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


                                    FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
                     FOR FISCAL YEAR ENDED DECEMBER 31, 1996

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
               FOR THE TRANSITION PERIOD FROM      TO
                                              -----   -----

                         COMMISSION FILE NUMBER 1-10390


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

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

     400 Alexander Park, Princeton, New Jersey            08540
     ---------------------------------------------      ----------
     (Address of principal executive offices)           (Zip code)

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

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

  TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED:
  -------------------                 ------------------------------------------
  Common Stock, $.10 par value        New York Stock Exchange


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


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

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

Based on the average bid and ask price at March 27, 1997, the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$59,756,353.

The number of shares of the Registrant's common stock outstanding as of March
27, 1997 was 9,406,013.

                   DOCUMENTS INCORPORATED BY REFERENCE : None

                               Page 1 of 80 Pages
                        Exhibit Index Appears on Page 74


<PAGE>

                                     PART I




ITEM 1.  BUSINESS

INTRODUCTION

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

The  Company,  through  its  predecessors,  was  founded  over 115 years ago and
completed its initial public  offering in 1989.  Since  February  1993,  Benesse
Corporation   (formerly   Fukutake   Publishing   Co.,  Ltd.)   ("Benesse")  has
beneficially  owned  approximately  6.7 million  shares of common  stock  (which
currently  represents  71.6% of the  outstanding  common stock of the  Company).
Public shareholders of the Company hold the remaining  outstanding common stock.
Since  1990,  Benesse  has also owned a 20%  interest  in Berlitz  Japan,  Inc.,
("Berlitz Japan"), the Company's Japanese subsidiary.

Berlitz  is the only  company  to  operate a  language  services  business  on a
worldwide basis. This worldwide presence enables Berlitz to provide a full range
of language  services to  multi-national  customers and to take advantage of new
business  opportunities.  Its  operations  are conducted  through three business
segments (Language Instruction,  Translation Services, and Publishing),  each of
which is currently organized geographically into five operating divisions: North
America,  Western Europe,  Central/Eastern  Europe,  Asia and Latin America.  At
least 89% of total Asia sales,  operating profits,  assets and employees in 1996
are  attributable  to the  operations  in Japan.  Country and division  managers
determine pricing,  teacher/translator and administrative  salaries,  leasing of
facilities,  local  advertising and sales promotions,  and other  administrative
matters,  within guidelines established at the Company's corporate headquarters.
The country  managers  are  evaluated  and provided  incentives  based on profit
performance  of their  particular  areas while  division  managers  are provided
incentives  based on profit  performance of both their  particular areas and the
Company  as a  whole.  Business  segment  and  geographic  area  information  is
incorporated  herein in the Notes to Consolidated  Financial  Statements  within
Item 8, Financial Statements and Supplementary Data, under Note 13.



                                        2




<PAGE>



LANGUAGE INSTRUCTION

As of December 31, 1996, the Company owned and operated 325 language  centers in
35  countries  using  the  Berlitz  Method(R),  hereinafter  described,  and the
Company's proprietary  instruction material, to provide instruction in virtually
all spoken  languages.  Approximately 5.1 million language lessons were given in
1996, the most frequently  taught languages being English,  Spanish,  German and
French.  Revenues from Language Instruction accounted for approximately 75%, 77%
and 81% of total Company revenues in 1996, 1995 and 1994, respectively.

The following tables set forth, by geographic  division,  the number of language
centers  and the  number of lessons  given  over the last five years  (excluding
franchise locations):


                                       NUMBER OF CENTERS AT DECEMBER 31,
                             ------------------------------------------------
                             1996       1995       1994       1993       1992
                             ----       ----       ----       ----       ----

North America                  70         72         72         72         73
Western Europe                 57         55         56         60         67
Central/Eastern Europe         86         84         81         76         72
Asia                           52         52         53         57         59
Latin America                  60         60         58         57         53
                             ----       ----       ----       ----       ----

   Total                      325        323        320        322        324
                             ====       ====       ====       ====       ====



                                     NUMBER OF LESSONS (IN THOUSANDS)
                            -------------------------------------------------
                             1996       1995       1994       1993       1992
                            -----      -----      -----      -----      -----
North America               1,095      1,050      1,064      1,091      1,123
Western Europe                896        897        835        876      1,029
Central/Eastern Europe      1,160      1,084      1,017        920        897
Asia                          939        935        946        844      1,003
Latin America               1,049        981        911        857        818
                            -----      -----      -----      -----      -----

   Total                    5,139      4,947      4,773      4,588      4,870
                            =====      =====      =====      =====      =====


A lesson  consists of a single  45-minute  session  (regardless of the number of
students).  In 1996,  the  United  States,  Japan,  and  Germany  accounted  for
approximately 19%, 16% and 12% of lessons given and 20%, 24% and 14% of Language
Instruction sales, respectively.



                                        3




<PAGE>



At December 31, 1996,  all of the language  centers  operated by the Company and
its  subsidiaries  were  wholly-owned,  except for a joint venture  operation in
Korea.  The following  table sets forth, by geographic  division,  the number of
language  centers  in  each  of the  countries  in  which  the  Company  and its
subsidiaries owned and operated centers as of December 31, 1996:



WESTERN EUROPE                               NORTH AMERICA
--------------                               -------------

  Belgium                      11            United States                62
  Denmark                       2            Canada                        8
  Finland                       1                                      -----
  France                       17               Total                     70
  Holland                       2                                      =====
  Italy                         5
  Norway                        1            LATIN AMERICA
  Portugal                      1            -------------
  Spain                        11            Argentina                     5
  Sweden                        1            Brazil                       16
  United Kingdom                5            Chile                         4
                            -----            Colombia                      6
    Total                      57            Mexico                       17
                            =====            Puerto Rico                   4
                                             Venezuela                     8
                                                                       -----
CENTRAL/EASTERN EUROPE                          Total                     60
----------------------                                                 =====
  Austria                       7

  Czech Republic                5
  Germany                      50
  Greece                        1            ASIA
  Hungary                       3            ----
  Israel                        3            Hong Kong                     1
  Poland                        6            Japan                        47
  Slovak Republic               1            Korea                         1
  Slovenia                      1            Singapore                     1
  Switzerland                   9            Thailand                      2
                            -----                                      -----
    Total                      86                Total                    52
                            =====                                      =====



In 1996,  10  language  centers  were  added and 8 were  removed,  bringing  the
worldwide total to 325. Capital expenditures incurred in connection with opening
a new language center in 1996 ranged from $121,000 to $296,000.

The Company has  traditionally  financed the cost of expansion  with  internally
generated  funds and does not  anticipate  that  borrowing  will be necessary to
finance its planned expansion.

As discussed subsequently, in an effort to continue to capture additional market
share in its  existing  markets  and to reach  additional  retail and  corporate
customers in secondary or emerging markets, the Company introduced a franchising
program in 1996.

BERLITZ  METHOD(R).  At  the  heart  of  Language  Instruction  is  the  Berlitz


                                        4




<PAGE>



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

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

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

LANGUAGE  INSTRUCTION  PROGRAMS.  The Company  offers  several types of language
instruction  programs,  which  vary in cost,  length  and  intensity  of  study.
Approximately  48% of all  tuition  revenues in 1996 were from  private  lessons
(excluding Total  Immersion(R)).  Private  instruction is typically  provided in
blocks of three or more 45-minute lessons, with a short break after each lesson.
Total Immersion(R) courses, an intensive form of private instruction,  accounted
for  approximately 5% of tuition revenues in 1996. Total  Immersion(R)  programs
last a full day and  generally  continue for two to six weeks.  The Company also
offers semi-private  lessons designed for two to three clients, as well as group
instruction,  where  classes  include  four  or  more  students.  Group  classes
generally meet over a period of weeks. Semi-private and group programs, together
represented 47% of tuition revenues in 1996.

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

Included in the Language  Instruction  business are specialty  areas that in the
aggregate  accounted for approximately 5% of the Company's revenues in 1996. Two
such programs,  Berlitz on Campus(TM) ( formerly Language  Institute For English
("L.I.F.E.(R)"))  and  Berlitz  Study  Abroad(R),   combine  intensive  language
instruction with first-hand exposure to the cultural  environment of the country
where the target language is spoken. A third specialty program,  Berlitz Jr.(R),
provides  complete  language  instruction  programs  to  children  in public and
private schools  throughout the world. A fourth area,  cross-cultural  training,
which is typically provided on a fee basis to corporate  employees,  complements
language  study by providing  expatriates  with detailed  practical and cultural


                                       5

<PAGE>



information about the countries to which they are relocating.

MARKETING AND PRICING POLICY.  The Company directs its marketing  efforts toward
individuals,   businesses  and  governments.  The  Company  utilizes  newspaper,
magazine  and yellow page  advertising  in addition  to direct  contacts.  Local
marketing efforts are coordinated on a divisional and country-by-country  basis.
Center  directors,  district  managers and regional managers are responsible for
sales development with existing and new clients.  In addition,  sales forces are
maintained in the Company's major markets to supplement other marketing methods.

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

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

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

TRANSLATION SERVICES

Berlitz Translations  Services provides high quality software localization (i.e.
the  translation  of  software-related  products),  software  quality  assurance
("SQA") testing, technical translation,  interpretation,  electronic publishing,
and other foreign language-related  services.  Translations Services represented
approximately 21%, 18% and 13% of total Company revenues in 1996, 1995 and 1994,
respectively, and is expected to contribute an increasingly larger percentage of
total  corporate  revenues over the next few years as a result of growing demand
for translation-related services, a continued focus on larger customer accounts,
and an expansion in Asian and Latin American  markets and  multimedia  products.
The majority of Translations Services' recent growth has been fueled by software
localization,   which  combines  Berlitz's   translations   expertise  with  the
technological   ability  to  provide  software  quality  assurance  and  project
management.  In addition,  the Company has  increased  its product  offerings to
include  software  testing  of  localized  products,   multimedia  localizations
(CD-ROM) and Internet related offerings such as web site localization.


                                       6

<PAGE>



Berlitz  Translations'  sales  focus is on large,  complex  projects in multiple
languages for global markets.  Translations Services' customer base is primarily
in the  following  sectors:  information  technology,  automotive/manufacturing,
medical technology/pharmaceutical, and telecommunications. Translations Services
is also actively developing its multimedia translation business with a dedicated
studio located in Southern California.

The Company has an international network of full scale production and technology
centers.  Materials are electronically  transferred between locations to utilize
specialized  in-country  translations  and  production  facilities  in  order to
produce the highest quality products and reduce costs. The Company has developed
an  international  network of contract  translators who provide a broad range of
technical and linguistic  resources,  with an internal  qualification program to
assure a high level of linguistic  expertise.  The Company has also  developed a
production process that incorporates several editing phases designed to maximize
the accuracy of its translations.  Production  staffs at dedicated  Translations
Services facilities generally consist of production managers,  project managers,
translators,  editors, and desktop publishing ("DTP") specialists.  Managers and
editors are generally  full-time  staff  members,  while the  translator and DTP
staffs  are  comprised  of  both  full-time  employees  and  freelance  workers.
Freelance  translators  provide the  specialized  skills that are  necessary for
technical  translations  at a more cost  effective  rate than that of  full-time
employees.

COMPETITION.  In the translation services market, providers compete on the basis
of  expertise,  quality,  price  and job  turnaround  time.  Although  currently
fragmented,  the market is  consolidating  and the Company  believes that in the
near future, there will be less, but larger,  competitors.  The Company does not
believe that any one company  accounts for a  significant  portion of the entire
commercial translation market.


PUBLISHING

The  Company  publishes  pocket-size  travel  guides,   language  phrase  books,
bilingual  dictionaries,  medium format travel  guides,  self-teaching  language
audio and language reference products.  It is also involved in several licensing
arrangements  for products that use Berlitz  materials and for which the Company
receives royalties. The Company has recently instituted a new prototype language
center that is designed,  in part, to create an attractive retail store that the
Company expects will facilitate  greater sales of  Company-published  materials.
The  Publishing  business  accounted  for  approximately  4%, 5% and 5% of total
Company revenues in 1996, 1995 and 1994,  respectively.  Approximately  43%, 48%
and 50% of Publishing segment sales in 1996, 1995 and 1994,  respectively,  were
in Europe.

In 1996,  the Company  initiated the  relocation of most of its U.S.  publishing
operations  and all editorial and  production  functions of its U.K.  Publishing
operations to the Company's new Princeton headquarters.

BERLITZ BOOKS AND GUIDES.  Pocket-size,  smaller  format  travel guides  include
full-color  pictures,  maps,  brief  histories,  points  of  interest,  food and
shopping  information  and a practical  A to Z section.  There are a total of 99
titles in this format  published  in English,  plus more than 200 titles in more


                                       7

<PAGE>




than 11 other languages. For these multiple-language titles, the Company employs
manufacturing  techniques  utilizing  the same  graphics  and  layouts to reduce
manufacturing  costs.  Larger format travel guides,  which include more detailed
descriptive  information,  are available primarily in English in two series: THE
BERLITZ TRAVELERS GUIDES and the DISCOVER series.

The Company's  phrase books include common  expressions,  words and phrases most
often used by  travelers.  These appear in  color-coded  sections  covering such
topics as  accommodations,  eating,  sightseeing,  shopping,  transportation and
medical  reference.  There  are a total  of 115  phrase  books  published  in 14
languages,  of which 30 are for  English-speaking  travelers.  A EUROPEAN PHRASE
BOOK, EAST EUROPEAN PHRASE BOOK and a EUROPEAN MENU READER are also published in
English.  Additional travel-related language products include Cassette Packs and
Compact Disc Packs,  which  consist of a 90-minute  cassette tape or a 75-minute
compact  disc  ("CD")  and  phrase  book  packaged  and  sold  together.  Retail
distribution  for the  books and  audio  products  is  generally  handled  by an
exclusive  distribution agreement with an established book trade distributor for
each major  country in which the  products  are sold  (e.g.,  the U.K.,  France,
Germany, U.S. and Canada).

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

In the U.S., the high-end  audio  cassette and CD products are marketed  through
in-flight airline magazine space advertising, as well as through credit card and
travel  club  statement  inserts.  In  addition  to the  audio  cassette  and CD
products,  the Company is presently  involved in several licensing  arrangements
for  products  that use  published  Berlitz  materials as the basis of alternate
media  products  (such as  hand-held  electronic  reference  products and CD-ROM
computer software) for which the Company receives royalties.

The  Company's  Publishing  segment plan  includes the  relaunching  of existing
product  lines and the  creation of new  products  that will  compete in today's
market place.  For example,  Berlitz  publishes  illustrated  book and audiotape
language  learning  products for children under the brand name BERLITZ KIDS(TM).
In  1997,  Berlitz  will  publish  an  all-new  series  of  technologically  and
pedagogically  advanced  self-teaching  language  instruction products that will
supercede the Company's current THINK & TALK(R) series. In addition, the Company
plans to take  advantage  of the growing  Asian and Latin  American  markets for
distribution of its products.

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


FRANCHISING ACTIVITIES

In 1996,  the Company began selling  language  center  franchises to independent



                                        8

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franchisees  in certain  countries to expand the reach of its language  services
business.  The Company has sold 13 language center franchises as of December 31,
1996,  three of which will be located in  Indonesia,  two each in the  Dominican
Republic and Japan and one each in  Argentina,  Brazil,  Mexico,  Oregon,  South
Carolina,  and Tennessee.  Franchisees are granted franchises to operate Berlitz
language  centers  in a  specific  territory,  the  size  of  which  depends  on
demographic  and  geographic  factors.  Such sites are  selected  to improve the
Company's  geographic  reach  beyond  areas  in  which  the  Company  and  other
franchisees  operate.  Franchisees pay Berlitz an application fee of $5,000,  an
initial  franchise fee of $25,000 ($45,000 in Asia), 10% (7.5% in Europe) of the
language  center's  gross  revenues in royalties,  and 2% of gross  revenues for
advertising participation.

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


EMPLOYEES

As of December 31,  1996,  the Company  employed  4,611  full-time  employee and
employee equivalents. Due to the nature of its businesses, the Company retains a
large number of teachers  and  translators  on a part-time  or freelance  basis.
Full-time employee equivalents are calculated by aggregating all part-time hours
(excluding  freelance  translators)  and dividing these by the average number of
hours worked by a full-time employee.

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


TRADEMARKS

The material trademarks used by the Company and its subsidiaries are BERLITZ(R),
TOTAL  IMMERSION(R)  (including  foreign  language  variations  used in  certain
foreign markets),  BERLITZ METHOD(R),  BERLITZ JR.(R),  BERLITZ STUDY ABROAD(R),
BERLITZ ON CAMPUS(TM),  and L.I.F.E.(R).  The Company or its  subsidiaries  hold
registrations  for these trademarks,  where possible,  in all countries in which
(i) material use is made of the  trademarks by the Company or its  subsidiaries,
and (ii)  failure to hold such a  registration  is  reasonably  likely to have a
material adverse effect on the Company or its subsidiaries.  The duration of the
registrations  varies from country to country.  However,  all  registrations are
renewable upon a showing of use. The effect of the  registrations  is to enhance
the Company's  ability to prevent  certain uses of the trademarks by competitors
and other  third  parties.  In certain  countries,  the  registrations  create a


                                       9

<PAGE>




presumption of exclusive ownership of the trademarks.

REGULATORY ISSUES

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

The Uniform Offering Circular  ("UFOC") of Berlitz  Franchising  Corporation,  a
wholly owned subsidiary of the Company,  has been registered with the FTC and by
various states as required. An "internationalized"  version of the UFOC has been
prepared  and has been  modified to comply with foreign law  requirements  where
applicable.






                                       10

<PAGE>



ITEM 2.  PROPERTIES

The  Company  has its  headquarters  in  Princeton,  New  Jersey  and  maintains
facilities  throughout the world. Except for eight facilities in Brazil,  Chile,
France, Hungary,  Mexico, and Spain, all of the Company's facilities are leased.
Total  annual  rental  expense for the twelve  months  ended  December 31, 1996,
principally for leased facilities, was $26,020,000.  No one facility is material
to the operation of the Company.  A typical Berlitz  language center has private
classrooms  designed for  individual  instruction,  as well as some larger rooms
suitable for group instruction.

The following  tables set forth, as of December 31, 1996, by geographic  region,
the number of  facilities  maintained  in that region,  the use of the Company's
facility, whether owned or leased, and the aggregate square footage:


                                OWNED FACILITIES

                       Number of                                   Aggregate
Region                 Facilities            Use                Square Footage
------                 ----------            ---                --------------
Western Europe              2                Center                  3,397
Central/Eastern Europe      2                Center                  2,945
Latin America               4                Center                 13,151
                       ------                                   ----------
Total                       8                 Total                 19,493
                       ======                                   ==========


                                LEASED FACILITIES

                       Number of                                   Aggregate
Region                 Facilities            Use                Square Footage
------                 ----------            ---                --------------
North America (1)          81                (2)                   266,263
Western Europe             70                (2)                   216,495
Central/Eastern Europe     90                (2)                   233,559
Asia                       58                (2)                   145,837
Latin America              59                (2)                   227,255
                       ------                                   ----------
    Total                 358                                    1,089,409
                       ======                                   ==========


(1) In April 1996, the Company relocated its worldwide  headquarters to a 70,550
    square  foot  office  building,  which is leased for an initial 15 year term
    with  options  to  renew  for  two  additional  five  year  terms.  The  new
    headquarters is located at 400 Alexander Park, Princeton, New Jersey 08540.

(2) Principally  language  centers.  Also  includes  administrative  offices and
    Translations  Services production  and technology centers.


ITEM 3.  LEGAL PROCEEDINGS

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


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

No matters have been  submitted to a vote of security  holders during the fourth
quarter of 1996.



