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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED MAY 31, 1998
 
                        COMMISSION FILE NUMBER: 0-23021
                            ------------------------
 
                          EDUTREK INTERNATIONAL, INC.
 
                             A GEORGIA CORPORATION
 
      3340 PEACHTREE ROAD, SUITE 2000                  58-2255472
           ATLANTA, GEORGIA 30326           (IRS Employer Identification No.)
                404-812-8200
 
                Securities Registered Pursuant to Section 12(b)
                    of the Securities Exchange Act of 1934:
                                      NONE
 
                Securities Registered Pursuant to Section 12(g)
                    of the Securities Exchange Act of 1934:
                    CLASS A COMMON STOCK, WITHOUT PAR VALUE
                            ------------------------
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K./X/
 
    The aggregate market value of the Class A Common Stock of the registrant
held by nonaffiliates of the registrant (4,268,688) on July 31, 1998 was
$105,116,442. For the purposes of this response, officers, directors, and
holders of 5% or more of the registrant's Class A Common Stock are considered
the affiliates of the registrant at that date.
 
    The number of shares outstanding of the registrant's Common Stock as of July
31, 1998: 4,337,095 Class A and 6,293,000 Class B.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in 1998 are incorporated by reference into
Part III of this Report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
 
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                          EDUTREK INTERNATIONAL, INC.
                                   FORM 10-K
                                     INDEX
 
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                                                                                                            PAGE
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<S>          <C>                                                                                         <C>
PART I
Item 1.      Business..................................................................................           1
Item 2.      Properties................................................................................          20
Item 3.      Legal Proceedings.........................................................................          21
Item 4.      Submission of Matters to a Vote of Security Holders.......................................          21
 
PART II
Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters.....................          22
Item 6.      Selected Consolidated Financial Data......................................................          23
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations.....          25
Item 7A.     Quantitative and Qualititative Disclosures About Market Risk..............................          32
Item 8.      Financial Statements and Supplementary Data...............................................          32
Item 9.      Changes in and Disagreements With Accountants on Accounting and Financial Disclosure......          50
 
PART III
Item 10.     Directors and Executive Officers of the Registrant........................................          50
Item 11.     Executive Compensation....................................................................          50
Item 12.     Security Ownership of Certain Beneficial Owners and Management............................          50
Item 13.     Certain Relationships and Related Transactions............................................          50
 
PART IV
Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................          50
SIGNATURES.............................................................................................          53
EXHIBIT INDEX..........................................................................................          55
</TABLE>
 
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                                     PART I
 
ITEM 1.  BUSINESS
 
    THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A SAFE HARBOR
TO ENCOURAGE COMPANIES TO PROVIDE PROSPECTIVE INFORMATION SO LONG AS IT IS
IDENTIFIED AS FORWARD-LOOKING AND ACCOMPANIED BY MEANINGFUL CAUTIONARY
STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE DISCUSSED. FORWARD-LOOKING STATEMENTS ARE RELATED
TO THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ECONOMIC
PERFORMANCE, OF PROJECTIONS OF REVENUES, INCOME, EARNINGS PER SHARE, CAPITAL
EXPENDITURES, DIVIDENDS, CAPITAL STRUCTURE, OR OTHER FINANCIAL ITEMS. IN THE
FOLLOWING DISCUSSION AND ELSEWHERE IN THE REPORT, STATEMENTS CONTAINING WORDS
SUCH AS "INTEND," "EXPECT," "ANTICIPATE," "BELIEVE," "GOAL," "OBJECTIVE," OR
SIMILAR WORDS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE SUCH FORWARD-LOOKING STATEMENTS, AND IT
WISHES TO IDENTIFY IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS CONTAINED IN
THE FOLLOWING DISCUSSION AND ELSEWHERE IN THE REPORT. THE RISKS AND
UNCERTAINTIES THAT MAY AFFECT THE OPERATIONS, PERFORMANCE, DEVELOPMENT, AND
RESULTS OF THE COMPANY'S BUSINESS INCLUDE BUT ARE NOT LIMITED TO THE FOLLOWING:
(1) HEIGHTENED COMPETITION; (2) GENERAL ECONOMIC AND BUSINESS CONDITIONS WHICH
ARE LESS FAVORABLE THAN EXPECTED; (3) CONTINUED DIFFICULTIES IN THE ECONOMIES OF
ASIAN AND OTHER COUNTRIES THAT ARE A SOURCE OF STUDENTS FOR THE COMPANY; AND (4)
OTHER RISKS DETAILED HEREIN AND FROM TIME TO TIME IN THE COMPANY'S OTHER
REPORTS.
 
OVERVIEW
 
    EduTrek International, Inc. ("EduTrek" or the "Company"), through American
InterContinental University ("AIU"), is a leading provider of global,
career-oriented higher education programs. AIU offers accredited associate's,
bachelor's, and master's degree programs in information technology ("IT"),
international business, multimedia communication, and design to over 3,000
students from over 100 countries. AIU maintains five campuses located in
Atlanta, Los Angeles, Washington, D.C., London, and Dubai, United Arab Emirates.
In 1987, AIU became the first for-profit four-year university to be accredited
by the Commission on Colleges of the Southern Association of Colleges and
Schools ("SACS"), one of the six regional accrediting agencies recognized by the
U.S. Department of Education. AIU's education programs are designed to help
graduates prepare for careers. AIU offers an authentic international education
environment; over half of its students are from outside the United States.
Through its Study Abroad program, AIU enrolled nearly 640 students from U.S.
universities in fiscal 1998 to study at AIU's London and Dubai campuses while
earning academic credit toward a degree from their home university. AIU intends
to become the high-quality, low-cost leader in the for-profit education industry
by offering market-driven programs in state-of-the-art facilities.
 
    Established as a two-year institution in 1970, AIU has grown significantly,
establishing three new campuses since fall 1995. The number of students
attending AIU has increased 54.5% to 2,920 students at May 31, 1998 from 1,890
students at May 31, 1994. The Company intends to continue expanding by opening
new campuses (including two new campuses in the remainder of calendar 1998).
Each campus will be a fully-wired university, utilizing state-of-the-art
educational technology specifically designed to accommodate the collaborative,
team-based learning model. AIU will offer four new business and information
technology programs designed to equip students with skills that are in strong
demand by employers: Master of Information Technology ("MIT"), Bachelor of
Information Technology ("BIT"), and Master of Business Administration ("MBA")
and Bachelor of Business Administration ("BBA") in International Business. Each
program will be offered during the day for full-time students and in the
evenings for working adults in order to provide flexibility for students and to
maximize capacity utilization.
 
    In July 1997, the Company licensed the core IT curriculum from ITI Education
Corporation ("ITI"), a quality provider of career-oriented postgraduate IT
diploma programs to university graduates, with five campuses in Canada. The
Company enriched and expanded this curriculum to develop the MIT degree, which
was approved by SACS. AIU launched the MIT degree program in Atlanta in December
1997. AIU
 
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currently has enrolled 300 MIT students at a program tuition of $24,950. The
retention rate for these students is in excess of 90%.
 
    On December 11, 1997, EduTrek and ITI entered into an agreement through
which the Company would acquire ITI. On March 30, 1998, the two companies
terminated these plans in favor of an expanded licensing agreement. Under the
new agreement, EduTrek acquired rights to license ITI's information technology
education system for 11 major markets in the U.S. and internationally.
 
    AIU has centralized at its Atlanta headquarters the administrative functions
of the various campuses, including marketing, accounting, recruiting, human
resources, program and curriculum development, information systems, financial
aid, and regulatory compliance. A campus president, supported by a team of human
resources, academic, marketing, and administrative staff members, manages local
campuses. AIU is in the process of implementing an integrated campus management
information system to assist in planning and controlling the opening of new
campuses. AIU is also implementing a total quality management program aimed at
assessing and improving the quality of academic and administrative services for
AIU's students.
 
MARKET
 
    The United States education market may be divided into distinct segments:
kindergarten through twelfth grade schools ("K-12"), vocational and technical
training schools, workplace and consumer training, and degree-granting colleges
and universities ("higher education"). The Company operates primarily in the
higher education segment. The Company expects that the international demand for
postsecondary education will continue to increase over the next several years as
a result of certain projected demographic, economic, and social trends
including:
 
    (1) 43% projected growth in the number of students enrolled in institutions
       of higher education internationally from approximately 56 million in 1995
       to approximately 80 million in 2005, according to UNESCO;
 
    (2) estimated 346,000 current vacancies in computer programmer and system
       analyst jobs in companies with more than 100 employees, representing one
       out of ten of all information technology jobs, projected to increase to
       one million vacancies by the year 2005, according to the Commerce
       Department's Office of Technology Policy;
 
    (3) 24% projected growth in the number of new high school graduates from
       approximately 2.5 million in 1994 to approximately 3.1 million in 2004,
       according to the United States Department of Education ("DOE");
 
    (4) the relatively small percentage of adults over the age of 25 who possess
       a bachelors degree (approximately 23% in 1995), according to the DOE;
 
    (5) an increasing number of high school graduates attending postsecondary
       institutions (65% in 1996 versus 53% in 1983), according to the DOE;
 
    (6) increasing international student enrollment at U.S. colleges and
       universities, reaching a record high of 454,000 in the 1995-1996 academic
       year, according to the Institute of International Education ("IIE");
 
    (7) 75% increase in the number of U.S. students studying abroad from
       approximately 48,000 in the 1985-1986 academic year to approximately
       89,000 in the 1995-96 academic year, according to the IIE; and
 
    (8) heightened recognition of the importance of postsecondary education to
       an individual's career progress and income potential.
 
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The Company believes that it is well positioned to take advantage of the
increasing demand for postsecondary education programs for the following
reasons:
 
    BETTER QUALITY EDUCATIONAL PROGRAMS.  AIU's primary goal is to deliver
better quality educational programs at a fast pace, resulting in a greater
return on students' investment. Quality educational programs provide students
with the life-long learning skills to compete successfully for employment
opportunities. In AIU's new programs in business and information technology,
students solve real-world problems in a collaborative, team-based environment,
which simulates the work environment. In addition, the new program curriculum
maximizes contact hours with faculty to accelerate the student learning process.
Students can earn a degree at AIU much more rapidly than at a traditional
university and begin his or her career sooner. By reducing the opportunity cost
of foregone income while in school, AIU graduates can increase the return on
their educational investment.
 
    BETTER QUALITY LEARNING ENVIRONMENT.  AIU's new campuses are equipped with
state-of-the-art technologies to enhance and accelerate student learning. They
are "plug-and-play" environments, with thousands of ports to give students easy
access to the Internet and electronic learning resources. The interiors are also
configured with classroom/team room modules to complement student learning.
 
    WORKING ADULT PROGRAMS.  AIU's programs for working adults in business and
information technology are designed to meet the unique needs of this market
segment. They are offered in the evenings at convenient times, can be completed
at a fast pace, and provide practical education based upon solving problems
likely to be encountered in the workplace.
 
    INTERNATIONAL PROGRAMS.  AIU's Global Studies program is composed of the
Study Abroad and Study in America programs. The Study Abroad program recruits
students at other U.S. universities to study at AIU's London and Dubai campuses.
The Study in America program recruits international students to attend AIU's
U.S. campuses. Program advisors for both programs ensure a smooth transition for
students studying at an international campus.
 
BUSINESS STRATEGY
 
    EduTrek's strategic goal is to become the high quality, low cost producer of
higher education programs for traditional students, working adults and
international students by opening additional campus locations, developing or
acquiring new programs, and increasing enrollment at existing campuses through
targeted marketing programs.
 
    OPEN NEW CAMPUSES
 
    EduTrek plans to add campuses in high-growth markets throughout the United
States and worldwide. New locations are selected based on an analysis of a
variety of factors: the number of IT employers and their educational
reimbursement policies, the number of and projected growth in IT jobs, the
number of university graduates, the population of working adults, the
availability of similar programs offered by other institutions, and the timing
of securing state licenses to do business in the area. Campuses consist of
classrooms, team rooms and administrative facilities with full student and
administrative services. EduTrek has opened or plans to open five new campuses
in fiscal 1999: Dunwoody, north of Atlanta (opened in July 1998), Washington,
D.C. (opened in July 1998), Miami, Los Angeles (new campus located in Playa del
Rey), and a fifth site to be determined. In fiscal 2000, EduTrek plans to open
an additional campus each quarter. To the extent possible, EduTrek will open
campuses in markets where the Company currently has campuses in order to enhance
operating efficiencies.
 
    DEVELOP OR ACQUIRE ADDITIONAL DEGREE PROGRAMS
 
    EduTrek plans to introduce programs in additional fields of study and at
different degree levels. In fiscal 1998, AIU introduced two new programs,
including the MIT (day and evening) and the BBA for
 
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working adults, which had a total of 420 students enrolled on July 31, 1998. The
average annual tuition revenue per student for these new programs is $16,800, as
compared to $10,700 for students enrolled in AIU's traditional programs in
Atlanta. The retention rate for students in new programs is in excess of 90%.
EduTrek believes that the development and introduction of high quality new
programs will result in higher retention rates and higher revenues and operating
profits per student. EduTrek intends to launch three additional new programs for
both full-time and working adult students in fiscal 1999 in five campus
locations: BIT and BBA and MBA in International Business.
 
    INCREASING ENROLLMENT AT EXISTING CAMPUSES
 
    EduTrek plans to continue to implement an integrated marketing program which
utilizes direct mail, print and radio advertising, direct contact with high
school counselors and other referral sources and a public relations program to
build enrollment of students from local markets. Management believes that the
existing campuses will also benefit from greater brand awareness resulting from
increased advertising for AIU's new programs. In addition, EduTrek plans to
market to students from countries outside of Asia. In the Atlanta market, where
this plan was first initiated, students from the state of Georgia increased 92%
from 185 students to 355 students during the Summer II 1998 term. EduTrek will
institute this program at all existing campuses in fiscal 1999.
 
PROGRAMS OF STUDY
 
    AIU offers the following degree programs and related areas of
specialization. Unless otherwise noted, each of the degree programs is offered
at all of AIU's campuses.
 
<TABLE>
<CAPTION>
ACADEMIC DISCIPLINE                                               DEGREE PROGRAMS
(FALL 1997 ENROLLMENT, EXCEPT WHERE NOTED)        DEGREE OFFERED  (FALL 1997 ENROLLMENT, EXCEPT WHERE NOTED)
------------------------------------------------  --------------  ------------------------------------------------
 
<S>                                               <C>             <C>
International Business (1,125 students)           A.A., B.S.      International Business (947)
                                                  M.B.A.          International Business* (48)
                                                  B.B.A.**        International Business (120)
 
International Design (1,097 students)             A.A., B.A.      Fashion Design (173)
                                                                  Fashion Marketing (254)
                                                                  Fashion Design & Marketing (245)
                                                                  Interior Design (425)
 
Multimedia Communication (586 students)           A.A., B.A.      Visual Communications (400)
                                                                  Video Production*** (186)
 
Information Technology (300 students)             M.I.T.****      Information Technology (300)
</TABLE>
 
------------------------
 
   * Offered only in London and Dubai
 
  ** On July 31, 1998; offered only in Dunwoody and Atlanta
 
 *** Offered only in Atlanta and London
 
**** On July 31, 1998; offered only in Dunwoody
 
    SACS accredits all of AIU's degree programs. AIU's interior design program
at the Atlanta and Los Angeles campuses is accredited by the Foundation for
Interior Design Education Research ("FIDER").
 
    INFORMATION TECHNOLOGY.  AIU offers the MIT program for both full-time
students during the day and working adults during the evening. The full-time
program is 10 1/2 months in length, and the evening program is 21 months. Both
programs educate university graduates from a variety of backgrounds to become IT
professionals. The IT curriculum is market-driven and changes frequently in
response to advances in technology. The technical portion of the curriculum
includes Microsoft Access-Registered Trademark-, Oracle-Registered Trademark-,
Visual Basic-Registered Trademark-, JAVA-TM- plus network administration for
Windows 95-TM-, Windows NT-TM-, network and
 
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hardware support, and Windows NT-TM- Internet Information Server. Students also
learn professional development skills and business strategy, including financial
accounting, marketing, and professional sales. The program features a method of
delivery that emphasizes problem-based, collaborative learning. Class size is
limited to cohorts, or groups, of 24 students to ensure interactive learning and
one-on-one attention from the faculty. MIT students enjoy new, state-of-the-art
facilities, including classrooms and team rooms designed specifically for the
MIT program. AIU plans to introduce an undergraduate BIT program for full-time
students and working adults in fiscal 1999.
 
    INTERNATIONAL BUSINESS.  AIU offers associate's, bachelor's, and master's
degrees in international business. The associate's and bachelor's degree
programs for working adults are focused on the unique needs of the adult
learner. Working adults can earn a BBA degree in about four years or less,
depending upon previously earned transfer credits. Classes meet one evening per
week, and class size is limited to 24 students to encourage group discussion and
the exchange of information and ideas. In addition to the regular class
meetings, students participate in weekly project team sessions. These sessions
give students the opportunity to find solutions to real-life problems, applying
their business knowledge in a collaborative learning environment. AIU plans to
introduce the master's degree program in international business for working
adults in fiscal 1999.
 
    The international business programs for traditional students provide
students with a broad exposure to international business from the basic elements
through technical and functional areas. Students may follow a general business
track or choose advanced classes leading to a concentration in areas such as
marketing and management.
 
    INTERNATIONAL DESIGN.  The international design program educates students in
the fields of fashion design and marketing and commercial and residential
interior design. The fashion design program offers students a solid foundation
in designing and the opportunity to develop their own design collection. The
fashion marketing program prepares students for executive careers in the retail
and wholesale fashion industry and related businesses. The interior design
programs provide students with a thorough understanding of the fundamentals and
advanced principles of interior design.
 
    MULTIMEDIA COMMUNICATION.  The field of multimedia communication includes
advertising art, graphic design, photography, illustration, and video
production. Taught by working professionals, the programs offer a balance of
practical experience and theoretical concepts, providing a firm grounding in the
business aspects of the multimedia communication industry.
 
AMENDED ITI LICENSING AGREEMENT
 
    On March 30, 1998, EduTrek and ITI terminated their planned merger in favor
of a revised licensing arrangement ("Second Agreement"), which expanded the
original licensing agreement ("Georgia Agreement") previously entered into by
the two companies on July 26, 1997. Under the Georgia Agreement, ITI licensed
its Applied Information Technology ("AIT") program to EduTrek for use in the
State of Georgia. The Georgia Agreement expires on July 31, 2007 and is
renewable for one ten-year term. The AIT program is an intensive nine month
postgraduate diploma program that trains students in the growing field of
information technology management. The AIT program is specifically designed to
convert university graduates from a broad range of disciplines with little or no
background in information technology to become IT professionals.
 
    Under the Georgia Agreement, EduTrek paid a one-time initial license fee and
continuing royalties of a percentage of net revenues derived from AIU's use of
the AIT program curriculum. The Georgia Agreement stipulates that EduTrek is
required, among other things, to: (i) pay ITI royalties based upon the higher of
tuition levels charged to students enrolled in the program or minimum tuition
levels specified in the Georgia Agreement; (ii) expend a percentage of revenues
derived from the operation of the programs to market the AIT program; (iii)
purchase from ITI certain courseware, equipment and other materials
 
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and; (iv) make capital investments and expenditures necessary to upgrade the AIT
program. The Georgia Agreement further grants EduTrek the right to utilize the
AIT program in the cities of Los Angeles, London, and Dubai upon the payment of
an additional license fee for each location and the execution of an additional
license agreement substantially in the form of the Georgia Agreement for each
such territory. ITI also agreed to negotiate exclusively with EduTrek for
additional territories for a certain time period. ITI granted EduTrek a right of
first refusal in the event that ITI receives an offer to license its AIT program
in any such territories during the 24-month period beginning July 26, 1998.
 
    The Second Agreement granted EduTrek the right until July 26, 1999 to
utilize the AIT program in the following additional territories upon the payment
of a one-time license fee: San Francisco-Oakland-San Jose, CA CMSA; San Diego,
CA MSA; Miami-Ft. Lauderdale FL, CMSA; Tampa-Saint Petersburg-Clearwater, FL
MSA; Dallas-Ft. Worth, TX CMSA; Houston-Galveston-Brazoria, TX CMSA; Washington,
D.C.-Baltimore, MD-VA-WV CMSA; and the United Arab Emirates (in addition to
Dubai). In addition, ITI granted EduTrek a right of first refusal in the event
that ITI receives an offer to license its AIT program in any of the above
territories during the 24-month period beginning July 26, 1999.
 
