44,300           --
Vice President,                     1999      224,000       60,000           --           --           --           --
Asia Language Services              1998      212,000       15,000           --        1,980      186,000           --

Jose Alvarino                       2000      209,828       65,300       26,930           --       24,400        8,122
Vice President                      1999      200,000           --       27,173           --           --        8,318
                                    1998      198,500       58,109       27,121           --      100,000        8,216

Mark Harris                         2000      172,692      100,000       48,494           --       20,740       11,225
Vice President                      1999      181,134           --      123,159           --           --       10,400
                                    1998      155,000       50,000          231        5,000           --       10,075
</TABLE>

--------
(1)   Mr. Kahl, whose employment with the Company commenced on July 1, 2000, is
      acting as the Company's senior executive officer. Mr. Kahl has served as a
      director of the Company since March 7, 2000.

(2)   Mr. Yokoi served as Vice Chairman, CEO and President until his retirement
      on June 30, 2000.

(3)   Other Annual Compensation for Mr. Kahl represents consulting fees prior to
      the commencement of his employment. For Mr. Yokoi and Mr. Alvarino, this
      column primarily represents monthly housing allowances. For Mr. Lewis and
      Mr. Harris, this column primarily represents relocation expense
      reimbursements.

                                       78
<PAGE>

(4)   The amounts reported in this column for 2000 for Mr. Yokoi primarily
      represent benefits received under the Company's Supplemental Executive
      Retirement Plan. Also included in these columns are contributions made by
      the Company for the account of each Named Executive Officer pursuant to
      the thrift and retirement portions of the Berlitz Retirement Savings Plan.

PENSION PLAN TABLE

The Company's Supplemental Executive Retirement Plan ("SERP"), effective January
1, 1996, is a defined benefit plan which provides retirement income/disability
retirement benefits, retiree medical benefits and death benefits to certain
designated executives and their designated beneficiaries. The following table
shows the estimated annual retirement income/disability retirement benefits
(assuming payments made on the normal life annuity) payable upon retirement at
age 60 to a participant in specified compensation and years of service
classifications.

                                         YEARS OF SERVICE
                        -------------------------------------------------------
                        PARTICIPANTS AT
                        MARCH 5, 2001              ALL OTHER PARTICIPANTS
                        -------------------------------------------------------
    COMPENSATION        5 OR MORE              5           10        15 OR MORE
    ------------        ---------          --------    ---------     ----------
      $100,000          $  40,000          $ 10,000    $  20,000     $  30,000
       150,000             60,000            15,000       30,000        45,000
       200,000             80,000            20,000       40,000        60,000
       250,000            100,000            25,000       50,000        75,000
       300,000            120,000            30,000       60,000        90,000
       400,000            160,000            40,000       80,000       120,000
       550,000            220,000            55,000      110,000       165,000
       750,000            300,000            75,000      150,000       225,000

Under the SERP, monthly benefits are available to any participant who retires at
age 60 or above, with at least 5 years of service with the Company. The
retirement income/disability retirement benefits are based on a percentage (the
"SERP percentage") of an average monthly salary (calculated on the base salary
over the last 36 months of employment(2) and 1/36th of the last three short-term
bonuses paid) and will be paid to the retired participant for life, with 50% of
the benefit paid to the participant's surviving spouse for life upon the retired
participant's death. On March 5, 2001, the Compensation Committee and the Board
of Directors approved an increase in the SERP percentage for participants at
that date from 30% to 40% (retroactive to 2000). The SERP percentage for all
other participants is 2% (or such other percentage as the board of directors may
determine) multiplied by years of service, not to exceed 30%. On December 7,
1999, the Compensation Committee and the board of directors approved an increase
in the SERP percentage from 30% to 40% of average final pay for four
participants, Robert C. Hendon, Jr., Hiromasa Yokoi, Henry D. James and David
Horn, in anticipation of their pending retirement. The Company will also provide
each retired participant and their surviving spouse with medical coverage for
both of their lives. If a participant with at least 5 years of service dies
before retirement, the participant's designated beneficiary will receive, in
lieu of the above-mentioned benefits, a one-time payment equal to the
participant's base salary projected to age 65 at a 4% annual increase.

Each of the Named Executive Officers, except for Mr. Kahl and Mr. Lewis, are
participants in the SERP and will each have at least 5 years of service at age
60. The compensation covered under the SERP for each of the Named Executive
Officers who is a participant is shown under the "Salary" and "Bonus" columns of
the Summary Compensation Table.

Awards under the SERP are subject to deduction for Social Security.

                                       79
<PAGE>

Mr. Kahl is the sole participant in a separate executive retirement plan (the
"ERP"), the purpose of which is to encourage his productive efforts by providing
retirement income, disability benefits, retiree medical benefits and death
benefits to him and his beneficiaries. Under the ERP, upon reaching age 60 and
completing two years of continuous service starting March 7, 2000, Mr. Kahl is
eligible to receive a normal retirement benefit. This normal retirement benefit
is equal to 40% of (a) an average imputed annual salary, currently $575,000, for
the last 24 months of continuous service prior to termination of employment plus
(b) the average of the last two short-term incentive bonuses actually paid out
prior to termination of employment, as shown under the "Bonus" column of the
Summary Compensation Table. If Mr. Kahl should die prior to
commencement of the normal retirement benefit payment, his surviving spouse (or
if no spouse survives, his estate) shall receive an amount equal to 100% of his
imputed base salary. This amount will be funded from a "split-dollar" life
insurance policy purchased by the Company to fund Mr. Kahl's retirement benefit.
If Mr. Kahl dies after commencement of the normal retirement benefit payment,
his surviving spouse (if any) will receive an amount for life equal to 50% of
his retirement benefit. The ERP also provides that if Mr. Kahl retires, or if he
dies while employed prior to his normal retirement age, the Company will provide
medical coverage to both Mr. Kahl and his spouse for their lifetimes.
Competitive employment, confidentiality and termination for cause clauses are
included in the ERP.