                                       11

<PAGE>




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


EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

The following  table sets forth  certain  information  concerning  the Executive
Officers and Directors of the Company as of March 1, 1997.


NAME, AGE, POSITION WITH
REGISTRANT                        BUSINESS EXPERIENCE
----------                        -------------------

Soichiro Fukutake, 51             Mr.  Fukutake  has served as  Chairman  of the
Chairman of the Board;            Board of the Company since  February 1993. Mr.
Director (A)                      Fukutake joined Benesse in 1973, and since May
                                  1986  has   served   as  its   President   and
                                  Representative Director. He also serves on the
                                  Board of Directors  of a number of  companies,
                                  private foundations and associations in Japan.
                                  Mr.  Fukutake became a Director of the Company
                                  in  February  1993.  His term  will  expire in
                                  1997.

Hiromasa Yokoi, 57                Mr.  Yokoi was  elected  Vice  Chairman of the
Vice Chairman of the Board,       Board  and  Chief  Executive  Officer  of  the
Chief Executive Officer and       Company in February 1993 and  additionally was
President; Director (A)           elected  President  effective  on  August  31,
                                  1993.  Mr.  Yokoi has served as a director  of
                                  Benesse  since  June  1992  and  Director  for
                                  Berlitz and North American  Sector since April
                                  1994.  Prior to that,  he  served  as  General
                                  Manager of the  Overseas  Operations  Division
                                  (formerly  the   International   Division)  of
                                  Benesse from October 1990 to March 1994 and as
                                  General Manager of the  President's  Office of
                                  Benesse from July 1990 to September  1990. Mr.
                                  Yokoi  currently  is  also  a  Director  of La
                                  Petite Academy and serves on its  compensation
                                  committee.  Mr. Yokoi has served as a Director
                                  of the Company since  January  1991.  His term
                                  will expire in 1998.

Susumu Kojima, 54                 Mr.  Kojima  has  served  as  Executive   Vice
Executive Vice President,         President,  Asia Division of the Company since
Asia Division;                    January 1, 1996.  Prior thereto,  he served as
Director (A)                      Executive Vice President,  Corporate  Planning
                                  from  September  1993 to December 1995, and as
                                  Senior Vice President,  Corporate  Planning of
                                  the Company  from  February  1993 to September
                                  1993.  Mr.  Kojima has served as a Director of
                                  Benesse  since March 1993.  Prior to that,  he
                                  was  Joint  General  Manager  of the  Business
                                  Development  Department of The Industrial Bank
                                  of Japan, Limited ("I.B.J.") from June 1991 to
                                  February 1993.  Between November 1987 and June
                                  1991,  he  served  as  Senior  Deputy  General
                                  Manager,  Industrial  Research  Department  of



                                       12

<PAGE>



                                  I.B.J.    after   having   served   as   Chief
                                  Representative    of    I.B.J.'s    Washington
                                  Representative Office from September 1983. Mr.
                                  Kojima  was  elected  as  a  Director  of  the
                                  Company in February 1993. His term will expire
                                  in 1997.

Robert Minsky, 52                 Mr.  Minsky  has  served  as  Executive   Vice
Executive Vice President          President   and   Chief   Operating   Officer,
and Chief Operating Officer,      Translations  and  Publishing  of the  Company
Translations and Publishing;      since  January  1,  1995.  Prior  thereto,  he
Director (A)                      served   as    Executive    Vice    President,
                                  Translations  of the Company  from  October 1,
                                  1993 to January 1995,  and as Chief  Financial
                                  Officer of the Company from  November  1990 to
                                  January  1995.  From  November 1990 to October
                                  1993,  he also served as Vice  President.  Mr.
                                  Minsky has served as a Director of the Company
                                  since  April  1991.  His term  will  expire in
                                  1997.

Manuel Fernandez, 60              Mr.  Fernandez  has served as  Executive  Vice
Executive Vice President and      President   and   Chief   Operating   Officer,
Chief Operating Officer,          Worldwide Language  Instruction of the Company
Worldwide Language                since January 1, 1995.  Prior thereto,  he was
Instruction;                      Executive Vice President, Language Services of
Director (A)                      the  Company  from  September  1993 to January
                                  1995 and Vice President,  European  Operations
                                  of the Company  from October 1989 to September
                                  1993. He previously  served as Vice President,
                                  European Operations for Berlitz Languages from
                                  January 1983 to October  1989.  Mr.  Fernandez
                                  was first  employed  by Berlitz  Languages  in
                                  1963 and  served in  various  positions  until
                                  becoming Vice President in 1983. Mr. Fernandez
                                  has served as a Director of the Company  since
                                  July 1993. His term will expire in 1997.

Henry D. James, 59                Mr.  James  has  served  as   Executive   Vice
Executive Vice President and      President and Chief  Financial  Officer of the
Chief Financial Officer;          Company  since  November 21, 1995,  and as its
Director                          Vice  President  and Chief  Financial  Officer
                                  from  January  1, 1995 to  November  1995.  He
                                  previously   served  as  Vice   President  and
                                  Controller of the Company and its predecessor,
                                  Berlitz  Languages,   since  1981.  Mr.  James
                                  joined Berlitz Languages in 1977 and served as
                                  Controller  with that  company  prior to 1981.
                                  Mr.  James  has  served as a  Director  of the
                                  Company since November 21, 1995. His term will
                                  expire in 1998.

Edward G. Nelson, 65              Since January  1985,  Mr. Nelson has served as
Director                          Chairman  and  President  of  Nelson   Capital
(B)(C)(D)                         Corporation.   From  1983  to  1985,   he  was
                                  Chairman  and  Chief   Executive   Officer  of
                                  Commerce Union Corporation.  He also serves on
                                  the Board of  Directors of  ClinTrials,  Inc.,
                                  Osborn  Communications  Corporation,   Central



                                       13

<PAGE>




                                  Parking  System  and  Advocat,  Inc.  He  is a
                                  trustee of Vanderbilt  University.  Mr. Nelson
                                  became a Director  of the  Company in February
                                  1993. His term will expire in 1998.

Robert L. Purdum, 61              Mr.  Purdum  is the  retired  Chairman  of the
Director (B)(C)(D)                Board  of  Armco,  Inc.  and  currently  is an
                                  independent   consultant   and  partner   with
                                  American   Industrial   Partners,   a  private
                                  investment company located in New York and San
                                  Francisco.  During his Armco career, he served
                                  in various positions since first joining Armco
                                  in  1962,   including   Chairman   and   Chief
                                  Executive  Officer  (November 1990 to December
                                  1993),  President and Chief Executive  Officer
                                  (April  1990  to  November  1990),   President
                                  (October 1986 to April 1990),  Chief Operating
                                  Officer  (February  1985 to October  1986) and
                                  Chief Executive  Officer-Steel Group (November
                                  1982 to February 1985). Mr. Purdum also serves
                                  on  the  Board  of   Directors   of  Holophane
                                  Corporation  since 1994. In addition,  he is a
                                  member  of  the  Board  of   Trustees  of  GMI
                                  Engineering  and  Management  Institute  since
                                  1991  and  is  chairman  of  their  Investment
                                  Committee. Mr. Purdum has served as a Director
                                  of the Company  since  August  1994.  His term
                                  will expire in 1998.

Aritoshi Soejima, 70              Mr.  Soejima  served  as Senior  Counselor  of
Director                          Benesse   from   December   1980   until   his
(B)(C)(D)                         appointment  as a member of the  Disinterested
                                  Directors and  Compensation  Committees of the
                                  Company. From 1950 to 1981, Mr. Soejima served
                                  in  various   positions   with  the   Japanese
                                  government (including the Ministry of Finance)
                                  and   multilateral    financial   institutions
                                  (including  the World  Bank and  International
                                  Monetary  Fund).  Mr.  Soejima also  currently
                                  serves as Chairman of Osaka, Tokyo Bay, Nagoya
                                  Hilton   Company,   Ltd.,   and  Director  and
                                  Counselor  of Capital  International  Company,
                                  Ltd.  and as  special  advisor to the Board of
                                  Directors   of  the   Nippon   Fire  &  Marine
                                  Insurance  Company,   Ltd..  In  addition,  he
                                  serves on the Board of  Directors  of a number
                                  of   companies,    private   foundations   and
                                  associations  in Japan.  Mr.  Soejima became a
                                  Director of the Company in February  1993. His
                                  term will expire in 1997.

Kazuo Yamakawa, 56                Mr.  Yamakawa  has  served  as a  Director  of
Director                          Benesse   and  has   supervised   its  General
                                  Administration   and  Accounting   Departments
                                  since June 1995. He also has served as General
                                  Manager  of  Benesse's  Accounting  Department
                                  since January 1996.  Since joining  Benesse in
                                  April 1995, he served as Counselor  until June
                                  1995.  Prior to that, Mr.  Yamakawa  served in
                                  various  positions with The Shokochukin  Bank,
                                  including Director (April 1993 to March 1995),



                                       14

<PAGE>



                                  General  Manager  of its Tokyo  branch  (April
                                  1993 to March  1995),  General  Manager of its
                                  International   Department  (October  1991  to
                                  March  1993) and  General  Manager  of its New
                                  York Branch  (April 1988 to  September  1991).
                                  Mr.  Yamakawa became a Director of the Company
                                  in May 1996. His term will expire in 1998.

Robert C. Hendon, Jr., 59         Mr. Hendon has served as Vice President, Legal
Vice President, General           Department  of the  Company  since  January 1,
Counsel and Secretary             1995 and as Secretary  and General  Counsel of
                                  the Company since April 1992.  Prior  thereto,
                                  he was first an  associate  then a partner  at
                                  the law firm of Waller  Lansden Dortch & Davis
                                  from 1964 until April 1992.

Jose Alvarino, 57                 Mr.  Alvarino has been Vice  President,  Latin
Vice President                    American Division of the Company since October
                                  1989.  Prior  thereto,  he  served in the same
                                  capacity  with  Berlitz  Languages  from  1985
                                  until  October  1989.  Mr.  Alvarino was first
                                  employed  by  Berlitz  Languages  in 1970  and
                                  served  in  various  positions  from that time
                                  until being appointed Vice President in 1985.

Anthony Tedesco, 54               Mr.  Tedesco  has  served  as Vice  President,
Vice President                    North  American  Division of the Company since
                                  October 1994.  From July 1993 to October 1994,
                                  he  served  as  Vice  President,   East  Asian
                                  Division of the Company.  Prior  thereto,  Mr.
                                  Tedesco  was Vice  President,  North  American
                                  Division of the Company  from  October 1989 to
                                  July 1993 and he previously served in the same
                                  capacity  with  Berlitz   Languages  from  his
                                  initial employment in 1983.

Wolfgang Wiedeler, 51             Mr.  Wiedeler  has  served as Vice  President,
Vice President                    Central/Eastern Europe Division of the Company
                                  since  January 1, 1996 and as Vice  President,
                                  Language  Instruction European Division of the
                                  Company from  September 1993 to December 1995.
                                  From  May 1992 to  September  1993 he was Vice
                                  President,       Central/Eastern      European
                                  Operations.   Prior  thereto,   he  served  as
                                  Divisional    Manager    of    German-speaking
                                  countries since October 1989. Prior thereto he
                                  served  in  the  same   capacity  for  Berlitz
                                  Languages from his initial employment in 1984.

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

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



                                       15

<PAGE>




between any of the Directors or Executive Officers of the Company.

SIGNIFICANT EMPLOYEES OF THE REGISTRANT

The  following  table  sets  forth  certain   information   concerning   certain
significant employees of the Company as of March 1, 1997.



Frank Garton, 50                  Mr.  Garton  has  served  as  Vice  President,
Vice President                    Franchising  of the Company  since March 1995.
                                  Prior to that,  he was  Director of  Worldwide
                                  Franchise Sales and Corporate  Development for
                                  King Bear  Enterprises from 1987 to 1995. From
                                  1978 to 1987,  Mr.  Garton was  President  and
                                  Chief Executive Officer of Regeneration, Inc.,
                                  an automotive components manufacturing company
                                  with internationally  franchised manufacturing
                                  processes.

Brian Kelly, 49                   Mr.  Kelly  has  served  as  Vice   President,
Vice President                    Western  Europe  Division of the Company since
                                  January  1,  1996  and  as  General   Manager,
                                  Translations  Services  Europe  since  January
                                  1993. Prior to that, he was Managing  Director
                                  of  Softrans  International  Ltd. of which the
                                  Company  acquired a 51%  holding  in  December
                                  1991 and fully  acquired  in 1994.  Mr.  Kelly
                                  founded  Softrans  in 1984  and  prior to that
                                  held senior  management  positions  with Apple
                                  Computer and Data General.

Isao Hisai, 44                    Mr.  Hisai  has  served  as   Executive   Vice
Executive Vice President of       President  of Berlitz  Japan  since  September
Berlitz Japan                     1996. He previously  served as Vice President,
                                  Finance  of the  Company  from  February  1993
                                  until  September 1996. From October 1992 until
                                  February  1993,  Mr.  Hisai  was  employed  in
                                  Benesse's Overseas Operation  Department,  and
                                  from April 1988 until  October 1992, he served
                                  as Manager,  Finance and Accounting Department
                                  of Benesse.






                                       16

<PAGE>



                                     PART II

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

The  Company's  common  stock  ("Common  Stock") is traded on the New York Stock
Exchange  ("NYSE")  under the symbol BTZ.  Holders of shares of Common Stock are
entitled to receive  such  dividends as may from time to time be declared by the
Board of Directors;  however,  such  dividends are subject to  restrictions  set
forth in the debt facilities  incurred in connection  with the Merger  Agreement
with Benesse.  As a result,  the Company does not expect to pay dividends during
the term of such  debt  facilities.  See  Item 7,  Management's  Discussion  and
Analysis,  Liquidity and Capital Resources,  for further discussion.  Holders of
Common Stock are entitled to one vote per share on all matters  submitted to the
vote of such holders, including the election of directors. There were 86 holders
of record of Common Stock as of February 28, 1997.

The sales  prices  per share of Common  Stock as  reported  by the NYSE for each
quarter during the period from January 1, 1995 until December 31, 1996 ranged as
follows:


                                           PRICE PER SHARE
                                          -----------------
                                           HIGH       LOW
                                          -------   -------

       First Quarter 1996                 $17 1/8   $15 3/4
       Second Quarter 1996                $21 3/4   $15 7/8
       Third Quarter 1996                 $23 5/8   $20 3/8
       Fourth Quarter 1996                $22 3/4   $18 7/8

       First Quarter 1995                 $14 3/4   $12 3/8
       Second Quarter 1995                $15       $14 1/2
       Third Quarter 1995                 $15       $14 5/8
       Fourth Quarter 1995                $16 1/2   $14


No common stock dividends for 1995 or 1996 were declared or paid.





                                       17


<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA

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


<TABLE>
<CAPTION>
                                                  Post-Merger                                Post-Merger(1)
Pre-Merger (1)                          --------------------------------                     --------------
--------------                                                                      Period from   Period from
                                                                                         Feb. 1,    Jan. 1,      Year
                                              Year Ended December 31,      Year Ended    1993 to    1993 to       Ended
                                        --------------------------------  December 31,  Dec. 31,   Jan. 31,    Dec. 31,
                                             1996       1995        1994      1993 (2)      1993       1993        1992
                                        ---------  ---------   ---------   ---------   ---------   --------   ---------
<S>                                     <C>        <C>         <C>         <C>         <C>         <C>        <C>
Income Statement Data:
Sales of services and
products sold (3)                       $ 366,067  $ 351,139   $ 300,234   $ 271,677   $ 252,069   $ 19,608   $ 281,320
                                        ---------  ---------   ---------   ---------   ---------   --------   ---------

Cost and expenses:
  Cost of services and
       products sold (3)                  218,758    213,073     179,869     169,102     155,623     13,479     178,009
  Selling, general and
      administrative (3)                  113,695    105,039      91,703      83,500      76,781      6,719      82,837
  Amortization of publishing
      rights, excess of cost over
      net assets acquired and
      other intangibles                    12,746     13,425      12,750      12,423      11,551        872      10,463
   Merger-related restructuring
      costs (4)                              --         --          --         4,808       4,808       --          --
  Other (income) expense, net               8,054      8,826       8,070       5,630       5,925       (295)     (1,871)
   Non-recurring Merger-related
      charges                                --         --          --          --          --         --         1,356
                                        ---------  ---------   ---------   ---------   ---------   --------   ---------
  Total costs and expenses                353,253    340,363     292,392     275,463     254,688     20,775     270,794
                                        ---------  ---------   ---------   ---------   ---------   --------   ---------
  Income (loss) before income
    taxes,  minority interest and
    cumulative effect of change
    in accounting principle             $  12,814  $  10,776   $   7,842   $  (3,786)  $  (2,619)  $ (1,167)  $  10,526
                                        =========  =========   =========   =========   =========   ========   =========

   Minority interest-income/(expense)   $  (1,503) $  (1,106)  $    (738)  $   3,860   $   3,692   $    168   $  (1,038)
                                        =========  =========   =========   =========   =========   ========   =========
  Cumulative effect of change in
    accounting principle                $    --    $    --     $    --     $   3,172   $    --     $  3,172   $    --
                                        =========  =========   =========   =========   =========   ========   =========

Net income (loss)                       $   3,803  $   2,270   $     909   $  (2,018)  $  (3,556)  $  1,538   $   4,041
                                        =========  =========   =========   =========   =========   ========   =========

Earnings (loss) per  share:
  Income (loss) before cumulative
  effect of change in accounting
   principle                            $    0.40  $    0.23   $    0.09               $  (0.35)   $  (0.09)  $    0.21
  Cumulative effect of change in
    accounting principle                     --         --          --                      --         0.17         --
                                        ---------  ---------   ---------               ---------   --------   ---------
Earnings (loss) per  share              $    0.40  $    0.23   $    0.09               $  (0.35)   $   0.08   $    0.21
                                        =========  =========   =========               =========   ========   =========
Dividends declared per share            $    --    $    --     $    --                 $    --     $    --    $    0.42
                                        =========  =========   =========               =========   ========   =========

Average number of shares (000)              9,569     10,033      10,033                 10,031      19,024      19,022
                                        =========  =========   =========               =========   ========   =========

Balance sheet data (at year end):
Total assets                            $ 561,245  $ 576,930   $ 582,005               $ 570,472              $ 456,583
Long-term debt                          $  56,353  $  67,081   $  78,420               $ 105,775              $    --
Shareholders' equity                    $ 357,407  $ 370,416   $ 367,235               $ 364,953              $ 326,421

Other data:
  Language lessons given
     during year (000)                      5,139      4,947       4,773       4,588                              4,870
  Language centers at year end                325        323         320         322                                324
  Growth (decline) in same center
     sales from year to year (5)             0.5%       9.7%        9.4%      (6.1)%                               2.4%
</TABLE>



                                       18

<PAGE>



(1)  In February 1993, Benesse  Corporation (formerly Fukutake  Publishing  Co.,
     Ltd.)  ("Benesse")  acquired,  through  a  merger  of the  Company  with an
     indirect   wholly-owned   U.S.   subsidiary  of  Benesse  (the   "Merger"),
     approximately  6.7 million  shares of the common stock,  par value $.10 per
     share  ("Common") of the Company (which  currently  represents 71.6% of the
     outstanding Common).  Subsequent to the Merger,  public shareholders of the
     Company hold the remaining outstanding Common.

(2)  Income  statement data give effect to the combination of the results of the
     Company for the 1993 Pre-Merger and Post-Merger periods.

(3)  In 1993, under the purchase method of accounting, the Post-Merger sales and
     expenses  of  facilities   closed  in  connection   with  the  Merger  were
     reclassified  to  "Merger-related   restructuring   costs"  on  the  income
     statement  (33%) and  "Excess  of cost  over net  assets  acquired"  on the
     balance sheet (67%).