    EduTrek was also granted the right to terminate the agreement without
penalty under the following conditions: (i) in the event of a direct or indirect
acquisition of 50.1% of more of ITI, (ii) upon 12 months written notice to ITI
and payment to ITI of a termination fee of $500,000; or (iii) upon 24 months
prior written notice to ITI.
 
STUDY ABROAD PROGRAM
 
    The Study Abroad Program provides students from U.S. universities with the
opportunity to earn academic credits toward their degree from their home
university by studying at AIU's international campuses. The program was
established through a marketing program combining direct contact with selected
university professors and study abroad advisors with telemarketing support.
AIU's study abroad personnel ensure that students enjoy a seamless transition to
international college life, from selecting the appropriate courses to
understanding and appreciating cultural differences.
 
    Since the program's inception in fall 1989, nearly 300 U.S. universities
have "outsourced" international education to AIU. The U.S. institutions sending
the highest number of students to AIU's London and Dubai campuses in the 1997
fall term were the following:
 
Ohio State University
University of Wisconsin
Indiana University
Ohio University
Washington State University
Philadelphia College of Textiles and Design
University of Rhode Island
University of Georgia
Furman University
State University of New York
University of Iowa
University of Massachusetts
University of Arizona
 
    Student participation has increased approximately 30% annually since 1994.
During fiscal 1998, nearly 640 students enrolled in AIU's Study Abroad program.
 
TUITION AND FEES
 
    AIU's undergraduate tuition is priced between the tuition levels of
non-profit private universities and comparatively lower tuition charged to
resident students at public universities. The tuition is comparable to the
tuition of public universities of non-resident and international students. The
tuition ranges between $3,625 and $4,425 per academic term, or $10,875 and
$13,275 for the full academic year, depending upon campus location. The tuition
for AIU's MIT program is $24,950; all textbooks, registration fees, lab fees,
Internet account, use of notebook computer, and use of electronic library
resources are included in the tuition. The annual tuition for the BBA program
for working adults is approximately $8,650.
 
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    AIU offers a number of institutional scholarships for selected students who
meet specific eligibility requirements and range from $500 to full tuition
scholarships. In fiscal 1998, institutional scholarships had a value of
approximately $843,000, or 2.0% of EduTrek's net revenues.
 
    AIU bills students for tuition and instruction fees by term of instruction.
AIU's refund policies meet the requirements of the DOE, SACS, and the state or
country where the campus is located. Generally, if a student drops out during
the first 60% of the term, AIU will refund a pro-rated portion of the tuition.
After a student has attended 60% of the term, AIU is not obligated to refund and
will retain 100% of tuition and fees.
 
    Historically, AIU has increased tuition and fees without consumer
resistance. AIU increased tuition and fees by approximately 5% for the 1997-98
academic year and did the same in the 1998-99 academic year. EduTrek anticipates
that tuition increases will keep pace with inflation.
 
FACULTY
 
    Faculty members are hired in accordance with criteria established by AIU,
accrediting bodies and applicable federal and state regulatory authorities. The
critical measures of faculty competence are teaching excellence, academic
background, prior education, and the degree and relevance of prior work
experience to the curriculum. AIU has developed a competency-based hiring model
designed to target and screen qualified faculty members. AIU has also
implemented a faculty development program to ensure that the skills and
knowledge base of all IT faculty are continually updated as new technologies are
introduced into the marketplace. In addition, faculty are trained in
collaborative learning techniques so that student learning in the team
environment is optimized.
 
    AIU faculty members are typically working professionals who are experts in
their fields, rather than professional educators. For this reason, management
believes that AIU faculty provide students with a practical education that can
be applied directly to their chosen careers.
 
    Most faculty members are employed on a contractual basis and are compensated
based on the number of courses taught. All IT faculty members are employed on a
full-time basis. Low student-teacher ratios (approximately 14:1, 15:1, 14:1, and
18:1 in fall 1997 for AIU's campuses in Atlanta, Los Angeles, London, and Dubai,
respectively) and the absence of a faculty tenure track promote a
student-focused environment. In AIU's MIT program, students rotate from
classroom instruction with 24 students to team problem-solving sessions with six
students. Students and administrative staff evaluate faculty members each
academic term on the basis of teaching abilities and demonstrated technical
knowledge.
 
STUDENT RECRUITMENT
 
    To generate interest in AIU's academic programs, EduTrek engages in a broad
range of activities, including print and radio advertising, Internet
advertising, direct mail, and direct contact with targeted corporations, high
schools, and community colleges. EduTrek also attempts to locate its campuses
near major highways to provide high visibility and easy access. Alumni,
employers, embassies, and currently enrolled students refer a substantial
portion of new students.
 
    EduTrek also has Web sites on the Internet World Wide Web
(http//:www.edutrek.com, http://www.aiuniv.edu) that allow electronic access to
company and program information. These Web sites are accessible from major
online networks and Internet service providers.
 
    AIU advertising is controlled centrally and is targeted at local markets
where the campuses are located, at U.S. universities (for the Study Abroad
program), and at international markets to attract students from other countries.
Direct responses to advertising and direct mail are received, tracked, and
forwarded promptly to the appropriate admissions officers. All responses are
analyzed in order to improve AIU's marketing efforts continually.
 
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<PAGE>
    EduTrek employs over 40 admissions representatives who make visits and
presentations at various organizations and who follow up on leads generated by
EduTrek's advertising efforts and referrals. Representatives pursue leads by
arranging interviews with prospective students at the campus and generally
assist students with clarifying their career goals and completing the
application process. The interview is designed to establish the student's
qualifications, academic background and goals, determine their suitability for
specific programs, and administer any required tests. Recruiting policies and
processes are established centrally but implemented at the campus level through
a director of admissions. AIU also employs recruiting personnel who recruit
students at high schools, community colleges, universities, embassies, college
fairs, and corporations.
 
ADMISSIONS REQUIREMENTS
 
    To gain admission to AIU's undergraduate programs, students must generally
have a high school diploma or General Equivalency Diploma ("G.E.D."),
demonstrate a satisfactory level of English language competence, satisfy certain
minimum grade point average requirements, and submit two letters of reference.
Prospective students are interviewed to assess their qualifications, their
interest in the degree programs, and their commitment to education.
 
    To gain admission to AIU's graduate programs, students generally must have
an undergraduate degree from a regionally accredited college or university and
satisfy minimum grade point average, work experience, and employment
requirements.
 
STUDENT RETENTION
 
    The ability to retain students until graduation is a critical indicator of
AIU's success and early academic intervention is crucial to improving student
completion rates. To minimize student withdrawals, AIU devotes staff and other
resources to assist and advise students regarding academic and financial
matters, part-time employment, and housing. AIU employs guidance counselors at
all its campuses to advise students. Tutoring is also encouraged for those
students experiencing academic difficulties.
 
GRADUATE PLACEMENT
 
    The successful placement of graduates in occupations related to their fields
of study is critical to AIU's ability to continue to recruit students
successfully. Based on the information received from recent alumni and
employers, 83% of U.S. AIU graduates in 1997, excluding those who continued
their education, obtained employment within approximately six months of
graduation, as compared to 71% in 1996. The approximate average starting salary
of 1997 AIU bachelor's degree graduates was $27,900, as compared to $24,000 in
1996.
 
    To increase placement rates and starting salaries, AIU increased its
placement staff in fiscal 1998. The placement personnel assist students in
developing individualized career plans, selecting classes to further these
plans, obtaining internships and forming job search strategies. Students also
receive instruction during their program of study on basic job search skills.
 
COMPETITION
 
    The higher education market is highly fragmented and competitive with no
private or public institution enjoying a significant market share. In the U.S.
and London, EduTrek competes primarily with four-year and two-year degree
granting public and private regionally accredited colleges and universities.
Many of these institutions have greater financial resources than EduTrek. The
American University in Dubai is currently the only U.S.-accredited postsecondary
institution offering degree programs in the United Arab Emirates and competes
with numerous institutions in the Persian Gulf region. Some of these
institutions in the United Kingdom and The Persian Gulf region are government
sponsored and charge a lower tuition than AIU.
 
                                       8
<PAGE>
    AIU competes primarily at a local and regional level with other regionally
accredited colleges and universities based on the quality of the academic
programs, the accessibility of the programs and learning resources, the cost of
the program, the perceived quality of the instruction, the employability of its
graduates, and the time required to earn a degree.
 
SUPERVISION AND REGULATION
 
ACCREDITATION
 
    Accreditation is a process for evaluating the quality of educational
institutions and their programs against established criteria and standards. This
process entitles institutions of higher education to the confidence of the
educational community and the public. In the United States, an institution
submits itself to qualitative review by an organization of peer institutions to
obtain accreditation. There are three types of accrediting agencies in the
United States: (i) regional accrediting associations, of which there are six,
which accredit degree-granting institutions located within their geographic
areas, (ii) national accrediting agencies, which accredit institutions without
regard to their locations, and (iii) specialized accrediting agencies, which
accredit specific programs within an institution. Accrediting agencies primarily
examine the institutional and programmatic operations and the academic quality
of the instructional programs. A grant of accreditation is generally viewed as
certification that the institution's programs meet generally accepted or
specific academic standards. Accrediting agencies also review the
administrative, service, and financial operations of institutions to ensure that
each has the resources to accomplish its educational mission.
 
    The accreditation of AIU provides significant advantages over most other
for-profit educational institutions. College and university administrators
depend on accreditation to evaluate transfers of credit and applications to
graduate schools. Employers rely on the accreditation when evaluating a
candidate's credentials, and parents and high school counselors look to
accreditation for assurance that an institution meets quality educational
standards. Moreover, accreditation is necessary for students to qualify for
eligibility for federal financial assistance. Also, most scholarship commissions
restrict their awards to students attending accredited institutions.
 
    Pursuant to provisions of the Higher Education Act of 1965, as amended (the
"HEA"), the DOE relies on accrediting agencies to determine whether
institutions' educational programs qualify them to participate in Title IV
Programs. The HEA specifies certain standards that all recognized accrediting
agencies must adopt in connection with their review of postsecondary
institutions. Accrediting agencies that meet DOE standards are recognized as the
arbiters of the quality of the education or training offered by an institution.
Each of AIU's campuses is accredited by SACS, an accrediting agency recognized
by the DOE. In addition, AIU's interior design programs in Atlanta and Los
Angeles are accredited by FIDER, and the advertising program in Dubai is
accredited by the International Advertising Association.
 
    The HEA requires each recognized accrediting agency to submit to a periodic
review of its procedures and practices by the DOE as a condition of its
continued recognition. SACS, AIU's regional accreditor for purposes of
participation in Title IV Programs, has been reviewed within the last three
years and has had its recognition extended.
 
    An accrediting agency may place an institution on private or public
"reporting" status in order to monitor one or more specified areas of a school's
performance. An institution placed on reporting status is required to report
periodically to its accrediting agency on that school's performance in the
specified areas. While on reporting status, an institution may not open and
commence teaching at new locations without first receiving a waiver from its
accrediting agency. Frequently, sanctions may be attached to this "reporting"
status. Failure to demonstrate compliance with accrediting standards could
result in the loss of accreditation. None of AIU's campuses have been placed on
reporting status by their respective accrediting agencies.
 
                                       9
<PAGE>
STUDENT FINANCIAL ASSISTANCE
 
    Students attending AIU finance their education through a combination of
family contributions, individual resources, financial aid, and employer tuition
reimbursement. As at most other postsecondary institutions, many students
enrolled at AIU must rely, at least in part, on financial assistance to pay the
cost of their education. The largest source of such support for AIU's U.S.
students is the federal programs of student financial assistance under Title IV
of the HEA.
 
    Additional sources of funds include other federal grant programs, state
grant and loan programs, private loan programs, and institutional grants and
scholarships. Because international students attending AIU are not eligible to
participate in U.S. government-sponsored student loan programs, the majority of
their funding is derived from personal and family resources. Less than 1% of the
international students enrolled at AIU receive funding from their home
government.
 
    To provide students access to Title IV Programs, a school must be (i)
authorized to offer its programs of instruction by the relevant agency of the
state in which it is located, (ii) accredited by an agency recognized by the
DOE, and (iii) certified as an eligible institution by the DOE. In addition,
that school must ensure that Title IV Program funds are properly accounted for
and disbursed in the correct amounts to eligible students.
 
    Under the HEA and its implementing regulations, AIU must comply with certain
standards on an institutional basis. For purposes of these standards, the
Regulations define an institution as a main campus with additional locations
(formerly called branch campuses), if any. Under this definition, all of AIU's
campuses are treated as one institution for purposes of complying with the HEA.
 
NATURE OF FEDERAL SUPPORT FOR POSTSECONDARY EDUCATION
 
    While the states support public colleges and universities primarily through
direct state subsidies, the federal government provides a substantial part of
its support for postsecondary education in the form of grants and loans to
students enrolled at eligible institutions. Title IV Programs have provided aid
to students for more than 30 years and, since the enactment of the HEA in 1965,
the scope and size of such programs have steadily increased. Since 1972,
Congress has expanded the scope of the HEA to provide for the needs of the
changing national student population. Among other things, the amended HEA
provides that students at proprietary schools are eligible for assistance under
Title IV Programs, establishes a program for loans to parents of eligible
students, opens Title IV Programs to part-time students, increases maximum loan
limits, and eliminates the requirement that students demonstrate financial need
to obtain unsubsidized federally guaranteed student loans. Most recently, the
Direct Loan program was enacted, enabling students to obtain loans from the
federal government rather than from commercial lenders.
 
    Students at AIU participate in the following Title IV Programs.
 
    PELL.  The Federal Pell Grant ("Pell") program is the principle means by
which the DOE makes grants to students who demonstrate financial need. Every
eligible student is entitled to receive a Pell grant; there is no institutional
allocation or limit. Grants presently range from $400 to $2,700 per year.
Amounts received by students enrolled in AIU in fiscal 1998 under the Pell
program equaled approximately $800,000 or 1.9% of the Company's net revenues.
 
    FSEOG.  Federal Supplemental Educational Opportunity Grant ("FSEOG") program
awards are designed to supplement Pell grants for the neediest students. FSEOG
grants generally range in amount from $100 to $4,000 per year. The maximum
amount of FSEOG grants may be increased to as much as $4,400 for a student
participating in a program of study abroad that is approved for credit by the
student's home educational institution. The availability of FSEOG awards,
however, is limited by the amount of those funds allocated to an institution
under a formula that is based upon the size of the institution, its costs, and
the income levels of its students. FSEOG awards at AIU generally do not exceed
$1,500 per eligible student per year. The Company is required to make, at a
minimum, a 25% matching contribution
 
                                       10
<PAGE>
for all FSEOG program funds disbursed. Resources for this institutional
contribution may include institutional grants and scholarships and, in certain
states, portions of state scholarships. In fiscal 1998, the Company's
institutional match was approximately $18,000. Amounts received by students
enrolled in AIU under the FSEOG program in fiscal 1998 equaled approximately
$111,000 or 0.3% of the Company's net revenues.
 
    FEDERAL FAMILY EDUCATION LOANS AND FEDERAL DIRECT STUDENT LOANS.  The FFEL
programs include the Federal Stafford Loan Program ("Stafford Loan"), and the
Federal PLUS Loan Program ("PLUS"), whereby private lenders make loans to a
student or his or her parents to pay the cost of attendance at a postsecondary
school.
 
    The FFEL Program is administered through state and private non-profit
guarantee agencies that insure loans directly, collect loans in default, and
provide various services to lenders. The federal government provides interest
subsidies in some cases and reinsurance payments for borrower default, death,
disability, and bankruptcy.
 
    The Direct Loan program is substantially the same as the FFEL program in
providing Stafford and PLUS loans. Under the Direct Loan program, however, funds
are provided directly by the federal government to the students, and the loans
are administered through the school. For schools electing to participate, the
Direct Loan program replaces the FFEL program (unless the participation in both
programs is permitted by the DOE), although loans are made on the same general
terms and conditions.
 
    DIRECT AND FFEL STAFFORD LOAN PROGRAM.  Undergraduate students may borrow an
aggregate of $2,625 for their first undergraduate academic year, $3,500 for
their second academic year, and $5,500 for their third and fourth academic years
under the FFEL Stafford Loan or Direct Stafford Loan program. Graduate students
may borrow up to $8,500 each academic year. If the student qualifies for a
subsidized loan, based on financial need, the federal government pays interest
on the loan while the student is attending school and during certain grace and
deferment periods. If the student does not qualify for a subsidized Stafford
Loan, the interest accruing on the loans must be paid by the student. In
addition, independent students may qualify for an additional $4,000 to $10,000 a
year in unsubsidized Stafford loans.
 
    In fiscal 1998, AIU participated in both the FFEL and Direct Loan programs.
FFEL and Direct Stafford loans amounted to approximately $2.6 million and $6.4
million, respectively, or approximately 6.2% and 15.3%, respectively, of the
Company's net revenues in fiscal 1998.
 
    DIRECT AND FFEL PLUS LOAN PROGRAM.  Parents of dependent students may
receive loans under the FFEL PLUS Loan Program or the Direct PLUS Loan Program
on an academic year basis. The maximum amount of any PLUS loan is the total cost
of a student's education for each relevant academic year less other financial
aid received by the student attributable to such year. These loans are repayable
commencing 60 days following the last disbursement, with flexible payment
schedules over a ten year period. The FFEL PLUS loans are made by lending
institutions and guaranteed by the federal government. The Direct PLUS Loan
Program provides PLUS loans issued directly by the federal government on the
same general terms as the FFEL PLUS loans. FFEL PLUS loans and Direct PLUS loans
amounted to approximately $762,000 and $590,000, respectively, or approximately
1.8% and 1.4%, respectively, of the Company's net revenues in fiscal 1998.
 
    FEDERAL WORK-STUDY.  Under the Federal Work-Study ("FWS") program, federal
funds are made available to pay up to 75% of the cost of part-time employment of
eligible students, based on their financial need, to perform work for the
institution or for off-campus public or non-profit organizations. At least 5% of
an institution's FWS allocation must be used to fund student employment in
community service positions. In fiscal 1998, FWS funds amounted to approximately
$54,000 or 0.1% of the Company's net revenues.
 
                                       11
<PAGE>
AVAILABILITY OF LENDERS
 
    Five lending institutions currently provide over 85% of all federally
guaranteed loans to students attending AIU. While the Company believes that
other lenders would be willing to make federally guaranteed student loans to its
students if loans were no longer available from its current lenders, there can
be no assurance in this regard. In addition, the HEA requires the establishment
of lenders of last resort in every state to make loans to students at any school
that cannot otherwise identify lenders willing to make federally guaranteed
loans to its students. Moreover, because AIU is a participant in the Direct Loan
program, students are able to obtain loans directly from the federal government.
 
    The DOE currently guarantees over 85% of all federally guaranteed student
loans made to students enrolled at AIU. The Company believes that other guaranty
agencies would be willing to guarantee loans to AIU's students if the DOE ceased
guaranteeing those loans or reduced the volume of those loans guaranteed.
 
FOREIGN SOURCES OF FINANCIAL AID
 
    In fiscal 1998, 78 international students, or less than 1% of total
enrollment, received financial assistance from their respective foreign
governments in the form of either loans or grants. The foreign government
providing loans to AIU's students was Sweden and the foreign governments
awarding grants to AIU's students were Bahrain, Botswana, Libya, Qatar, Saudi
Arabia, Sweden, Zimbabwe, and the United Arab Emirates.
 
OTHER FINANCIAL ASSISTANCE SOURCES
 
    Students at AIU participate in state grant programs, including most recently
Georgia's HOPE Scholarship and Tuition Equalization Grant programs. In fiscal
1998, approximately $409,000 or 1.0% of the Company's net revenues was derived
from state grant programs. In addition, certain students attending AIU receive
financial aid provided by the United States Department of Veterans Affairs, the
United States Department of the Interior (Bureau of Indian Affairs), and the
Rehabilitative Services Administration of the DOE (vocational rehabilitation
funding). In fiscal 1998, financial assistance from such federal programs
equaled less than 0.2% of the Company's net revenues. AIU also provides
institutional scholarships to qualified students. In fiscal 1998, institutional
scholarships had a value equal to approximately $843,000 or 2.0% of the
Company's net revenues.
 