The Company intends to fund the SERP/ERP through a combination of funds
generated from operations and life insurance policies and annuity contracts on
the participants. The insurance policies and annuity contracts on the SERP/ERP
participants are held in an irrevocable grantor trust. Subject to the claims of
the company's general creditors in the event of the company's insolvency, the
trust's principal and income shall be held by the trust until paid to the
SERP/ERP participants in such manner and at such times as specified in the
SERP/ERP. It is the intention of the Company that the trust constitutes an
unfunded arrangement and does not affect the status of the SERP/ERP as an
unfunded plan. Included within "Other assets" on the Company's Consolidated
Balance Sheet at December 31, 2000, is $4.3 million held by the trust.


2000 BOARD OF DIRECTORS MEETINGS, COMMITTEES AND FEES

During 2000, the Board of Directors of the Company met four times. The Board of
Directors had five standing committees in 2000: Executive, Audit, Disinterested
Directors, Compensation, and Nominating Committees.

The Executive Committee may, with certain exceptions, exercise the powers of the
board of directors during the intervals between meetings of the board of
directors. The Executive Committee held two telephonic meeting during 2000.

The Audit Committee recommends the engagement of the independent auditors of the
Company to the Board of Directors and reviews with the independent auditors the
scope and results of the Company's audits. The Audit Committee reviews the terms
of all agreements between the Company and its affiliates. The Audit Committee
meets with management and with the Company's internal auditors and independent
auditors to review matters relating to the quality of financial reporting and
internal control, including the nature, extent and results of their audits, and
otherwise maintains communications between the Company's independent auditors
and the Board of Directors. The Audit Committee met three times during 2000.

                                       80
<PAGE>

The Disinterested Directors Committee reviews and monitors all matters affecting
the relationship between the Company and Benesse and its affiliates. During
2000, the Disinterested Directors Committee met twice.

The Compensation Committee reviews performance of corporate officers,
establishes overall employee compensation policies and recommends major
compensation programs to the Board of Directors. It also reviews and approves
salary arrangements and other remuneration for executive officers of the Company
and is responsible for review of certain employee benefit plans. The
Compensation Committee oversees and approves grants of stock options and other
awards pursuant to the Company's various stock option and stock appreciation
plans. It also administers the Company's short-term and long-term incentive
compensation plans, and approves awards and discretionary bonuses under these
plans. No member of the Compensation committee is eligible to participate in the
stock option, stock appreciation, or incentive compensation plans, except for a
special one-time grant on December 9, 1997 of 500 options to each director.
During 2000, the Compensation Committee met in person four times.

The Nominating Committee nominates directors and considers possible successors
to senior executives. During 2000, the Nominating Committee met once and held
one telephonic meeting.

The Company's standard retainer payable to each director who is not an employee
of the Company or any of its affiliates is $35,000 per year, plus expenses, with
an additional $2,000 for each committee meeting attended and $1,000 for each
meeting participated in by telephone. No fees are paid for actions taken by
unanimous written consent. Directors who are also full-time employees of the
Company or any of its affiliates receive no compensation in consideration of
their duties as directors, but are eligible to participate in the health benefit
plan maintained by the company. The outside directors earned an aggregate of
approximately $235,000 as cash compensation for their services during 2000.

The Company has entered into indemnification agreements with each director and
executive officer pursuant to which the Company agrees to pay any amount a
director or executive officer becomes obligated to pay as a result of any claims
made against the director or executive officer because of any alleged act,
omission, neglect or breach of duty which he commits while acting in his
capacity as a director or executive officer and solely because of his being a
director or executive officer, subject to limitations imposed by the New York
Business Corporation Law.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF
CONTROL ARRANGEMENTS

Under a letter agreement between the Company and James Kahl, if Mr. Kahl is
terminated during the two-year term ending March 6, 2002, he is eligible to be
paid the remainder of his then current annual salary to the end of the term.

                                       81
<PAGE>

The company also has a severance agreement with James Lewis which provides that
if Mr. Lewis is terminated other than for cause, he is to be paid 15 months of
severance at his then current annual base salary plus a prorated amount of the
award under the Company's short-term Incentive Plan to which he would have been
entitled for such year. He also would receive a one-time relocation payment
equal to that which he received when joining the Company.

As previously noted under "2000 Board of Directors Meetings, Committees and
Fees", the Company is a party to indemnification agreements with each director
and executive officer.

               COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 2000

The Compensation Committee of the board of directors reviews and determines the
compensation of the Company's executive officers. It also reviews and approves
any employment, severance or similar agreements for executive officers.
Furthermore, the Compensation Committee oversees and approves grants of stock
options and other awards pursuant to the Company's various stock option and
stock appreciation plans, and determines the amount, if any, of the Company's
contributions under its retirement savings plan. It also administers the
Company's short-term and long-term incentive compensation plans, and approves
awards and discretionary bonuses under these plans.