(4)  Principally  represents 33% of severance payments,  language center closing
     costs,  and  costs  of  reorganizing   Translations  and  certain  Language
     Instruction divisions.

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




                                       19

<PAGE>



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

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

OPERATIONS OVERVIEW

The Company's  operations are conducted through the following business segments:
Language Instruction,  Translation Services, and Publishing. The Company's sales
grew from $300.2  million in 1994 to $366.1  million in 1996, a compound  annual
growth rate of 10.4%, and its earnings per share rose from $0.09 to $0.40 in the
same three-year period, favorably impacted by higher operating profits.

The  majority  of the  Company's  subsidiaries  are  located  outside the United
States, with operations conducted in their respective local currencies.  For the
three  years  ended   December  31,  1996,  the  percentage  of  total  revenues
denominated in currencies  other than U.S.  dollars  averaged  74.7%, in foreign
currencies  including  the Japanese  yen, the German mark,  the Irish punt,  the
British pound and the French and Swiss francs. As a result,  changes in exchange
rates affected the comparisons of the Company's  earnings from period to period,
benefiting  1995's financial  results when the U.S. dollar weakened against most
foreign currencies,  while adversely affecting 1996's financial results when the
dollar generally  strengthened.  The following table shows the impact of foreign
currency  rate  fluctuations  on the annual  growth  rate of sales and EBITA (1)
during the periods presented:


                                    PERCENTAGE GROWTH (DECLINE)
                                    ---------------------------
                                      YEAR ENDED DECEMBER 31,
                                      -----------------------
                                       1996     1995     1994
                                       ----     ----     ----
           Sales:
            Operations (2)             9.0%     10.3%     7.9%
            Exchange                  (4.7)      6.7      2.6
                                      ----      ----     ----
               Total                   4.3%     17.0%    10.5%
                                      ====      ====     ====


           EBITA:
            Operations (2)             7.8%     10.6%    47.0%
            Exchange                  (6.0)      4.6      3.3
                                      ----      ----     ----
               Total                   1.8%     15.2%    50.3%
                                      ====      ====     ====



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

(2)  Adjusted to eliminate fluctuations in foreign currency from year-to-year by
     assuming a  constant  exchange  rate over two years,  using as the base the
     first year of the periods being compared.



                                       20
<PAGE>




The Company's  operations have benefited in recent years from a number of global
trends. For example, the opening of Central and Eastern Europe to capitalism and
the recent economic  growth  experienced in Latin America and parts of Asia have
contributed to increased  international business activity and the use of English
worldwide as a business language.  The Company intends to continue to capitalize
on these trends, anticipating,  for example, that franchising and joint ventures
may be used in emerging and secondary  markets to increase  market  penetration.
Through  December 31, 1996,  the Company had sold 13 franchises  (recognizing  a
related $0.1 million as revenue  under  Language  Instruction,  and  recording a
related $0.4 million as deferred revenue.)

In recent years,  the Company has focused its marketing and product  development
efforts on meeting  the needs of  existing  customers  and  reaching  out to new
customers.  In 1995, the Company  introduced a new corporate  identity  program,
which  included the  adoption of a new  corporate  logo and slogan.  In Language
Instruction,  the Company continued to expand several niche programs,  including
cross-cultural services,  Berlitz Jr(R), Berlitz on Campus(TM) and Berlitz Study
Abroad(R), enabling it to operate even more effectively as a "one-stop" language
service  provider.   To  complement  its  live  instruction,   the  Company  has
increasingly used technology,  such as CD-ROM, video and audio tools, to enhance
its  traditional  teaching  programs  while  reducing  teaching  costs.  In  its
publishing  business,  the Company has updated  some of its  language  reference
titles and has  introduced a new language  instruction  series for children.  In
1995,  the Company  introduced a new prototype  language  center  design,  which
features a distinctive  reception  rotunda and display kiosks featuring  Berlitz
publishing   and  other  Berlitz  brand   products  to  create  a  retail  store
point-of-sale environment.

A discussion of revenues by business segment follows:

From 1994 to 1996, Language Instruction revenues, which declined from 81% to 75%
of total Company  revenues,  grew at a compound annual growth rate of 5.7%. This
growth was attributable to a number of factors,  including: a) an average annual
increase in lesson volume of 3.8%; b) an overall improvement, excluding exchange
rate  fluctuations,  in average revenue per lesson ("ARPL") resulting from price
increases  and a greater  emphasis  on more  profitable  semi-private  and group
lessons,  and c) strong  performances  from  specialty  areas such as Berlitz On
Campus and cross-cultural  services.  Foreign currency rate fluctuations had the
following impact on Language Instruction's annual revenue growth:

                                PERCENTAGE GROWTH (DECLINE)
                                ---------------------------
                                  YEAR ENDED DECEMBER 31,
                                  -----------------------
                                1996        1995      1994
                                ----        ----      ----

     Sales:
        Operations (1)          6.9%        4.1%      6.4%
        Exchange               (5.6)        6.5       3.0
                               ----        ----      ----
          Total                 1.3%       10.6%      9.4%
                               ====        ====      ====


 (1)  See Note 2 on page 20 .


                                       21

<PAGE>


Over the three year period ending  December 31, 1996,  the Company opened 23 new
language  centers and closed 20. The  following  table shows the  year-over-year
increase,  including the impact of foreign currency rate fluctuations,  in sales
by  centers  which  were  operating  during the  entirety  of both  years  being
compared.

                                    PERCENTAGE GROWTH (DECLINE)
                                    ---------------------------
                            1996                1995              1994
                           -----               -----             -----

  Same Center Sales          0.5%                9.7%              9.4%
                           =====               =====             =====



From 1994 to 1996,  Translations Services revenues,  which increased from 13% to
21% of  total  Company  revenues,  grew at an  annual  compound  rate of  38.7%,
principally through continued focus on large corporate accounts,  development of
new customers,  expansion of services to existing customers,  and the success of
new services.  The Company's continuing commitment to the information technology
industry and the  expansion of software  localization  and testing  services has
provided  increased  revenue,  particularly  in  1995.  In  addition,  continued
customer satisfaction has led to increased business within the existing customer
base.  The  table  that  follows  shows  the  impact of  foreign  currency  rate
fluctuations on Translations' annual revenue growth:

                                         PERCENTAGE GROWTH (DECLINE)
                                         ---------------------------
                                           YEAR ENDED DECEMBER 31,
                                           -----------------------
                                   1996              1995            1994
                                   ----              ----            ----
    Sales:
       Operations (1)              22.6%             51.0%           11.0%
       Exchange                    (2.5)              9.1             1.1
                                   -----             -----           -----
     Total                         20.1%             60.1%           12.1%
                                   =====             =====           =====

(1)  See Note 2 on page 20 .

The  Company  is  a  global  leader  in  software   localization  and  technical
translations. Demand for software localization services has increased rapidly as
(i) software  programs have  proliferated and have been translated into numerous
language  versions;  (ii)  simultaneous  shipment of domestic and local language
products,  translation into at least 10 different languages and software updates
every six months are becoming the norm;  and (iii) the Company's  customers have
increasingly  outsourced the software localization process. The Company believes
that its global translation network and technical  capability provide it with an
advantage  in pursing this growing  market.  The Company is currently  providing
these services to some of the leading software companies in the world.

As Translations Services continues to grow, the Company will seek to improve the
profitability  of the segment through (i) improving its pricing  strategy,  (ii)
increasing   productivity  through  the  use  of  more  advanced  computer-aided
translation tools and communications technology;  (iii) continuing to centralize
certain non-linguistic functions, such as software engineering, software quality
assurance and desktop  publishing;  (iv) increasing the percentage of multi-year
projects which reduce the Company's  project  start-up costs;  and (v) expanding
on-line translation capabilities to customers.


                                       22

<PAGE>




From 1994 to 1996,  Publishing revenues,  which decreased from 5% to 4% of total
Company  revenues,  declined  slightly due to the loss of licensing  revenues in
1996  and  costs   associated  with  the  relocation,   initiated  in  1996,  of
Publishing's  editorial and production  functions from the United Kingdom to the
United States.

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


                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------
                                                       1996      1995      1994
                                                     -------   -------   -------
Sales of Services and Products                        100.0%    100.0%    100.0%
                                                     -------   -------   -------


Costs of services and products sold (1)                59.8      60.7      59.9
Selling, general and administrative (2)                31.1      29.9      30.5
Amortization of publishing rights
   excess of cost over net assets acquired,
   and other intangibles                                3.5       3.8       4.2
Interest expense on long-term debt                      2.1       2.5       3.5
Interest expense to affiliate                           0.5       0.4       0.1
Other (income), net                                    (0.5)     (0.4)     (0.8)
                                                     -------   -------   -------
 Total costs and expenses                              96.5      96.9      97.4
                                                     -------   -------   -------

Income before income taxes and minority
   interest in earnings of subsidiary                   3.5       3.1       2.6

Income tax expense                                      2.1       2.1       2.1
Minority interest                                       0.4       0.4       0.2
                                                     -------   -------   -------

Net Income                                              1.0%      0.6%      0.3%
                                                     =======   =======   =======


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

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

Cost of services  and  products  sold as a  percentage  of sales  ("COS  Ratio")
increased from 1994 to 1995  principally  as percentage  increases in translator
costs  (compared to both segment and total  company  revenues)  more than offset
percentage  decreases  in teacher  costs.  The  increases  in  translator  costs
occurred  as the  Company  aggressively  expanded  services  to the  information
technology  industry  while the teacher cost ratio  improvements  were favorably
impacted by higher  usage of  supplemental  CD- ROM  teaching  aids,  as well as
increased  semi-private  and group  lessons.  From  1995 to 1996,  the COS Ratio
declined primarily due to: a) a continued percentage reduction in teacher costs;
b) a decline in  Publishing's  cost of materials;  and c) an overall  percentage
decrease in rent and premises upkeep due to renegotiated language center leases,


                                       23

<PAGE>




partially  offset by  expanded  translation  facilities.  Translator  costs as a
percentage of 1996 total company  revenues  increased  from the prior year,  but
remained consistent with 1995 as a percentage of Translations Services revenues.
Translation  Services  margins are expected to improve as growth  stabilizes and
production efficiencies improve.

Selling,  general and  administrative  expenses as a  percentage  of sales ("SGA
Ratio")  declined  from  1994 to  1995,  principally  as the  effect  of  higher
advertising   expenditures   was  more  than  offset  by   decreases   in  other
administrative  cost  percentages.  The SGA Ratio  increased  from 1995 to 1996,
primarily reflecting higher franchise related expenses and a percentage increase
in administrative salaries, including the impact in 1996 of $1.6 million expense
related to the Company's Supplemental Executive Retirement Plan ("SERP") and New
Long-Term Incentive Plan ("New LTIP").

The year to year  comparison  of the  results of  operations  are  discussed  in
further detail in the sections which follow.

YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------

The Company's  Language  Instruction  sales for the twelve months ended December
31, 1996 were  $274.0  million,  1.3% above the same period in 1995,  reflecting
increases  in all  geographic  divisions  except  Asia.  North  America's  sales
increase  ($5.1  million,  or 9.4%) was  primarily  due to volume  increases and
strong  performance  from  specialty  programs such as Berlitz on Campus(TM) and
cross cultural programs.  The increase in Latin American revenues ($4.5 million,
or 12.3%) was primarily  attributable to volume increases in Brazil and a higher
ARPL in Mexico, which more than offset weakness in Venezuela. The improvement in
Central/Eastern  European  revenues  ($2.7  million,  or 4.6%)  mainly  reflects
increases  in lesson  volume  and ARPL,  experienced  in most  countries  in the
division,   partially  offset  by  the  unfavorable  effects  of  exchange  rate
fluctuations  ($3.5  million,  or  5.9%),  more than half of which is due to the
strengthening  of the U.S. dollar against the German mark.  Asia's sales decline
($9.0 million,  or 11.5%)  resulted  primarily  when favorable  volume and price
fluctuations  were more than offset by  unfavorable  exchange rate  fluctuations
($10.9  million)  due to a stronger  dollar  versus the  Japanese  yen.  Western
Europe's results increased $0.2 million from the prior year, reflecting a number
of factors,  including  volume  increases in Denmark and Belgium and an improved
ARPL in France and Italy,  all of which were partially offset by volume declines
in France and unfavorable  exchange rate  fluctuations  ($0.8 million,  or 1.9%)
arising  primarily from the  strengthening of the U.S. dollar against the French
and Belgium francs.

During the  twelve-month  period ended  December 31, 1996, the number of lessons
given was  approximately  5.1  million,  3.9% above the same period in the prior
year.  Lesson  volume in North  America  improved  by 4.3% over the prior  year.
Lesson volume in Asia rose only 0.4% from 1995,  reflecting the negative effects
of a continuing flat economy in Japan,  and declines in Thailand.  Lesson volume
in Latin  America  rose by 7.0% from prior year,  primarily  due to increases in
Brazil and Colombia  (reflecting strong economic  conditions),  and increases in
Venezuela  despite economic turmoil,  offset by a 4.2% drop in Mexico,  which is
recovering from the 1994/1995  devaluation of the Mexican peso.  Central/Eastern
Europe lesson volume increased by 7.0% over 1995,  reflecting  strong demand for
the Company's services in Poland, Israel, and Slovenia. Lesson volume in Western
Europe remained flat with 1995, primarily as improvements in Denmark and Belgium
were offset by declines in France.


                                       24

<PAGE>




For the twelve  months ended  December 31, 1996,  ARPL was $44.91 as compared to
$46.70  in  the  comparable   prior-year   period.  The  decline  reflected  the
unfavorable  effect of exchange  rate  fluctuations.  ARPL ranged from a high of
approximately  $70.75  in  Japan  to a low of  $16.61  in the  Slovak  Republic,
reflecting  effects of foreign  exchange  rates and  differences in the economic
value of the service.  The Company  opened new language  centers  during 1996 in
Korea, Singapore, Colombia, the Czech Republic, Greece and Poland.

Translation  segment sales were $76.9 million for the twelve-month  period ended
December 31, 1996, an increase of $12.9 million,  or 20.1%, from the same period
in 1995. Most of this growth occurred in Ireland and the United States. The U.S.
sales  increase was  attributed  primarily to increased  volume from certain key
clients and to the success of new services.  Ireland's revenue increase resulted
from the  development  of new customers  and the  expansion of software  related
services to new and existing  clients.  In addition,  sales increases in certain
Western  European  countries  also  reflected the expansion of  software-related
services.  Revenue  growth  is  expected  to  continue  since  the  Company  has
established  a foundation  as a world leader in  documentation  translation  and
software related services.

Publishing segment sales were $15.2 million for the twelve months ended December
31, 1996,  $1.4  million or 8.2% below 1995,  reflecting a reduction in revenues
from  licensing  activities  and a general  slowdown  in the  travel  publishing
segment.

EBITA  for the year was $33.6  million,  or 9.2% of sales in 1996,  compared  to
$33.0 million,  or 9.4% of sales, in the same prior year period.  The percentage
decline in 1996 primarily  reflected  margin  decreases in the  Translation  and
Publishing segments, as well as the impact of SERP related expense.

Instruction  segment  EBITA for the twelve  months  ended  December 31, 1996 was
$44.1 million, or 16.1% of segment sales, compared to $39.9 million, or 14.8% of
segment sales, in the comparable prior year period. This improvement was largely
due to percentage  reductions in teacher costs,  rent and premises  upkeep,  and
advertising,   partially  offset  by  higher  franchise   related  expenses  and
administrative salaries.

Translation  segment EBITA for the  twelve-month  period ended December 31, 1996
was $5.0 million, or 6.6% of segment sales, compared to $5.5 million, or 8.6% of
segment sales, in the prior year. The 1996 results were hurt by costs associated
with the  significant  expansion of Asian  production  resources,  certain lower
margin contracts and certain  non-recurring  costs.  Exchange rate  fluctuations
were not material.

Publishing  segment  EBITA was $1.1  million  in the 1996  twelve-month  period,
compared  to EBITA of $1.6  million  in the  prior  year.  Results  in 1996 were
negatively  impacted by costs  associated  with the  relocation of  Publishing's
editorial and production functions from the United Kingdom to the United States,
as well as by the loss of licensing  revenues.  Exchange rate  fluctuations were
not material.

Non-segment  related  corporate and divisional  expenses  included in EBITA were
$16.6 million for the twelve months ended December 31, 1996, compared with $14.0
million in the same prior year period. This increase was primarily  attributable


                                       25

<PAGE>




to a  reallocation  of resources  under the new matrix  management  structure in
1996, and to expenses associated with the SERP and corporate training programs.

Amortization of publishing  rights,  excess of cost over net assets acquired and
other  intangibles  decreased by $0.7  million,  or 5.1%,  from the prior twelve
month period,  primarily due to the effects of translating into U.S. dollars the
excess  of cost  over net  assets  acquired  related  to the  Company's  foreign
subsidiaries.

Interest expense on long-term debt for the twelve months ended December 31, 1996
decreased by $1.0  million,  or 11.7%,  from the  comparable  prior year period,
primarily due to scheduled  principal  repayments  and a lower average  interest
rate on a portion of the Company's long-term debt.

Interest expense to affiliates for the year ended December 31, 1996 increased by
$0.4  million,  or 28.6%,  from the prior  twelve  month  period,  due to a $6.0
million  increase in notes payable to the Company's  majority  shareholder  (see
"Liquidity and Capital Resources").

Other  income,  net for the twelve months ended  December 31, 1996  increased by
$0.2  million,  or 13.6%,  from the prior year,  primarily  as a favorable  $2.1
million  fluctuation  in foreign  exchange  gains  (principally  reflecting  the
impacts of certain  Japanese  yen,  Swiss franc,  U.S.  dollar and British pound
denominated  intercompany  transactions)  more  than  offset:  a) a  decline  in
interest income on temporary  investments due to lower average cash balances, b)
a lower gain on the  Company's  German mark  floating rate coupon swap which was
settled in January 1996; c) the absence of non-recurring  joint  venture-related
income, which reduced expenses in 1995, and d) a favorable fluctuation in losses
on disposal of fixed assets,  which was  significantly  increased in 1995 due to
certain Japanese language centers relocations.

Minority interest in subsidiary  earnings increased $0.4 million, or 35.9%, from
the prior year due to higher net income in the Company's Japanese subsidiary.

The Company recorded an income tax expense of $7.5 million, or an effective rate
of 58.6%, during the current twelve-month period. This compared to an income tax
expense of $7.4  million,  or an  effective  rate of 68.7%,  in the prior year's
period.  The  effective  tax  rates in both  1996 and 1995  were  above the U.S.
Federal  statutory tax rate primarily as a result of nondeductible  amortization
charges.

Net income for the twelve months ended  December 31, 1996 was $3.8  million,  or
$0.40 per share,  compared to net income of $2.3 million, or $0.23 per share, in
the comparable  prior year's period.  This  improvement of $1.5 million resulted
primarily  from a higher  operating  profit and a reduced  effective tax rate in
1996.


YEAR ENDED DECEMBER 31, 1995 VS. YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------

Sales for the year ended December 31, 1995 were $351.1 million,  17.0% above the
same period in the prior year, reflecting increases in the Language Instruction,
Translations and Publishing segments.


                                       26
<PAGE>




Language  Instruction  sales for the twelve months ended  December 31, 1995 were
$270.5 million, $26.0 million or 10.6% above the same period in 1994, reflecting
increases in all geographic divisions.  The improvement in Asian sales from 1994
($5.6 million, or 7.7%) resulted primarily from the favorable impact of exchange
rate fluctuations ($6.3 million) due to the weakening of the U.S. dollar against
the Japanese yen. Central/Eastern Europe's increase ($7.9 million, or 15.6%) was
favorably impacted by exchange rate fluctuations  ($6.2 million),  due primarily
to the weakening of the U.S. dollar against the German mark and the Swiss franc,
and by operating  activity in almost all countries.  The  improvement in Western
Europe's  revenues ($6.5 million,  or 18.4%) was due both to favorable  exchange
rate fluctuations ($3.6 million,  primarily reflecting the weakening of the U.S.
dollar against the Belgian and

French francs) and to favorable operating activity primarily in Italy,  Belgium,
the United Kingdom and Holland. The improvement in Latin American revenues ($3.8
million, or 11.4%) was primarily due to volume and price increases in Brazil and
Colombia,  reflecting improved economic  conditions,  which more than offset the
unfavorable effect of the devaluation of the Mexican peso.