FEDERAL OVERSIGHT OF TITLE IV PROGRAMS
 
    The substantial amount of federal funds disbursed through Title IV Programs
and the large numbers of participating students and institutions have led to
instances of fraud, waste, and abuse. As a result, the United States Congress
has required the DOE to increase its level of regulatory oversight of schools to
ensure that public funds are properly used. Therefore, to obtain and maintain
eligibility to participate in the Title IV Programs, AIU must comply with the
rules and regulations set forth in the HEA and the Regulations thereunder. An
institution must obtain certification by the DOE as an "eligible institution" to
participate in Title IV Programs. Certification as an "eligible institution"
requires, among other things, that the institution be authorized to offer its
educational programs by the state in which it operates. It must also be
accredited by an accrediting agency recognized by the DOE.
 
    The HEA provides standards for institutional eligibility to participate in
the Title IV Programs. The standards are designed, among other things, to limit
dependence on Title IV Program funds, prevent schools with unacceptable student
loan default rates from participating in Title IV Programs, and, in general,
require institutions to satisfy certain criteria intended to protect the
integrity of the federal programs, including criteria regarding administrative
capability and financial responsibility. A school that has been certified as
eligible to participate in the Title IV Programs continues to remain eligible
for the period of its certification, which is generally four years. A school
must apply for a renewal of its
 
                                       12
<PAGE>
certification prior to its expiration, and must demonstrate compliance with the
eligibility requirements in its application.
 
    Under certain circumstances, the DOE may provisionally certify a school to
participate in Title IV Programs. Provisional certification may be imposed when
a school undergoes a change in ownership resulting in a change of control or
when a school is reapplying for certification, if the school (i) does not
satisfy all the financial responsibility standards, (ii) has a cohort default
rate of 25% or more in any single fiscal year of the three most recent federal
fiscal years for which data is available, and (iii) under other circumstances
determined by the Secretary of Education. Provisional certification may last no
longer than three years. Provisional certification differs from certification in
that a provisionally certified school may be terminated from eligibility to
participate in the Title IV Programs without the same opportunity for a hearing
before an independent hearing officer and an appeal to the Secretary of
Education as is afforded to a fully certified school faced with termination,
suspension, or limitation of eligibility prior to expiration of its
certification. Additionally, the DOE may impose such further conditions on a
provisionally certified institution's eligibility to continue participating in
the Title IV Programs as the DOE deems necessary. In connection with the
Company's acquisition of American European in October 1996 which resulted in a
change of control of AIU, the Company has been provisionally certified to
participate in Title IV Programs.
 
    COHORT DEFAULT RATES.  A significant component of the Congressional
initiative aimed at reducing fraud, waste, and abuse was the imposition of
limitations on participation in Title IV Programs by institutions whose former
students defaulted on the repayment of federally guaranteed student loans at an
"excessive" rate. Since the DOE began to impose sanctions on institutions with
cohort default rates above certain levels, more than 600 institutions have lost
their eligibility to participate in some or all Title IV Programs. However, many
institutions, including AIU, have responded by implementing aggressive student
loan default management programs aimed at reducing the likelihood of student
defaults.
 
    A school's cohort default rate under the FFEL program is calculated on an
annual basis as the rate at which student borrowers scheduled to begin repayment
on their loans in one federal fiscal year default on those loans by the end of
the next federal fiscal year. Any institution whose FFEL cohort default rates
equal or exceed 25% for three consecutive years will no longer be eligible to
participate in that program or the Direct Loan program for the remainder of the
federal fiscal year in which the DOE determines that such institution has lost
its eligibility and for the two subsequent federal fiscal years. In addition, an
institution whose FFEL cohort default rate for any federal fiscal year exceeds
40% may have its eligibility to participate in all Title IV Programs limited,
suspended, or terminated. Since the calculation of FFEL cohort default rates
involves the collection of data from many non-governmental agencies (i.e.,
lenders and private guarantors), as well as the DOE, the HEA provides a formal
process for the review and appeal of the accuracy of FFEL cohort default rates
before the DOE takes any action against an institution based on its FFEL cohort
default rates. An institution may continue to participate in the FFEL and Direct
Loan programs during the pendency of the appeal process.
 
    AIU has had FFEL cohort default rates of less than 25% for three consecutive
federal fiscal years. AIU had a published 1995 FFEL cohort default rate and a
1994 rate below 25%. For federal fiscal 1993 and 1994, the FFEL cohort default
rate for all borrowers at AIU was 14.3% and 14.0%, respectively. The average
FFEL cohort default rate for all proprietary institutions for federal fiscal
1993 and 1994 was 26.5% and 21.1%, respectively. For federal fiscal year 1995,
the preliminary FFEL cohort default rate for all borrowers at AIU was 18.5%.
Preliminary cohort default rates are subject to revision by the DOE based on
information that schools and guaranty agencies identify and submit to the DOE
for review, in order to correct errors. Any such adjustment will be made by the
DOE at the time that final rates are officially published. In connection with
AIU's preliminary default rate issued for the federal fiscal year 1995, AIU
received a preliminary default rate of 18.5%. However, after submitting
corrections, AIU's default rate was adjusted to a final rate of 16.7%.
Accordingly, AIU has submitted such corrections for its 1996 preliminary cohort
default rate and anticipates that the DOE will reduce AIU's cohort default rate
from a preliminary
 
                                       13
<PAGE>
rate of 14.1% to a final rate of 13.7%, although there can be no assurance that
the DOE will agree with the corrections submitted by AIU with regard to its 1996
preliminary cohort default rate. The Company understands that the DOE
anticipates issuing official 1996 FFEL cohort default rates in October 1998, and
the Company expects preliminary 1997 FFEL cohort default rates to be issued in
early calendar year 1999.
 
    If an institution's FFEL cohort default rate equals or exceeds 25% in any of
the three most recent federal fiscal years, that institution may be placed on
provisional certification status for up to four years. Provisional certification
does not limit an institution's access to Title IV Program funds; however, an
institution with provisional status is under closer review by the DOE and may be
subject to summary adverse action if it commits violations of Title IV Program
requirements. To the Company's knowledge, the DOE reviews an institution's
compliance with the cohort default rate thresholds only when that school is
otherwise subject to a DOE certification review. AIU has not had a FFEL cohort
default rate of 25% or greater during any of the last three fiscal years.
 
    INCREASED REGULATORY SCRUTINY.  The 1992 reauthorization of the HEA
contained a three-part initiative, referred to as the Program Integrity Triad,
intended to increase regulatory scrutiny of postsecondary education
institutions. Part one of that initiative required each state to establish a
State Postsecondary Review Entity ("SPRE") to review certain institutions to
determine their eligibility to continue participating in Title IV Programs.
However, the United States Congress has declined to provide funding for SPREs in
appropriations legislation that has been signed into law, the DOE has not
requested any future funding for SPREs, and the United States House of
Representatives has passed legislation repealing SPRE authority.
 
    Part two of the Program Integrity Triad expanded the role of accrediting
agencies in the oversight of institutions participating in Title IV Programs. As
a result, the accrediting agencies that accredit AIU have increased the depth
and intensity of reviews and have expanded examinations in such areas as
financial responsibility and timeliness of student refunds. The Program
Integrity Triad provisions also require each accrediting agency recognized by
the DOE to undergo comprehensive periodic reviews to ascertain whether such
accrediting agency is adhering to required standards. No accrediting agency or
association may be approved by the DOE for a period of more than five years.
SACS, AIU's primary accrediting agency, has been reviewed by the DOE under the
Program Integrity Triad provisions and reapproved for continued recognition by
the DOE.
 
    Part three of the Program Integrity Triad tightened the standards to be
applied by the DOE in evaluating the financial responsibility and administrative
capability of institutions participating in Title IV Programs, and mandated that
the DOE periodically review the eligibility and certification to participate in
Title IV Programs of every such eligible institution. By law, all institutions
are required to undergo such a recertification review by the DOE by 1997 and
every four years thereafter. Under these standards, AIU would be evaluated by
the DOE more frequently than in the past. A denial of recertification would
preclude AIU from continuing to participate in Title IV Programs.
 
    FINANCIAL RESPONSIBILITY STANDARDS.  All institutions participating in Title
IV Programs must satisfy a series of specific standards of financial
responsibility. Institutions are evaluated for compliance with those
requirements as part of the DOE's quadrennial recertification process and also
annually as each institution submits its audited financial statements to the
DOE.
 
    In November 1997, the DOE published new regulations regarding financial
responsibility, which are effective on July 1, 1998. The new regulations take
effect for audited financial statements submitted to the DOE on or after July 1,
1998 and will apply to the Company's fiscal years commencing June 1, 1997 and
thereafter. The new standards replace the acid test ratio, the tangible net
worth standard, and the net operating results test with three different ratios:
an equity ratio, a primary reserve ratio, and a net income ratio. The equity
ratio measures an institution's capital resources, ability to borrow, and
financial viability. The primary reserve ratio measures an institution's ability
to support current operations from expendable resources. The net income ratio
measures the ability to operate at a profit. The results of each ratio are
 
                                       14
<PAGE>
assigned a strength factor on a scale from negative 1.0 to positive 3.0, with
negative 1.0 reflecting financial weakness and a positive 3.0 reflecting
financial strength. An institution's strength factors are then evaluated based
on an assigned weighting percentage for each ratio. The weighted scores for the
three ratios are then added together to produce a composite score for the
institution. The composite score must be at least 1.5 for the institution to be
deemed financially responsible by the DOE without the need for further financial
monitoring. If the institution's composite score is less than 1.5, but equal to
or greater than 1.0, the institution may continue in the Title IV Programs for a
maximum period of three (3) years, subject to more rigorous financial aid
disbursement and financial monitoring requirements by the DOE. Based on the
Company's interpretation of the application of these new standards to the
Company's financial statements for the fiscal year ended May 31, 1998, the
Company's calculations result in a composite score of 1.5 on a consolidated
basis.
 
    An institution that is determined by the DOE not to meet the standards of
financial responsibility on the basis of failing to meet one or more of the
specified numeric indicators is nonetheless entitled to participate in Title IV
Programs if it can demonstrate to the DOE that it is financially responsible on
an alternative basis. An institution may do so by demonstrating, with the
support of a statement from a certified public accountant, proof of prior
compliance with the numeric standards and other information specified in the
regulations, and that its continued operation is not jeopardized by its
financial condition. Alternatively, an institution may post surety either in an
amount equal to one-half of the total Title IV Program funds received by
students enrolled at such institution during the prior year or in an amount
equal to 10% of such prior year's funds and agree to disburse those funds only
on an "as-earned" basis. The DOE has interpreted this surety condition to
require the posting of an irrevocable letter of credit in favor of the DOE.
 
    In addition to the financial responsibility standards, an institution is
required to make timely refunds when a student who receives Title IV Program
funds withdraws from an institution. Depending on when during the academic term
the student withdraws, the institution is required to refund all or a portion of
the Title IV Program funds paid by the withdrawing student. Beginning with the
1995-1996 award year, an institution that has failed to make all Title IV
Program refunds on a timely basis during the previous two years is required to
post a letter of credit in favor of the DOE equal to 25% of the Title IV Program
refunds that the institution was required to make for the previous year. During
the past three years AIU has made all Title IV Program refunds on a timely
basis.
 
    ADMINISTRATIVE CAPABILITY.  The Regulations set certain standards of
"administrative capability" which a school must satisfy to participate in the
Title IV Programs. These criteria require, among other things, that the school
comply with all applicable Title IV Regulations, have capable and sufficient
personnel to administer the Title IV Programs, have acceptable methods of
defining and measuring the satisfactory academic progress of its students,
provide financial aid counseling to its students, timely submit all reports and
financial statements required by the Regulations, and have cohort default rates
not equal to or in excess of 25% for any one of the three most recent fiscal
years. See "--Cohort Default Rates."
 
    Failure to satisfy any of the criteria may lead the DOE to determine that
the school lacks the requisite administrative capability and may subject the
school to provisional certification when it seeks to renew its certification as
an eligible institution, or may subject it to a fine or to a proceeding for the
limitation, suspension, or termination of its participation in Title IV
Programs. Proceedings to fine, limit, suspend, or terminate an institution are
conducted before an independent hearing officer of the DOE and are subject to
appeal to the Secretary of Education, prior to any sanction taking effect.
Thereafter, judicial review may be sought in the federal courts pursuant to the
federal Administrative Procedures Act.
 
    RESTRICTIONS ON OPERATING ADDITIONAL CAMPUSES.  The HEA generally requires
that certain institutions, including proprietary schools, be in full operation
for two years before applying to participate in Title IV Programs. However,
under the HEA and the Regulations, an institution that is certified to
participate in Title IV Programs may establish an additional location within a
state or selected territory of the United
 
                                       15
<PAGE>
States (as identified in the Regulations) and apply to participate in Title IV
Programs at that location without reference to the two-year requirement, if such
additional location satisfies all other applicable requirements. In addition, a
school which undergoes a change in ownership resulting in a change of control
must be reviewed and recertified for participation in Title IV Programs under
its new ownership. See "--Change of Control." Pending recertification, the DOE
suspends Title IV Program funding to that school's students. If a school is
recertified, it will be on a provisional basis. During the time a school is
provisionally certified, it may be subject to summary adverse action for
violations of Title IV Program requirements, but provisional certification does
not otherwise limit an institution's access to Title IV Program funds. The
Company's expansion plans are based, in part, on its ability to add additional
locations and acquire schools that can be recertified.
 
    Certain of the state authorizing agencies and accrediting agencies with
jurisdiction over AIU also have requirements that may, in certain instances,
limit the ability of the Company to open a new school, acquire an existing
school, or establish an additional location of an existing school. The Company
does not believe that those standards will have a material adverse effect on the
Company or its expansion plans.
 
    CHANGE OF CONTROL.  Upon a change in ownership resulting in a change of
control of the Company, as defined in the HEA and the Regulations, AIU would
lose its eligibility to participate in Title IV Programs for an indeterminate
period of time during which it applies to regain eligibility. A change of
control also could have significant regulatory consequences for the Company at
the state level and could affect the accreditation of AIU's campuses.
 
    In connection with the Company's acquisition of American European in October
1996, AIU was required to be recertified by the DOE as well as obtain the
reaccreditation of SACS. In addition, AIU's campus in Los Angeles was required
to be reauthorized by the State of California. The DOE has granted AIU
provisional certification to participate in Title IV Programs which provisional
certification will expire in December 1999. Because the acquisition of American
European was found to be an excluded transaction under the Regulations, however,
AIU's Title IV Program funding was not suspended during the DOE's review of its
recertification application. On August 5, 1996 the change of control was
approved by SACS and following a Substantive Change Visit to AIU in April 1997,
as required to ensure compliance with accreditation standards following a change
of control, on April 18, 1997 SACS issued a final report on AIU with no
recommendations. On August 14, 1996, AIU's Los Angeles campus was reapproved by
the State of California's Council for Private Postsecondary and Vocational
Education (the "California Council").
 
    The DOE's regulations provide that after a Company becomes publicly-traded,
a change of control occurs when a report on Form 8-K is required to be filed
with the Commission disclosing a change of control. Most states and accrediting
agencies have similar requirements, but they do not provide a uniform definition
of change of control. If the Company were to lose its eligibility to participate
in Title IV Programs for a significant period of time pending an application to
regain eligibility, or if it were determined not to be eligible, its operations
would be materially adversely effected. The possible loss of Title IV
eligibility resulting from a change of control may also discourage or impede a
tender offer, proxy contest, or other similar transaction involving control of
the Company.
 
    THE "85/15 RULE."  Under a provision of the HEA commonly referred to as the
"85/15 Rule," a proprietary institution, such as AIU, would cease being eligible
to participate in Title IV Programs if, on a cash accounting basis, more than
85% of its revenues for the prior fiscal year was derived from Title IV
Programs. Any school that violates the 85/15 Rule immediately becomes ineligible
to participate in Title IV Programs and is unable to apply to regain its
eligibility until the following fiscal year. Each year, every institution
participating in the Title IV Programs must submit consolidated financial
statements demonstrating compliance with this standard. The Company has
calculated that, since this requirement took effect in fiscal 1995, AIU has not
derived more than 27% of its revenues from Title IV Programs for any fiscal
year, and during fiscal 1998, approximately 27% of AIU's revenues were derived
from Title IV
 
                                       16
<PAGE>
Programs. The Company regularly monitors compliance with this requirement in
order to minimize the risk that AIU would derive more than 85% of its revenues
from Title IV Programs for any fiscal year. If AIU appears likely to approach
the 85% threshold, the Company would evaluate the appropriateness of making
changes in student funding and financing to ensure compliance.
 
    BRANCHING AND CLASSROOM LOCATIONS.  The Regulations contain specific
requirements governing the establishment of new main campuses, branch campuses,
and classroom locations at which any student receives not less than 50% of his
or her instruction. In addition to classrooms at campuses, locations affected by
these requirements include the business facilities of client companies used by
AIU. AIU has obtained approval for all locations required to be approved by the
Regulations. Should the DOE change its regulations with respect to this approval
process, or delay approvals of new locations beyond the current approval time
rate, the Company's business strategy may be impacted negatively.
 
    RESTRICTIONS ON PAYMENT OF BONUSES, COMMISSIONS, OR OTHER
INCENTIVES.  Schools participating in Title IV Programs are prohibited from
providing any commission, bonus, or other incentive payment based directly or
indirectly on success in securing enrollments or financial aid to persons
engaged in any student recruitment, admission, or financial aid awarding
activity (the "Incentive Compensation Rule"). The DOE has not provided specific
regulations with respect to this requirement. If the DOE were to determine that
AIU's methods of compensation do not comply with the Incentive Compensation
Rule, AIU could be required to modify its compensation system, repay certain
previously disbursed Title IV Program funds, pay administrative fines, or lose
its eligibility to participate in Title IV Programs. The Company believes AIU's
compensation policies do not violate the Incentive Compensation Rule.
 
STATE AUTHORIZATION
 
    AIU's campuses in Atlanta and Los Angeles are authorized to offer education
programs and grant degrees or diplomas by the States of Georgia and California,
respectively. In addition, because AIU's campuses located in London and Dubai
are operated under a corporation whose parent corporation is organized under the
laws of the District of Columbia, the London and Dubai campuses in addition to
the District of Columbia campus are authorized to offer education programs and
grant degrees or diplomas by the Education Licensure Commission of the District
of Columbia. The level of regulatory oversight varies substantially from state
to state. In some states, campuses are subject to licensure by the state
education agency and also by a separate higher education agency. State laws
establish standards for instruction, qualifications of faculty, location and
nature of facilities, financial policies and responsibility, and other
operational matters. State laws and regulations may limit the ability of the
Company to obtain authorization to operate in certain states or to award degrees
or diplomas or offer new degree programs. As discussed below, California
prescribes standards of financial responsibility that are different from those
prescribed by the DOE. The Company believes that AIU's campuses in Atlanta, Los
Angeles, London, Dubai, and the District of Columbia are in substantial
compliance with state authorizing and licensure laws.
 
    CALIFORNIA.  In January 1991, the State of California adopted legislation
that requires private, postsecondary educational institutions to meet certain
fiscal tests in order to continue operating in the state. These fiscal tests
include three requirements: (i) not having an operating loss in each of an
institution's two most recent fiscal years; (ii) having positive net worth in
its latest fiscal year; and (iii) maintaining a ratio of current assets to
current liabilities of 1.25:1 or greater. For the year ended May 31, 1998, the
AIU's Los Angeles campus had satisfied each of these tests. The California
Council also has discretion under this statute to allow an educational
institution to continue operating if it does not satisfy the fiscal tests, if
the institution can demonstrate that it has maintained sufficient financial
resources to sustain all of its promised educational services. Accordingly, if
AIU's campus in Los Angeles fails to meet one of the above-described tests, the
Company has the opportunity to demonstrate to the California Council its
financial strength and ability to continue to operate. In connection with
granting authority for
 
                                       17
<PAGE>
continued operations, California law also requires an on-site visit to all
postsecondary institutions having accreditation from a regional accrediting
association other than the Western Association of Colleges and Schools. The
California Council conducted a visit to AIU's campus in Los Angeles in June 1996
and recently issued its report, granting approval for continued degree-granting
operation for the maximum four-year period.
 