The Company seeks to compensate executive officers at levels competitive with
other companies with similar annual revenues and to provide incentives for
superior individual and corporate performance. Salaries are set to correspond to
the mid-range of salaries paid by competitive companies. In setting
compensation, the company compares itself with companies with similar annual
revenues rather than with industry peers because the company is the only
publicly-held language instruction company.

The key components of executive officer compensation are base salary, cash
bonuses, and awards pursuant to incentive-based plans. The Compensation
Committee attempts to combine these components in such a way to attract,
motivate and retain key executives critical to the long-term success of the
Company. A discussion of the various components of executive compensation for
the fiscal year 2000 follows.

BASE SALARY

Each executive officer receives a base salary, with the potential for annual
salary increases based largely on merit from prior annual performance.

The proposed annual compensation of executive officers for the 2000 calendar
year was discussed at Compensation Committee meetings held in 1999 and 2000.
Base salary recommendations were made by management of the Company for the
committee to approve. After review and consideration of management's
recommendations, the committee approved base salary adjustments for executive
officers considering individual and company performance, as well as any changes
in the individual's employment position. The criteria used to evaluate company
performance were sales and earnings figures, and return on equity. The committee
believes that all such criteria were accorded equal weight.

                                       82
<PAGE>

Pursuant to the Company's Short-Term Incentive Plan, each executive officer is
eligible for an annual bonus based upon the officer's present employment
position and company performance compared to earnings goals. The committee
believes that individual performance and company performance are given
approximately equal weight. The Short-Term Incentive Plan also permits the
committee to award discretionary cash awards to employees, who may or may not be
participants under the Short-Term Incentive Plan, subject to those terms and
conditions as the committee shall determine in its sole discretion. At its March
5, 2001, meeting, the committee approved, after discussion, discretionary
bonuses for executive officers of $147,100 for the year 2000 for exceptional
individual performance.

STOCK BASED AWARDS

No grants of stock options, restricted stock, or any other stock-based awards
were made in 2000 under the Company's 1989 and 1996 stock option plans.

LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLANS

On September 7, 2000, the Compensation Committee terminated the Company's 1999
Long Term Incentive Plan (the "1999 LTIP"), which had provided for cash awards
to be paid to senior management in 2002 based on revenue, earnings and cash flow
targets achieved during the three year period from 1999 to 2001. Consequently,
the Company paid executive officers in 2000 $0.7 million that had been accrued
in 1999.

The 1999 LTIP was replaced with a phantom stock appreciation plan covering
Berlitz International, Inc. and Berlitz Languages, Inc. (the "2000 PSAP") and a
non-qualified stock option plan for Berlitz GlobalNET (the "2000 GlobalNET
Plan"), both approved by the Compensation Committee on September 7, 2000. No
specific grants have been made as of December 31, 2000 under either the 2000
PSAP or the 2000 GlobalNET Plan.

OTHER COMPENSATION

The executive officers also are eligible to participate in the Company's pension
plan. The pension plan provides for the Company to make regular contributions
based on salaries of eligible employees. During 2000, the Company contributed
3.5% of eligible employees' respective base salary to the pension plan, and
provided matching contributions under its 401(k) plan to all domestic employees
up to a maximum of 3% of the employee's salary.

SENIOR EXECUTIVE OFFICER COMPENSATION

The Compensation Committee approved and ratified the compensation paid to both
Mr. Kahl (who is acting as the Company's senior executive officer) and Mr. Yokoi
for fiscal year 2000 based on their business experience, their responsibilities
to guide the Company's daily affairs and long-term strategic plan in a global
marketplace, and the Company's 2000 performance. The committee believes that
both Mr. Kahl's and Mr. Yokoi's compensation package for the year 2000 was in
line with compensation packages of chief executive officers of other companies
with similar annual revenues.

                                       83
<PAGE>

TAX LEGISLATION

The committee has reviewed regulations issued by the U.S. Internal Revenue
Service which limit deductions for certain compensation in excess of $1 million
annually paid to executive officers of public companies. Based on present levels
of compensation, the Company does not anticipate the loss of deductibility for
any compensation paid over the next year.

COMPENSATION COMMITTEE MEMBERSHIP

During 2000, the Compensation Committee consisted of Edward G. Nelson, Robert L.
Purdum and Takuro Isoda. All of the views expressed by the Compensation
Committee in 2000 may not have been the views of each member of the Compensation
Committee individually. However, all decisions affecting compensation were
approved by all of the members of the Compensation Committee.

                                       84
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2000, the Compensation Committee consisted of Edward G. Nelson, Robert L.
Purdum and Takuro Isoda. None of these committee members were officers of the
Company or any of its subsidiaries during 2000 or any previous year.

PERFORMANCE GRAPHS

The following graphs set forth the Company's total shareholder return as
compared to the S&P 400 Industrial Index and a peer group index (described
below) over a five-year period, beginning on December 31, 1995, and ending on
December 31, 2000. The total shareholder return assumes $100 invested at the
beginning of the period in the Company's common stock, the S&P 400 Industrial
Index and the peer group index. It also assumes reinvestment of all dividends.