During the  twelve-month  period ended  December 31, 1995, the number of lessons
given was  approximately  4.9  million,  3.6% above the same period in the prior
year.  Lesson volume in Asia decreased 1.1% from 1994,  unfavorably  affected by
declines  in  Japan  due in part to the  Kobe  earthquake  in  early  1995 and a
continuing flat economy.  Lesson volume in Latin America  increased by 7.6% from
prior year,  primarily  due to increases in Brazil and Colombia  resulting  from
improved economic conditions.  Lesson volume in Central/Eastern Europe increased
6.6% over 1994 as increases in most countries more than offset slight  decreases
in Germany (2.3%,  due primarily to  competition)  and  Switzerland  (2.0%,  due
primarily to economic conditions).  Lesson volume in Western Europe increased by
7.4% over 1994 as increases in most countries more than offset slight  decreases
in Spain (0.3%, due primarily to competition), Norway (2.2%) and Sweden (2.7%).

For the twelve  months ended  December 31, 1995,  ARPL was $46.70 as compared to
$43.27 in the comparable  prior-year period. ARPL (excluding Russia) ranged from
a high of  approximately  $81.62  in  Japan  to a low of  $16.48  in the  Slovak
Republic,  reflecting  effects of foreign  exchange rates and differences in the
economic  value of the service.  The Company  opened five new  language  centers
during 1995 in Colombia, Israel, Mexico, Poland and Slovenia.

Translations sales were $64.0 million for the twelve-month period ended December
31, 1995, an increase of $24.0 million,  or 60.1%, from the same period in 1994.
This  increase  was  primarily  due to higher  volume and,  to a lesser  degree,
favorable  exchange  rate  fluctuations  resulting  from a weakening of the U.S.
dollar  against the Irish punt, the Danish krone,  and the German mark.  Most of
the volume growth occurred in the United States, Ireland,  Germany,  Denmark and
France.  The U.S. sales increase was  attributed  primarily to increased  volume
from  certain key  clients  and the  expansion  into new and  existing  markets.
Ireland's  revenue increase  resulted from the increased volume from certain key
clients,  development  of new customers  and the  expansion of software  related
services.  In addition,  sales increases in Germany and certain Western European
countries reflected general business expansion.

Publishing segment sales were $16.6 million for the twelve months ended December
31,  1995,  $0.8  million or 5.4% above 1994 sales,  reflecting  both  favorable


                                       27

<PAGE>




exchange  rate  fluctuations  versus the British  pound and  positive  operating
results in the United  States,  primarily  from an increase  in travel-  related
product sales and revenues from licensing activities.

The Company's  EBITA for the year was $33.0  million,  or 9.4% of sales in 1995,
compared  to $28.7  million,  or 9.5% of sales,  in the same prior year  period.
Included in 1995 were expenses of $1.9 million,  which primarily  related to the
Company's worldwide  corporate image campaign;  these types of expenses were not
incurred in prior years'  periods.  The  percentage  change was also impacted by
faster  growth in the  Translation  segment than in the higher  margin  Language
Instruction segment.

Instruction  segment  EBITA for the twelve  months  ended  December 31, 1995 was
$39.9 million, or 14.8% of segment sales, compared to $35.9 million, or 14.7% of
segment sales, in the comparable prior year period. This percentage  improvement
was primarily due to percentage reductions in teacher costs, offset by increases
in certain other expenses.

Translation  segment EBITA for the  twelve-month  period ended December 31, 1995
was $5.5 million, or 8.6% of segment sales, compared to $3.1 million, or 7.7% of
segment sales, in the prior year. This percentage  improvement was primarily the
result of percentage  reductions in most fixed  administrative  expenses,  which
more than offset percentage increases in translator costs.

Publishing  segment  EBITA was $1.6  million  in the 1995  twelve-month  period,
compared to EBITA of $0.9 million in the prior year.

Non-segment  related  corporate and divisional  expenses  included in EBITA were
$14.0 million for the twelve months ended December 31, 1995, compared with $11.3
million in the same prior year period.  This increase  primarily  reflected 1995
expenses  associated  with  the  Company's  corporate  image  campaign  and  its
franchising program, as well as higher administrative expenses.

Amortization of publishing  rights,  excess of cost over net assets acquired and
other  intangibles  was $13.4  million for the year ended  December 31, 1995, an
increase of 5.3% from $12.8 million in the comparable  prior-year  period.  This
increase  was  primarily  attributable  to the effect of  translating  into U.S.
dollars  the excess of cost over net assets  acquired  related to the  Company's
foreign subsidiaries.

Interest  expense  on  long-term  debt  for the year  ended  December  31,  1995
decreased by $1.9 million,  or 18.0%,  from the  comparable  prior-year  period,
primarily due to scheduled principal repayments and the refinancing of a portion
of long-term debt in September 1994.

Interest expense to affiliates for the year ended December 31, 1995 increased by
$1.1  million  from  the  comparable  prior-year  period,  due to a full  year's
outstanding balance on borrowings from Benesse.

Other  income,  net for the twelve months ended  December 31, 1995  decreased by
$1.6 million,  or 55.8%,  from the same  prior-year  period,  primarily as joint


                                       28

<PAGE>




venture-related income (consisting  principally of value-added-tax refunds and a
reduction in accrued  expenses) and a $1.2 million gain on the Company's  German
mark coupon swap was more than  offset by: a) lower net foreign  exchange  gains
(reflecting  principally  the  adverse  impact of  certain  yen and Swiss  franc
denominated  intercompany  transactions),  b) higher  non-operating taxes and c)
losses  from  the  disposal  of  fixed  assets  in 1995 in  connection  with the
consolidation  and  relocation  of certain  Japanese  centers for the purpose of
reducing overhead costs.

Minority interest in subsidiary  earnings increased $0.4 million, or 49.9%, from
the prior year due to higher net income in the Company's Japanese subsidiary.

The Company recorded an income tax expense of $7.4 million, or an effective rate
of 68.7%,  during the current period.  This compared to an income tax expense of
$6.2 million,  or an effective  rate of 79.0%,  in the prior year. The effective
tax rates in both 1995 and 1994 were above the U.S.  Federal  statutory tax rate
primarily as a result of  nondeductible  charges related to the  amortization of
goodwill.

Net income available to common shareholders for the year ended December 31, 1995
was $2.3  million,  or $0.23 per common  share,  compared  to net income of $0.9
million,  or $0.09 per common share, in the prior year. This improvement of $1.4
million resulted  primarily from increased sales,  partially offset by increases
in cost of services and products sold, and selling,  general and  administrative
expenses.

LIQUIDITY AND CAPITAL RESOURCES

Historically,  the primary  source of the Company's  liquidity has been the cash
provided by operations,  and capital expenditures,  working capital requirements
and acquisitions have been funded from internally  generated cash. The Company's
liquidity  is   principally   generated  from  the  Language   Instruction   and
Translations segments. Similarly, cash requirements for capital expenditures and
acquisitions  are principally due to the Language  Instruction and  Translations
segments. Net cash needs of Publishing are generally not material. Although each
geographic area exhibits  different patterns of lesson volume over the course of
the year, the Company's sales are generally not seasonal in the aggregate.

Net cash provided by operating  activities was $25.4 million,  $16.6 million and
$21.0  million  for  the  years  ended   December  31,  1996,   1995  and  1994,
respectively.  These cash flows were  affected by tax  refunds of  approximately
$1.3 million,  $1.4 million and $5.6 million  which were received in 1996,  1995
and 1994,  respectively.  The 1994 refund  principally was due to tax deductions
related to the bankruptcy  filing of the indirect  former parent of the Company.
In reconciling  reported net income to net cash provided by operations,  changes
in net operating  assets  decreased  operating  cashflows by $0.4 million,  $6.9
million and $0.4 million in 1996, 1995 and 1994,  respectively.  The 1996 change
in net  operating  assets was  primarily  attributable  to a number of  factors,
including:  a)  accounts  and  unbilled  receivable  increases,  primarily  from
Translations sales growth; b) an increase in franchising- related inventory;  c)
an increase in deferred revenues in Ireland,  Japan, Poland,  Mexico and Canada;
d) an increase in accrued  interest  payable on  affiliate  debt;  and e) higher
taxes  payable.   The  1995  change  in  net  operating   assets  was  primarily
attributable  to a $10.5 million  increase in accounts  receivable  due to sales
growth in the  Translations  business  segment,  partially offset by a change in


                                       29
<PAGE>




income  taxes  payable of $3.9  million,  primarily  adjusting  the  current tax
provision for a net operating  loss benefit  recorded to the excess of cost over
net assets acquired. The 1994 change in net operating assets primarily reflected
the effects of accounts  receivable  increases from  Translations  segment sales
growth, a decrease in other current  liabilities due to payment of non-recurring
Merger-related  restructuring  costs,  and an increase in other  liabilities due
primarily  to accruals for future  taxes and the  reflection  of the entire $3.2
million  change  in  the  fair  value  of the  Company's  currency  coupon  swap
agreements.

Net cash used in investing activities, which totaled $13.1 million, $7.9 million
and $8.0 million in 1996, 1995 and 1994,  respectively,  consisted  primarily of
capital  expenditures  for the opening of new facilities and the refurbishing of
existing  facilities,  and, in 1995,  for the relocation  and  consolidation  of
certain  centers in Japan.  Included in 1996 were capital  expenditures  of $3.2
million  related  to  the  April  1996  relocation  of the  Company's  corporate
headquarters and Princeton  language center to a new facility in Princeton,  New
Jersey.  1996 also reflected higher  Translation  segment  expenditures  than in
prior years due to the segment's  growth.  Included in 1994 were  investments in
joint  ventures of $1.3 million,  respectively,  primarily for  shutdown-related
costs.

Net cash used for financing activities totaled $11.0 million and $9.4 million in
1996 and 1995, respectively,  compared with net cash provided of $2.0 million in
1994. A substantial  portion of this activity  represents  repayments of certain
long-term  indebtedness  incurred  in 1993 in  connection  with the Merger ( the
"Acquisition Debt  Facilities").  Certain financial  covenants  contained in the
Acquisition Debt Facilities restrict the ability of the Company to pay dividends
and the  Company  does  not  expect  to pay  dividends  during  the  term of the
Acquisition Debt Facilities. Additional activity included the March 1996 receipt
of the proceeds of a $6.0 million subordinated promissory note payable to a U.S.
subsidiary of Benesse, which together with prior affiliate indebtedness incurred
in 1994 (collectively,  the "Benesse Notes"), had a combined balance at December
31, 1996 of $38.3 million. Principal and interest repayment on the Benesse notes
are deferred until all  obligations  under the  Acquisition  Debt Facilities are
satisfied.  Finally,  in April 1996,  the Company  consummated  the  purchase of
627,000 shares of its common stock from Maxwell Communication  Corporation,  plc
(In  Administration)  at a price of $9 per share.  Such  shares were placed into
treasury and reserved for future use.

Pursuant to a covenant under the Acquisition  Debt  Facilities,  the Company was
party at  December  31, 1996 to five  currency  coupon  swap  agreements  with a
financial  institution to hedge the Company's net investments in certain foreign
subsidiaries and to help manage the effect of foreign  currency  fluctuations on
the Company's  ability to repay its U.S. dollar debt. These  agreements  require
the Company, in exchange for U.S. dollar receipts,  to periodically make foreign
currency  payments,  denominated  in the  Japanese  yen,  the Swiss  franc,  the
Canadian  dollar,  the  British  pound,  and the German  mark.  Credit loss from
counterparty  nonperformance  is  not  anticipated.  The  fair  value  of  these
agreements at December 31, 1996,  representing  the amount that could be settled
based on estimates  obtained from a dealer, was a net liability of approximately
$0.5 million.

Effective  January  1,  1996,  the  Company  established  the  SERP  to  provide
retirement income / disability retirement benefits, retiree medical benefits and
death benefits to the Chairman of the Board,  certain designated  executives and
their designated  beneficiaries.  The Company intends to fund the SERP through a


                                       30

<PAGE>




combination of funds  generated from  operations and life insurance  policies on
the participants.

In October 1996, the Internal Revenue Service issued a deficiency  notice to the
Company  relating to its 1989,  1990,  1992 and 1993 Federal tax  returns.  Such
notice  proposed  adjustments  which could result in additional  tax payments of
approximately $9.3 million, plus accrued interest. The Company is contesting the
deficiency  notice,  and  intends  to fund any  deficiency  that may  ultimately
result, by settlement or litigation,  through the Company's cash resources.  The
Company  believes that it has adequate cash resources to pay any such deficiency
and to pursue its business plans.

On October 4, 1996, the Company filed a Protest with the  Government  Accounting
Office  ("GAO")  protesting  the  Department  of Justice,  Executive  Office for
Immigration  Review  ("EOIR")  award  of  its  nationwide  interpreter  services
contract for the next five years to a competing bidder. The Company has been the
contractor  for these EOIR  services for the last 10 years and its 1996 revenues
under the current  contract were  approximately  $10.0  million.  On January 13,
1997,  the GAO  sustained the Company's  protest and  recommended  that the EOIR
contract be awarded to Berlitz. On March 21, 1997, EOIR advised the Company that
based on the GAO decision,  and after  reviewing  its  programmatic  needs,  the
Department  of Justice  had  selected  the  Company to receive  the  interpreter
services  contract.  It is anticipated that contract documents will be finalized
by the end of March 1997. The contract award is subject to applicable government
procurement laws, including EOIR's right to initiate recompetition for a portion
(less than 5%) of the EOIR contract; to elect not to exercise its annual renewal
rights under the EOIR contract for the contract year  beginning May 1, 1999; and
any contract Protest rights of third persons.

At December 31, 1996, the Company's liquid assets of $25.8 million  consisted of
cash and temporary investments.  At December 31, 1996, the Company does not have
any material  commitments  for capital  expenditures.  During 1997,  the Company
anticipates capital expenditures to increase in connection with the expansion of
the  Company's  Translations  segment  and the  refurbishment  of the  Company's
language  centers.  The Company plans to meet its debt service  requirements and
future working capital needs through funds generated from operations.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain  statements  in this Annual Report on Form 10-K,  including  information
appearing under the captions "Business", "Legal Proceedings",  and "Management's
Discussion  and  Analysis of  Financial  Conditions  and Results of  Operations"
constitute  "forward-looking  statements"  within  the  meaning  of the  Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company desires
to take  advantage of certain "Safe Harbor"  provisions of the Reform Act and is
including  this  special  note to enable the  Company to do so.  Forward-Looking
Statements  involve known and unknown  risks,  uncertainties,  and other factors
which  could cause the  Company's  actual  results,  performance  (financial  or
operating)  or  achievements  to  differ  materially  from the  future  results,
performance  (financial or operating)  or  achievements  expressed or implied by
such Forward- Looking  Statements.  Such risks,  uncertainties and other factors
include, among others: the finalization of definitive contract documents and the
future  continuation  of the EOIR contract;  the outcome of future  negotiations
and/or  litigation  pertaining  to  the  deficiency  assessed  by the  IRS;  the


                                       31

<PAGE>




Company's  success in selling new  franchises;  as well as more general  factors
affecting future cashflows,  including fluctuations in foreign currency exchange
rates;   demand  for  the  Company's  products  and  services;   the  impact  of
competition; the effect of changing economic and political conditions; the level
of success and timing in implementing corporate strategies and new technologies;
changes  in  governmental  and tax laws and  regulations,  tax  audits and other
factors  (known or  unknown)  which may  affect  the  Company.  As a result,  no
assurance  can  be  given  as  to  future   results,   levels  of  activity  and
achievements.


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






                                       32


<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

                                                                          PAGE

REPORT OF INDEPENDENT AUDITORS                                             34

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR CONSOLIDATED
    FINANCIAL STATEMENTS                                                   35

CONSOLIDATED FINANCIAL STATEMENTS:

    Consolidated Statements of Operations, years ended
           December 31, 1996, 1995 and 1994                                36

    Consolidated Balance Sheets, December 31, 1996 and 1995                37

    Consolidated Statements of Shareholders' Equity, years ended
           December 31, 1996, 1995 and 1994                                38

    Consolidated Statements of Cash Flows, years ended
           Decembe  31, 1996, 1995 and 1994                                39

    Notes to Consolidated Financial Statements                             40

FINANCIAL STATEMENT SCHEDULE:

           Schedule II.  Valuation and Qualifying Accounts                 59


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





                                       33


<PAGE>



                         REPORT OF INDEPENDENT AUDITORS




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

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Berlitz
International,  Inc. and its  subsidiaries  as of December 31, 1996 and 1995 and
the related  consolidated  statements of operations,  shareholders'  equity, and
cash flows for the years ended December 31, 1996, 1995 and 1994. Our audits also
included the financial  statement schedule listed in the Index at Item 8 for the
years ended December 31, 1996, 1995 and 1994. These financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is to express an opinion on these financial  statements and
the financial statement schedule based on our audits.

We  conducted  our  audits  in  accordance  with  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 Berlitz International, Inc. and its
subsidiaries  as of  December  31,  1996  and  1995  and the  results  of  their
operations and their cash flows for the years ended December 31, 1996,  1995 and
1994, in conformity with generally accepted accounting principles.  Also, in our
opinion, the financial statement schedule for the years ended December 31, 1996,
1995 and 1994, when considered in relation to the basic  consolidated  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.




/s/  DELOITTE & TOUCHE LLP
---------------------------
New York, New York
February 21, 1997



                                       34




<PAGE>



                    STATEMENT OF MANAGEMENT'S RESPONSIBILITY
                     FOR CONSOLIDATED FINANCIAL STATEMENTS




To the Shareholders of Berlitz International, Inc.:

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

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

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





/s/  HENRY D. JAMES
--------------------
Henry D. James
Executive Vice President and Chief Financial Officer





                                       35




<PAGE>





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



<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                    --------------------------------------------------
                                                              1996               1995             1994
                                                    --------------     --------------     ------------

<S>                                                 <C>                <C>                <C>
Sales of services and products                      $    366,067       $      351,139     $    300,234
                                                    --------------     --------------     ------------

Costs and expenses:
    Cost of services and products sold                   218,758              213,073          179,869
    Selling, general and administrative                  113,695              105,039           91,703
    Amortization of publishing rights, excess
       of cost over net assets acquired, and
       other intangibles                                  12,746               13,425           12,750
    Interest expense on long-term debt                     7,647                8,658           10,559
    Interest expense to affiliates                         1,848               1,437               384
    Other income, net                                      (1,441)            (1,269)           (2,873)
                                                    --------------     --------------     -------------
         Total costs and expenses                        353,253              340,363          292,392
                                                    -------------      --------------     ------------

Income before income taxes and minority
    interest in earnings of subsidiary                     12,814              10,776            7,842

Income tax expense                                         7,508                7,400            6,195

Minority interest in earnings
     of subsidiary                                         1,503                1,106              738
                                                    -------------      --------------     ------------

Net income                                          $      3,803       $        2,270     $        909
                                                    =============      ==============     ============


Earnings per common share                           $       0.40       $         0.23     $       0.09
                                                    =============      ==============     ============

Average number of shares (000)                             9,569               10,033           10,033
                                                    =============      ==============     ============
</TABLE>


See accompanying notes to the consolidated financial statements.