    GEORGIA.  Until May 1, 1997 AIU's campus in Atlanta was exempt from the
regulatory oversight of the State of Georgia. For fiscal 1998, AIU agreed,
however, to subject its operations to the oversight of the State of Georgia in
order to become eligible to participate in Georgia's HOPE Scholarship and
Tuition Equalization Grant programs as well as to use the term "University" as
part of its name. In the State of Georgia, for-profit institutions such as AIU
are reviewed by the Georgia Nonpublic Postsecondary Education Commission
("NPEC"). NPEC regulations require for-profit institutions to meet minimum
standards relating to educational quality, ethical business practices, health
and safety, and fiscal responsibility. These standards include, but are not
limited to, requirements that the institution demonstrate that it has adequate
facilities and equipment, that its instructors and administrators have the
requisite education and experience, and that the quality and content of each
program meet stated objectives. Other NPEC standards address such areas as the
institution's library resources, catalog disclosures, support services, student
complaints, advertising, admissions, recruitment, student refunds, and student
records. In order to demonstrate fiscal responsibility, NPEC requires that the
institution have sufficient resources to support its operation for at least the
length of its degree program, funds to operate which are not limited to current
tuition, and accounts receivable and funds available to operate the institution
for at least the quarter or semester, as the case may be. NPEC recently
determined that AIU satisfied its requirements and issued a certificate of
authorization for the period of May 1, 1997 through April 30, 1998. The Company
must seek renewal of this authorization on a yearly basis and is in the process
of submitting its annual report for such authorization.
 
    DISTRICT OF COLUMBIA.  AIU's campuses in London, Dubai, and the District of
Columbia are subject to the regulatory oversight of the District of Columbia
Education Licensure Commission (the "Licensure Commission"). The Licensure
Commission's standards governing degree granting institutions address such areas
as administration, the adequacy of the institution's finances, faculty
qualifications, curricula, admissions, procedures for assessing student
outcomes, student services, the adequacy of the library and equipment,
maintenance of student records, and advertising. Additionally, in connection
with conferring degree-granting status, the Licensure Commission requires an
on-site visit to all post-secondary institutions with accreditation under the
laws of the District of Columbia. The Licensure Commission conducted a visit to
AIU's campuses in London and Dubai in December 1997 and will conduct a visit to
AIU's campus in the District of Columbia in the Fall of 1999. The Licensure
Commission granted AIU a license which will remain in effect until June 30,
2001. These licenses are subject to periodic review under various circumstances
including a change in ownership and changes in accreditation status, location,
and degrees or certificates offered.
 
    FLORIDA.  The State of Florida through its State Board of Independent
Colleges and Universities (SBICU) regulates the establishment of in-state and
out-of-state higher educational enterprises within the territorial jurisdiction
of the state. The SBICU utilizes a multi-stage process by which to grant
institutions permission to operate and move through a series of progressive
steps toward "full approval." Each approval stage is accompanied by a mandated
report and an appearance before the SBICU in public session. Two of the four
stages are preceded by visitations of staff or a peer review team to the Florida
location. AIU was granted Temporary Licensure in April of 1998 and moved to
Level I Provisional Licensure in July of that same year. A staff member visited
the parent campus for information collection purposes and further analysis of
the institution prior to the July action. AIU is currently in the process of
establishing its Florida location and working toward achievement of the next
approval stage. AIU is presently authorized to advertised, admit students, and
operate an institution of higher education in Florida.
 
                                       18
<PAGE>
EXECUTIVE OFFICERS
 
    The following table sets forth information concerning the Company's
executive officers.
 
<TABLE>
<CAPTION>
NAME                                                AGE                                POSITION
----------------------------------------------      ---      ------------------------------------------------------------
<S>                                             <C>          <C>
Steve Bostic..................................          55   Chairman of the Board and Chief Executive Officer
Stephen G. Franklin, Sr.......................          51   President, Chief Academic Officer and Director
Donald J. Blankers............................          59   Chief Financial Officer
Barbara S. Butterfield........................          58   Senior Vice President, Human Resources
Douglas C. Chait..............................          34   Vice President, Corporate Development and Secretary
Eric R. Fliegel...............................          36   Chief Information Officer
</TABLE>
 
    STEVE BOSTIC has served as Chairman of the Board and Chief Executive Officer
of the Company since its inception in July 1996. Since October 1996, Mr. Bostic
has also served on AIU's Governing Board, and since June 1997, Mr. Bostic has
served as the President of AIU. Prior to founding the Company in 1996, from 1993
to 1996 Mr. Bostic was the Chairman of the Board of EduTrek Systems, Inc. and,
from 1989 to 1993, Mr. Bostic was the chairman of the Board of Delphi
Technology, Inc., a company specializing in the scientific development and
application of cognitive-based learning systems. Mr. Bostic was the principal
owner and Chairman of American Photo Group, an operator of consumer photo
processing labs, from 1981 to 1987. In addition, Mr. Bostic serves as a member
of the Board of Trustees of Presbyterian College, the Dean's Advisory Council of
the Indiana School of Business, and the Board of the School of Public Policy at
Georgia Institute of Technology. Mr. Bostic has more than ten years of
experience in the educational arena.
 
    STEPHEN G. FRANKLIN, SR. has served as the President of the Company since
July 1997, Chief Academic Officer since April 1997 and as a member of the Board
of Directors of the Company since June 1997. Prior to his appointment as
President, Dr. Franklin served as Executive Vice President of the Company from
April to July 1997. Since October 1996, Franklin has also served on the AIU's
Governing Board. Prior to joining the Company, Dr. Franklin served as the
Associate Dean of Executive Education at the Goizueta Business School of Emory
University from 1995 to 1997 where he developed and delivered executive
education programs for companies. Prior to serving as Associate Dean, Dr.
Franklin was a tenured professor of Business Administration of the Goizueta
Business School of Emory University from 1978 to 1984. At Emory, Dr. Franklin
focused his academic research on change management, team-based anticipating
learning strategies, and entrepreneurship in organizations and has co-authored
two management textbooks. Dr. Franklin established and, from March 1988 to 1995,
owned Global Access Learning, Inc., an international executive education and
management development firm specializing in developing custom management
programs for global companies. Prior to that time, from 1984 to 1988, Dr.
Franklin was the Executive Vice President and principal shareholder in Financial
Service Corporation, an independent financial planning broker-dealer.
 
    DONALD J. BLANKERS has served as the Chief Financial Officer of the Company
since September 1996 and is a member of the American Institute of Certified
Public Accountants and Financial Executives Institute. Prior to joining the
Company, from 1995 to 1996, Mr. Blankers served as Acting Chief Financial
Officer for Alcott Staff Leasing, Inc. From 1994 to 1995, Mr. Blankers was a
consultant for CFO Consulting and, from 1993 to 1994, Mr. Blankers served as
Vice President and Chief Financial Office for Cryolife, Inc. From 1991 to 1993,
Mr. Blankers served as an independent consultant and, from 1983 to 1991, Mr.
Blankers served in various capacities with National Data Corporation, including
Senior Vice President and Chief Financial Officer from 1987 to 1991 and Vice
President, Controller, and Treasurer from 1983 to 1987.
 
    BARBARA S. BUTTERFIELD is the Senior Vice President of Human Resources, a
position she has held since March 1997. Prior to joining the Company, from 1991
to 1997, Dr. Butterfield was the Vice President of Human Resources and Vice
President of Faculty and Staff Services at Stanford University, Palo Alto,
 
                                       19
<PAGE>
California where she provided long-range planning, analysis and strategies in
such areas as risk management, environmental health and safety, faculty/staff
housing, and human resources. Prior to Stanford University, Dr. Butterfield was
the Vice President of Human Resources at the University of Pennsylvania from
1987 to 1991. From 1986 to 1987, Dr. Butterfield was the Director of Human
Resources Administration at Duke University and from 1983 to 1986, was the
Director of Personnel Administration at Michigan State University.
 
    DOUGLAS C. CHAIT has served as the Vice President, Corporate Development,
and Secretary since October 1996. Prior to joining the Company, Mr. Chait was
the Director of Corporate Development for EduTrek Systems, Inc. from May 1994 to
October 1996 where he was responsible for identifying and pursuing joint venture
and acquisition opportunities in the corporate training and education
industries. From September 1992 to May 1994, Mr. Chait attended the Goizueta
Business School of Emory University where he graduated with an M.B.A. in finance
and strategy.
 
    ERIC R. FLIEGEL has served as the Chief Information Officer since April
1997. Prior to joining the Company, from 1995 to 1997, Mr. Fliegel served as the
Executive Director of Information Services for Emory Healthcare where he was
responsible for providing information services to such Emory Healthcare entities
as Emory University Hospital, Crawford Long Hospital, and the Emory Clinic. From
1988 to 1995, Mr. Fliegel served as the Assistant Dean of Information Services
for the Goizueta Business School of Emory University where he managed the
school's information systems, and from January 1981 to April 1988, Mr. Fliegel
was the Associate Director of Computing for the William E. Simon Graduate School
of Business Administration.
 
ITEM 2.  PROPERTIES
 
    AIU maintains well-equipped campuses and facilities that support the
university's focus on technology in education. Classrooms and team rooms provide
a comfortable but professional environment to facilitate collaborative learning
and better prepare students for the workplace. An advanced technical
infrastructure allows students to work on-line from thousands of data ports,
communicating with each other, instructors, and the world via the internet. In
the undergraduate areas of study, fashion and interior design studios feature
sophisticated equipment. The visual communication facilities include
professionally equipped darkrooms and photography studios as well as classrooms
with drafting tables and other studio supplies. Video production studios house
advanced sound and video equipment. Macintosh and PC labs feature computers and
printers and the latest software available, including programs for
computer-aided design. The Library Resource Center on each campus includes audio
visual and interior design resources.
 
    The Company leases all of its administrative and educational facilities. The
table below sets forth certain information regarding the Company's facilities as
of May 31, 1998:
 
<TABLE>
<CAPTION>
                                                                           APPROXIMATE
LOCATION                                                                 SQUARE FOOTAGE   EXPIRATION
-----------------------------------------------------------------------  ---------------  ------------------------
<S>                                                                      <C>              <C>
Atlanta, GA
  AIU..................................................................      60,800       January 31, 2009
  AIU..................................................................      10,400       December 31, 1998
  Headquarters.........................................................      18,400       December 31, 1999
  Corporate Education..................................................       2,200       March 31, 2001
    Los Angeles, California............................................      32,900       From September 30,
                                                                                          1998 to May 31, 1999
    London, England....................................................      46,000       November 27, 2005
    Dubai, United Arab Emirates........................................      34,300       Leased by MEC
</TABLE>
 
    Typically, AIU's facilities occupy an entire building or several floors or
portions of floors in a building. Leases typically have terms of six months to
ten years, with zero to five year renewal options. The Company also leases
facilities for student parking and housing.
 
                                       20
<PAGE>
    The Company entered into a 138-month lease to begin in July of 1998 for a
75,700 square foot building in the North Atlanta area for its Dunwoody campus.
The Company also entered into a 127-month lease to begin July of 1998 for a
32,600 square foot space in the District of Columbia for a new campus.
 
    The Company actively monitors facility capacity in light of current
utilization and projected enrollment growth. Management believes that in order
to accommodate projected increases in student enrollment at each of its campuses
over the next two years, AIU may be required to acquire additional space. The
Company believes that it can acquire additional capacity on acceptable terms.
 
ITEM 3.  LEGAL PROCEEDINGS
 
    The Company is not a party to any legal proceedings, the adverse outcome of
which, in management's opinion, would have a material adverse effect on the
Company's operating results.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matter was submitted to a vote of security holders of the Company during
the fourth quarter ended May 31, 1998.
 
                                       21
<PAGE>
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
MARKET INFORMATION
 
    The Company's Class A Common Stock began trading on the Nasdaq National
Market ("Nasdaq") under the symbol "EDUT" during the second quarter of fiscal
year 1998 on September 24, 1997. Prior to that time, the Company's Class A
Common Stock was not listed or traded on any organized market. The Company's
Class B Common Stock, which does not trade on any market and which is held
entirely by the Company's Chairman and Chief Executive Officer and his
affiliates, may be converted into Class A Common Stock, in whole or in part, at
any time on the basis of one share of Class A Common Stock for each share of
Class B Common Stock.
 
    The following table sets forth, for the periods indicated, the reported high
and low sale prices of the Company's Class A Common Stock, as reported by
Nasdaq:
 
<TABLE>
<CAPTION>
                                                                                              YEAR ENDED
                                                                                             MAY 31, 1998
                                                                                         --------------------
                                                                                           HIGH        LOW
                                                                                         ---------  ---------
<S>                                                                                      <C>        <C>
Second Quarter (September 24, 1997 through November 30, 1997)..........................      28.75      18.00
Third Quarter ended February 28, 1998..................................................      26.00      20.75
Fourth Quarter ended May 31, 1998......................................................      28.25      18.50
</TABLE>
 
STOCKHOLDERS
 
    According to the records of the Company's transfer agent, the Company had 47
and 3 holders of record of Class A and Class B Common Stock, respectively, at
July 31, 1998. The Company believes that a substantially larger number of
beneficial owners hold such shares in depository or nominee form.
 
DIVIDENDS AND DISTRIBUTIONS
 
    The Company has never declared nor paid cash dividends on its Common Stock
and does not anticipate paying any cash dividends on its Common Stock in the
near future. It is the current policy of the Company's Board of Directors to
retain earnings to finance the operations and expansion of the Company's
business. Holders of Class A Common Stock are entitled to receive cash dividends
on at least an equal per share basis as holders of Class B Common Stock if and
when such dividends are declared by the Board of Directors of the Company.
 
SALES OF UNREGISTERED SECURITIES
 
    On June 17, 1997, September 24, 1997, and December 3, 1997, following the
exercise of warrants to purchase shares of Class A Common Stock by three
holders, the Company issued 257,110, 444,318, and 177,723 shares, respectively,
of Class A Common Stock for purchase prices of $359.95, $622.05, and $248.81,
respectively.
 
    The issuances of the securities described above were made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended, as a transaction by an issuer not involving a public offering.
The securities were acquired by the purchasers for investment and with no view
toward the resale or distribution thereof. The purchasers had a preexisting
relationship with the Company or its founder, the offers and sales were made
without any public solicitation, and the stock certificates bear restrictive
legends. No underwriter was involved in the transaction and no commissions were
paid.
 
                                       22
<PAGE>
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
 
    The following table sets forth certain consolidated financial and other
operating data for the Company and American European Corporation and
Subsidiaries (the "Predecessor"). This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 of this Form 10-K and the Company's and
Predecessor's Consolidated Financial Statements and Notes thereto included in
Item 8 of this Form 10-K.
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
       (IN THOUSANDS, EXCEPT PER SHARE, PERCENTAGE, AND ENROLLMENT DATA)
 
<TABLE>
<CAPTION>
                                              THE COMPANY(1)
                                           ---------------------               THE PREDECESSOR(1)(2)
                                                                  ------------------------------------------------
                                           FISCAL YEAR ENDED MAY    PERIOD FROM
                                                    31,            JUNE 1, 1996       FISCAL YEAR ENDED MAY 31,
                                           ---------------------      THROUGH      -------------------------------
                                             1998        1997     OCTOBER 8, 1996    1996       1995       1994
                                           ---------  ----------  ---------------  ---------  ---------  ---------
<S>                                        <C>        <C>         <C>              <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA(3):
Net revenues.............................  $  41,914  $   23,590     $   6,189     $  26,493  $  23,696  $  20,654
  Cost of education and facilities.......     16,927       9,014         3,256        11,144     10,051      8,611
  Selling and promotional expenses.......      6,321       2,428         1,335         3,614      3,083      3,165
  General and administrative expenses....     10,516       5,468         2,739         6,677      6,115      6,264
  Acquisition costs......................        487      --            --            --         --         --
  Rents paid to majority shareholder.....     --          --                49           150        145        146
  Amortization of goodwill...............      1,008         696        --            --         --         --
                                           ---------  ----------       -------     ---------  ---------  ---------
  Total costs and expenses...............     35,259      17,606         7,379        21,585     19,394     18,186
                                           ---------  ----------       -------     ---------  ---------  ---------
Income (loss) from campus operations.....      6,655       5,984        (1,190)        4,908      4,302      2,468
Income (loss) from management
  agreement..............................         23         479           (21)          127     --         --
                                           ---------  ----------       -------     ---------  ---------  ---------
Income (loss) from operations............      6,678       6,463        (1,211)        5,035      4,302      2,468
Interest expense.........................      1,328       2,499           258           730        607        440
Interest income--shareholder notes.......     --          --                98           361        153        183
Other income--net........................      1,539          20            66            72         25        483
                                           ---------  ----------       -------     ---------  ---------  ---------
Income (loss) before income taxes,
  minority interest, and extraordinary
  item...................................      6,889       3,984        (1,305)        4,738      3,873      2,694
Provision for income taxes(4)............     (2,581)     (1,981)       --              (107)      (124)      (148)
                                           ---------  ----------       -------     ---------  ---------  ---------
Income (loss) before minority interest
  and extraordinary item.................      4,308       2,003        (1,305)        4,631      3,749      2,546
Minority interest in earnings of American
  University in Dubai....................     (1,445)     --            --            --         --         --
                                           ---------  ----------       -------     ---------  ---------  ---------
Income (loss) before extraordinary
  item...................................      2,863       2,003        (1,305)        4,631      3,749      2,546
Extraordinary loss less applicable income
  taxes..................................       (960)     --            --            --         --         --
                                           ---------  ----------       -------     ---------  ---------  ---------
Net income...............................  $   1,903  $    2,003     $  (1,305)    $   4,631  $   3,749  $   2,546
                                           ---------  ----------       -------     ---------  ---------  ---------
                                           ---------  ----------       -------     ---------  ---------  ---------
</TABLE>
 
                                       23
<PAGE>
<TABLE>
<CAPTION>
                                              THE COMPANY(1)
                                           ---------------------               THE PREDECESSOR(1)(2)
                                                                  ------------------------------------------------
                                           FISCAL YEAR ENDED MAY    PERIOD FROM
                                                    31,            JUNE 1, 1996       FISCAL YEAR ENDED MAY 31,
                                           ---------------------      THROUGH      -------------------------------
                                             1998        1997     OCTOBER 8, 1996    1996       1995       1994
                                           ---------  ----------  ---------------  ---------  ---------  ---------
<S>                                        <C>        <C>         <C>              <C>        <C>        <C>
Basic income per share before
  extraordinary item(5)..................  $    0.30  $     0.29
Basic income per share(5)................  $    0.20  $     0.29
Diluted income per share before
  extraordinary item(5)..................  $    0.28  $     0.26
Diluted income per share(5)..............  $    0.19  $     0.26
Average shares outstanding...............      9,527       7,000
Dilutive effect of stock options and
  warrants...............................        681         569
                                           ---------  ----------
Average shares outstanding assuming
  dilution...............................     10,208       7,569
 
PRO FORMA DATA:
Income before income taxes, as
  reported...............................                            $  (1,305)    $   4,738  $   3,873  $   2,694
Pro forma provision for income
  taxes(6)...............................                                  509         1,848      1,510      1,051
                                                                       -------     ---------  ---------  ---------
Pro forma net income.....................                            $    (796)    $   2,890  $   2,363  $   1,643
                                                                       -------     ---------  ---------  ---------
                                                                       -------     ---------  ---------  ---------
 
SELECTED OPERATING DATA:
Net cash provided by operating
  activities.............................      2,686       1,356         1,413         5,798      5,522      4,375
Net cash provided by (used in) investing
  activities.............................     (2,045)    (31,428)         (288)       (2,662)    (1,507)       725
Net cash provided by (used in) financing
  activities.............................      4,510      30,780        (1,197)       (3,442)    (3,916)    (5,030)
AIU fall term enrollment(7)..............      3,045       2,822         2,822         2,441      2,200      2,000
 
BALANCE SHEET DATA:
Working capital deficiency...............       (281)     (9,772)                     (8,696)    (8,355)    (8,467)
Total assets.............................     58,285      47,671                       7,253      6,682      7,190
Long-term debt, including current
  portion................................      1,241      30,075                       4,756      2,874      2,333
Shareholders' equity.....................     44,294       7,877                      (7,287)    (6,166)    (4,877)
</TABLE>
 
------------------------
 
(1) The Company was organized on July 1, 1996 for the purpose of acquiring the
    Predecessor. On October 8, 1996, the Company acquired the Predecessor and
    EduTrek Systems. See note 1 of notes to consolidated financial statements.
 