As the Company is the only publicly-held language instruction company, there are
no directly comparable companies. Therefore, the Company has created a peer
group index of selected publicly-held companies in the educational services and
educational publishing industries. The companies included in this peer group
are: ITT Educational Services, Inc. (a leading proprietary provider of technical
post secondary degree programs in the U.S.); Education Management Corporation
(among the largest providers of proprietary post-secondary education in the U.S.
offering degree and non-degree programs in the areas of design, media arts,
culinary arts, fashion and paralegal studies); and three educational publishing
companies: Houghton Mifflin, John Wiley & Sons and McGraw-Hill, Inc. While none
of these companies are directly comparable to the Company, the Company believes
they are within the same broad category of education-related businesses as the
Company.

Education Management Corporation has been publicly traded since October 1996.
For purposes of creating the peer group index, this company has been given a
market capitalization weighting of zero for those periods prior to its initial
public trading dates.

                                       85
<PAGE>

                           COMPARISON OF STOCK PRICES
            BERLITZ INTERNATIONAL, INC., THE S&P 400 INDUSTRIAL INDEX
                              AND PEER GROUP INDEX





                                [GRAPHIC OMITTED]





====================|=========|=========|=========|=========|=========|========|
                    |  1995   |   1996  |   1997  |   1998  |   1999  |   2000 |
                    |         |         |         |         |         |        |
Berlitz             |  $ 100  |  $ 124  |  $ 161  |  $ 176  |  $ 104  |  $  49 |
--------------------|---------|---------|---------|---------|---------|--------|
S & P 400 Index     |  $ 100  |  $ 123  |  $ 161  |  $ 215  |  $ 271  |  $ 227 |
--------------------|---------|---------|---------|---------|---------|--------|
Peer Group Index    |  $ 100  |  $ 122  |  $ 181  |  $ 261  |  $ 286  |  $ 298 |
====================|=========|=========|=========|=========|=========|========|


                                       86
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of shares of common
stock beneficially owned as of March 6, 2001, by each director, nominee, the
Named Executive Officers, and all officers and directors as a group. If not
mentioned by name, no individual in the categories described above beneficially
owned any shares of common stock as of March 6, 2001. No security set forth in
the third column of the following table reflects an amount as to which the
beneficial owner has joint voting or investment power.

                                                  AMOUNT AND
                                                  NATURE OF
                        NAME OF                   BENEFICIAL        PERCENT
    TITLE OF CLASS      BENEFICIAL OWNER          OWNERSHIP         OF CLASS
    --------------      ----------------          -------------     --------

       Common           Soichiro Fukutake         8,934,533 (1)     61.84%(11)
       Common           James Kahl                        -             *
       Common           Laurence Berg                     -(10)         *
       Common           Takura Isoda                      -             *
       Common           Hiroshi Kitada                    -             *
       Common           James Lewis                   6,320 (2)         *
       Common           Edward G. Nelson              2,000 (3)         *
       Common           Robert L. Purdum              2,500 (4)         *
       Common           Antony Ressler                    -(10)         *
       Common           Ryoichi Tanaka                    -             *
       Common           Jose Alvarino                21,547 (5)         *
       Common           Mark Harris                   5,517 (6)         *
       Common           Henry D. James               27,972 (7)         *
       Common           Susumu Kojima                18,320 (8)         *
       Common           Hiromasa Yokoi               50,220 (9)         *

                        All Officers and
                        Directors as a Group
       Common           (21 in number)            9,109,159         63.13%(11)

----------
(1)   This amount includes: a) 6,985,338 shares of outstanding common stock
      beneficially owned by Benesse and Benesse Holdings; b) 1,664,145 shares of
      common stock which would be issuable upon conversion of $55 million in
      convertible debentures (the "Benesse Debentures") held by Benesse
      Holdings; c) 227,800 shares of common stock held by Mr. Fukutake; d) 6,500
      shares of common stock awarded to Mr. Fukutake in 1999 in lieu of his
      participation in the 1999 LTIP; and e) 50,750 shares of common stock which
      would be issuable under currently exercisable stock options held by Mr.
      Fukutake. Mr. Fukutake is the President, Representative Director and
      principal shareholder of Benesse. Consequently, he could be deemed to be
      in ultimate control of Benesse and the beneficial owner of shares that it
      beneficially owns. See "Security Ownership of Certain Beneficial Owners."
(2)   Includes options to purchase 5,120 shares, which are currently
      exercisable.
(3)   Includes options to purchase 500 shares, which are currently exercisable.
      Further, Mr. Nelson's wife owns an additional 1,000 shares of common
      stock, for which Mr. Nelson has disclaimed ownership.
(4)   Includes options to purchase 500 shares, which are currently exercisable.
(5)   Includes options to purchase 15,360 shares, which are currently
      exercisable.

                                       87
<PAGE>
(6)   Includes options to purchase 5,120 shares, which are currently
      exercisable.
(7)   Includes options to purchase 20,300 shares, which are currently
      exercisable.
(8)   Includes options to purchase 18,320 shares, which are currently
      exercisable.
(9)   Includes options to purchase 46,220 shares, which are currently
      exercisable.
(10)  Does not include 3,025,718 shares of common stock, which would be issuable
      upon conversion of $100 million in convertible debentures (the "Apollo
      Debentures") held by two affiliates of Apollo. The beneficial ownership of
      these shares is disclaimed by each of Mr. Ressler and Mr. Berg, whose
      relationships with Apollo are described under "Executive Officers and
      Directors of the Registrant".
(11)  Assumes conversion of all convertible debentures held by Apollo and
      Benesse Holdings and the exercise of all currently exercisable stock
      options. In the event that Apollo converted all of its convertible
      debentures but Benesse Holdings did not convert any of its convertible
      debentures, Apollo would own approximately 24% of the total common stock
      then outstanding. Alternatively, in the event that Benesse Holdings
      converted all of its convertible debentures but Apollo did not convert any
      of its convertible debentures, Benesse Holdings would own approximately
      78% of the total common stock then outstanding.