                                       36

<PAGE>





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


<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                    1996                1995
                                                                                ------------         ----------
<S>                                                                             <C>                  <C>
ASSETS
Current assets:
Cash and temporary investments                                                  $     25,781         $   25,402
Accounts receivable, less allowance for doubtful accounts
 of  $1,914 and $1,468                                                                36,048             34,825
Unbilled receivables                                                                   3,807              2,744
Inventories, net                                                                      10,260              9,343
Prepaid expenses and other current assets                                              6,815              6,856
                                                                                ------------         ----------
 Total current assets                                                                 82,711             79,170
Property and equipment, net                                                           29,363             25,626
Publishing rights, net of accumulated
 amortization of $3,504 and $2,524                                                    18,864             19,114
Excess of cost over net assets acquired and other intangibles, net
 of accumulated amortization of $46,049 and $35,114                                  417,611            439,407
Other assets                                                                          12,696             13,613
                                                                                ------------         ----------
 Total assets                                                                   $    561,245         $  576,930
                                                                                ============         ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt                                               $     10,741         $   11,371
Accounts payable                                                                       5,383              7,481
Deferred revenues                                                                     34,748             35,608
Payrolls and commissions                                                              10,227             10,846
Income taxes payable                                                                   4,207              2,251
Accrued expenses and other current liabilities                                        12,273             11,523
                                                                                ------------         ----------
 Total current liabilities                                                            77,579             79,080

Long-term debt                                                                        56,353             67,081
Notes payable to affiliates                                                           38,294             31,534
Deferred taxes and other liabilities                                                  22,348             21,290
Minority interest                                                                      9,264              7,529
                                                                                ------------         ----------
 Total liabilities                                                                   203,838            206,514
                                                                                ------------         ----------

Shareholders' Equity:
Common stock
 $.10 par value - 40,000,000 shares authorized;
 10,033,013 shares issued                                                              1,003             1,003
Additional paid - in capital                                                         368,658           368,658
Retained earnings (deficit)                                                            3,426              (377)
Cumulative translation adjustment                                                    (10,037)            1,132
Treasury stock at cost; 627,000 shares                                                (5,643)             --
                                                                                ------------         ----------
 Total shareholders' equity                                                          357,407            370,416
                                                                                ------------         ----------
 Total liabilities and shareholders' equity                                     $    561,245         $  576,930
                                                                                ============         ==========
</TABLE>


See accompanying notes to the consolidated financial statements.



                                       37



<PAGE>




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


<TABLE>
<CAPTION>
                                                      ADDITIONAL    RETAINED     CUMULATIVE                  TOTAL
                                           COMMON       PAID-IN     EARNINGS     TRANSLATION   TREASURY   SHAREHOLDERS'
                                            STOCK       CAPITAL     (DEFICIT)    ADJUSTMENT     STOCK        EQUITY
                                          ---------    ---------    ---------    ---------    ---------    ---------

<S>                                       <C>          <C>          <C>          <C>          <C>          <C>
Balance at January 1, 1994                $   1,003    $ 368,658    $  (3,556)   $  (1,152)   $    --      $ 364,953

Net income                                                                909                                    909
Translation adjustment and other,
   including the effects of certain
    hedges and  intercompany
    transactions                                                                       598                       598
Allocated income taxes                                                                 775                       775
                                          ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1994                  1,003      368,658       (2,647)         221         --        367,235

Net income                                                              2,270                                  2,270
Translation adjustment and other,
   including the effects of certain
    hedges and  intercompany
    transactions                                                                       414                       414
Allocated income taxes                                                                 497                       497
                                          ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1995                  1,003      368,658         (377)       1,132         --        370,416

Net income                                                              3,803                                  3,803

Translation adjustment and other,
   including the effects of certain
    hedges and intercompany
    transactions                                                                   (10,266)                  (10,266)
Allocated income taxes                                                                (559)                     (559)
Transfers from CTA related to
    liquidation of foreign subsidiaries                                               (344)                     (344)
Treasury share purchase                                                                          (5,643)      (5,643)

                                          ---------    ---------    ---------    ---------    ---------    ---------
Balance at December 31, 1996              $   1,003    $ 368,658    $   3,426    $ (10,037)   $  (5,643)   $ 357,407
                                          =========    =========    =========    =========    =========    =========
</TABLE>




See accompanying notes to the consolidated financial statements.




                                       38



<PAGE>



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


<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                --------------------------------------
                                                                  1996           1995           1994
                                                                --------       --------       --------
<S>                                                             <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                      $  3,803       $  2,270       $    909
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation                                                   7,972          7,099          6,423
    Amortization of publishing rights, excess of cost over
      net assets acquired, and other intangibles                  12,746         13,425         12,750
    Minority interest in earnings of subsidiary                    1,503          1,106            738
    Deferred income taxes                                           (172)        (1,405)         1,737
    Provision for bad debts                                        1,168            349            442
    Foreign exchange (gains) losses, net                          (1,005)         1,131         (1,707)
    Gains on currency coupon swap agreements                        (399)        (1,151)          --
    Equity in (gains) losses of joint ventures                       187            (13)            15
    Losses on disposal of fixed assets                                70            622            136
    Changes in operating assets and liabilities:
        (Increase) in accounts and unbilled receivables           (3,900)       (10,504)        (4,242)
        (Increase) decrease in inventories                        (1,039)          (154)         2,321
        (Increase) in prepaid expenses and other assets           (1,130)        (1,256)        (3,343)
        Increase (decrease) in deferred revenues                   1,732           (650)           419
        Increase (decrease) in accounts payable and
          other current liabilities                                 (772)         1,125         (4,002)
        Increase in due to affiliates                              1,862          1,416            384
        Increase (decrease) in income taxes payable                2,178          3,893           (868)
        Increase (decrease) in other liabilities                     630           (752)         8,913
                                                                --------       --------       --------
    Net cash provided by operating activities                     25,434         16,551         21,025
                                                                --------       --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                             (13,034)        (8,035)        (5,892)
Acquisitions of businesses                                          --              (15)          (894)

Refunds from (investments in) joint ventures                         (72)           177         (1,259)
                                                                --------       --------       --------
    Net cash used in investing activities                        (13,106)        (7,873)        (8,045)
                                                                --------       --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of notes payable to affiliates                            6,000           --           30,145
Repayment of long-term debt                                      (11,366)        (9,325)       (24,935)
Payments to acquire treasury stock                                (5,643)          --             --
Net repayments under revolving credit agreement                     --             --           (3,000)
Payment of deferred financing costs                                 --             (107)          (232)
                                                                --------       --------       --------

    Net cash provided by (used in) financing activities          (11,009)        (9,432)         1,978
                                                                --------       --------       --------

Effect of exchange rate changes
    on cash and temporary investments                               (940)            (9)          (531)
                                                                --------       --------       --------

Net increase (decrease) in cash and
    temporary investments                                            379           (763)        14,427

Cash and temporary investments at beginning of period             25,402         26,165         11,738
                                                                --------       --------       --------

Cash and temporary investments at end of period                 $ 25,781       $ 25,402       $ 26,165
                                                                ========       ========       ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash payments for:
        Interest                                                $  6,835       $  7,736       $  8,988
                                                                ========       ========       ========
        Income taxes                                            $  6,640       $  6,556       $  6,070
                                                                ========       ========       ========
    Cash refunds of income taxes                                $  1,298       $  1,371       $  5,584
                                                                ========       ========       ========
    Noncash investing activities:
        Accounts payable for capital expenditures in Japan      $   --         $    456       $   --
                                                                ========       ========       ========
</TABLE>


See accompanying notes to the consolidated financial statements.


                                       39
<PAGE>



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



1.       NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         -------------------------------------------------------------------

         a)  Nature of Operations - Berlitz International,  Inc. (the "Company")
             is a New York  corporation  organized in 1989.  Its  operations are
             conducted on a worldwide  basis  through three  business  segments:
             Language Instruction, Translation Services and Publishing. Over 73%
             of its 1996 revenues are  denominated in currencies  other than the
             U.S. dollar.

             In February 1993, Benesse Corporation (formerly Fukutake Publishing
             Co., Ltd.)  ("Benesse")  acquired,  through a merger of the Company
             with an  indirect  wholly-owned  U.S.  subsidiary  of Benesse  (the
             "Merger"),  approximately  6.7 million  shares of the common stock,
             par value $.10 per share ("Common") of the Company (which currently
             represents  71.6% of the  outstanding  Common).  Subsequent  to the
             Merger,  public  shareholders  of the  Company  hold the  remaining
             outstanding Common.

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

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

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

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



                                       40

<PAGE>


             periods upon reaching certain milestones.

         e)  Inventories  -  Inventories,  which  consist  primarily of finished
             goods, are valued at the lower of average cost or market.

         f)  Deferred   Financing   Costs  -  Direct   costs   relating  to  the
             indebtedness incurred in connection with the Merger and the Benesse
             borrowings (see Notes 6 and 9) have been  capitalized and are being
             amortized  by the  interest  method  over the terms of the  related
             debt.

         g)  Property and  Equipment - Property and  equipment is stated at cost
             and  depreciated  over estimated  useful lives,  using  principally
             accelerated methods.

         h)  Publishing  Rights -  Publishing  rights  are  associated  with the
             Company's  proprietary  language  instruction  print  materials and
             travel related titles.  They are being amortized on a straight-line
             basis over 25 years.  The carrying  value of  publishing  rights is
             evaluated  periodically  to  determine  if there has been a loss in
             value by considering the impacts of expected future revision dates.
             Publishing  rights  will be  written  off if and  when it has  been
             determined that an impairment in value has occurred.

         i)  Excess of Cost Over Net Assets  Acquired  and Other  Intangibles  -
             Excess of cost over net assets  acquired  is being  amortized  on a
             straight-line  basis over 40 years,  while  other  intangibles  are
             being amortized  primarily on a straight-line  basis over 40 years.
             Their carrying  values are evaluated  periodically  to determine if
             there has been a loss in value, by reviewing  current and estimated
             future revenues and cash flows, and the interrelated  impact on the
             values of the Company's  trademark and franchise rights. The excess
             of cost over net  assets  acquired  and other  intangibles  will be
             written off if and when it has been  determined  that an impairment
             in value has occurred.

         j)  Deferred  Revenues -  Deferred  revenues  primarily  arise from the
             prepayment of fees for classroom  instruction and are recognized as
             income as  lessons  are given.  The  Company  recognizes  in income
             deferred revenues for lessons paid for and not expected to be taken
             based upon historical experience by country.

         k)  Income Taxes - The Company has adopted the  provisions of Statement
             of Financial  Accounting  Standards No. 109, "Accounting for Income
             Taxes" ("SFAS 109"). SFAS 109 requires  recognition of deferred tax
             liabilities and assets for the expected future tax  consequences of
             events that have been included in the  financial  statements or tax
             returns. Under this method, deferred tax liabilities and assets are
             determined based on the difference between the financial  statement
             and tax bases of assets and  liabilities  using  enacted  tax rates
             expected  to apply to  taxable  income in the  periods in which the
             differences are expected to reverse.

         l)  Cash and Temporary  Investments - The Company  considers all highly
             liquid  instruments  purchased  with an original  maturity of three



                                       41

<PAGE>

             months or less to be temporary investments.

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

         n)  Financial  Instruments  - The  Company  has  adopted  Statement  of
             Financial  Accounting  Standard  No. 107,  "Disclosures  about Fair
             Value of Financial Instruments",  which requires disclosure of fair
             value  information  about  financial  instruments,  whether  or not
             recognized on the balance sheet.

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

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

         o)  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.

         p)  Reclassifications  -  Certain  reclassifications  have been made in
             prior  years'  financial  statements  and notes to conform with the
             1996 presentation.


2.       EARNINGS PER SHARE
         ------------------

         Earnings  per  share  of  common  stock  is  determined by dividing net
         income by the weighted  average  number  of  common shares outstanding.

         Primary  and  fully  diluted earnings per share of common stock are the
         same  since there  were no  common stock equivalents outstanding during
         the years ended December 31, 1996, 1995 or 1994.



                                       42

<PAGE>



3.       PROPERTY AND EQUIPMENT, NET
         ---------------------------

                                                              DECEMBER 31,
                                                        ------------------------
                                                          1996            1995
                                                        -------          -------

         Building and leasehold improvements            $17,938          $17,749
         Furniture, fixtures and equipment               25,318           19,766
         Land                                             1,382            1,403
                                                        -------          -------
                                                         44,638           38,918
         Less: accumulated depreciation
                 and amortization                        15,275           13,292
                                                        -------          -------
                  Total                                 $29.363          $25,626
                                                        =======          =======



4.       OTHER INCOME, NET
         -----------------

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                         -----------------------------------
                                                           1996          1995          1994
                                                         -------       -------       -------

<S>                                                      <C>           <C>           <C>
         Interest income on temporary investments        $  (728)      $(1,278)      $(1,692)
         Foreign exchange (gains) losses, net             (1,005)        1,131        (1,707)
         Gains on currency coupon swap agreement            (399)       (1,151)         --
         Equity in (gains) losses of joint ventures          187           (13)           15
         Joint venture-related income                       --          (1,299)         --
         Other non-operating taxes                           586           669            48
         Term Loan administration fee                        150           150           150
         Losses on disposal of fixed assets                   70           622           136
         Other interest income, net                          (67)         (242)         (173)
         Other (income) expense, net                        (235)          142           350
                                                         -------       -------       -------
             Total other income, net                     $(1,441)      $(1,269)      $(2,873)
                                                         =======       =======       =======
</TABLE>


5.       INCOME TAXES
         ------------

         The  components  of the deferred tax liability at December 31, 1996 and
         1995 were as follows:

                                                           1996           1995
                                                         -------        -------

         Deferred tax assets:
              Inventory                                  $   827        $   896
              Property and equipment depreciation            122           --
              Deferred revenue                             1,836          1,107
              Unrealized hedging losses                      243          1,272
              Accrued expenses                             2,871          3,689
              Net operating losses                        12,965         18,828
                                                         -------        -------
                Total deferred tax assets                 18,864         25,792
                                                         -------        -------


                                       43



<PAGE>



         Deferred tax liabilities:
              Joint ventures                              (368)            (408)
              Property and equipment depreciation         --               (226)
              Unrealized hedging gains                     (80)            (410)
              Publishing rights amortization            (7,853)          (8,052)
              Other intangibles amortization               (92)            --
                                                      --------         --------
                 Total deferred tax liabilities         (8,393)          (9,096)
                                                      --------         --------

         Net deferred tax assets                        10,471           16,696
           Valuation allowance                         (13,036)         (18,874)
                                                      --------         --------
         Net deferred tax liability                   $ (2,565)        $ (2,178)
                                                      ========         ========


         As a result of the Merger,  $4,086 of the valuation  allowance  will be
         allocated to reduce goodwill and other intangibles in future periods if
         realization of net operating losses becomes more likely than not.


         The  Company's  effective  tax  rate  for 1996 was 58.6%, compared with
         68.7% and 79.0% in 1995 and 1994, respectively.

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

<TABLE>
<CAPTION>
                                              U.S.                                U.S. STATE
                                            FEDERAL            FOREIGN*           AND LOCAL         TOTAL
                                        --------------      --------------      -------------    ------------
<S>                                     <C>                 <C>                 <C>              <C>
         Year ended December 31, 1996:
             Current                    $       1,945       $       5,364       $        371     $     7,680
             Deferred                            (182)                 (7)                17            (172)
                                        --------------      --------------      -------------    ------------
             Total                      $       1,763      $        5,357      $         388     $     7,508
                                        ==============      ==============      =============    ============

         Year ended December 31, 1995:
             Current                    $         272       $       8,062       $        471     $      8,805
             Deferred                          (1,180)                116               (341)          (1,405)
                                        --------------      --------------      -------------    -------------
             Total                      $        (908)      $       8,178       $        130     $      7,400
                                        ==============      ==============      =============    =============

         Year ended December 31, 1994:
             Current                    $         202       $       3,887       $        369     $      4,458
             Deferred                           1,286                 166                285            1,737
                                        --------------      --------------      -------------    -------------
             Total                      $       1,488       $       4,053       $        654     $      6,195
                                        ==============      ==============      =============    =============
</TABLE>



         * Pre-tax  income from foreign  operations  of the Company was $22,429,
           $20,232,  and  $13,541  for  the  twelve  months  ended  December 31,
           1996, 1995 and 1994, respectively.





                                       44



<PAGE>





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

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                    ----------------------------------------------------
                                                         1996               1995               1994
                                                    -------------      --------------     --------------

<S>                                                 <C>                <C>                <C>
         Accrued liabilities                        $         88       $         (76)     $       2,430
         Foreign exchange                                    232                 410                -
         Benefit of net operating loss                      (313)               (228)            (2,646)
         Amortization of intangibles                        (199)             (1,536)             2,027
         Other, net                                          20                   25                (74)
                                                    -------------      --------------     --------------
             Total                                  $       (172)      $      (1,405)     $       1,737
                                                    =============      ==============     ==============
</TABLE>


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


<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                        1996        1995        1994
                                                       ------      ------      ------

<S>                                                    <C>         <C>         <C>
         U.S. Federal statutory  tax rate                35.0%       35.0%       35.0%
         Foreign income taxes, net of Federal
           income tax benefits                          (34.5)        3.3       (28.0)
         U.S. state and local income taxes,
           net of Federal income taxes                    2.0         3.0         6.0
         Net domestic and foreign losses                 12.4         3.9        14.1
         Amortization and writeoff of intangibles        34.8        30.5        58.6
         Other, net                                       8.9        (7.0)       (6.7)
                                                       ------      ------      ------
                 Total                                   58.6%       68.7%       79.0%
                                                       ======      ======      ======
</TABLE>


         For tax return  purposes,  at December  31, 1996 the Company has a U.S.
         Federal net operating loss  carryforward  of $13,792.  Such loss may be
         carried forward through the year 2006. In addition to the U.S.  Federal
         net operating  loss  carryforward,  the Company has net operating  loss
         carryforwards   that   relate  to  a  number  of   foreign   and  state
         jurisdictions that will expire on various dates.

         At December 31, 1996,  accumulated  earnings of foreign subsidiaries of
         $49,087 are intended to be permanently  reinvested outside the U.S. and
         no tax has been provided for the remittance of these earnings. However,
         it is estimated that foreign withholding taxes of $2,585 may be payable
         if such earnings were distributed. These taxes, if ultimately paid, may
         be recoverable as foreign tax credits in the U.S. The  determination of
         deferred  U.S.  tax  liability  for  the   undistributed   earnings  of
         international subsidiaries is not practicable.



                                       45



<PAGE>



6.       LONG-TERM DEBT
         --------------

         Long-Term Debt consists of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                 -----------------------------------
                                                           1996                 1995
                                                 --------------       --------------
<S>                                              <C>                  <C>
              Term Loan                          $       10,500       $       21,550
              Senior Notes                               56,000               56,000
              Other                                         594                  902
                                                    ----------           -----------
                 Total debt                              67,094               78,452
              Less current maturities                    10,741               11,371
                                                 --------------       --------------
                 Long-term debt                  $       56,353       $       67,081
                                                 ==============       ==============
</TABLE>


          Annual  maturities of long-term  debt  outstanding  as of December 31,
          1996 are as follows:  1997, $10,741;  1998, $353; 1999, $14,000; 2000,
          $14,000; 2001, $14,000; thereafter, $14,000.