(2) Because the Company did not acquire the Predecessor until October 8, 1996,
    the financial information with respect to the Company for the period from
    July 1, 1996 through October 8, 1996 does not include the Predecessor.
    EduTrek Systems is included in the financial information of the Company in a
    manner similar to a pooling of interests because the Company and EduTrek
    Systems were under common control. Financial information for EduTrek Systems
    is not included in the Selected Consolidated Financial Data prior to July 1,
    1996 because, since its formation in 1992, EduTrek Systems has not generated
    revenues and in the years ended December 31, 1992, 1993, 1994, and 1995 and
    for the period ended October 8, 1996, EduTrek Systems incurred losses of
    $321,000, $90,911, $312,954, $584,627, and $819,430, respectively. Such
    amounts are not considered to be relevant to the Company
 
                                       24
<PAGE>
    and the Predecessor because, in prior years, EduTrek Systems had no revenues
    and existed solely to provide a corporate structure through which its
    controlling shareholder could pursue a variety of opportunities and
    activities.
 
(3) The Company's results of operations are affected by AIU's level of
    enrollment which ranges from the highest level during the Fall term
    (October-December) to the lowest level during the Summer terms
    (June-September). See "Management's Discussion and Analysis of Financial
    Condition and Results of Operations--Seasonality."
 
(4) As a result of its election to be treated as an S Corporation for income tax
    purposes, the Predecessor has not been subject to federal and most state
    income taxes. Accordingly, the historical provision for income taxes
    includes income taxes only for those jurisdictions that do not recognize S
    Corporation status.
 
(5) Income per share information for the Predecessor is not presented as the
    amounts are not considered meaningful due to the minimal number of
    outstanding shares and the S Corporation election of the Predecessor.
 
(6) As a result of its election to be treated as an S Corporation for income tax
    purposes, the Predecessor has not been subject to federal and most state
    income taxes. Accordingly, the historical provision for income taxes
    includes income taxes only for those jurisdictions that do not recognize S
    Corporation status. The pro forma provision for income taxes (computed under
    the provisions of Statement of Financial Accounting Standards No. 109)
    reflects provisions that would have been recorded had the Predecessor been a
    C Corporation for income tax purposes during the periods shown using an
    estimated income tax rate of 40.0%. Prior to the initial public offering,
    distributions in the form of cash dividends were made principally to assist
    the shareholders with their income tax obligations arising from the
    Predecessor's S Corporation status. Such distributions amounted to
    $4,068,962, $3,800,000, $4,500,000, and $1,889,694 for the fiscal years
    ended May 31, 1994, 1995, and 1996 and for the period from June 1, 1996
    through October 8, 1996, respectively.
 
(7) Represents enrollment data as measured on the first day of each Fall term.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    The following discussion of the results of operations and financial
condition of the Company and Predecessor should be read in conjunction with the
"Selected Consolidated Financial Data" and the Company's and Predecessor's
Consolidated Financial Statements and Notes thereto. Unless otherwise specified,
any reference to a "fiscal year" is to a fiscal year ended May 31.
 
OVERVIEW
 
    EduTrek acquired AIU (formerly The American College) through its acquisition
of the American European Corporation (the "Predecessor") on October 8, 1996.
EduTrek's revenues have increased 102% to $41.9 million for the fiscal year 1998
from $20.7 million for the fiscal year 1994. The number of students attending
AIU has increased 54.5% to 2,920 students at May 31, 1998 from 1,890 students at
May 31, 1994.
 
    EduTrek's principal sources of revenue are tuition, related fees and
payments for student housing collected from students. Other sources of revenue
include sales of textbooks, application fees, other student fees, consulting and
other income. Net revenues are calculated by deducting AIU awarded scholarships
from gross revenues.
 
    AIU's academic year is divided into three 10-week terms (Fall, Winter,
Spring) and two eight-week summer terms (Summer I and Summer II). Summer terms
are shorter and more concentrated, and the two terms combined equal a 10-week
term with respect to their contribution to net revenues. The average term
 
                                       25
<PAGE>
enrollment levels for Winter, Spring and Summer terms are approximately 95%, 90%
and 85%, respectively, of the Fall benchmark. The following table correlates
EduTrek's fiscal quarters to AIU's academic terms:
 
<TABLE>
<CAPTION>
FISCAL QUARTERS                      ACADEMIC TERMS
-----------------------------------  --------------------------------------------------
<S>                                  <C>
First (June-August)                  Summer I and one-half of Summer II
Second (September-November)          Last half of Summer II and two-thirds of Fall
Third (December-February)            Last third of Fall and four-fifths of Winter
Fourth (March-May)                   Last fifth of Winter and all of Spring
</TABLE>
 
    AIU's MIT program has four enrollment periods per year: January, April, July
and October. The full-time day program is divided into four 10-week terms, and
the evening program is divided into seven 10-week terms. Enrollment periods for
AIU's BBA evening program occur approximately once per month. Net revenues from
this program vary from period to period based on several factors that include
(1) the aggregate number of students attending classes; (2) the number of
classes held during the period; and (3) the average tuition per credit hour.
 
    Tuition and fees are payable prior to the start of each term, and
historically over 80% of funds are received in advance of the term's start date.
Of the balance, approximately 40% is collected through financial aid; the
remainder is collected under payment schedules established on a student by
student basis. Uncollectible receivables are written off once a year and have
not exceeded 0.75% of annual net revenues during each of the fiscal years in the
three-year period ending May 31, 1998.
 
    Each of AIU's campuses is 100% controlled by EduTrek except the campus in
Dubai, which is 50.1% controlled by EduTrek under a management agreement with an
investment group based in the United Arab Emirates. Under the terms of that
agreement, the investment group provided all the start-up capital required to
open the campus in Dubai and is responsible for ongoing capital expenditures in
exchange for 49.9% of net operating cash flow from that campus. In exchange for
its management services, EduTrek receives 50.1% of the net operating cash flow.
 
    As tuition is received, it is recorded as deferred tuition income, a current
liability. During the term, the applicable portion of deferred tuition income is
recognized as revenue each month based on the aggregate number of credit hours
taken by students during the term. Deferred tuition income historically has been
at its highest level at the end of September before the start of the academic
year and Fall term for two reasons: (1) the Fall term represents the highest
level of enrollment in the year, and (2) some students, principally non-U.S.
students in London, pay a full year's tuition in advance.
 
    EduTrek's expenses consist of cost of education and facilities, selling and
promotional expenses, general and administrative expenses and, effective with
the acquisition of the Predecessor in October 1996, the amortization of
goodwill.
 
    Education costs include salaries of full-time and adjunct faculty,
instructional support, academic administrators, student development and support
costs relating to library and classroom expenses, curriculum costs and royalty
payments to ITI. Facility costs consist of leasing, maintenance and other
occupancy costs relating to campus facilities. Student housing costs are also
included.
 
    Selling and promotional expenses include salaries of personnel involved in
recruitment, admissions and marketing at the campus and corporate office level
and their related costs. The costs of advertising and the production of
marketing materials are also included.
 
    General and administrative expenses include salaries of personnel engaged in
general administration, accounting, financial aid, personnel and compliance at
the campus level, all corporate personnel and their related expenses and the net
costs of EduTrek's airplane, which was sold in the fourth quarter of fiscal
1998. These expenses also include depreciation and amortization of related fixed
assets and deferred costs as well as benefits relating to personnel at the
campus and corporate levels.
 
                                       26
<PAGE>
    As a result of its election to be treated as an S corporation for income tax
purposes, the Predecessor was not subject to federal and state income taxes.
Accordingly, the provision for income taxes for the Predecessor includes income
taxes only for those jurisdictions that do not recognize S corporation status.
Since its inception in July 1996, EduTrek has been a C corporation for income
tax purposes. EduTrek's income tax provision is provided at rates approximating
statutory federal and state rates (approximately 40%).
 
RESULTS OF OPERATIONS
 
    The following table sets forth, for the periods indicated, the percentage
relationship of certain statement of operations items to net revenues for the
Company and Predecessor:
 
<TABLE>
<CAPTION>
                                                                                                          THE COMPANY
                                                                                                      --------------------
                                                                           THE PREDECESSOR
                                                                  ----------------------------------   FISCAL YEAR ENDED
                                                                    FISCAL YEAR    PERIOD FROM JUNE         MAY 31,
                                                                   ENDED MAY 31,    1, 1996 THROUGH   --------------------
                                                                       1996         OCTOBER 8, 1996     1997       1998
                                                                  ---------------  -----------------  ---------  ---------
<S>                                                               <C>              <C>                <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................................................         100.0%            100.0%         100.0%     100.0%
Cost of education and facilities................................          42.1              52.6           38.2       40.4
Selling and promotional expenses................................          13.6              21.6           10.3       15.1
General and administrative expenses.............................          25.2              44.3           23.2       25.1
Acquisition costs...............................................           0.0               0.0            0.0        1.2
Rents paid to majority shareholder..............................           0.6               0.8            0.0        0.0
Amortization of goodwill........................................           0.0               0.0            2.9        2.4
                                                                         -----             -----      ---------  ---------
Income (loss) from campus operations............................          18.5             (19.3)          25.3       15.8
Income (loss) from management agreement.........................           0.5              (0.3)           2.0        0.1
                                                                         -----             -----      ---------  ---------
Income (loss) from operations...................................          19.0             (19.6)          27.3       15.9
Interest expense................................................           2.8               4.2           10.6        3.2
Interest income--shareholder notes..............................           1.4               1.6            0.0        0.0
Other income--net...............................................           0.3               1.1            0.1        3.7
                                                                         -----             -----      ---------  ---------
Income (loss) before income taxes, minority interest, and
  extraordinary item............................................          17.9             (21.1)          16.8       16.4
Provision for income taxes......................................          (0.4)              0.0           (8.4)      (6.2)
Income (loss) before minority interest and extraordinary item...          17.5             (21.1)          (8.4)      10.2
Minority interest in earnings of American University in Dubai...             0                 0              0       (3.4)
Income (loss) before extraordinary item.........................          17.5             (21.1)           8.4        6.8
Extraordinary loss less applicable income Taxes.................           0.0               0.0            0.0       (2.3)
                                                                         -----             -----      ---------  ---------
Net income (loss)...............................................          17.5%            (21.1)%          8.4%       4.5%
                                                                         -----             -----      ---------  ---------
                                                                         -----             -----      ---------  ---------
</TABLE>
 
YEAR ENDED MAY 31, 1998 COMPARED TO YEAR ENDED MAY 31, 1997
 
    Prior to the Company's acquisition of the Predecessor in October 1996, the
Company's operations were de minimis as its principal operations primarily
related to the acquisition of the Predecessor. The following discussion compares
the Company's results for the twelve months ended May 31, 1998 to the eleven
month period from July 1, 1996 through May 31, 1997 which, because the
operations of the Company were de minimis prior to October 1996, essentially
presents the operations of the Company for the eight month period ended May 31,
1997.
 
                                       27
<PAGE>
    NET REVENUES.  Net revenues increased approximately $18.3 million or 77.7%
from $23.6 million for the eleven months ended May 31, 1997 (the "1997 period")
to $41.9 million for the year ended May 31, 1998 (the "1998 period"). Of this
77.7% increase, 26.6% or approximately $4.9 million was due to the consolidation
of the American University in Dubai ("Dubai") (see note 2 of notes to
consolidated financial statements). The remaining increase in net revenues was
due to an increase in student enrollments and a tuition increase.
 
    COST OF EDUCATION AND FACILITIES.  Cost of education and facilities
increased approximately $7.9 million or 88.1% from $9.0 million in the 1997
period to $16.9 million in the 1998 period. Education costs increased
approximately $4.8 million or 89.3% from $5.4 million in the 1997 period to
$10.2 million in the 1998 period due to the consolidation of Dubai and salary
and other cost increases. Facility costs increased approximately $3.1 million or
86.2% from $3.6 million in the 1997 period to $6.7 million in the 1998 period
due to the consolidation of Dubai, rent increases, and an increase in the number
of housing students. Cost of education and facilities increased as a percentage
of net revenues from 38.2% in the 1997 period to 40.4% in the 1998 period.
 
    SELLING AND PROMOTIONAL EXPENSES.  Selling and promotional expenses
increased by approximately $3.9 million or 160.3% from $2.4 million in the 1997
period to $6.3 million in the 1998 period. Of the 160.3% increase, 9.2% or
approximately $223,000 was due to the consolidation of Dubai. The remaining
increase was due to increases in salary and other selling and promotional
expenses related to new educational programs such as the Masters in Information
Technology and the Bachelors in Business Administration for adult evening
students. As a percentage of net revenues, selling and promotional expenses
increased from 10.3% in the 1997 period to 15.1% in the 1998 period.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased approximately $5.0 million or 92.3% from $5.5 million in the 1997
period to $10.5 million in the 1998 period. Of the 92.3% increase, 20.4% or
approximately $1.1 million was due to the consolidation of Dubai. The remaining
increase was primarily due to additions of personnel at the home office to
support the Company's growth. As a percentage of net revenues, general and
administrative expenses increased from 23.2% in the 1997 period to 25.1% in the
1998 period.
 
    ACQUISITION COSTS.  Acquisition costs include $487,000 of accounting, legal,
and other costs in the 1998 period associated with the planned combination with
ITI Education Corporation ("ITI"). In March 1998, the Company and ITI announced
that their planned combination was terminated in favor of amended and expanded
licensing arrangements under which the Company acquired rights to ITI's
information technology system.
 
    AMORTIZATION OF GOODWILL.  Amortization expenses, principally goodwill
expenses, of approximately $1.0 million in the 1998 period and approximately
$696,000 in the 1997 period were the result of the October 1996 acquisition of
the Predecessor with goodwill costs being amortized over a 40-year period.
 
    INCOME FROM MANAGEMENT AGREEMENT.  Income from the Dubai campus management
agreement decreased approximately $456,000 or 95.2% from approximately $479,000
in the 1997 period to approximately $23,000 in the 1998 period due to the
consolidation of Dubai effective September 1, 1997. The portion of income from
operations related to Dubai was approximately $789,000 for the 1998 period,
which represents an increase of 64.7% primarily due to an increase in
enrollment.
 
    INTEREST EXPENSE.  Interest expense decreased approximately $1.2 million or
46.9% in the 1998 period compared to the 1997 period as a result of the
application of the proceeds of the Company's September 1997 initial public
offering to retire debt.
 
    OTHER INCOME--NET.  Other income--net increased from $20,000 in the 1997
period to approximately $1.5 million in the 1998 period primarily due to a
$991,000 gain on the sale of aircraft, which offset
 
                                       28
<PAGE>
$481,000 of related net operating costs during the 1998 period. The remaining
increase is related to interest income after the initial public offering and a
one-time sales tax recovery.
 
    MINORITY INTEREST IN EARNINGS OF AMERICAN UNIVERSITY IN DUBAI.  Effective
September 1, 1997, the Company modified its joint venture agreement relating to
Dubai, which resulted in the change in presentation of income from management
agreement and minority interest in earnings (see note 2 of notes to consolidated
financial statements).
 
    EXTRAORDINARY LOSS LESS APPLICABLE INCOME TAXES.  The extraordinary loss of
$960,000 is the result of the early retirement of debt after the Company's
initial public offering.
 
YEAR ENDED MAY 31, 1997 (COMPANY) COMPARED TO EIGHT MONTHS ENDED MAY 31, 1996
  (UNAUDITED) (PREDECESSOR)
 
    The Company was organized on July 1, 1996 for the purpose of acquiring the
Predecessor and all of the capital stock of EduTrek Systems. Prior to the
Company's acquisition of the Predecessor in October 1996, the Company's
operations were de minimis as its principal operations primarily related to the
acquisition of the Predecessor. The following discussion compares the Company's
results for the eleven month period from July 1, 1996 through May 31, 1997 to
the Predecessor's results for the eight month period from October 8, 1995
through May 31, 1996 which, because the operations of the Company were de
minimis prior to October 1996, essentially presents a comparison of the
operations of the Company for the eight month period ended May 31, 1997 to the
comparable eight months of the prior year. The results of the Company during the
period from July 1996 through October 1996 related primarily to the Company's
acquisition activities, were non-operational in nature and immaterial in amount.
The period from October through May is comprised of AIU's Fall, Winter, and
Spring terms.
 
    NET REVENUES.  Net revenues increased approximately $2.7 million or 13.0%
from $20.9 million for the eight months ended May 31, 1996 (the "1996 period")
to $23.6 million for the eleven months ended May 31, 1997 (the "1997 period").
Of this 13.0% increase, 6.2% or approximately $1.3 million was due to an
increase in student enrollment and 6.8% or approximately $1.4 million was the
result of an effective price increase.
 
    COST OF EDUCATION AND FACILITIES.  Cost of education and facilities
increased approximately $1.4 million or 18.1% from $7.6 million in the 1996
period to $9.0 million in the 1997 period. Education costs increased
approximately $946,000 or 21.2% from $4.5 million in the 1996 period to $5.4
million in the 1997 period due to salary and other cost increases. Facility
costs increased approximately $433,000 or 13.6% from $3.2 million in the 1996
period to $3.6 million in the 1997 period due to rent increases and an increase
in the number of housing students. Cost of education and facilities increased as
a percentage of net revenues from 36.6% in the 1996 period to 38.2% in the 1997
period.
 
    SELLING AND PROMOTIONAL EXPENSES.  Selling and promotional expenses remained
constant at approximately $2.4 million in the 1997 period. Decreases in
advertising of approximately $267,000 were offset by increases in salary and
other selling and promotional expenses. As a percentage of net revenues, selling
and promotional expenses decreased from 11.4% in the 1996 period to 10.3% in the
1997 period.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased approximately $881,000 or 19.2% from $4.6 million in the 1996 period
to $5.5 million in the 1997 period. The increase was due to costs incurred prior
to the acquisition of the Predecessor and to additions of personnel at the home
office after the acquisition, which expenses were offset in part by a reduction
in costs relating to assets purchased by one of the selling shareholders in
connection with the acquisition of The American College. As a percentage of net
revenues, general and administrative expenses increased from 22.0% in the 1996
period to 23.2% in the 1997 period.
 
                                       29
<PAGE>
    AMORTIZATION OF GOODWILL.  Amortization expenses, principally goodwill
expenses, of approximately $696,000 in the 1997 period were the result of the
October 1996 acquisition of the Predecessor with goodwill costs being amortized
over a 40-year period.
 
    INCOME FROM MANAGEMENT AGREEMENT.  Income from the Dubai campus management
agreement increased approximately $393,000 or 457.0% from its start-up level of
approximately $86,000 in the 1996 period to approximately $479,000 in the 1997
period.
 
    INTEREST EXPENSE.  Interest expense increased approximately $2.2 million or
753.4% from approximately $292,000 in the 1996 period to $2.5 million in the
1997 period due to an increase in borrowing associated with the acquisition of
the Predecessor in October 1996.
 
    OTHER INCOME--NET.  Other income decreased approximately $198,000 or 91.2%
from approximately $217,000 in the 1996 period to approximately $19,000 in the
1997 period due to a decrease in interest income.
 
QUARTERLY RESULTS OF OPERATIONS
 
    The following table sets forth unaudited quarterly financial data for each
of the eight fiscal quarters in the two years ended May 31, 1998. The Company
believes that this information includes all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of such
quarterly information when read in conjunction with the Company's Consolidated
Financial Statements. The operating results for any quarter are not necessarily
indicative of the results for any future period.
 