* Less than 1%

To the best of the Company's knowledge, there are no events of delinquent filing
requiring disclosure under Item 405 of Regulation S-K, except that Mark Harris
did not timely file a Form 4 with respect to his acquisition of 397 shares in
April 2000. Mr. Harris has since filed a Form 4 with respect to the acquisition
of these shares.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth the ownership by each person or group known by
the Company to own beneficially more than 5% of common stock:
<TABLE>
<CAPTION>
                            NAME AND ADDRESS OF                                        PERCENT
   TITLE OF CLASS             BENEFICIAL OWNER                     OWNERSHIP           OF CLASS
   --------------      ----------------------------               -----------         ----------
<S>                    <C>                                        <C>                 <C>
     Common            Benesse Corporation (1)                      8,934,533         61.84% (3)
                       3-17-17 Minamigata
                       Okayama-shi 700, Japan

     Common            Apollo Advisors, L.P.                        3,025,718(2)      20.94% (3)
                       1999 Avenue of the Stars
                       Los Angeles, CA 90067

     Common            Dimensional Fund Advisors, Inc. (5)            822,372          8.61% (4)
                       1299 Ocean Avenue
                       Santa Monica, CA 90401

     Common            Mario Gabelli (6)                              482,500          5.05% (4)
                       One Corporate Center
                       Rye, NY 10580-1434
</TABLE>
----------
(1)   Fukutake Publishing Co., Ltd. changed its name to Benesse Corporation on
      April 1, 1995. As of March 12, 2001, 6,972,138 shares of outstanding
      common stock are held by Benesse Holdings, and 13,200 shares of
      outstanding common stock are held directly by Benesse. In
      addition, 1,664,145 shares of common stock would be issuable upon
      conversion of the Benesse Debentures. Mr. Fukutake holds 227,800 shares of
      common stock, and another 6,500 shares of common stock were awarded to Mr.
      Fukutake in 1999 in lieu of his participation in the 1999 LTIP. An
      additional 50,750 shares of common stock would be issuable upon exercise
      of currently
                                       88
<PAGE>

      exercisable stock options held by Mr. Fukutake. Soichiro Fukutake is the
      President, Representative Director and principal shareholder of Benesse.
(2)   Represents 3,025,718 shares of common stock, which would be issuable upon
      conversion of the Apollo Debentures.
(3)   Assumes conversion of all convertible debentures held by Apollo and
      Benesse Holdings and the exercise of all currently exercisable stock
      options. In the event that Apollo converted all of the Apollo Debentures
      but Benesse did not convert any Benesse Debentures, Apollo would own
      approximately 24% of the total common stock then outstanding.
      Alternatively, in the event that Benesse converted all Benesse Debentures
      but Apollo did not convert any Apollo Debentures, Benesse would own
      approximately 78% of the total common stock then outstanding.
(4)   Percent of Class does not assume the conversion of all convertible
      debentures held by Apollo and Benesse Holdings or the exercise of all
      currently exercisable stock options.
(5)   This information is taken from the Schedule 13G, dated February 2, 2001,
      filed with the Securities and Exchange Commission. Dimensional Fund
      Advisors, Inc. ("Dimensional"), in its role as investment advisor or
      manager to certain investment companies, commingled group trusts and
      separate accounts (collectively, the "Funds"), possesses voting and/or
      investment power over these shares of common, which are owned by the
      Funds. Dimensional disclaims beneficial ownership of all such shares.
(6)   This information is taken from the Schedule 13D, dated May 9, 2000, filed
      with the Securities and Exchange Commission.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Soichiro Fukutake is the President of Benesse and the Chairman of Benesse
Holdings. Mr. Fukutake beneficially owns 20.7% of Benesse's outstanding common
stock and, accordingly, may be deemed to control Benesse. Benesse currently
beneficially owns 7,219,638 shares (or approximately 76%) of the 9,546,536
shares of Berlitz common stock outstanding at March 20, 2001. Hiroshi Kitada,
James Kahl and Ryoichi Tanaka serve on the board of directors of Benesse
Holdings.

James Kahl currently serves as the Benesse nominee on the board of directors of
the company in connection with the acquisition by Benesse in January 1991 of a
20% interest in Berlitz Japan, Inc.("Berlitz Japan"), a subsidiary of the
company.

On December 28, 2000, Benesse and Benesse Holdings made a proposal to acquire
all of the outstanding shares of common stock of Berlitz not held by them or Mr.
Fukutake for a cash price of $12.00 per share. A special committee of
disinterested directors of Berlitz is evaluating the fairness of the proposal.