          In   connection   with  the  Merger,   the  Company  has   outstanding
          indebtedness  through  borrowing under a bank term facility (the "Bank
          Term  Facility") and the issuance of Senior Notes (the "Senior Notes")
          (collectively  the  "Acquisition  Debt  Facilities").  The  Bank  Term
          Facility  consists  of a senior  term  loan  facility  ("Term  Loan"),
          originally in an amount equal to $59,000,  and  originally  included a
          $10,000   senior   revolving   loan  facility  (the  "Bank   Revolving
          Facility").  The Company also issued an aggregate  principal amount of
          Senior  Notes of $56,000.  The  borrowings  by the  Company  under the
          Acquisition Debt Facilities are  collateralized by: (i) certain shares
          of the Company's common stock  indirectly  owned by Benesse,  (ii) the
          capital stock of the Company's  direct and indirect U.S.  subsidiaries
          and a portion of capital stock of certain foreign subsidiaries,  (iii)
          substantially  all other  tangible and intangible  U.S.  assets of the
          Company  and its direct and  indirect  U.S.  subsidiaries,  other than
          leases of school  premises,  and (iv) subject to certain  limitations,
          trademark  rights of the  Company  and its  direct and  indirect  U.S.
          subsidiaries  in  certain  non-U.S.   jurisdictions.   The  Term  Loan
          amortizes  quarterly  until final  maturity on September 30, 1997. The
          Senior Notes amortize in equal annual  installments  on December 31 in
          each of the years 1999  through  2002.  The Term Loan and Senior Notes
          are also  subject  to  mandatory  prepayment  to the  extent  that the
          Company  receives net proceeds from asset sales or cash flow in excess
          of certain  specified  amounts.  No such  mandatory  prepayments  have
          occurred.

          Borrowings  under the Bank Term  Facility  bear  interest  at variable
          rates based on, at the option of the  Company,  (i) Chase  Manhattan's
          alternate  base  rate  plus a  spread  of  1.0%-1.5%  or (ii) the rate
          offered by certain  reference  banks to prime  banks in the  interbank
          Eurodollar  market,  fully  adjusted  for  reserves  plus a spread  of
          2.0%-2.5%. The spread applicable to the borrowings under the Bank Term
          Facility  will  depend on a specified  debt-to-cash  flow ratio of the
          Company.  The average  interest  rate on the Term Loan during 1996 was
          approximately 7.63%. The Senior Notes bear interest at 9.79%.

          The Acquisition Debt Facilities contain certain  covenants,  including
          (i) limitations on the ability of the Company and its  subsidiaries to
          incur indebtedness and guarantee obligations,  to prepay indebtedness,
          to redeem or repurchase  capital stock or subordinated  debt, to enter


                                       46

<PAGE>




          into, grant or suffer to exist liens or  sale-leaseback  transactions,
          to make loans or investments,  to enter into mergers,  acquisitions or
          sales of assets,  to change the nature of the business  conducted,  to
          amend material  agreements,  to enter into agreements  restricting the
          ability of the Company and its  subsidiaries  to grant or to suffer to
          exist liens,  to enter into  transactions  with affiliates or to limit
          the  ability of  subsidiaries  to pay  dividends  or make loans to the
          Company,  (ii)  limitations on the payment of dividends by the Company
          on its capital stock and (iii) a requirement that the Company maintain
          foreign  currency hedge agreements to fix the rate of exchange between
          the U.S.  dollar and such foreign  currencies.  The  Acquisition  Debt
          Facilities also contain financial  covenants  requiring the Company to
          maintain  certain  levels  of  earnings,  liquidity  and net worth and
          imposes limitations on capital expenditures, cash flow and total debt.
          As of  December  31,  1996,  the Company  was in  compliance  with all
          Acquisition Debt Facilities covenants.

          In  September  1994,  as part of a  refinancing  of a  portion  of its
          long-term debt, the Company made a $19,000 prepayment against the Term
          Loan, applied in inverse order of the scheduled principal  maturities.
          The Company also repaid $7,000  outstanding  under its Bank  Revolving
          Facility, which was then terminated. In addition, amendments were made
          to certain covenants under the Acquisition Debt Facilities.

7.        COMMITMENTS AND CONTINGENCIES
          -----------------------------

          LEASE COMMITMENTS

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

          Rent expense,  principally for language centers,  amounted to $26,020,
          $25,443 and $24,816,  for the years ended December 31, 1996,  1995 and
          1994,  respectively.  Certain leases are subject to escalation clauses
          and/or renewal options.

          The minimum rental commitments under  noncancellable  operating leases
          with a remaining  term of more than one year at December  31, 1996 are
          as  follows:  1997-$13,640;  1998-$10,189;  1999-$7,907;  2000-$5,808;
          2001-$4,876; and an aggregate of $19,363 thereafter.

          LEGAL PROCEEDINGS

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

          IRS DEFICIENCY NOTICE

          In October  1996,  the Internal  Revenue  Service  issued a deficiency
          notice to the Company relating to its 1989,  1990,  1992 and 1993 U.S.
          Federal tax returns.  The Company is contesting the deficiency  notice


                                       47

<PAGE>




          and  believes  that  any  liability  that  may  ultimately  result  is
          adequately provided for at December 31, 1996.

          SEVERANCE AGREEMENTS

          The Company has  severance  agreements  with two key  employees  which
          generally  provide for  termination  payments of one times annual base
          salary,  plus a  portion  of the  Company's  bonus  plan  awards.  The
          agreements also provide for the continuation of certain benefits.  The
          maximum  contingent  liability under such agreements is  approximately
          $800.

8.        FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
          ---------------------------------------------

          a)  Currency coupon swap agreements

          Pursuant to a covenant  under the  Acquisition  Debt  Facilities,  the
          Company  maintains  currency  coupon swap  agreements with a financial
          institution to hedge the Company's net  investments in certain foreign
          subsidiaries  and to  help  manage  the  effect  of  foreign  currency
          fluctuations  on the Company's  ability to repay its U.S. dollar debt.
          These agreements require the Company to periodically  exchange foreign
          currency-denominated  interest  payments  for U.S.  dollar-denominated
          interest receipts. Credit loss from counterparty nonperformance is not
          anticipated.

          The periodic  interest  exchanges for agreements  existing during 1996
          were based upon annual  interest rates applied to notional  amounts as
          follows:


<TABLE>
<CAPTION>
                           INTEREST PAYMENTS TO FINANCIAL INSTITUTION    INTEREST RECEIPTS FROM FINANCIAL INSTITUTION
                           ------------------------------------------    --------------------------------------------
                             NOTIONAL AMOUNT (000'S)      INTEREST RATE   NOTIONAL AMOUNT (000'S)       INTEREST RATE
                             -----------------------      -------------   -----------------------       -------------
<S>                                        <C>                   <C>                 <C>                     <C>
FIXED RATE
AGREEMENTS:
                Japanese Yen               2,335,500             9.71%               $     22,500            9.79%
                Swiss Franc                   11,475             9.89%               $      7,500            9.79%
                British Pound                  5,133            10.43%               $      7,550            9.79%
                Canadian Dollar                5,596            10.43%               $      4,300            9.79%
                German Mark                   60,165             4.78%               $     35,000            5.31%

FLOATING RATE
AGREEMENTS:
                German Mark                   60,165          DEM-LIBOR-BBA          $     35,000         USD-LIBOR-BBA
                                                                +2.8%                                       +2.5%
</TABLE>



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



                                       48
<PAGE>




         During the second half of 1995, the German mark floating rate agreement
         became  ineffective  as a hedge of the Company's net  investment in its
         German subsidiaries,  and consequently the Company recognized a foreign
         exchange  gain of $1,151 in its  Consolidated  Statement of  Operations
         within "Other income,  net". On January 23, 1996, the Company exchanged
         this swap for a fixed interest rate coupon-only  currency swap of equal
         fair  value.  The  Company  recognized  a gain of $399 during the first
         quarter of 1996,  representing the change in fair value of the original
         swap from December 31, 1995 to the date of the exchange.

         b) Concentration of credit risk

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

         The Company maintains cash and temporary  investments with various high
         credit  qualified  financial   institutions.   The  majority  of  these
         financial  institutions  are  located  outside  of  the  U.S.  and  the
         Company's  policy is  designed  to limit  exposure  to any one of these
         foreign   institutions.   The  Company  maintains  U.S.   concentration
         accounts,  consisting  of  overnight  investments,  with one major U.S.
         bank. During 1996 and 1995, balances in these accounts averaged 31% and
         27% of worldwide  cash.  As part of its cash  management  process,  the
         Company performs  periodic  evaluations of the relative credit standing
         of all financial  institutions in which it maintains cash and temporary
         investments.

         Credit  risk with  respect  to  Language  Instruction  and  Translation
         Services accounts receivable is generally  diversified due to the large
         number of entities  comprising  the  Company's  customer base and their
         dispersion  across  many  different   industries  and  countries.   The
         Publishing  segment also sells to a substantial  client base,  although
         several  of its  larger  receivables  are from its  distributors.  Such
         receivables from Publishing's  distributors comprised  approximately 8%
         of the Company's total accounts receivable balance before allowances at
         both December 31, 1996 and 1995.




                                       49


<PAGE>




         c) Fair values of financial instruments

         The  carrying  amounts  and  estimated  fair  values  of the  Company's
         financial instruments at December 31, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
                                                         1996                     1995
                                                ---------------------    ----------------------
                                                CARRYING   ESTIMATED     CARRYING     ESTIMATED
                                                 AMOUNT    FAIR VALUE     AMOUNT     FAIR VALUE
<S>                                             <C>          <C>          <C>          <C>
         Assets:
           Cash and temporary investments       $25,781      $25,781      $25,402      $25,402
           Currency coupon swap agreements          228          228         --           --

         Liabilities:
           Long-term debt, including
             current maturities                  67,094       71,652       78,452       84,419
           Notes payable to affiliates           38,294       32,926       31,534       25,292
           Currency coupon swap agreements          694          694        2,464        2,464
</TABLE>

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

9.       RELATED PARTY TRANSACTIONS
         --------------------------

         In September 1994, the Company borrowed $20,000 from a U.S.  subsidiary
         of Benesse,  as evidenced by a subordinated  promissory note (the "U.S.
         Note")  bearing  interest  at a rate of 6.93% per annum.  Berlitz-Japan
         also borrowed  (Yen)1.0  billion  (approximately  $10,145 at inception)
         from Benesse as evidenced by an interest-free  subordinated  promissory
         note (the "Japan Note").  A portion of the proceeds of these notes were
         used  to  settle  certain   obligations   under  the  Acquisition  Debt
         Facilities.  In March 1996,  the Company  received  the  proceeds of an
         additional  $6,000  subordinated  promissory  note  payable  to a  U.S.
         subsidiary  of Benesse and bearing  interest at a rate of the six-month
         LIBOR  plus 1% per  annum,  adjusted  semi-annually.  These  notes  are
         collectively referred to as the Benesse Notes.

         The Benesse Notes rank PARI PASSU with one another and are  subordinate
         in rights of  payment to debt under the  Acquisition  Debt  Facilities,
         including  the  currency  coupon  swap  agreements.  They mature on the
         earlier  of June 30,  2003 or  twelve  months  from  the date  that all
         payment  obligations  under the  Acquisition  Debt Facilities have been
         satisfied. To the extent that interest payments are not permitted while
         any amounts remain  outstanding  under the Acquisition Debt Facilities,
         such  accrued  interest  will  roll  over  semi-annually  into the note
         principal.

         Payment  obligations  under the U.S. Note are guaranteed by the Company


                                       50

<PAGE>




         and its significant U.S. subsidiaries,  subject to senior guarantees of
         the Acquisition Debt  Facilities.  The Company and its significant U.S.
         subsidiaries  have also  executed a  guarantee  of payment  obligations
         under the Japan Note,  effective as of the day  following the date upon
         which all payment obligations under the Acquisition Debt Facilities are
         satisfied.

         The Benesse Notes contain certain covenants,  including prohibitions on
         the incurrence of other debt, liens,  loans,  mergers or consolidations
         and amendments to the Acquisition Debt Facilities without consent.

         The Company and Benesse maintain a joint Directors and Officers ("D&O")
         insurance  policy  covering  acts by  directors  and  officers  of both
         Benesse and the Company.  Consequently,  the premiums on the D&O policy
         are  allocated  60% to  Benesse  and 40% to the  Company,  except  for,
         commencing  in 1997,  the premium for entity  coverage  which  benefits
         Berlitz only and is allocated 100% to Berlitz, resulting in a total D&O
         allocation  of 57% to Benesse and 43% to the  Company.  Since May 1995,
         the Company has maintained a stand-alone Employment Practices Liability
         ("EPL")  insurance  policy  covering  the  Company,  its  officers  and
         directors  (including  the Benesse  directors who are also directors of
         the Company).  Consequently, the premium on the EPL policy is allocated
         30% to Benesse and 70% to the Company.

         During 1994, pursuant to a 1992 contract (the "Development  Agreement")
         with Benesse for the development of English conversation video programs
         for elementary and junior high school students in Japan,  Berlitz-Japan
         received from Benesse  production cost  reimbursements of approximately
         $2,300, and a coordination fee and other project-related reimbursements
         of approximately $250. All development activities under the Development
         Agreement were completed during 1994.

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

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

10.      STOCK OPTION AND INCENTIVE PLANS
         --------------------------------

         The Company's 1993 Short-Term  Executive  Incentive  Compensation  Plan
         (the "Short-Term Plan"), provides for potential cash awards to officers
         and other key  employees  if  certain  financial  goals and  individual
         discretionary  performance measures are met for the applicable calendar
         year. Approximately $811, $1,328 and $1,300 was paid for 1996, 1995 and
         1994, respectively, pursuant to the Short-Term Plan.

         In September  1996,  the Company  adopted the New  Long-Term  Executive
         Incentive   Compensation   Plan  (the  "New  LTIP")  and,   subject  to
         shareholder  approval  in 1997,  the 1996 Stock  Option Plan (the "1996
         Stock Option Plan") (collectively, the "Plans"). The Plans



                                       51

<PAGE>



         replaced the  Company's  then existing  Long Term  Executive  Incentive
         Compensation  Plan (the "Old  LTIP"),  which was  initially  adopted in
         1994.

         The  New  LTIP  provides  for  potential  cash  awards  in  1999 to key
         executive  employees  and the  Chairman  of the Board of the Company if
         certain  financial  goals are met for the year ended December 31, 1998.
         Such awards may not exceed $5.0 million in the  aggregate.  The Company
         is not  required  to  establish  any fund or  segregate  any assets for
         payments  under the New LTIP.  For the twelve months ended December 31,
         1996, the Company recorded expense of $318 related to the New LTIP.

         The 1996  Stock  Option  Plan  authorizes  the  issuance  of options to
         directors and key executive employees of the Company.  The total number
         of shares for which options may be granted is 300,000.  The Company has
         agreed to grant  277,200 of these  options not later than June 30, 1997
         at an exercise price equal to the closing price of the Company's common
         stock on the New York Stock Exchange on the date of grant.

         The  Company  has two other  stock  plans:  the 1989  Stock  Option and
         Incentive Plan (the "1989 Plan") and the Non-Employee  Directors' Stock
         Plan (the "Directors'  Plan"). The 1989 Plan authorizes the issuance of
         various stock  incentives to officers and key employees and the related
         issuance of up to 2,000,000 shares of common stock. The Directors' Plan
         provides non-employee Directors of the Company the opportunity to elect
         to  receive  a portion  of their  annual  retainer  fees in the form of
         common stock of the Company,  or to defer  receipt of a portion of such
         fees and have the  deferred  amounts  treated as if  invested in common
         stock.  There has been no activity  related to these plans during 1994,
         1995 or 1996, and there are no related incentives or shares outstanding
         at December 31, 1996.

11.      THRIFT AND RETIREMENT PLANS
         ---------------------------

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

         In addition, certain foreign operations have other defined contribution
         benefit  plans.  Total  expense  with  respect  to all  benefit  plans,
         excluding the SERP (hereafter defined),  was $1,632,  $1,704 and $1,445
         for the years ended December 31, 1996, 1995 and 1994, respectively.

         Effective  January 1, 1996, the Company  established  the  Supplemental
         Executive  Retirement  Plan  ("SERP"),  a defined  benefit  plan  which
         provides retirement income / disability  retirement  benefits,  retiree
         medical  benefits  and death  benefits  to the  Chairman  of the Board,
         certain  designated  executives  and  their  designated  beneficiaries.
         Monthly  benefits will be available to any  participant  who retires at
         age 60 or above, with at least 5 years of service with the Company.



                                       52

<PAGE>



         The  retirement  income/disability  retirement  benefits are based on a
         percentage of an average monthly salary  (calculated on the base salary
         and short-term  bonuses paid over the last 36 months of employment) and
         will be paid to the  retired  participant  for  life,  with 50% of such
         benefit paid to the  participant's  surviving  spouse for life upon the
         retired  participant's  death. Such percentage for initial participants
         as of January 1, 1996 is 30%. For future participants,  such percentage
         will be 2% (or such  other  percentage  as the Board of  Directors  may
         determine)  multiplied  by years of  service,  not to exceed  30%.  The
         Company will also provide each retired  participant and their surviving
         spouse with medical  coverage for both of their lives. If a participant
         with  at  least  5  years  of  service  dies  before  retirement,   the
         participant's  designated  beneficiary  will  receive,  in  lieu of the
         above-mentioned benefits, a one-time payment equal to the participant's
         base salary projected to age 65 at a 4% annual increase.

         Awards under the SERP are not subject to deduction for Social  Security
         or  other  offset  amounts,  except  to the  extent  of any  disability
         benefits  payable under the Company's  long-term  disability  insurance
         policy.  In the case of Chairman  of the Board,  who does not receive a
         salary  from the  Company,  the SERP  benefits  are based on an imputed
         salary  determined  by the Company's  Board of  Directors.  The Company
         intends to fund the SERP through a combination of funds  generated from
         operations and life insurance policies on the participants.

         The  following  table  sets  forth the  funded  status  of the  medical
         coverage portion of the SERP, reconciled with amounts recognized in the
         Company's statement of financial position at December 31, 1996:

              Accumulated postretirement benefit obligation:
                       Retirees                                     $  --
                       Fully eligible active plan participants         --
                       Other active plan participants                 1,435
                                                                    -------
                                                                      1,435
              Plan assets at fair value                                --
                                                                    -------
              Accumulated postretirement benefit obligation
                 in excess of plan assets                             1,435
              Prior service cost not yet recognized in net
                 periodic postretirement benefit cost                  (999)
                                                                    -------
              Accrued postretirement benefit cost                   $   436
                                                                    =======




                                       53


<PAGE>




         Net periodic  postretirement  benefit cost for the year ended  December
         31, 1996 included the following components:

              Service cost - benefits earned during the period      $       196
              Interest cost on accumulated postretirement
                 benefit obligation                                          81
              Amortization of prior service cost                            159
                                                                    -----------
              Net periodic postretirement benefit cost              $       436
                                                                    ===========

         The  assumed  health  care  cost  trend  rate  used  in  measuring  the
         accumulated  postretirement  benefit obligation was a beginning rate of
         14%  leveling to an  ultimate  rate of 6% over 15 years.  The  weighted
         average   discount   rate   used   in   determining   the   accumulated
         postretirement benefit obligation was 7%. If the health care cost trend
         rate assumption  were increased by 1%, the  accumulated  postretirement
         benefit obligation as of January 1, 1996 would increase by $206 and the
         service cost for benefits  earned during the period ending December 31,
         1996 would increase by $36.