                                 QUARTERLY DATA
                      (IN THOUSANDS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                             FISCAL YEAR ENDED MAY 31, 1997                   FISCAL YEAR ENDED MAY 31, 1998
                                   --------------------------------------------------  --------------------------------------------
                                   1ST QTR(1)   2ND QTR(1)     3RD QTR      4TH QTR     1ST QTR     2ND QTR     3RD QTR    4TH QTR
                                   -----------  -----------  -----------  -----------  ---------  -----------  ---------  ---------
<S>                                <C>          <C>          <C>          <C>          <C>        <C>          <C>        <C>
Net revenues.....................   $   4,842    $   6,718    $   8,803    $   9,416   $   6,228   $   9,312   $  12,701  $  13,673
Income (loss) from operations....        (284)         371        2,699        2,466        (526)        768       3,115      3,321
Income (loss) before
  extraordinary item.............        (333)        (714)         935          810        (962)        214       1,778      1,833
Net income (loss)................   $    (333)   $    (714)   $     935    $     810   $    (962)  $    (746)  $   1,778  $   1,833
Basic income (loss) per share
  before extraordinary item(2)...                             $    0.13    $    0.12   $   (0.13)  $    0.02   $    0.17  $    0.17
Basic income (loss) per
  share(2).......................                             $    0.13    $    0.12   $   (0.13)  $   (0.08)  $    0.17  $    0.17
Diluted income (loss) per share
  before extraordinary item(2)...                             $    0.12    $    0.10         N/A   $    0.02   $    0.16  $    0.17
Diluted income (loss) per
  share(2).......................                             $    0.12    $    0.10         N/A   $   (0.07)  $    0.16  $    0.17
</TABLE>
 
------------------------
 
(1) Includes financial data of the Predecessor from June 1, 1996 through October
    8, 1996, the date the Company acquired the Predecessor.
 
(2) Income per share information is not presented for first and second quarter
    1997 as the amounts are not considered meaningful due to the minimal number
    of outstanding shares and the S Corporation election of the Predecessor.
 
                                       30
<PAGE>
SEASONALITY IN RESULTS OF OPERATIONS
 
    The Company experiences seasonality in its results of operations primarily
as a result of changes in the level of student enrollments. While the Company
enrolls students throughout the year, the Company's first and second fiscal
quarter enrollments and related revenues generally are lower than the third and
fourth fiscal quarters due to traditionally lower student enrollment levels in
the summer terms (the first fiscal quarter is comprised of the Summer I term and
one-half of the Summer II term; the second fiscal quarter is comprised of
one-half of the Summer II term and two-thirds of the Fall term). First and
second fiscal quarter costs and expenses historically are higher as a percentage
of net revenues as a result of certain fixed costs which are not significantly
affected by the seasonal first and second fiscal quarter declines in net
revenues.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    EduTrek finances its operating activities and capital requirements,
including debt repayments, principally from cash provided by operating
activities, borrowings under the NationsBank Credit Agreement (the "Credit
Agreement"), and cash proceeds from the initial public offering. The Credit
Agreement provides that, beginning on October 1, 1997, the maximum permitted
borrowings is $1.75 million and on October 1, 1998, the maximum permitted
borrowings is to be reduced to $1.0 million. Amounts outstanding bear interest
at 9.5%. EduTrek has generated positive cash flow from operations over the last
three fiscal years. Cash flow from operations was $1.4 million and $2.7 million
for fiscal 1997 and 1998, respectively. Fiscal 1997 includes the operations of
AIU from October 8, 1996. EduTrek's principal sources of funds as of May 31,
1998 were cash and equivalents of $5.8 million and available borrowings of $1.75
million under the Credit Agreement.
 
    At May 31, 1998, EduTrek had no outstanding borrowings under the Credit
Agreement. The Credit Agreement is renewable annually and any amounts borrowed
are payable upon its termination in October 1, 1999.
 
    Historically, EduTrek's investing activity has primarily consisted of
capital asset purchases. Capital expenditures, excluding capital leases, totaled
approximately $1.4 million, $681,000 and $4.1 million for fiscal 1996, 1997 and
1998. The increase in capital expenditures was principally due to the increase
in the number of locations and to curriculum licensing costs associated with
this expansion.
 
    Total purchases of property, plant and equipment for the year ended May 31,
1999 are expected to range from $4.5 million to $5.5 million. The increase from
1998 is due to: (1) the opening of several new campuses; (2) hardware and
software costs related to the installation of a new management information
system; (3) improvements to EduTrek's computer facilities and telecommunications
equipment at the corporate level; (4) investments in computer technology to
support AIU's information technology curriculum; and (5) increases in normal
recurring capital expenditures due to the overall increases in student and
employment levels resulting from the growth of the business. In addition,
curriculum development costs are not expected to exceed $5.5 million for the
year ended May 31, 1999, including a $900,000 per-site license fee payable to
ITI and additional staff dedicated to curriculum development. Start-up costs are
expected to be no greater than $1.0 million for fiscal 1999, as compared to
$240,000 for fiscal 1998, due to recent and planned campus expansion. EduTrek
expects to fund these capital expenditures for new campuses through cash from
operations and a proposed amendment to the Credit Agreement, which is currently
under negotiation and will increase the Company's borrowing capacity.
 
    The DOE requires that Title IV program funds collected by an institution for
unbilled tuition be kept in a separate cash or cash equivalent account until the
students are billed for the portion of their program related to these funds. In
addition, all funds transferred to EduTrek through electronic funds transfer
programs are held in a separate, cash account until certain conditions are
satisfied. As of May 31, 1998, EduTrek had approximately $220,000 in these
separate accounts to comply with these requirements. These
 
                                       31
<PAGE>
funds generally remain in these separate accounts for an average of 60 to 75
days from the date of collection. These restrictions on cash have not affected
EduTrek's ability to fund daily operations.
 
    On September 29, 1997, EduTrek completed its initial public offering. Net
proceeds from the offering were approximately $34.6 million. A large portion of
the proceeds were used to repay in full the outstanding principal and interest
under the Term Loan, Subordinate Debt and Revolving Loan incurred with the
acquisition of the American European Corporation.
 
YEAR 2000 COMPLIANCE
 
    Some of the Company's computer information systems are not currently
configured to recognize the year 2000 in the two digit date field used by such
system. The Company is currently implementing a new centralized information
system to integrate its operations and financial data including admissions,
financial aid, student services, placement services, and default management. The
new system is designed to properly recognize the year 2000 in the two digit date
field. The Company anticipates that the information system will be fully
operational by the end of fiscal 1999 and that it will require a total of
approximately $2 million in fiscal 1998 and fiscal 1999 to develop and implement
this integrated information system although there can be no assurance that the
new system will be implemented on a timely basis or the total expenditures will
not exceed $2 million. Management does not anticipate that the expenditure of
such funds to implement the new computer system will have a material impact on
the Company's results of operations, liquidity, or capital resources. In the
event this information system is not implemented in a timely fashion, management
will evaluate other available options to revise its computer programs, as
necessary, for the effect of the year 2000 problem including, without
limitation, relying on manual record keeping until full compliance is achieved.
 
EFFECT OF INFLATION
 
    The Company does not believe its operations have been materially affected by
inflation.
 
ACCOUNTING PRONOUNCEMENTS
 
    In 1997 the Financial Accounting Standards Board issued SFAS 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." These statements, which are effective for
fiscal years beginning after December 15, 1997, expand or modify disclosures and
will have no impact on the Company's consolidated financial position, results of
operations, or cash flows.
 
    The Company adopted SFAS 128, "Earnings per Share," during fiscal year 1998.
In accordance with SFAS 128, the Company has presented both basic and diluted
per share amounts in the 1998 and 1997 statements of operations presented.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
    No response is required to this item.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Independent Auditors' Report...............................................................................          33
Consolidated Balance Sheets................................................................................          34
Consolidated Statements of Operations......................................................................          35
Consolidated Statements of Changes in Shareholders' Equity.................................................          36
Consolidated Statements of Cash Flows......................................................................          37
Notes to Consolidated Financial Statements.................................................................          38
</TABLE>
 
                                       32
<PAGE>
INDEPENDENT AUDITORS' REPORT
 
Board of Directors of EduTrek International, Inc.:
 
    We have audited the accompanying consolidated balance sheets of EduTrek
International, Inc. (the "Company") and its subsidiaries as of May 31, 1998 and
1997 and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for the year ended May 31, 1998 and the
period from July 1, 1996 (date of formation) to May 31, 1997. We also audited
the accompanying consolidated statements of operations, changes in shareholders'
equity, and cash flows of American European Corporation and subsidiaries (the
Predecessor) for the period from June 1, 1996 to October 8, 1996 and for the
year ended May 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries as of May 31, 1998 and 1997 and the results of their operations and
their cash flows for the year ended May 31, 1998 and for the period from July 1,
1996 (date of formation) to May 31, 1997 and the results of operations and cash
flows of the Predecessor for the period from June 1, 1996 to October 8, 1996 and
for the year ended May 31, 1996 in conformity with generally accepted accounting
principles.
 
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 7, 1998
 
                                       33
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                    MAY 31,
                                                                                              --------------------
                                                                                                1998       1997
                                                                                              ---------  ---------
<S>                                                                                           <C>        <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................................................  $   5,843  $     678
  Accounts receivable--net of allowance of $190 and $33, respectively.......................      5,402        272
  Deferred income taxes.....................................................................        130         95
  Other.....................................................................................        759        224
                                                                                              ---------  ---------
Total current assets........................................................................     12,134      1,269
Property, plant, and equipment--net of accumulated depreciation.............................      5,729      4,737
Goodwill--net of accumulated amortization of $1,704 and $696, respectively..................     38,957     39,965
Deferred financing costs--net of accumulated amortization of $165...........................     --          1,156
Other.......................................................................................      1,465        544
                                                                                              ---------  ---------
                                                                                              $  58,285  $  47,671
                                                                                              ---------  ---------
                                                                                              ---------  ---------
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable..........................................................................  $   2,508  $   1,501
  Accrued expenses..........................................................................        721      1,167
  Value-added tax payable...................................................................        157        606
  Unearned revenues.........................................................................      6,839      3,997
  Income taxes payable......................................................................      1,616      1,756
  Current maturities--long-term debt........................................................        574      2,014
                                                                                              ---------  ---------
Total current liabilities...................................................................     12,415     11,041
Long-term debt--less current maturities.....................................................        667     27,649
Due to affiliates...........................................................................     --            412
Deferred rent...............................................................................        849        692
Other liabilities...........................................................................         60     --
Commitments and contingencies
 
SHAREHOLDERS' EQUITY
Common stock, Class A voting, one vote per share, without par value, 40,000,000 shares
  authorized, 4,335,401 and 665,000, issued and outstanding, respectively...................     36,564      1,287
Common stock, Class B voting, ten votes per share, without par value, 10,000,000 shares
  authorized, 6,293,000 and 6,335,000 issued and outstanding, respectively..................      3,973      4,000
Common stock warrants.......................................................................     --            677
Foreign currency translation................................................................         88        147
Retained earnings...........................................................................      3,669      1,766
                                                                                              ---------  ---------
Total shareholders' equity..................................................................     44,294      7,877
                                                                                              ---------  ---------
                                                                                              $  58,285  $  47,671
                                                                                              ---------  ---------
                                                                                              ---------  ---------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       34
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                             THE COMPANY                     THE PREDECESSOR
                                                  ----------------------------------  ------------------------------
                                                                 PERIOD FROM JULY 1,    PERIOD FROM
                                                                        1996           JUNE 1, 1996
                                                   YEAR ENDED    (DATE OF FORMATION)      THROUGH       YEAR ENDED
                                                  MAY 31, 1998     TO MAY 31, 1997    OCTOBER 8, 1996  MAY 31, 1996
                                                  -------------  -------------------  ---------------  -------------
<S>                                               <C>            <C>                  <C>              <C>
Net revenues....................................    $  41,914         $  23,590          $   6,189       $  26,493
Costs and expenses:
  Cost of education and facilities..............       16,927             9,014              3,256          11,144
  Selling and promotional expenses..............        6,321             2,428              1,335           3,614
  General and administrative expenses...........       10,516             5,468              2,739           6,677
  Acquisition costs.............................          487            --                 --              --
  Amortization of goodwill......................        1,008               696             --              --
  Rents paid to majority stockholders...........       --                --                     49             150
                                                  -------------         -------            -------     -------------
    Total costs and expenses....................       35,259            17,606              7,379          21,585
                                                  -------------         -------            -------     -------------
Income (loss) from campus operations............        6,655             5,984             (1,190)          4,908
Income (loss) from management agreement.........           23               479                (21)            127
                                                  -------------         -------            -------     -------------
Income (loss) from operations...................        6,678             6,463             (1,211)          5,035
Interest expense................................        1,328             2,499                258             730
Other income--net...............................        1,539                20                164             433
                                                  -------------         -------            -------     -------------
Income (loss) before income taxes, minority
  interest, and extraordinary item..............        6,889             3,984             (1,305)          4,738
Provision for income taxes......................       (2,581)           (1,981)            --                (107)
                                                  -------------         -------            -------     -------------
Income (loss) before minority interest and
  extraordinary item............................        4,308             2,003             (1,305)          4,631
Minority interest in earnings of American
  University in Dubai...........................       (1,445)           --                 --              --
                                                  -------------         -------            -------     -------------
Income (loss) before extraordinary item.........        2,863             2,003             (1,305)          4,631
Extraordinary loss less applicable income
  taxes.........................................         (960)           --                 --              --
                                                  -------------         -------            -------     -------------
Net income (loss)...............................    $   1,903         $   2,003          $  (1,305)      $   4,631
                                                  -------------         -------            -------     -------------
                                                  -------------         -------            -------     -------------
Earnings Per Share:
Basic income per share before extraordinary
  item..........................................    $    0.30         $    0.29
Basic net income per share......................    $    0.20         $    0.29
 
Diluted income per share before extraordinary
  item..........................................    $    0.28         $    0.26
Diluted net income per share....................    $    0.19         $    0.26
 
Average shares outstanding......................        9,527             7,000
Dilutive effect:
  Warrants......................................          240               569
  Options.......................................          441            --
                                                  -------------         -------
                                                          681               569
                                                  -------------         -------
Average shares outstanding assuming dilution....       10,208             7,569
                                                  -------------         -------
                                                  -------------         -------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       35
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                     FOREIGN
                                                                                                    CURRENCY
                                                          COMMON       PAID-IN    STOCKHOLDERS'    TRANSLATION     ACCUMULATED
PREDECESSOR                                                STOCK       CAPITAL        NOTES        ADJUSTMENT        DEFICIT
------------------------------------------------------  -----------  -----------  -------------  ---------------  -------------
<S>                                                     <C>          <C>          <C>            <C>              <C>
Balance--May 31, 1995.................................   $       1    $     434     $  (3,229)      $      67       $  (3,440)
Distribution to shareholders..........................                                                                 (4,500)
Capital contributed by stockholder....................                       43
Net income............................................                                                                  4,631
Foreign currency translation..........................                                                     35
Notes receivable and advances from shareholders.......                                 (1,330)
                                                             -----        -----   -------------           ---     -------------
Balance--May 31, 1996.................................           1          477        (4,559)            102          (3,309)
Distribution to shareholders..........................                                                                 (1,890)
Capital contributed by stockholder....................                                                                  1,239
Net loss..............................................                                                                 (1,305)
Foreign currency translation..........................                                                    (18)
Notes receivable and advances from shareholders.......                                 (1,016)
                                                             -----        -----   -------------           ---     -------------
Balance--October 8, 1996..............................   $       1    $     477     $  (5,575)      $      84       $  (5,265)
                                                             -----        -----   -------------           ---     -------------
                                                             -----        -----   -------------           ---     -------------
 
<CAPTION>
 
PREDECESSOR                                               TOTAL
------------------------------------------------------  ---------
<S>                                                     <C>
Balance--May 31, 1995.................................  $  (6,167)
Distribution to shareholders..........................     (4,500)
Capital contributed by stockholder....................         43
Net income............................................      4,631
Foreign currency translation..........................         35
Notes receivable and advances from shareholders.......     (1,330)
                                                        ---------
Balance--May 31, 1996.................................     (7,288)
Distribution to shareholders..........................     (1,890)
Capital contributed by stockholder....................      1,239
Net loss..............................................     (1,305)
Foreign currency translation..........................        (18)
Notes receivable and advances from shareholders.......     (1,016)
                                                        ---------
Balance--October 8, 1996..............................  $ (10,278)
                                                        ---------
                                                        ---------
</TABLE>
<TABLE>
<CAPTION>
                                                    COMMON STOCK--                                                  FOREIGN
                                                   NUMBER OF SHARES            COMMON STOCK          COMPANY       CURRENCY
                                               ------------------------  ------------------------     STOCK       TRANSLATION
COMPANY                                          CLASS A      CLASS B      CLASS A      CLASS B     WARRANTS      ADJUSTMENT
---------------------------------------------  -----------  -----------  -----------  -----------  -----------  ---------------
<S>                                            <C>          <C>          <C>          <C>          <C>          <C>
Issuance of common stock--July 1, 1996.......                    2,240                 $   1,000
Issuance of common stock in connection with
  the acquisition of EduTrek Systems, Inc....         105        1,995
Sale of common stock in connection with
  acquisition of Predecessor.................                    2,100                     3,000
Issuance of common stock in exchange for
  certain fees...............................         350                 $     500
Issuance of warrants in connection with
  acquisition of Predecessor.................                                                       $     677
Issuance of common stock in exchange for
  stock of Predecessor                                210                       787
Foreign currency translation.................                                                                      $     147
Net income...................................
                                               -----------  -----------  -----------  -----------       -----          -----
Balance--May 31, 1997........................         665        6,335        1,287        4,000          677            147
Issuance of common stock net of initial
  public offering costs--September 29,
  1997.......................................       2,733                    34,560
Conversion of warrants to common stock.......         879                       677                      (677)
Conversion of Class B Common Stock to Class A
  Common Stock...............................          42          (42)          27          (27)
Issuance of common stock under stock option
  plan.......................................          16                        13
Foreign currency translation.................                                                                            (59)
Net income...................................
                                               -----------  -----------  -----------  -----------       -----          -----
Balance--May 31, 1998........................       4,335        6,293    $  36,564    $   3,973    $  --          $      88
                                               -----------  -----------  -----------  -----------       -----          -----
                                               -----------  -----------  -----------  -----------       -----          -----
 
<CAPTION>
 
                                                RETAINED
COMPANY                                         EARNINGS      TOTAL
---------------------------------------------  -----------  ---------
<S>                                            <C>          <C>
Issuance of common stock--July 1, 1996.......               $   1,000
Issuance of common stock in connection with
  the acquisition of EduTrek Systems, Inc....   $    (237)       (237)
Sale of common stock in connection with
  acquisition of Predecessor.................                   3,000
Issuance of common stock in exchange for
  certain fees...............................                     500
Issuance of warrants in connection with
  acquisition of Predecessor.................                     677
Issuance of common stock in exchange for
  stock of Predecessor                                            787
Foreign currency translation.................                     147
Net income...................................       2,003       2,003
                                               -----------  ---------
Balance--May 31, 1997........................       1,766       7,877
Issuance of common stock net of initial
  public offering costs--September 29,
  1997.......................................                  34,560
Conversion of warrants to common stock.......                  --
Conversion of Class B Common Stock to Class A
  Common Stock...............................                  --
Issuance of common stock under stock option
  plan.......................................                      13
Foreign currency translation.................                     (59)
Net income...................................       1,903       1,903
                                               -----------  ---------
Balance--May 31, 1998........................   $   3,669   $  44,294
                                               -----------  ---------
                                               -----------  ---------
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       36
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                     THE COMPANY                     THE PREDECESSOR
                                                          ----------------------------------  ------------------------------
                                                                         PERIOD FROM JULY 1,    PERIOD FROM
                                                                            1996 (DATE OF      JUNE 1, 1996
                                                           YEAR ENDED     FORMATION) TO MAY   THROUGH OCTOBER   YEAR ENDED
                                                          MAY 31, 1998        31, 1997            8, 1996      MAY 31, 1996
                                                          -------------  -------------------  ---------------  -------------
<S>                                                       <C>            <C>                  <C>              <C>
OPERATING ACTIVITIES
Net income (loss).......................................    $   1,903         $   2,003          $  (1,305)      $   4,631
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
Extraordinary loss......................................        1,600            --                 --              --
Gain on sale of aircraft................................         (991)           --                 --              --
Depreciation and amortization...........................        2,718             1,626                392           1,087
Bad debt expense........................................          307               126                 69             168
Amortization of loan discount...........................           22               146             --              --
Decrease (increase) in accounts receivable..............       (5,437)            1,334               (192)           (199)
Increase (decrease) in accounts payable and accrued
  liabilities...........................................          561               796               (461)            391
Increase (decrease) in unearned revenues................        2,842            (6,508)             3,135              30
Increase (decrease) in value-added taxes payable........         (449)             (323)               190              13
Increase (decrease) in income taxes payable.............         (140)            1,537             --                 (58)
Other...................................................         (250)              619               (415)           (265)
                                                          -------------         -------            -------     -------------
Net cash provided by operating activities...............        2,686             1,356              1,413           5,798
 
INVESTING ACTIVITIES
Additions to pre-opening and curriculum development
  costs.................................................       (1,440)           --                 --              --
Purchases of property, plant, and equipment.............       (2,681)             (681)              (118)         (1,434)
Sale of property, plant, and equipment..................        2,076
Acquisition of Predecessor..............................       --               (30,747)            --              --
Net increase in note receivable from related parties and
  former stockholders...................................       --                --                   (170)         (1,228)
                                                          -------------         -------            -------     -------------
Net cash used in investing activities...................       (2,045)          (31,428)              (288)         (2,662)
 
FINANCING ACTIVITIES
Proceeds from issuance of common stock..................       34,560             4,000             --              --
Proceeds from long-term borrowings......................        4,043            29,117                750           2,058
Principal repayments on long-term debt..................      (33,347)              (26)              (234)           (893)
Principal payments under capital lease obligations......         (346)              (52)               (94)           (148)
Other...................................................         (400)           --                    120          --
Net receipts (payments)--line-of-credit.................       --                  (938)               151              (2)
Distributions to stockholders...........................       --                --                 (1,890)         (4,500)
Capital contribution from stockholder...................       --                --                 --                  43
Increase in deferred loan costs.........................       --                (1,321)            --              --
                                                          -------------         -------            -------     -------------
Net cash provided by (used in) financing activities.....        4,510            30,780             (1,197)         (3,442)
Effect of exchange rate changes on cash.................           14               (30)               (12)              8
                                                          -------------         -------            -------     -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....        5,165               678                (84)           (298)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........          678            --                    453             751
                                                          -------------         -------            -------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................    $   5,843         $     678          $     369       $     453
                                                          -------------         -------            -------     -------------
                                                          -------------         -------            -------     -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................    $   1,567         $   1,690          $     295       $     730
Income taxes............................................        2,047                45             --                 107
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       37
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 COMPANY--AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997; PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND FOR THE YEAR ENDED MAY 31,
                                      1996
 
NOTE 1--ORGANIZATION AND BUSINESS
 
    ORGANIZATION--EduTrek International, Inc. (the "Company"), through American
InterContinental University ("AIU"), is a leading provider of career-oriented,
internationally focused higher education programs. The Company operates campuses
in Atlanta, Los Angeles, London, and Dubai, United Arab Emirates, with curricula
focusing on international business, multimedia communications, design, and
information technology. AIU is accredited by the Commission on Colleges of the
Southern Association of Colleges and Schools.
 