Pursuant to a 1999 private placement, the Company has $100.0 million aggregate
principal amount of outstanding convertible debentures to Apollo and $55.0
million aggregate principal amount of outstanding convertible debentures to
Benesse Holdings. Assuming conversion of all of the convertible debentures
issued in the transaction, Apollo would own approximately 20% of the then
outstanding common stock of the company and Benesse Holdings would own
approximately 60% of the then outstanding common stock of the company. During
2000, the Convertible Debentures bore interest at 5% per year, paid
semi-annually.

Pursuant to a 1999 transaction, the Company also has a promissory note payable
to Benesse Holdings in the principal amount of $50.0 million. During 2000, this
note bore interest at 5.2% per year, paid semi-annually.

The Company and Benesse maintain a joint Directors and Officers ("D&O")
insurance policy covering acts by directors and officers of both Benesse and the
Company. Consequently, the premium on the

                                       89
<PAGE>

D&O policy is allocated 60% to Benesse and 40% to the Company. Since May 1995,
the Company has also maintained a stand-alone Employment Practices Liability
("EPL") insurance policy covering the company, its officers and directors
(including the Benesse directors who are also directors of the Company). The
premium on this EPL policy is allocated 30% to Benesse and 70% to the Company.

The Company and Benesse participated in certain other joint business
arrangements during 2000, in the ordinary course of business, including the
following:

o        Pursuant to extended industrial block contracts, Berlitz Japan provided
         lessons to Benesse at its standard rate for prepaid industrial lessons
         which was approximately 20% below the rate charged for individual
         instruction. Revenues under these contracts aggregated approximately 10
         million Yen (approximately $93,000 at an average 2000 exchange rate of
         (Y) 108).

o        The Company's subsidiary, Berlitz Franchising Corporation, is party to
         a standard franchise agreement dated July 30, 1997 with the Okayama
         Language Center, Inc., a corporation formed by Benesse and the Okayama
         Institute of Languages, the latter being controlled by Mr. Fukutake's
         sister-in-law.

o        The Company and Benesse also participated in certain other joint
         business arrangements in the ordinary course of business, none of which
         had a material effect on the financial statements.

Management believes that the company has entered into all such agreements on
terms no less favorable than it would have received in an arm's-length
transaction with independent third parties. Each of the transactions with
Benesse entered into after the merger was approved by the Disinterested
Directors Committee.

                                       90
<PAGE>

                                     PART IV

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


A.       Index to Financial Statements and Financial Statement Schedules

         1.   FINANCIAL STATEMENTS

         2.   FINANCIAL STATEMENT SCHEDULES

              The Financial Statements and the Financial Statement Schedules
              included in the Annual Report on Form 10-K are listed in Item 8 on
              page 39.

         3.   EXHIBITS

              All Exhibits listed below are filed with this Annual Report on
              Form 10-K unless specifically stated to be incorporated by
              reference to other documents previously filed with the Commission.

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

         2.1      Amended and Restated Agreement and Plan of Merger, dated as of
                  December 9, 1992, among the registrant, Benesse Corporation
                  (formerly Fukutake Publishing Co., Ltd.) and BAC, Inc. Exhibit
                  1 to the registrant's Form 8-K, dated December 9, 1992, is
                  incorporated by reference herein.

         3.1      Restated Certificate of Incorporation of the registrant filed
                  with the State of New York on December 11, 1989. Exhibit 3.4
                  to Registration Statement No. 33-31589 is incorporated by
                  reference herein.

         3.2      Certificate of Merger of BAC, Inc. into the registrant
                  (including amendments to the registrant's Certificate of
                  Incorporation), filed with the State of New York on February
                  8, 1993. Exhibit 3.2 to the Company's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1992 is
                  incorporated by reference herein.

         3.3      Amended and Restated By-laws of the registrant, adopted May
                  11, 1993. Exhibit 1 to the Company's Quarterly Report on Form
                  10-Q for the quarter ended March 31, 1993 is incorporated by
                  reference herein.

         4.1      Specimen Certificate of Common Stock. Exhibit 4.1 to
                  Registration Statement No. 33-56566 is incorporated by
                  reference herein.

         10.1     Agreement among the registrant, Berlitz Financial Corporation,
                  The Berlitz School of Language (Japan) Inc., The Berlitz
                  Schools of Languages Limited and Maxwell Communication
                  Corporation plc, dated January 8, 1993. Exhibit 1 to the
                  Company's Form, 8-K, dated January 7, 1993, is incorporated by
                  reference herein.

                                       91
<PAGE>

         10.2     Agreement among the registrant, Berlitz Financial Corporation,
                  Macmillan, Inc. and Macmillan School Publishing Holding
                  Company, Inc., dated January 8,1993. Exhibit 2 to the
                  Company's Form 8-K, dated January 7, 1993 is incorporated by
                  reference herein.

         10.3     1989 Stock Option and Incentive Plan. Exhibit 10.13 to
                  Registration Statement No. 33-31589 is incorporated by
                  reference herein.

         10.4     Berlitz International, Inc. Non-Employee Directors' Stock
                  Plan. Exhibit 10.17 to the Company's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1990 is
                  incorporated by reference herein.

         10.5     Berlitz International, Inc., Retirement Savings Plan,
                  effective as of January 1, 1992. Exhibit 10.31 to Registration
                  Statement No. 33-56566 is incorporated by reference herein.

         10.6     1993 Short-Term Executive Incentive Compensation Plan. Exhibit
                  2 to the Company's Form 8-K, dated December 2, 1993 is
                  incorporated by reference herein.