         Net periodic pension cost of the retirement  income portion of the SERP
         is as follows:

              Service cost on benefits earned during the period     $       407
              Interest cost on projected benefit obligation                 188
              Net amortization and deferral                                 179
                                                                    -----------
              Net periodic pension cost                             $       774
                                                                    ===========

         The actuarial  present value of benefit  obligations  and funded status
         for the SERP at December 31, 1996 is as follows:

              Benefit obligations:
                       Vested benefits                                  $  --
                       Nonvested benefits                                 2,370
                                                                        -------
                       Accumulated benefit obligation                     2,370
              Projected compensation increases                              818
                                                                        -------
              Projected benefit obligation                                3,188
              Plan assets at fair value                                    --
                                                                        -------
              Projected benefit obligation in excess of plan assets       3,188
              Unrecognized prior service cost                            (2,503)
              Unrecognized actuarial gain                                    89
              Adjustment required to recognize minimum liability          1,596
                                                                        -------
              Net pension liability                                     $ 2,370
                                                                        =======


         Assumptions used in developing the projected  benefit  obligation as of
         December 31 were as follows:

                  Discount rate (annual compounding)                        7.0%
                  Annual rate of increase in compensation                   4.0%




                                       54

<PAGE>



         The assumed  interest rate at the beginning of each year is the same as
         the discount rate at the end of each prior year.  Net pension income is
         determined using  assumptions as of the beginning of each year.  Funded
         status is determined using assumptions as of the end of each period.

12.      TREASURY STOCK
         --------------

         On April 4, 1996,  the  Company  consummated  the  purchase  of 627,000
         shares of its common stock from Maxwell  Communication  Corporation plc
         (In Administration) at a price of $9 per share. Such shares were placed
         into treasury and are reserved for future use.

13.      BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
         ------------------------------------------------

         The Company's  operations are conducted through the following  business
         segments:  Language Instruction,  Translation Services, and Publishing.
         Intersegment and intergeographical sales are not significant.

         Included  within  general  corporate  identifiable  assets  for 1996 is
         $1,596 for an intangible  required to recognize minimum liability under
         the  SERP.  Also  included  for 1996  and  1994  are  $288 and  $1,011,
         respectively,  of  currency  coupon  swap  agreements.  The  balance of
         general   corporate   identifiable   assets  consist  of  property  and
         equipment.  Depreciation  and  amortization  relates  to  property  and
         equipment,  excess of cost over net assets acquired,  other intangibles
         and publishing rights.




                                       55

<PAGE>



<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                    ----------------------------------------------------
                                                             1996                1995               1994
                                                    -------------      --------------     --------------
         BUSINESS SEGMENTS
         -----------------

<S>                                                 <C>                <C>                <C>
         Sales of services and products:
            Language Instruction                    $     273,957      $     270,524      $     244,502
            Translation Services                           76,897             64,036             39,997
            Publishing                                     15,213             16,579             15,735
                                                    -------------      --------------     -------------
               Total                                $     366,067      $     351,139      $     300,234
                                                    =============      ==============     =============


         Operating profit (loss):
            Language Instruction                    $      33,312      $      28,560      $      24,884
            Translation Services                            3,458              3,836              1,731
            Publishing                                        682              1,235                 524
            Divisional expenses                           (6,147)             (4,275)            (4,450)
                                                    -------------      --------------     --------------
               Total operating segments                    31,305             29,356             22,689

            General corporate                            (10,437)             (9,754)            (6,777)
                                                    -------------      --------------     --------------
               Total                                $      20,868      $      19,602      $      15,912
                                                    =============      =============      =============


         Capital expenditures:
            Language Instruction                    $       5,693      $       5,188      $       3,508
            Translation Services                            3,903              1,659                648
            Publishing                                      1,289                853              1,349
                                                    -------------      -------------      -------------
               Subtotal                                    10,885              7,700              5,505

            General corporate and divisional                2,149                335                387
                                                    -------------      --------------     -------------
               Total                                $      13,034      $       8,035      $       5,892
                                                    =============      ==============     =============


         Depreciation and amortization:
            Language Instruction                    $      15,395      $      15,900      $      15,339
            Translation Services                            3,391              2,826              2,180
            Publishing                                      1,450              1,551              1,371
                                                    -------------      --------------     -------------

               Subtotal                                    20,236             20,277             18,890

            General corporate and divisional                  482                247                283
                                                    -------------      --------------     -------------
               Total                                $      20,718      $      20,524      $      19,173
                                                    =============      ==============     =============




                                                                         DECEMBER 31,
                                                    ----------------------------------------------------
                                                             1996                1995               1994
                                                    -------------      --------------     --------------
         Identifiable assets:
            Language Instruction                    $     457,198      $     477,300      $      490,462
            Translation Services                           77,945             76,368              65,925
            Publishing                                     22,415             22,717              24,037
                                                    -------------      --------------     --------------

               Subtotal                                   557,558            576,385             580,424

            General corporate                               3,687                545               1,581
                                                    -------------      --------------     --------------
               Total                                $     561,245      $     576,930      $      582,005
                                                    =============      ==============     ==============
</TABLE>



                                       56
<PAGE>



<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                    ----------------------------------------------------
                                                             1996                1995               1994
                                                    -------------      --------------     --------------

         GEOGRAPHIC AREAS
<S>                                                 <C>                <C>                <C>
         Sales of services and products:
            North America                           $     101,921      $      92,821      $      79,984
            Western Europe                                 82,869             76,198             58,934
            Central/Eastern Europe                         66,037             63,000             52,857
            Asia                                           72,922             81,652             74,915
            Latin America                                  42,318             37,468             33,544
                                                    -------------      --------------     -------------
               Total                                $     366,067      $     351,139      $     300,234
                                                    =============      ==============     =============


         Operating profit (loss):
            North America                           $      12,506      $      13,634      $      11,308
            Western Europe                                  4,927              4,231                (70)
            Central/Eastern Europe                          3,766              3,453              3,024
            Asia                                            6,462              4,476              4,628
            Latin America                                   8,162              6,976              6,170
            Business segment corporate expenses           (4,518)             (3,414)            (2,371)
                                                    -------------      --------------     --------------

               Total operating segments                    31,305             29,356             22,689

            General corporate expenses                   (10,437)             (9,754)            (6,777)
                                                    -------------      --------------     --------------
               Total                                $      20,868      $      19,602      $      15,912
                                                    =============      ==============     =============
</TABLE>




         Amortization  of  publishing  rights,  excess of cost  over net  assets
         acquired and other intangibles,  included in operating profit (loss) in
         the years ended  December 31, 1996,  1995 and 1994  amounted to $9,282,
         $9,344,  and $9,220 for North  America;  $1,148,  $1,196,  and $873 for
         Western  Europe;  $484,  $688,  and  $528 for  Central/Eastern  Europe;
         $1,446, $1,762, and $1,575 for Asia; and $387, $435, and $554 for Latin
         America.

         Profit  (expense),   resulting  from  an  intersegment   allocation  to
         compensate  North America for use of its  intangibles,  and included in
         operating  profit (loss) in each of the years ended  December 31, 1996,
         1995 and 1994  amounted  to $6,071  for  North  America;  $(1,505)  for
         Western Europe; $(1,408) for Central/Eastern Europe; $(2,188) for Asia;
         and $(970) for Latin America.


                                                  DECEMBER 31,
                                  ------------------------------------------
                                    1996              1995            1994
                                  --------         --------         --------
Identifiable assets:
   North America                  $374,540         $377,253         $382,203
   Western Europe                   57,699           56,985           52,922
   Central/Eastern Europe           34,392           39,319           36,453
   Asia                             68,680           78,458           83,353
   Latin America                    25,934           24,914           27,074
                                  --------         --------         --------
      Total                       $561,245         $576,930         $582,005
                                  ========         ========         ========




                                       57

<PAGE>




14.      QUARTERLY FINANCIAL DATA (UNAUDITED)



<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                    --------------------------------------------------------------
                                      MARCH 31        JUNE 30           SEPT 30          DEC 31             YEAR
                                    -----------    ------------      ------------     ------------      ------------
<S>                                 <C>            <C>               <C>              <C>               <C>
1996:
Sales of services and products      $    89,266    $     91,332      $     93,177     $     92,292      $    366,067
Operating profit                          3,910           5,876             5,022            6,060            20,868
Income before income taxes
 and minority interest                    1,476           3,404             2,670            5,264            12,814
Net income                                  204           1,006               439            2,154             3,803
Earnings per share                  $      0.02    $       0.11      $       0.05     $       0.23      $       0.40
                                    ===========    ============      ============     ============      ============
</TABLE>


<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                    --------------------------------------------------------------
                                      MARCH 31        JUNE 30           SEPT 30          DEC 31             YEAR
                                    -----------    ------------      ------------     ------------      ------------
<S>                                 <C>            <C>               <C>              <C>               <C>
1995:
Sales of services and products      $   80,406     $     89,674      $     91,410     $     89,649      $    351,139
Operating profit                         2,623            4,632             6,400            5,947            19,602
Income before income taxes
  and minority interest                  1,910            1,473             3,417            3,976            10,776
Net income (loss)                         (587)              78             1,118            1,661             2,270
Earnings (loss) per share           $    (0.06)    $       0.01      $       0.11     $       0.17      $       0.23
                                    ==========     ============      ============     ============      ============
</TABLE>







                                       58
<PAGE>




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



                                   SCHEDULE II




<TABLE>
<CAPTION>
                                      BALANCE AT       CHARGED TO                                            BALANCE
                                       BEGINNING         COST AND                                          AT END OF
                                         OF YEAR         EXPENSES    DEDUCTIONS (1)       OTHER (2)          OF YEAR
                                    ------------  ---------------  ---------------   --------------    -------------

Allowances for doubtful accounts:

<S>                                 <C>           <C>              <C>               <C>               <C>
Year Ended December 31, 1996        $      1,468  $         1,168  $          (698)  $          (24)   $       1,914
                                    ============  ===============  ================  ===============   =============

Year Ended December 31, 1995        $      1,912  $           349  $          (814)  $           21    $       1,468
                                    ============  ===============  ================  ===============   =============

Year Ended December 31, 1994        $      2,566  $           442  $        (1,176)  $           80    $       1,912
                                    ============  ===============  ================  ===============   =============
</TABLE>


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

(2)  Principally represents foreign currency translation.




                                       59

<PAGE>




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

Not applicable.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following Summary Compensation Table sets forth the compensation awarded to,
earned by or paid to the Chief Executive  Officer ("CEO") and certain  executive
officers (collectively,  the "Named Executive Officers") during the fiscal years
ended December 31, 1996,  1995 and 1994 for services  rendered in all capacities
to the Company and its subsidiaries.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                      LONG-TERM
                                                                                     COMPENSATION
                                                      ANNUAL COMPENSATION                 (3)
                                             --------------------------------------   ----------
                                                                              OTHER    AWARDS OF
NAME AND                                                                     ANNUAL     OPTIONS/       ALL OTHER
PRINCIPAL POSITION              YEAR          SALARY            BONUS  COMPENSATION         SARS    COMPENSATION
                                                 ($)              ($)       ($) (2)      (#) (4)         ($) (5)
                                ----         -------          -------  ------------   ----------    ------------
<S>                             <C>          <C>               <C>           <C>            <C>            <C>
Hiromasa Yokoi                  1996         480,000           84,000        60,469         None           9,750
Vice Chairman of the Board,     1995         444,800          180,000        55,200         None           9,750
CEO and President               1994         404,320          161,700        39,000         None           9,750

Manuel Fernandez                1996         240,000           40,900           990         None           9,750
Executive Vice President and    1995         224,800           51,000         1,312         None           9,750
Chief Operating Officer,        1994         207,200           72,500        20,978         None           9,750
Worldwide Language Instruction

Robert Minsky                   1996         240,000           10,000           874         None           9,750
Executive Vice President and    1995         227,900           80,000          None         None           9,750
Chief Operating Officer,        1994         207,200           46,600          None         None           9,750
Translations and Publishing

Susumu Kojima                   1996         225,000            8,700        65,000         None            None
Executive Vice President,       1995         210,000           25,200        42,000         None           9,750
Asia Division                   1994         200,000           45,000        42,000         None           9,500

Henry D. James (1)              1996         210,000           32,000           771         None           9,750
Executive Vice President and    1995         182,300           51,000          None         None           9,750
Chief Financial Officer         1994         168,000           78,800          None         None           9,750
</TABLE>



                                       60
<PAGE>




(1) Mr.  James' 1996  percentage  increase in base salary was due in part to the
    additional  responsibilities  he  assumed  as a result of his  promotion  to
    Executive Vice President.

(2) Other Annual Compensation for Mr. Yokoi and Mr. Kojima primarily  represents
    monthly  housing  allowances.   For  Mr.  Fernandez,  this  column  includes
    relocation expense reimbursements of $19,795 in 1994.

(3) The column designated by the SEC to report Long-Term  Incentive Plan Payouts
    has been  excluded  because no payouts have been made in 1994,  1995 or 1996
    under  the  Company's   long-term  incentive  plans,  as  discussed  in  the
    Compensation   Committee   report  under  "Long-Term   Executive   Incentive
    Compensation Plan".

    The column designated by the SEC to report Restricted Stock  Awards has been
    excluded because the Company made no awards of restricted stock to the Named
    Executive  Officers  during any portion of fiscal years 1996,  1995 or 1994.
    There were no Common restricted shares outstanding at December 31, 1996.

(4) The  Company  has not  granted  stock  options  or SARs to any of the  Named
    Executive  Officers during fiscal years 1996, 1995 or 1994.  There have been
    no  exercises  of options or SARs for the fiscal year 1996,  and at December
    31, 1996, there were no options or SARs outstanding.

(5) The  amounts  reported  in this  column for the fiscal  year 1996  include a
    contribution  of $4,500  made by the  Company  for the account of each Named
    Executive  Officer pursuant to the thrift portion (the "401(k) Plan") of the
    Berlitz Retirement Savings Plan (the "Retirement Savings Plan"). The amounts
    reported also include a  contribution  of $5,250 made by the Company for the
    account of each Named Executive  Officer pursuant to the retirement  portion
    (the "Pension Plan") of the Retirement Savings Plan.




                                       61

<PAGE>



PENSION PLAN TABLE


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

<TABLE>
<CAPTION>
                                                        YEARS OF SERVICE
                                    ----------------------------------------------------
                                    INITIAL
                                    PARTICIPANT
                                    (HEREINAFTER
                                    DEFINED)                 ALL OTHER PARTICIPANTS

         COMPENSATION               5 OR MORE            5           10       15 OR MORE
         ------------               ----------      ---------   ----------    ----------

<S>      <C>                        <C>             <C>         <C>           <C>
         $100,000                   $  30,000       $ 10,000    $  20,000     $   30,000
          150,000                      45,000         15,000       30,000         45,000
          200,000                      60,000         20,000       40,000         60,000
          250,000                      75,000         25,000       50,000         75,000
          300,000                      90,000         30,000       60,000         90,000
          400,000                     120,000         40,000       80,000        120,000
          550,000                     165,000         55,000      110,000        165,000
          750,000                     225,000         75,000      150,000        225,000
</TABLE>


Under the SERP, monthly benefits are available to any participant who retires at
age 60 or  above,  with at  least 5 years  of  service  with  the  Company.  The
retirement income/disability retirement benefits are based on a percentage of an
average  monthly salary  (calculated  on the base salary and short-term  bonuses
paid  over the last 36 months of  employment/1/) and will be paid to the retired
participant  for  life,  with  50% of such  benefit  paid  to the  participant's
surviving spouse for life upon the retired  participant's death. Such percentage
for participants  designated as of January 1, 1996 ("Initial  Participants")  is
30%.  For  future  participants,  such  percentage  will  be 2% (or  such  other
percentage  as the Board of  Directors  may  determine)  multiplied  by years of
service,  not to  exceed  30%.  The  Company  will  also  provide  each  retired
participant and their surviving  spouse with medical  coverage for both of their
lives. If a participant with at least 5 years of service dies before retirement,
the  participant's   designated   beneficiary  will  receive,  in  lieu  of  the
above-mentioned  benefits,  a one-time payment equal to the  participant's  base
salary  projected to age 65 at a 4% annual  increase.  Awards under the SERP are
not subject to deduction for Social Security or other offset amounts,  except to
the extent of any  disability  benefits  payable under the  Company's  long-term
disability  insurance  policy.  The Company  intends to fund the SERP  through a
combination of funds  generated from  operations and life insurance  policies on
the participants.

The Named Executive Officers,  all of whom are Initial  Participants,  will each
have at least 5 years of service at age 60. The  compensation  covered under the
SERP for each of the Named  Executive  Officers is shown under the  "Salary" and
"Bonus" columns of the Summary Compensation Table.

---------------
/1/ In the case  of  the  Chairman  of the Board,  who does not receive a salary
    from  the  Company,  the  SERP  benefits  are  based  on  an  imputed salary
    determined  by the Company's Board of Directors.


                                       62

<PAGE>




LONG-TERM INCENTIVE PLANS - AWARDS IN FISCAL YEAR 1996

The following awards were made pursuant to the New LTIP  (hereinafter  defined),
which  completely  replaced  the  Old  LTIP  (hereinafter   defined).   See  the
"Compensation Committee Report" for a further description.

<TABLE>
<CAPTION>
                                                                       ESTIMATED FUTURE PAYOUTS
                                                                   UNDER NON-STOCK PRICE-BASED PLANS
                                                               --------------------------------------
                                              PERFORMANCE
NAME                          NUMBER OF            PERIOD       THRESHOLD        TARGET       MAXIMUM
                               UNITS(#)      UNTIL PAYOUT          ($)(1)           ($)           ($)
                               --------      ------------      ----------       -------     ---------

<S>                            <C>           <C>               <C>              <C>
Hiromasa Yokoi                 882,223           12/31/98         441,112       441,112        882,223
Manuel Fernandez               330,834           12/31/98         165,417       165,417        330,834
Robert Minsky                  330,834           12/31/98         165,417       165,417        330,834
Susumu Kojima                  310,432           12/31/98         155,216       155,216        310,432
Henry D. James                 230,481           12/31/98         115,241       115,241        230,481
</TABLE>


(1)  Assumes  that  minimum  revenues  and  earnings goals are met.  Should such
     goals not be met, no payments will be made.


1996 BOARD OF DIRECTORS MEETINGS, COMMITTEES AND FEES

During  1996,  the Board of  Directors  of the Company met in person four times,
participated in one telephonic  meeting and took no actions by unanimous written
consent.

In 1996,  the Board of Directors had standing  Executive,  Audit,  Disinterested
Directors,  and  Compensation  Committees.  The Company does not have a standing
Nominating Committee.

The Executive  Committee,  during the intervals between meetings of the Board of
Directors,  may,  with certain  exceptions,  exercise the powers of the Board of
Directors. The Executive Committee did not meet during 1996.

The Audit  Committee  recommends to the Board of Directors the engagement of the
independent  auditors of the Company and reviews with the  independent  auditors
the scope and results of the Company's  audits.  The Audit Committee reviews the
terms of all  agreements  between  the  Company  and its  affiliates.  The Audit
Committee  meets with  management and with the Company's  internal  auditors and
independent  auditors to review  matters  relating  to the quality of  financial
reporting and internal  accounting  control,  including  the nature,  extent and
results of their audits,  and  otherwise  maintains  communications  between the
Company's independent auditors and the  Board of Directors.  The Audit Committee
met four times during 1996.

Initially, the Disinterested Directors Committee was established for the purpose
of  protecting  the  long-term   interests  of  the  Company  and  its  minority
shareholders by independently reviewing and monitoring all matters affecting the
relationship  between the Company and  Maxwell  Communication  Corporation,  plc
("Maxwell Communication") and its affiliates.  Following the Merger (hereinafter
defined),  the  Disinterested   Directors  Committee's  role  was  retained  and
reconstituted  to review and  monitor  all matters  affecting  the  relationship
between  the Company and Benesse  Corporation  ("Benesse")  and its  affiliates.
During 1996, the Disinterested  Directors  Committee met in person two times and
participated in one telephonic meeting.