    ACQUISITION--The Company, formerly known as E Holdings, Inc., was organized
by Mr. Steve Bostic, the Company's current Chairman and Chief Executive Officer,
on July 1, 1996 for the purpose of acquiring all of the capital stock of EduTrek
Systems, Inc. ("EduTrek Systems") (a company also controlled by Mr. Bostic),
American Intercontinental University, Inc. ("AIU, Inc."), formerly known as
American European Corporation, and American College in London, Ltd. U.S., as
well as 85% of the membership interests of American European Middle East
Corporation, L.L.C ("AEMEC" which, together with AIU, Inc. and American College
in London, Ltd., U.S. are collectively referred to herein as the "Predecessor").
On October 8, 1996, the Company acquired the capital stock and membership
interests of the Predecessor which, prior to its acquisition, operated The
American College, now known as AIU. The purchase price for the acquisition of
the Predecessor was approximately $38.0 million. Also on October 8, 1996, the
Company acquired all of the issued and outstanding capital stock of EduTrek
Systems for an aggregate of 105,000 shares of Class A Common Stock and 1,995,000
shares of Class B Common Stock.
 
    The Company did not acquire the Predecessor until October 8, 1996.
Accordingly, the financial statements of the Company for the period from July 1,
1996 through October 7, 1996 do not include the Predecessor. EduTrek Systems is
included in the financial statements of the Company from July 1, 1996, the date
of the Company's formation, in a manner similar to a pooling of interests. The
results of operations of the Company include losses arising from the operation
of EduTrek Systems of approximately $380,000 for the period from July 1, 1996 to
May 31, 1997. Financial information for EduTrek Systems is not included prior to
July 1, 1996.
 
    The Company's acquisition of the Predecessor has been accounted for as a
purchase. Accordingly, the purchase price has been allocated to the
Predecessor's identifiable assets and liabilities based on estimated fair values
at the acquisition date. The excess of the purchase price over the fair value of
the Predecessor's identifiable net assets has been classified as goodwill. The
purchase price, net of noncash items totaling approximately $1.5 million, of the
Predecessor has been allocated as follows (in millions):
 
<TABLE>
<S>                                                    <C>
Current assets.......................................  $     3.9
Property, plant, and equipment.......................        3.1
Goodwill.............................................       40.4
Other assets.........................................        2.1
Liabilities assumed..................................       13.0
</TABLE>
 
                                       38
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 COMPANY--AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997; PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND FOR THE YEAR ENDED MAY 31,
                                      1996
 
NOTE 1--ORGANIZATION AND BUSINESS (CONTINUED)
    The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and the results of the
acquisition of the Predecessor for the period from July 1, 1996 to May 31, 1997
as if the acquisition had occurred as of July 1, 1996:
 
<TABLE>
<S>                                              <C>
Net revenue....................................  $27,926,000
Net income.....................................  $  276,000
Basic income per share.........................  $     0.04
Diluted income per share.......................  $     0.03
</TABLE>
 
    PUBLIC OFFERING--On September 29, 1997, the Company completed an initial
public offering of 2,990,000 shares of its Class A Common Stock, of which
2,732,890 shares were sold by the Company, including 390,000 shares sold as the
result of the Underwriter's exercise of an over-allotment option, at $14 per
share, which after underwriting discounts and commissions and payment of
offering expenses raised $34,560,000 for the Company. The Company used
$28,571,000 of the proceeds to retire long-term debt and related accrued and
unpaid interest incurred in connection with the acquisition, $620,000 to repay
short-term indebtedness outstanding under the Revolving Loan, and the remaining
net proceeds of $5,369,000 being used for general corporate purposes, including
increased working capital requirements of the Company resulting from its growth.
 
    OTHER--The Company effected a 7 for 1 stock split in June 1997. All share
and per share data information in the accompanying 1998 and 1997 consolidated
financial statements have been restated to reflect the stock split as if such
had occurred as of the earliest period presented.
 
    In June 1997, one warrant holder exercised its option to purchase 257,110
shares of Class A Common Stock at an exercise price of $.0014 per share. In
September 1997, another warrant holder exercised its option to purchase 444,318
shares of Class A Common Stock at the same exercise price.
 
    In December 1997, one warrant holder exercised its option to purchase
177,723 shares of Class A Common Stock at an exercise price of $.0014 per share.
There are no remaining warrants outstanding.
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
 
    PRINCIPLES OF CONSOLIDATION--Effective September 1, 1997, AEMEC entered into
an agreement with Middle East Colleges, Ltd. ("MEC") to modify certain aspects
of their joint venture agreement relating to the operation of the American
University in Dubai ("Dubai"). These modifications give effective control of the
joint venture to AEMEC as defined in Statement of Financial Accounting Standard
("SFAS") 94, "Consolidation of All Majority-Owned Subsidiaries," and require
consolidation of the financial statements of Dubai with those of the Company as
of September 1, 1997. Prior to this date, AEMEC's portion of the net income from
Dubai had been reported in the income statement of the Company as "income from
management agreement." Effective September 1, 1997, the Company records MEC's
ownership interest in the joint venture of 49.9% as minority interest in the
consolidated financial statements.
 
    The consolidated financial statements include the accounts of the Company,
AIU, Inc., the American College in London Ltd. U.S., AEMEC, MEC, and the
American College in London, Ltd., a registered
 
                                       39
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 COMPANY--AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997; PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND FOR THE YEAR ENDED MAY 31,
                                      1996
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
British corporation that is wholly owned by The American College in London, Ltd.
U.S. Significant intercompany accounts and transactions have been eliminated in
consolidation.
 
    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.
 
    CASH AND CASH EQUIVALENTS--The Company considers cash equivalents to be all
demand deposits and highly liquid unrestricted investments with an original
maturity of three months or less which can be readily converted to cash on
demand without penalty.
 
    Cash at May 31, 1998 and 1997 includes approximately $218,000 and $442,000,
respectively, which is restricted to expenditures for scholarships and other
awards to students. A corresponding liability has been recorded for these funds
until they are disbursed.
 
    PROPERTY AND EQUIPMENT--Property and equipment is stated at cost less
accumulated depreciation. Prior to its sale, the aircraft was depreciated over
10 years on the double declining balance method (see note 4). Depreciation for
all other property and equipment is calculated on a straight-line basis over the
estimated useful lives of the assets.
 
    INTANGIBLE ASSETS--Goodwill is amortized over 40 years using the
straight-line method.
 
    CURRICULUM DEVELOPMENT COSTS--The Company's policy is to capitalize direct
costs incurred in the production of and improvements to educational courses.
These direct costs, which are included in other assets, primarily include
salaries for staff directly engaged in the curriculum development process and
are amortized over a three year period beginning in the month the courses are
placed into service.
 
    PRE-OPENING COSTS--The Company's policy is to capitalize all pre-opening
costs, except those costs
related to advertising, prior to the commencement of a new educational program.
Pre-opening costs are amortized over twelve months upon commencement of a new
program. American Institute of Certified Public Accountants Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities," (SOP 98-5) will
require the Company to expense all pre-opening costs as incurred and to write
off any pre-opening costs included on the balance sheet beginning in June 1999.
 
    LICENSES--The Company capitalizes license fees and then amortizes the fees
over the life of the agreement. During the year ended May 31, 1998, the Company
capitalized and began amortizing a $450,000 license fee paid to ITI Education
Corporation ("ITI") for the use of an information technology curriculum in the
Masters of Information Technology program in Atlanta, GA. The amortization
period is 10 years, the life of the agreement. Also during fiscal year 1998, the
Company entered into a 10-year license agreement with ITI Learning Systems, Inc.
(a wholly-owned subsidiary of ITI) for the use of an information technology
curriculum at subsequent locations. The cost of this license was $750,000 which
was paid in July 1998. The license fee for subsequent locations is $900,000 per
location and will be amortized over 10 years.
 
                                       40
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 COMPANY--AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997; PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND FOR THE YEAR ENDED MAY 31,
                                      1996
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    IMPAIRMENT OF LONG-LIVED ASSETS--All long-lived assets are evaluated for
impairment in accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Under this
method, the Company is required to review long-lived assets and certain
identifiable intangibles to be held and used for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. All long-lived assets to be disposed of will be reported at the
lower of carrying amount or fair value less cost to sell.
 
    REVENUE RECOGNITION--Revenue is recognized when all educational related
services have been performed. The Company records accounts receivable and
related unearned revenue when students are billed for tuition, fees, and dorm
payments.
 
    UNEARNED REVENUES--Unearned revenues represent the portion of student
tuition, fees, and dorm payments received in advance of services being
performed.
 
    DEFERRED RENT--The Company records rent expense under operating leases with
escalating rent payments by amortizing the total operating lease obligation over
the lease term on a straight-line basis.
 
    INCOME TAXES--Deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying currently enacted statutory rates to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. The effect on deferred taxes of a change in
tax rates is recognized in the results of operations in the period that includes
the enactment date.
 
    EARNINGS PER SHARE--Basic net income per share is computed by dividing net
income by the weighted-average number of shares outstanding. Diluted net income
per share includes the dilutive effect of stock options and warrants.
 
    NEW ACCOUNTING PRONOUNCEMENTS--In 1997 the Financial Accounting Standards
Board issued SFAS 130, "Reporting Comprehensive Income," and SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information." These
statements, which are effective for fiscal years beginning after December 15,
1997, expand or modify disclosures and will have no impact on the Company's
consolidated financial position, results of operations, or cash flows.
 
    The Company adopted SFAS 128, "Earnings per Share," during fiscal year 1998.
In accordance with SFAS 128, the Company has presented both basic and diluted
per share amounts in the 1998 and 1997 statements of operations presented. SFAS
128 is effective for annual financial statements for periods ending after
December 15, 1997 and requires the Company to change the method previously used
to compute earnings per share and to restate all prior periods. As such, the
Company has conformed the 1998 and 1997 reported amounts to the provisions of
SFAS 128.
 
    FOREIGN CURRENCY TRANSLATION--Assets and liabilities of the Company's United
Kingdom operations are translated from Pounds Sterling into U.S. dollars at the
rate of currency exchange at the end of the fiscal period. Revenues and Expenses
are translated at average monthly exchange rates prevailing during the period.
Resulting translation differences are recognized as a component of shareholders'
equity.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS--Management has reviewed the various
assets and liabilities of the Company in accordance with SFAS 107, "Disclosures
About Fair Values of Financial Instruments," and has
 
                                       41
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 COMPANY--AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997; PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND FOR THE YEAR ENDED MAY 31,
                                      1996
 
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
concluded that substantially all of the Company's financial instruments have
terms such that their book value approximates fair value.
 
    RECLASSIFICATIONS--Certain prior period amounts have been reclassified to
conform with current year presentation.
 
NOTE 3--OTHER CURRENT ASSETS
 
    Other current assets at May 31, 1998 and 1997 consist of the following:
 
<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Prepaid expenses...............................................   $   511,191    $    89,638
Pre-opening costs..............................................       212,120        --
Other..........................................................        36,058        134,186
                                                                 -------------  -------------
                                                                  $   759,369    $   223,824
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>
 
NOTE 4--PROPERTY, PLANT, AND EQUIPMENT
 
    Property, plant, and equipment at May 31, 1998 and 1997 is summarized as
follows:
 
<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Furniture, fixtures, and equipment.............................   $ 4,396,024    $ 2,325,359
Leasehold improvements.........................................     1,895,681      1,061,304
Library and textbooks..........................................       550,931        605,808
Aircraft.......................................................       --           1,510,455
Other..........................................................       256,615        --
                                                                 -------------  -------------
                                                                    7,099,251      5,502,926
Less accumulated depreciation and amortization.................     1,370,437        765,715
                                                                 -------------  -------------
                                                                  $ 5,728,814    $ 4,737,211
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>
 
    A subsidary of the Company sold the aircraft during the year ended May 31,
1998. The gain on the sale of approximately $991,000 is included in other income
 
    Depreciation expense for property, plant, and equipment was $1,275,179,
$765,715, $1,224,711, and $390,983 for the year ended May 31, 1998, the period
from July 1, 1996 to May 31, 1997, the year ended May 31, 1996, and the period
from June 1, 1996 to October 8, 1996, respectively.
 
                                       42
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 5--LONG-TERM DEBT
 
    Long-term debt at May 31, 1998 and 1997 is summarized as follows:
 
<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Senior Credit Agreement--Term Loan (net of debt discount of
  $154,263)....................................................       --        $  20,845,737
Subordinate Loan (net of debt discount of $376,822)............       --            6,623,178
Loan Secured by Aircraft.......................................       --            1,565,000
Capital Lease Obligations......................................   $   955,502         603,762
Directors and Officers Insurance and other.....................       285,817          25,682
                                                                 -------------  -------------
                                                                    1,241,319      29,663,359
Less current portion...........................................       573,954       2,014,120
                                                                 -------------  -------------
                                                                  $   667,365   $  27,649,239
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>
 
    At May 31, 1998 and 1997, the Company had no amounts borrowed against its
$3.0 and $2.5 million lines of credit, respectively.
 
    Future maturities of long-term debt excluding capital lease obligations for
years ending May 31 are as follows:
 
<TABLE>
<S>                                                 <C>
1999..............................................  $ 238,128
2000..............................................     47,689
                                                    ---------
                                                    $ 285,817
                                                    ---------
                                                    ---------
</TABLE>
 
    The extraordinary loss of $960,000 net of taxes ($1,600,000 less the related
income tax effect of $640,000) is from the retirement of the Company's term loan
with NationsBank, N.A. and its subordinate debt with Stratford Capital Partners,
L.P. and GMM Investors SBIC, L.P. The funds used to retire the debt represent a
portion of the proceeds from the sale of 2,990,000 shares of the Company's Class
A Common Stock.
 
NOTE 6--EMPLOYEE BENEFIT PLAN
 
    The Company maintains a qualified 401(k) Plan available to full-time
employees who meet the Plan's eligibility requirements. This Plan, which is a
defined contribution plan, contains a profit sharing component, with
tax-deferred contributions to each employee based on an allocated portion of a
discretionary annual contribution. Company contributions to the Plan for
matching of employee contributions were approximately $77,000, $51,000, and
$44,000 for the year ended May 31, 1998, the period from July 1, 1996 to May 31,
1997, and the year ended May 31, 1996, respectively.
 
NOTE 7--LEASES
 
    The Company leases office and classroom space, dormitories, and various
items of equipment under lease agreements with varying expiration dates through
January 2009. Many of the lease agreements contain renewal clauses with various
terms; however, none of the leases contain any significant restrictions.
 
                                       43
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 7--LEASES (CONTINUED)
Several of the lease agreements contain provisions for rent escalations which
are either tied to the Consumer Price Index or require a specific percentage
increase annually. These leases are classified as operating leases.
 
    The Company also leases various other assets under agreements which are
classified as capital leases. The net book value of these assets at May 31, 1998
and 1997 was as follows:
 
<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Furniture, fixtures, and equipment.............................   $ 1,453,924    $   895,076
Less accumulated amortization..................................       291,354         52,226
                                                                 -------------  -------------
                                                                  $ 1,162,570    $   842,850
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>
 
    For the years ending May 31, future minimum lease payments and present value
of net minimum lease payments under capital leases and future minimum lease
payments under noncancellable operating leases are as follows:
 
<TABLE>
<CAPTION>
                                                                     CAPITAL       OPERATING
                                                                      LEASES        LEASES
                                                                   ------------  -------------
<S>                                                                <C>           <C>
Year ending May 31, 1999.........................................  $    418,175  $   3,722,046
2000.............................................................       311,341      4,153,135
2001.............................................................       158,944      3,833,748
2002.............................................................       103,246      3,819,331
2003.............................................................       102,911      3,683,804
Thereafter.......................................................        51,239     21,002,529
                                                                   ------------  -------------
  Total minimum lease payments...................................     1,145,856  $  40,214,593
                                                                                 -------------
                                                                                 -------------
Less amount representing interest................................       190,354
                                                                   ------------
  Present value of net minimum lease payments....................  $    955,502
                                                                   ------------
                                                                   ------------
</TABLE>
 
    Rent expense incurred for the year ended May 31, 1998, the period from July
1, 1996 to May 31, 1997, the period from June 1, 1996 to October 8, 1996, and
the year ended May 31, 1996 under all operating leases was approximately
$5,444,000, $3,101,000, $1,337,000, and $3,997,800, respectively.
 
NOTE 8--CONSULTING AND EMPLOYMENT AGREEMENTS
 
    In connection with the acquisition of the Predecessor, the Company entered
into consulting and employment agreements with the selling shareholders and
other officers of American European. The Company also entered into an employment
agreement with an officer of the Company. For the years ended May 31, 1998 and
1997, such payments, which were charged to operations, totaled $716,000 and
 
                                       44
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 8--CONSULTING AND EMPLOYMENT AGREEMENTS (CONTINUED)
$705,000, respectively. Future payments under these agreements for the years
ending May 31 are as follows:
 
<TABLE>
<S>                                                 <C>
1999..............................................  $ 642,000
2000..............................................    593,000
2001..............................................    525,000
2002..............................................    258,000
</TABLE>
 
    Of the above amounts, approximately $633,000 of future payments relate to a
continuing officer of the Company. Amounts paid to such officer totaled
approximately $165,000 and $27,500 for the years ended May 31, 1998 and 1997,
respectively.
 