         10.7     Supplemental Executive Retirement Plan, effective as of
                  January 1, 1996. Exhibit 10.33 to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 1996 is
                  incorporated by reference herein.

         10.8     Form of Indemnity Agreement between the Registrant and
                  Macmillan, Inc. dated October 11, 1989. Exhibit 10.16 to
                  Registration Statement No. 33-31589 is incorporated by
                  reference herein.

         10.9     Shareholders' Agreement among Berlitz Languages, Inc., Benesse
                  Corporation (formerly Fukutake Publishing Co., Ltd.) and the
                  registrant, dated as of November 8, 1990. Exhibit 10.18 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1990 is incorporated by reference herein.

         10.10    Amendment No. 1 to Shareholders' Agreement among Berlitz
                  Languages, Inc., Benesse Corporation (formerly Fukutake
                  Publishing Co., Ltd.) and the registrant, dated as of November
                  8, 1990. Exhibit 10.18 to the Company's Annual Report on Form
                  10-K for the fiscal year ended December 31, 1990 is
                  incorporated by reference herein. Exhibit 10.21 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1992 is incorporated by reference herein.

         10.11    Stock Purchase Agreement, dated as of November 8, 1990,
                  between Berlitz Languages, Inc., the registrant and Benesse
                  Corporation (formerly Fukutake Publishing Co., Ltd.) Exhibit
                  10.19 to the Company's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1990 is incorporated by
                  reference herein.

         10.12    Form of Indemnification Agreement between the registrant and
                  each of Robert Maxwell, Kevin Maxwell, Martin E. Maleska and
                  David H. Shaffer. Exhibit 10.20 to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1990 is
                  incorporated by reference herein.

                                       92
<PAGE>

         10.13    Form of Amended and Restated Indemnification Agreement between
                  the registrant and each of Elio Boccitto, John Brademas,
                  Rozanne L. Ridgway, Joe M. Rodgers, Robert Minsky and Rudy G.
                  Perpich. Exhibit 10.24 to Registration Statement No. 33-56566
                  is incorporated by reference herein.

         10.14    Amended and Restated Indemnification Agreement between the
                  registrant and Hiromasa Yokoi. Exhibit 10.25 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1992 is incorporated by reference herein.

         10.15    Form of Indemnification Agreement between the registrant and
                  each of Soichiro Fukutake, Owen Bradford Butler, Susumu
                  Kojima, Saburo Nagai, Edward G. Nelson, Makoto Sato and
                  Aritoshi Soejima. Exhibit 10.26 to the Company's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1992 is
                  incorporated by reference herein.

         10.16    Form of Indemnification Agreement between the registrant and
                  each of Jose Alvarino, Manuel Fernandez, Paul Gendler, Robert
                  C. Hendon, Jr., Henry James, Jacques Meon, Michael Mulligan,
                  Kim Sonne, Anthony Tedesco and Wolfgang Wiedeler. Exhibit
                  10.24 to Registration Statement No. 33-56566 is incorporated
                  by reference herein.

         10.17    Indemnification Agreement between the Company and each of
                  Ellen Adler, Perry Akins, Mark Harris, Brian Kelly, James
                  Lewis, Lionel Mellet and Kazuo Yamakawa. Exhibit 10.38 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997 is incorporated by reference herein.

         10.18    Employment Agreement, dated March 13, 1995, between the
                  Company and Frank Garton. Exhibit 10.41 to the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1997 is incorporated by reference herein.

         10.19    Employment Agreement, dated June 25, 1997, between the Company
                  and James Lewis. Exhibit 10.42 to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 1997 is
                  incorporated by reference herein.

         10.20    Amended and Restated Employment Agreement, dated November 1,
                  1986, and Amendment No. 1 thereto, dated October 1, 1988,
                  between the Company (as successor to ELS Educational Services,
                  Inc.) and Perry S. Akins. Exhibit 10.43 to the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1997 is incorporated by reference herein.

         10.21    Stock Purchase Agreement between Fukutake Holdings (America),
                  Inc. and Berlitz International, Inc., dated April 29, 1997.
                  Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
                  for the quarter ended March 31, 1997 is incorporated by
                  reference herein.

         10.22    1996 Stock Option Plan, as amended. Exhibit 10.2 to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1997 is incorporated by reference herein.

                                       93
<PAGE>

         10.23    Stock Purchase Agreement, dated November 14, 1997, between MCC
                  Proceeds, Inc. and Berlitz International, Inc. Exhibit 10.3 to
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1997 is incorporated by reference herein.

         10.24    Stock Purchase Agreement, dated as of July 23, 1997, between
                  ELS Educational Services, Inc., Roger O. Walther S.P. Trust,
                  Wendy Walther, Christine Walther Tripp, Edward Walther, Anne
                  Dunning, John Dunning, and Berlitz International, Inc. Exhibit
                  1 to the Company's Current Report on Form 8-K dated July 23,
                  1997 is incorporated by reference herein.

         10.25    Form of Purchase Agreement (for $100 million 5% Convertible
                  Exchangeable Subordinated Debentures due 2010, Series A),
                  dated as of October 2, 1998, between Berlitz International,
                  Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas
                  Partners, IV, L.P. Exhibit 1 of the Company's Form 8-K dated
                  October 6, 1998 is incorporated by reference herein.