NOTE 9--INCOME TAXES
 
    Income tax expense for the year ended May 31, 1998 and for the period from
July 1, 1996 to May 31, 1997 consists of (in thousands):
 
<TABLE>
<CAPTION>
                                                                               1998       1997
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Current:
  Federal..................................................................  $   2,238  $   1,423
  State....................................................................        480        333
                                                                             ---------  ---------
    Total current provision................................................      2,718      1,756
 
Deferred:
  Federal..................................................................       (117)       194
  State....................................................................        (20)        31
                                                                             ---------  ---------
    Total deferred provision...............................................       (137)       225
                                                                             ---------  ---------
    Total provision........................................................  $   2,581  $   1,981
                                                                             ---------  ---------
                                                                             ---------  ---------
</TABLE>
 
    The following is a reconciliation of the statutory tax rate to the Company's
effective tax rate for the year ended May 31, 1998 and for the period from July
1, 1996 to May 31, 1997:
 
<TABLE>
<CAPTION>
                                                                             1998       1997
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Statutory rate...........................................................     34.00%     34.00%
State income taxes (net of federal benefit)..............................      4.40%      6.03%
Permanent differences:
  Nondeductible goodwill.................................................      4.97%      9.69%
  Nontaxable foreign earnings of minority interest.......................     (5.90%)
                                                                           ---------  ---------
    Effective rate.......................................................     37.47%     49.72%
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>
 
                                       45
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 9--INCOME TAXES (CONTINUED)
    The effects of temporary differences which gave rise to the deferred tax
asset and liability at May 31, 1998 and 1997, respectively, are as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                               1998                        1997
                                                    --------------------------  --------------------------
                                                      CURRENT      LONG-TERM      CURRENT      LONG-TERM
                                                    -----------  -------------  -----------  -------------
<S>                                                 <C>          <C>            <C>          <C>
Deferred tax assets arising from:
  Unearned revenue................................   $      94                   $     112
  Deferred rent...................................                 $     376                   $     339
  Other...........................................          73           121            13            56
Deferred tax liabilities arising from:
  Other...........................................         (37)                        (30)
                                                         -----         -----         -----         -----
                                                     $     130     $     497     $      95     $     395
                                                         -----         -----         -----         -----
                                                         -----         -----         -----         -----
</TABLE>
 
    As a result of its election to be treated as an S Corporation for income tax
purposes, the Predecessor has not been subject to federal and most state income
taxes. Accordingly, the historical provision for income taxes includes income
taxes only for those jurisdictions that do not recognize S Corporation status.
Distributions in the form of cash dividends have been made principally to assist
the shareholders with their income tax obligations arising from the
Predecessor's S Corporation status. Such distributions amounted to $1,889,694
and $4,500,000 for the period from June 1, 1996 through October 8, 1996 and for
the year ended May 31, 1996, respectively.
 
    Significant components of the provision for income taxes for the period from
June 1, 1996 to October 8, 1996 and the year ended May 31, 1996 are as follows
(in thousands):
 
<TABLE>
<CAPTION>
                                                           PERIOD FROM JUNE 1,    YEAR ENDED MAY
                                                         1996 TO OCTOBER 8, 1996     31, 1996
                                                         -----------------------  ---------------
<S>                                                      <C>                      <C>
Domestic...............................................         $  --                $      23
Foreign................................................            --                       84
                                                                   ------                -----
                                                                $  --                $     107
                                                                   ------                -----
                                                                   ------                -----
</TABLE>
 
NOTE 10--U.S. AND FOREIGN OPERATIONS
 
    The Company's operations are located in the United States, the United
Kingdom, and Dubai, United Arab Emirates. The Company's operations in Dubai
represented management fees from a management agreement through August 1997 and
consolidated operations from September 1, 1997 through May 31, 1998 (see Note 2
on Consolidation). Net revenues and income (loss) from operations by geographic
area for fiscal year 1998 and for the period from October 8, 1996 (date of
acquisition of the Predecessor) to
 
                                       46
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 10--U.S. AND FOREIGN OPERATIONS (CONTINUED)
May 31, 1997 and for the year ended May 31, 1996 and identifiable assets by
geographic area at May 31, 1998, 1997 and 1996 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                 1998       1997       1996
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Net revenues:
  United States..............................................  $  22,453  $  13,437  $  14,630
  United Kingdom.............................................     14,595     10,153     11,863
  Dubai, UAE.................................................      4,866     --         --
  Home Office................................................     --         --         --
                                                               ---------  ---------  ---------
    Total....................................................  $  41,914  $  23,590  $  26,493
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
Income (loss) from operations:
  United States..............................................  $   8,089  $  10,533  $   5,986
  United Kingdom.............................................      5,873      4,385      4,888
  Dubai, UAE.................................................      2,257        479        127
  Home Office................................................     (9,541)    (8,934)    (5,966)
                                                               ---------  ---------  ---------
    Total....................................................  $   6,678  $   6,463  $   5,035
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
Identifiable assets:
  United States..............................................  $  55,241  $  46,141  $   5,690
  United Kingdom.............................................      2,216      1,530      1,563
  Dubai, UAE.................................................        828     --         --
  Home Office................................................     --         --         --
                                                               ---------  ---------  ---------
    Total....................................................  $  58,285  $  47,671  $   7,253
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>
 
NOTE 11--STOCK OPTION PLANS
 
    The Company has a stock incentive plan (the "Plan") for key employees and
directors under which it may grant incentive stock options, nonqualified stock
options, stock appreciation rights, restricted stock, or performance awards of
Class A Common Stock or cash. The maximum number of Class A Common Stock which
can be issued through awards granted under the Plan is 829,388.
 
    Incentive stock options granted under the Plan expire on the tenth
anniversary of the date the option is granted or the fifth anniversary of the
date the option is granted in the event that the individual grantee owns more
than 10% of the total voting power of all classes of stock of the Company.
 
    In fiscal year 1998, fixed stock options to purchase an aggregate of 299,644
shares of Class A Common Stock were granted to certain officers and employees of
the Company, exercisable at a weighted average exercise price of $17.07 per
share which was the fair market value at the grant date. Generally, these
options vest over a five-year period beginning on the first anniversary of the
date of grant.
 
    In March 1997, incentive stock options to purchase an aggregate of 415,877
shares of Class A Common Stock were granted to certain officers and employees of
the Company, exercisable at $.77 per
 
                                       47
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 11--STOCK OPTION PLANS (CONTINUED)
share which was the fair market value at the grant date. Generally, these
options vest over a five-year period beginning on the first anniversary of the
date of grant. Of these options, 35,000 vest contingent on the Company meeting
certain financial goals (the "performance options").
 
    The estimated weighted average fair value of options granted during 1998 and
1997 was $7.82 and $1.07, respectively. The Company applies Accounting
Principles Board Opinion 25 and related interpretations in accounting for the
Plan. Accordingly, no compensation cost has been recognized for the Plan. Had
compensation cost for the Plan been determined based on the fair value at the
grant dates for awards under the Plan consistent with the method of SFAS 123,
additional compensation expense of $730,000 and $22,000 would have been recorded
for the year ended May 31, 1998 and for the period from July 1, 1996 to May 31,
1997, respectively. Accordingly, the Company's net income and earnings per share
for the year ended May 31, 1998 and for the period from July 1, 1996 to May 31,
1997 would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                        1998          1997
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
Net income:
  As reported.....................................................  $  1,903,000  $  2,002,690
  Pro forma.......................................................  $  1,173,000  $  1,980,690
Basic net income per share:
  As reported.....................................................  $       0.20  $       0.29
  Pro forma.......................................................  $       0.12  $       0.28
Diluted net income per share:
  As reported.....................................................  $       0.19  $       0.26
  Pro forma.......................................................  $       0.11  $       0.26
</TABLE>
 
    The fair value of options granted under the Plan during the above periods
was estimated on the date of grant or modification using the Black-Scholes
option pricing model with the following weighted average assumptions used for
1998 and 1997, respectively: expected volatility of 52.62% and 0%, risk-free
interest rate of 5.76% and 6.16% for fixed options and 6.03% for the 1997
performance options, dividend yield of 0% for both years, and expected lives of
3.97 and 3.91 years for fixed options and 3.08 years for the 1997 performance
options. Annual forfeiture rates of 3% for both years were utilized, and the
likelihood of the 1997 performance options vesting was estimated to be 100%.
 
                                       48
<PAGE>
                          EDUTREK INTERNATIONAL, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
      AS OF MAY 31, 1998 AND 1997 AND FOR THE YEAR ENDED MAY 31, 1998, THE
 PERIOD FROM JULY 1, 1996 (DATE OF FORMATION) TO MAY 31, 1997, PREDECESSOR--FOR
THE PERIOD FROM JUNE 1, 1996 TO OCTOBER 8, 1996, AND THE YEAR ENDED MAY 31, 1996
 
NOTE 11--STOCK OPTION PLANS (CONTINUED)
    The following table sets forth activity in the Company's Plan:
 
<TABLE>
<CAPTION>
                                                                    1998                         1997
                                                         ---------------------------  ---------------------------
                                                                    WEIGHTED AVERAGE             WEIGHTED AVERAGE
                                                          SHARES     EXERCISE PRICE    SHARES     EXERCISE PRICE
                                                         ---------  ----------------  ---------  ----------------
<S>                                                      <C>        <C>               <C>        <C>
Outstanding, June 1, 1996
  Granted..............................................                                 415,877     $   0.7714
                                                                                      ---------
Outstanding, May 31, 1997                                                               415,877     $   0.7714
  Granted..............................................    299,644     $   17.065
  Exercised............................................                                 (16,360)    $   0.7714
  Canceled.............................................                                  (1,400)    $   0.7714
                                                         ---------                    ---------
Outstanding May 31, 1998...............................    299,644     $   17.065       398,117     $   0.7714
                                                         ---------                    ---------
                                                         ---------                    ---------
Exercisable May 31, 1998...............................      2,000     $   18.500        97,335     $   0.7714
 
Weighted average fair value of options granted:
  1998.................................................  $    7.82
                                                         ---------
                                                         ---------
  1997.................................................                               $    1.07
                                                                                      ---------
                                                                                      ---------
</TABLE>
 
    Exercise price for options outstanding as of May 31, 1998 ranged from $.7714
to $27.75. The weighted average remaining contractual life of those options is
9.2 years.
 
NOTE 12--SUBSEQUENT EVENTS
 
    In June 1998, the Company entered into a 127-month lease for a 32,632 square
foot building in the District of Columbia. The Company began its occupancy in
July 1998 and will incur rent payments of approximately $500,000 for fiscal year
1999 and approximately $800,000 to $900,000 each fiscal year thereafter.
 
    In July 1998, the Company entered into a 129-month lease for a 88,144 square
foot building in Los Angeles. The Company is to begin its occupancy in October
1998 and will incur rent payments of approximately $400,000 for fiscal year 1999
and approximately $2 to 3 million each fiscal year thereafter.
 
                                       49
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
    There has been no occurrence requiring a response to this item.
 
                                    PART III
 
    Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1998 Annual
Meeting of Shareholders (the "Proxy Statement"). The Company will, within 120
days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The information concerning directors and executive officers of the
Registrant is set forth in the Proxy Statement under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," which
information is incorporated herein by reference. The name, age, and position of
each executive officer of the Company is set forth under the heading "Executive
Officers" in Item 1 of this Report.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
    The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management," which information is
incorporated herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information concerning certain relationships and related transactions is
set forth in the Proxy Statement under the headings "Certain Transactions" and
"Compensation Committee Interlocks and Insider Participation," which information
is incorporated herein by reference.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
  (a)(1)  FINANCIAL STATEMENTS.  The following financial statements and
          auditors' report have been filed with Item 8 in Part II of this
          Report.
 
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                            ---------
<S>                                                                                                         <C>
Independent Auditors' Report..............................................................................         33
Consolidated Balance Sheets...............................................................................         34
Consolidated Statements of Operations.....................................................................         35
Consolidated Statements of Changes in Shareholders' Equity................................................         36
Consolidated Statements of Cash Flows.....................................................................         37
Notes to Consolidated Financial Statements................................................................         38
</TABLE>
 
                                       50
<PAGE>
    (a)(2) FINANCIAL STATEMENT SCHEDULES.  All financial statement schedules are
           omitted as the required information is inapplicable.
 
    (a)(3) EXHIBITS.  The exhibits listed below are filed with or incorporated
           by reference into this Report. The exhibits which are denominated
           with an asterisk (*) were previously filed as part of, and are hereby
           incorporated by reference from, either (i) the Company's registration
           statement on Form S-1, Registration Number 333-29603, as amended,
           declared effective by the Securities and Exchange Commission on
           September 23, 1997 (the "S-1"); (ii) the Company's Quarterly Report
           on Form 10-Q for the quarter ended August 31, 1997 (the "8/31/97
           10-Q"); or (iii) the Company's Quarterly Report on Form 10-Q for the
           quarter ended February 28, 1998 (the "2/28/98 10-Q"). Unless
           otherwise indicated, the exhibit number corresponds to the exhibit
           number in the referenced document.
 
<TABLE>
<CAPTION>
EXHIBIT NUMBER   DESCRIPTION                                                                        PAGE
---------------  ------------------------------------------------------------------------------     -----
<S>              <C>                                                                             <C>
        * 2.1    Stock Purchase Agreement dated July 25, 1996 by and between EduTrek
                   International, Ltd., Thomas J. Barnette and Phillip J. Markert relating to
                   the acquisition of the Predecessor (S-1)
       * 3(i)    Articles of Incorporation (S-1)
     * 3(i).1    Articles of Amendment to Articles of Incorporation, dated September 6, 1996
                   (S-1)
  * 3(i).2       Articles of Amendment to Articles of Incorporation, dated June 17, 1996 (S-1)
  * 3(ii)        Bylaws (S-1)
  * 4.1          Specimen Certificate of Class A Common Stock (S-1)
  *10.1          1997 Incentive Plan (S-1)
  *10.2          Amendment No. 1 to 1997 Incentive Plan (S-1)
  *10.2.1        Amendment No. 2 to 1997 Incentive Plan (8/31/98)
  *10.3          Form of Incentive Stock Option Agreement (S-1)
  *10.4          Form of Non-qualified Stock Option Agreement (S-1)
  *10.7          Employment Agreement, dated March 21, 1997, by and between E Holdings, Inc.
                   and Stephen G. Franklin, Sr. (S-1)
  *10.8          Employment Agreement, dated October 8, 1996 by and between American European
                   Corporation and Phillip J. Markert (S-1)
  *10.9          Consulting Agreement, dated October 8, 1996, by and between the Company and
                   The Phillip J. Markert Consulting Group, Inc. (S-1)
  *10.10         Agreement, dated October 1, 1995, by and between American Middle East
                   Corporation, LLC and Middle East College, Ltd., relating to the formation
                   and operation of the University's campus in Dubai (S-1)
   10.10.1       Agreement, dated September 1, 1997, relating to Agreements, dated October 1,
                   1995 and January 24, 1996, by and between American Middle East Corporation,
                   LLC and Middle East College, Ltd., relating to the formation and operation
                   of the University's campus in Dubai
  *10.11         Financial Operations Agreement, dated October 1, 1995, by and between American
                   European Middle East Corporation, LLC and Middle East Colleges, Ltd.,
                   relating to the operation of the University's campus in Dubai (S-1)
  *10.12         Memorandum of Understanding, dated January 24, 1996, by and between American
                   European Middle East Corporation, LLC and Middle East Colleges, Ltd. (S-1)
</TABLE>
 
                                       51
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER   DESCRIPTION                                                                        PAGE
---------------  ------------------------------------------------------------------------------     -----
<S>              <C>                                                                             <C>
       *10.13    Registration and Anti-Dilution Rights Agreement, dated October 8, 1996, by and
                   between E Holdings, Inc. and The Robinson-Humphrey Company, Inc. (S-1)
       *10.14    Anti-Dilution Rights Agreement, dated October 8, 1996, by and between E
                   Holdings, Inc. and Phillip J. Markert (S-1)
       *10.15    Agent Agreement, dated March 13, 1996, by and between Target Marketing
                   Systems, Inc. and EduTrek Systems, Inc. (S-1)
       *10.16    License Agreement, dated July 26, 1997, by and between ITI Learning Systems,
                   Inc., American European Corporation and the Company (S-1)
       *10.17    Lease: Embassy Row 500 Between EduTrek International, Inc., a Georgia
                   Corporation (Tenant) and a Maryland Corporation (Landlord) (2/28/98 10-Q)
        10.18    Lease Agreement dated June 30, 1998 between 1770 G Street Limited Partnership
                   and American Intercontinental University, Inc.
        *21.1    Subsidiaries of the Registrant (S-1)
         23.1    Consent of Deloitte & Touche LLP
         24.1    Power of Attorney of Stephen G. Franklin, Sr.
         24.2    Power of Attorney of Paul D. Beckham
         24.3    Power of Attorney of Fred C. Davison
         24.4    Power of Attorney of Ronald P. Hogan
         24.5    Power of Attorney of Gaylen D. Kemp
         24.6    Power of Attorney of Gerald Tellefsen
         27.1    Financial Data Schedule (SEC only)
         27.2    Financial Data Schedule (SEC only)
         27.3    Financial Data Schedule (SEC only)
</TABLE>
 
      (b) REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during the
          fourth quarter ended May 31, 1998.
 
                                       52
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
 
<TABLE>
<S>                             <C>  <C>
                                EDUTREK INTERNATIONAL, INC.
 
Date: August 31, 1998           By:               /s/ STEVE BOSTIC
                                     -----------------------------------------
                                                   Steve Bostic,
                                        CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                           (PRINCIPAL EXECUTIVE OFFICER)
 
Date: August 31, 1998           By:            /s/ DONALD J. BLANKERS
                                     -----------------------------------------
                                                Donald J. Blankers,
                                              CHIEF FINANCIAL OFFICER
                                        (PRINCIPAL FINANCIAL AND ACCOUNTING
                                                      OFFICER)
</TABLE>
 
    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 in the capacities and on the dates indicated
 
<TABLE>
<CAPTION>
          SIGNATURE                       TITLE                    DATE
------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
       /s/ STEVE BOSTIC
------------------------------  Chairman and Chief            August 31, 1998
         Steve Bostic             Executive Officer
 
    /s/ DONALD J. BLANKERS
------------------------------  Chief Financial Officer       August 31, 1998
      Donald J. Blankers
 
              *
------------------------------  President, Chief Academic     August 31, 1998
   Stephen G. Franklin, Sr.       Officer and Director
 
              *
------------------------------  Director                      August 31, 1998
       Paul D. Beckham
 
              *
------------------------------  Director                      August 31, 1998
       Fred C. Davison
 
              *
------------------------------  Director                      August 31, 1998
       Ronald P. Hogan
</TABLE>
 
                                       53
<PAGE>
<TABLE>
<CAPTION>
          SIGNATURE                       TITLE                    DATE
------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
              *
------------------------------  Director                      August 31, 1998
        Gaylen D. Kemp
 
              *
------------------------------  Director                      August 31, 1998
       Gerald Tellefsen
</TABLE>
 
<TABLE>
<S>   <C>
*By:   /s/ DONALD J. BLANKERS
      -------------------------
         Donald J. Blankers,
         AS ATTORNEY IN FACT
        PURSUANT TO POWERS OF
          ATTORNEY FILED AS
       EXHIBITS TO THIS REPORT
</TABLE>
 
                                       54
<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT NUMBER                                              DESCRIPTION
---------------  -------------------------------------------------------------------------------------------------
<S>              <C>
     10.10.1     Agreement, dated September 1, 1997, relating to Agreements, dated October 1, 1995, and January
                   24, 1996, by and between American Middle East Corporation, LLC and Middle East College, Ltd.,
                   relating to the formation and operation of the University's campus in Dubai
       10.18     Lease Agreement dated June 30, 1998 between 1770 G Street Limited Partnership and American
                   Intercontinental University, Inc.
        23.1     Independent Auditors' Consent
        24.1     Power of Attorney of Stephen G. Franklin, Sr.
        24.2     Power of Attorney of Paul D. Beckham
        24.3     Power of Attorney of Fred C. Davison
        24.4     Power of Attorney of Ronald P. Hogan
        24.5     Power of Attorney of Gaylen D. Kemp
        24.6     Power of Attorney of Gerald Tellefsen
        27.1     Financial Data Schedule (SEC only)
        27.2     Financial Data Schedule (SEC only)
        27.3     Financial Data Schedule (SEC only)
</TABLE>
 
                                       55