         10.26    Form of Purchase Agreement (for $55 million 5% Convertible
                  Exchangeable Subordinated Debentures due 2010, Series B),
                  dated as of October 2, 1998, between Berlitz International,
                  Inc., and Benesse Holdings International, Inc. Exhibit 2 of
                  the Company's Form 8-K dated October 6, 1998 is incorporated
                  by reference herein.

         10.27    Form of Registration Rights Agreement, dated as of October 2,
                  1998, between Berlitz International, Inc., and Apollo
                  Management IV, L.P. on behalf of Apollo Investment Fund IV,
                  L.P. and Apollo Overseas Partners, IV, L.P. Exhibit 3 of the
                  Company's Form 8-K dated October 6, 1998 is incorporated by
                  reference herein.

         10.28    Form of Registration Rights Agreement, dated as of October 2,
                  1998, between Berlitz International, Inc., and Benesse
                  Holdings International, Inc. Exhibit 4 of the Company's Form
                  8-K dated October 6, 1998 is incorporated by reference herein.

         10.29    Form of Investors Agreement between Berlitz International,
                  Inc., and Apollo Management IV, L.P. on behalf of Apollo
                  Investment Fund IV, L.P. and Apollo Overseas Partners, IV,
                  L.P. Exhibit 5 of the Company's Form 8-K dated October 6, 1998
                  is incorporated by reference herein.

         10.30    Form of Voting Agreement, dated as of October 2, 1998, between
                  Benesse Corporation, and Apollo Management IV, L.P. on behalf
                  of Apollo Investment Fund IV, L.P. and Apollo Overseas
                  Partners, IV, L.P. Exhibit 6 of the Company's Form 8-K dated
                  October 6, 1998 is incorporated by reference herein.

         10.31    Form of $50 million Subordinated Promissory Note from Berlitz
                  International, Inc. to Benesse Holdings International, Inc.
                  Exhibit 8 of the Company's Form 8-K dated October 6, 1998 is
                  incorporated by reference herein, except that initial interest
                  rate, as defined in that Exhibit, has changed to 5.2% per
                  annum from 5.9% per annum.

         10.32    Form of Indemnification Agreement between the Company and each
                  of Laurence Berg, Takuro Isoda, Mako Obara, and Antony
                  Ressler. Exhibit 10.59 of the Company's Form 10-K for the year
                  ended December 31, 1998 is incorporated by reference herein.

                                       94
<PAGE>

         10.33    Amendment No. 1 to Berlitz International, Inc. Supplemental
                  Executive Retirement Plan. Exhibit 10.60 of the Company's Form
                  10-K for the year ended December 31, 1999 is incorporated by
                  reference herein.

         10.34    Form of Amendment No. 1 to the Credit Agreement dated as of
                  March 31, 1999 between the registrant, Bank of America, N.A.,
                  and the Lenders party thereto from time to time. Exhibit 10.61
                  of the Company's Form 10-K for the year ended December 31,
                  1999 is incorporated by reference herein.

         10.35    Form of Executive Retirement Plan for James R. Kahl, effective
                  as of March 7, 2000. Exhibit 10 of the Company's Form 10-Q for
                  the quarter ended September 30, 2000 is incorporated by
                  reference herein.

         21*      List of subsidiaries of the registrant.

         23*      Consent of Independent Auditors.

         *Filed herewith.

B.       Reports on Form 8-K:

         No reports on Form 8-K were filed during the quarter ended December 31,
         2000.

         SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
         SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
         SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

         As of the date of the filing of this Annual Report on Form 10-K no
         proxy materials have been furnished to security holders. Copies of all
         proxy materials will be sent to the Commission in compliance with its
         rules.





                                       95
<PAGE>
                                   SIGNATURES

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

                           BERLITZ INTERNATIONAL, INC.


                               By: /s/ JAMES KAHL
                                   ---------------------
                                   James Kahl
                                   Vice Chairman of the Board

Dated:  March 30, 2001

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

<TABLE>
<S>                                         <C>                                         <C>
/s/  SOICHIRO FUKUTAKE
---------------------------                 Chairman of the Board                       March 30, 2001
     Soichiro Fukutake

/s/  JAMES KAHL
---------------------------                 Vice Chairman of the Board                  March 30, 2001
     James Kahl                             (Principal Executive Officer)

/s/  JAMES LEWIS
---------------------------                 Executive Vice President,                   March 30, 2001
     James Lewis                            and Director

/s/  ROYICHI TANAKA
---------------------------                 Vice President, and Director                March 30, 2001
     Royichi Tanaka

/s/  RONALD STARK
---------------------------                 Vice President                              March 30, 2001
     Ronald Stark                           (Principal Accounting Officer)

/s/  HIROSHI KITADA
---------------------------                 Director                                    March 30, 2001
     Hiroshi Kitada

/s/  LAURENCE BERG
---------------------------                 Director                                    March 30, 2001
     Laurence Berg

/s/  ANTONY RESSLER
---------------------------                 Director                                    March 30, 2001
     Antony Ressler

/s/  TAKURO ISODA
---------------------------                 Director                                    March 30 2001
     Takuro Isoda

/s/  EDWARD G. NELSON
---------------------------                 Director                                    March 27, 2001
     Edward G. Nelson

/s/  ROBERT L. PURDUM
---------------------------                 Director                                    March 30, 2001
     Robert L. Purdum
</TABLE>
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