                                       63

<PAGE>




The  Compensation   Committee   reviews   performance  of  corporate   officers,
establishes overall employee  compensation  policies and recommends to the Board
of Directors  major  compensation  programs.  The  Compensation  Committee  also
reviews and approves salary  arrangements  and other  remuneration for executive
officers  of the  Company  and is  responsible  for review of  certain  employee
benefit plans. The Compensation  Committee oversees and approves grants of stock
options and other stock-based  awards pursuant to the 1989 and 1996 Stock Option
Plans  (individually,  the "1989 Stock  Option  Plan" and the "1996 Stock Option
Plan",   and   collectively,   the  "Stock  Option  Plans")  and  the  Company's
Non-Employee  Directors Stock Plan (the "Directors' Stock Plan").  The Committee
also administers the 1993 Short-Term Executive Incentive  Compensation Plan (the
"Short-Term  Incentive Plan"),  and the 1996 New Long-Term  Executive  Incentive
Compensation Plan (the " New LTIP"), which replaced the 1993 Long-Term Executive
Incentive   Compensation  Plan  (the  "Old  LTIP"),   and  approves  awards  and
discretionary bonuses under these plans. No member of the Compensation Committee
is eligible to participate in the Stock Option Plans or the Short-Term Incentive
Plan. During 1996, the Compensation Committee met four times and participated in
telephonic meetings one time.

The Company's  standard retainer payable to each director who is not an employee
of the Company or any of its affiliates is $30,000 per annum plus expenses, with
an additional  $2,000 for each Committee  meeting  attended in person and $1,000
for each  meeting  participated  in by  telephone.  No fees are paid for actions
taken by unanimous written consent.  Only those directors who are also full-time
employees of the Company or any of its affiliates are eligible to participate in
the health  benefit plan  maintained by the Company.  Directors  employed by the
Company or any of its affiliates  receive no  compensation in  consideration  of
their  duties  as  directors.  The  outside  directors  earned an  aggregate  of
approximately $146,000 as cash compensation for their services during 1996.

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

EMPLOYMENT  CONTRACTS  AND  TERMINATION  OF  EMPLOYMENT  AND  CHANGE  OF CONTROL
ARRANGEMENTS

The Company has a severance  agreement with Robert Minsky which provides that if
Mr.  Minsky is  terminated  other  than for  cause,  he is to be paid one year's
severance at his then current  annual base salary plus a prorated  amount of the
award under the Company's  Short-Term Incentive Plan to which he would have been
entitled for such year and the continuation of certain other benefits.

The Company is a party to  indemnification  agreements  with each  director  and
executive  officer  pursuant  to which the  Company  agrees to pay,  subject  to
limitations  imposed by the NYBCL, any amount such director or executive officer
becomes obligated to pay as a result of any claims made against such director or
executive officer because of any alleged act or omission or neglect or breach of
duty which he commits  while  acting in his  capacity as a director or executive
officer, as the case may be.


                                       64

<PAGE>


               COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 1996

The Compensation  Committee of the Board of Directors reviews and determines the
compensation of the Company's executive  officers.  It also reviews and approves
any  employment,  severance or similar  agreements for executive  officers.  The
Committee determines the amount, if any, of the Company's contributions pursuant
to the  Retirement  Savings  Plan,  and oversees  and  approves  grants of stock
options and other stock-based  awards pursuant to the Stock Option Plans and the
Directors' Stock Plan. The Committee also  administers the Short-Term  Incentive
Plan and the New LTIP (which has replaced the Old LTIP) and approves  awards and
discretionary bonuses under each of such plans.

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

The key  components  of executive  officer  compensation  are base salary,  cash
bonuses, and awards pursuant to incentive-based plans. The Committee attempts to
combine  these  components  in such a way to  attract,  motivate  and retain key
executives critical to the long-term success of the Company. A discussion of the
various components of executive compensation for the fiscal year 1996 follows.

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

The  proposed  annual   compensation  of  Company  employees  was  discussed  at
Compensation   Committee   meetings   held  in  1996  and  1997.   Base   salary
recommendations  were made by  management  of the Company for the  Committee  to
approve.  After  review  and  consideration  by the  Committee  of  management's
recommendations,  the Committee  approved base salary  adjustments for executive
officers  considering  individual  and  Company  performance.  Such  adjustments
averaged  8.9% and 3.3% for 1996 and 1997,  respectively.  The criteria  used to
evaluate  Company  performance  were sales and earnings  figures,  and return on
equity.  The Committee  believes  that all such  criteria  were  accorded  equal
weight.

BONUSES
In 1993, the Committee approved the Short-Term  Incentive Plan,  commencing with
the 1993 calendar year, pursuant to which each executive officer is eligible for
an annual bonus based upon the officer's present employment position, individual
performance,  and,  through 1994, the total  Company's  performance  compared to
earnings goals. In 1995, the Committee amended the Short-Term  Incentive Plan so
that Division Vice  Presidents  would receive 1995 and subsequent  years' awards
based on 60% of divisional performance and 40% of total Company performance. The
Committee believes that individual performance and Company performance are given


                                       65
<PAGE>




approximately  equal  weight.  The  Short-Term  Incentive  Plan also permits the
Committee to award discretionary cash awards to employees, who may or may not be
participants  under the Short-Term  Incentive  Plan,  subject to those terms and
conditions as the Committee shall determine in its sole discretion.

At its March 1997  meeting,  the  Committee  approved,  after  discussion,  1996
bonuses for executive officers under the Short-Term Incentive Plan. Such bonuses
that  accrued  for 1996  ranged  up to 24.4% of each  executive  officer's  base
salary.  The Committee also approved a discretionary  special bonus proposal for
certain  executive  officers,  recommended by management  based upon exceptional
individual  performance.  Such  special  bonuses  that accrued for 1996 for such
executive officers ranged from 2.1% to 4.2% of their total salary.

STOCK OPTIONS AND RESTRICTED STOCK
The 1989 Stock Option Plan provides for the award of stock  options,  restricted
stock and other stock-based  awards to senior management of the Company.  Grants
under  this  plan  are  intended  to  provide  executives  with the  promise  of
longer-term  rewards which appreciate in value with favorable future performance
of the Company. In determining grants of stock options and restricted stock, the
Compensation  Committee reviews individual  performance and Company performance.
The criteria  used to evaluate  Company  performance  include sales and earnings
figures, and return on equity. The Committee believes that all such criteria are
accorded  equal weight.  The Committee did not approve,  and the Company did not
make, any grants of stock options,  restricted  stock, or any other  stock-based
award  under the 1989 Stock  Option Plan in 1996,  and there are no  outstanding
option grants under this plan.

In September 1996, the Company adopted, subject to shareholder approval in 1997,
the 1996 Stock  Option  Plan,  which,  together  with the New LTIP  (hereinafter
discussed), replaced the Company's then existing Old LTIP. The 1996 Stock Option
Plan authorizes the issuance of options to directors and key executive employees
of the Company.  The total number of shares for which  options may be granted is
300,000. The Company has agreed to grant 277,200 of these options not later than
June 30, 1997 at an exercise  price equal to the closing  price of the Company's
common stock on the New York Stock Exchange on the date of grant.

LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLANS
In 1993,  the  Committee  approved  the Old LTIP,  effective  January  1,  1994,
pursuant to which the Chairman of the Board,  officers and certain key employees
were eligible to receive, for each performance unit granted to the individual by
the Committee,  cash awards based on Company  performance and common stock price
results  over a five year  period  ending on  December  31,  1998.  The plan was
instituted to, among other things,  provide  executives  with a direct  economic
interest  in  meeting  long-term  business  objectives.  Performance  units were
granted by the Committee to each participant in its discretion. Criteria used to
evaluate  Company  performance  were  earnings  and  sales  figures.   For  each
performance  unit granted by the Committee,  each  participant  was to receive a
cash award based on Company  performance  and the  Company's  common stock price
results  from  January 1, 1994  through  December  31,  1998.  The Old LTIP also
contained  provisions  governing such awards in the event of a change of control
of the Company or a "going private" transaction with Benesse or its affiliates.

In September 1996, the Committee  adopted the New LTIP,  which together with the


                                       66

<PAGE>




1996  Stock  Option  Plan,  replaced  the Old LTIP.  The New LTIP  provides  for
potential cash awards in 1999 to key executive employees and the Chairman of the
Board of the Company if certain  sales and  earnings  goals are met for the year
ended December 31, 1998.  Common stock price does not impact  potential  awards,
which may not exceed $5.0 million in the aggregate. While the New LTIP's minimum
threshold  for potential  awards is lower than under the Old LTIP,  the Old LTIP
did not contain a limitation on maximum awards.

OTHER COMPENSATION
The executive officers also are eligible to participate in the Pension Plan. The
Pension Plan  provides for the Company to make  regular  contributions  based on
salaries  of  eligible  employees.   During  1996,  the  Compensation  Committee
determined  that  the  Company  would  contribute  3.5% of  eligible  employees'
respective  base salary to the  Pension  Plan.  During  1996,  the  Compensation
Committee also  determined that matching  contributions  by the Company would be
provided  under the 401(k) Plan to all domestic  employees up to a maximum of 3%
of the employee's salary.

CHIEF EXECUTIVE OFFICER COMPENSATION
Mr.  Hiromasa  Yokoi's base salary for 1996 was $480,000,  and he also earned a
bonus of $84,000 for 1996 under the Short-Term  Incentive Plan. The Compensation
Committee  approved and ratified the  compensation  paid to Mr. Yokoi for fiscal
year 1996 based on Mr.  Yokoi's  business  experience and  familiarity  with the
Company,  and his  responsibilities  to guide, among other things, the Company's
daily  affairs  and  the  Company's   long-term   strategic  plan  in  a  global
marketplace.  The Company's 1996  performance  was taken into  consideration  in
determining Mr. Yokoi's 1996 compensation  package.  The Committee believes that
Mr. Yokoi's 1996 compensation package was in line with compensation  packages of
chief executive officers of other companies with similar annual revenues.

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

COMPENSATION COMMITTEE MEMBERSHIP
During 1996, the Compensation Committee consisted of Edward G. Nelson, Robert L.
Purdum and Aritoshi  Soejima.  All of the views  expressed  by the  Compensation
Committee in 1996 may not have been the views of each member of the Compensation
Committee  individually.  However,  all decisions  affecting  compensation  were
approved by all of the members of the Compensation Committee.

                   Compensation Committee for Fiscal Year 1996

                                Edward G. Nelson
                                Robert L. Purdum
                                Aritoshi Soejima




                                       67
<PAGE>



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As discussed above, during 1996 and at March 1, 1997, the Compensation Committee
consisted of Edward G. Nelson,  Robert L. Purdum and Aritoshi  Soejima.  None of
these committee  members were officers of the Company or any of its subsidiaries
during 1996 or any previous year.

Aritoshi Soejima  previously  served as an advisor to Benesse.  He resigned such
position prior to his  appointment as a  Disinterested  Director and a member of
the Compensation Committee.

PERFORMANCE GRAPHS

The  following  graphs  set  forth the  Company's  total  shareholder  return as
compared to the S&P 400 Industrial Index and two peer groups  (described  below)
over a five-year period,  beginning on December 31, 1991, and effectively ending
on December 31, 1996. The total shareholder  return assumes $100 invested at the
beginning of the period in the Company's  common stock,  the S&P 400  Industrial
Index and the peer group indices. It also assumes reinvestment of all dividends.

As the Company is the only publicly-held language instruction company, there are
no directly comparable companies. The two closest industry groups to the Company
are education companies and educational publishers.  Therefore,  the Company has
created  an index  of  selected  publicly-held  companies  in each of these  two
industries.  These  indices  have  been  plotted  against  the  Company's  total
shareholder  return and the S&P 400 Industrial Index. The companies  included in
the  education  companies  index are  Flightsafety  International,  which  sells
primarily flight training materials,  and National Education Corporation,  which
sells  primarily  technical and  vocational  training  materials.  The companies
included in the educational  publishing index are Houghton Mifflin, John Wiley &
Sons and McGraw-Hill, Inc. While none of these companies are directly comparable
to the  Company,  the  Company  believes  they come under  either the same broad
rubric  of  education-related  activities  as the  Company,  in the  case of the
education  companies  index,  or  educational  publishers,  in the  case  of the
educational publishing index.




                                       68
<PAGE>




                           COMPARISON OF STOCK PRICES
            BERLITZ INTERNATIONAL, INC., THE S&P 400 INDUSTRIAL INDEX
                        AND SELECTED EDUCATION COMPANIES

[INSERT GRAPH]


<TABLE>
<CAPTION>
                                     1991         1992           1993          1994           1995            1996
===============================  ============ =============  ============= ============= =============== ===================
<S>                              <C>          <C>            <C>           <C>           <C>             <C>
Berlitz                          $  100       $   111        $  70(1)      $    66       $    84         $   105
-------------------------------  ------------ -------------  ------------- ------------- --------------- -------------------

S & P 400 Index                  $  100       $   103        $  110        $   111       $   146         $   177
-------------------------------  ------------ -------------  ------------- ------------- --------------- -------------------

Education Companies              $  100       $    89        $  73         $    80       $   105         $   115
===============================  ============ =============  ============= ============= =============== ===================
</TABLE>

(1) As a result of the Merger (hereinafter defined), each share of the Company's
common stock  outstanding  prior to the Merger ("Old Common") was converted into
the right to  receive  i) $19.50,  ii) 0.165  share of new  common  stock of the
Company  ("Common"),   iii)  $1.48,  representing  the  net  proceeds  from  the
disposition   of  the  Company's   claims  on  promissory   notes  from  Maxwell
Communications  Corporation,  plc and certain of its  affiliates  (the  "Maxwell
Notes"),  and iv) $.01,  representing  consideration  paid for the redemption of
each right under the a shareholders  rights agreement (the "Rights  Agreement").
Immediately following the Merger,  10,033,013 shares of Common were outstanding.
Prior to the Merger, 19,075,584 shares of Old Common were outstanding.


                           COMPARISON OF STOCK PRICES
          BERLITZ INTERNATIONAL, INC., THE S & P 400 INDUSTRIAL INDEX,
                  AND SELECTED EDUCATIONAL PUBLISHING COMPANIES

[INSERT GRAPH]


<TABLE>
<CAPTION>
                                     1991           1992           1993           1994            1995          1996
===============================  ============== =============  ============== ============== ============= =================

<S>                              <C>            <C>            <C>              <C>            <C>           <C>
Berlitz                          $   100        $   111        $    70(1)     $    66        $    84       $   105
-------------------------------  -------------- -------------  -------------- -------------- ------------- -----------------

S & P 400 Index                  $   100        $   103        $   110        $   111        $   146       $   177
-------------------------------  -------------- -------------  -------------- -------------- ------------- -----------------

Educational Publishing           $   100        $   113        $   127        $   127        $   159       $   173
Companies
===============================  ============== =============  ============== ============== ============= =================
</TABLE>


(1)  As a result of the Merger,  each share of Old Common was converted into the
     right to  receive  i)  $19.50,  ii)  0.165  share of  Common,  iii)  $1.48,
     representing  the net proceeds from the disposition of the Company's claims
     on the Maxwell Notes, and iv) $.01, representing consideration paid for the
     redemption of each Right under the Rights Agreement.  Immediately following
     the  Merger,  10,033,013  shares of Common were  outstanding.  Prior to the
     Merger, 19,075,584 shares of Old Common were outstanding.


                                       69
<PAGE>



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


SECURITY OWNERSHIP OF MANAGEMENT

The following  table sets forth the number and percentage of outstanding  shares
of Common beneficially owned as of March 1, 1997 by each director,  nominee, the
Company's  chief  executive  officer  during the fiscal year ended  December 31,
1996,  the four most  highly  compensated  executive  officers of the Company at
December  31,  1996 and all  officers  and  directors  as a group who  served at
December 31, 1996. If not  mentioned by name,  no  individual in the  categories
described above  beneficially owned any shares of Common as of March 1, 1997. No
security set forth in the third column of the following table reflects an amount
as to which the beneficial owner has joint voting or investment power.

<TABLE>
<CAPTION>
                                                                 AMOUNT AND
                                                                  NATURE OF
                                       NAME OF                   BENEFICIAL       PERCENT
         TITLE OF CLASS             BENEFICIAL OWNER             OWNERSHIP        OF CLASS
         --------------             ----------------             ---------        --------
<S>                                 <C>                          <C>              <C>
         Common                     Soichiro Fukutake            6,735,338 (1)     71.61%
         Common                     Manuel Fernandez                 8,745            *
         Common                     Robert Minsky                    2,857            *
         Common                     Henry D. James                   7,672            *
         Common                     Edward G. Nelson                 1,500 (2)        *
         Common                     Robert L. Purdum                 2,000            *

                                    All Officers and
                                    Directors as a Group
         Common                     (14 in number)               6,777,746         72.06%
         ------
</TABLE>


To the best of registrant's knowledge,  there are no events of delinquent filing
requiring disclosure under Item 405 of Regulation S-K.

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

(1) Soichiro  Fukutake is the President,  Representative  Director and principal
    shareholder  of  Benesse  Corporation,  which  is the  beneficial  owner  of
    6,735,338 shares of Common.  See "Security  Ownership of Certain  Beneficial
    Owners."

(2) An additional  1,000 shares of Common,  for which Mr. Nelson has  disclaimed
    ownership, are owned by Mr. Nelson's wife.

 *  Less than 1%



                                       70
<PAGE>




SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The  following  table sets forth the  ownership by each person or group known by
the Company to own beneficially more than 5% of Common:

<TABLE>
<CAPTION>
                                  NAME AND ADDRESS OF                               PERCENT
         TITLE OF CLASS            BENEFICIAL OWNER                  OWNERSHIP      OF CLASS
         --------------            ----------------                  ---------      --------

<S>                           <C>                                    <C>              <C>
         Common               Benesse Corporation (1)                6,735,338        71.61%
                               3-17-17 Minamigata
                               Okayama-shi 700, Japan

         Common               Dimensional Fund Advisors, Inc (2)       507,672        5.40%
                               1299 Ocean Avenue, 11th Floor
                               Santa Monica, CA 90401
</TABLE>


(1) Fukutake  Publishing  Co., Ltd.  changed its name to Benesse  Corporation on
    April 1, 1995. As of March 1, 1997, 6,722,138 shares of Common are held by a
    wholly  owned  subsidiary  of Benesse  and 13,200  shares of Common are held
    directly by Benesse.  Soichiro  Fukutake  is the  President,  Representative
    Director and principal shareholder of Benesse.

(2) This  information  is taken from the Schedule 13G,  dated  February 5, 1997,
    filed by Dimensional Fund Advisors, Inc. ("Dimensional") with the Securities
    and Exchange Commission.  Dimensional,  a registered  investment advisor, is
    deemed to have  beneficial  ownership of these  507,672  shares of Common at
    December 31, 1996,  all of which are held in  portfolios  of DFA  Investment
    Dimensions Group,  Inc., a registered  open-end  investment  company,  or in
    series of the DFA Investment  Trust Company,  a Delaware  business trust, or
    the DFA Group Trust and DFA Participation  Group Trust,  investment vehicles
    for qualified  employee  benefit plans, all of which  Dimensional  serves as
    investment manager.  Dimensional  disclaims beneficial ownership of all such
    shares.

On April 4, 1996,  the Company  consummated  the  purchase of 627,000  shares of
Common from Maxwell Communication Corporation, plc (In Administration) ("Maxwell
Communication") at a price of $9 per share. These shares were previously held in
escrow pursuant to an Escrow Agreement among the Company,  Maxwell Communication
and IBJ Schroder Bank & Trust Company, and subject to a Stock Purchase Agreement
between the Company and  Maxwell  Communication.  These  shares were placed into
treasury by the Company and reserved for future use.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr.  Kazuo  Yamakawa  currently  serves as the  Benesse  nominee on the Board of
Directors of the Company  pursuant to the acquisition by Benesse in January 1991
of a 20% interest in Berlitz Japan, Inc. ("Berlitz-Japan"),  a subsidiary of the
Company.


                                       71
<PAGE>




On December 9, 1992, the Company and Benesse  entered into the Merger  Agreement
pursuant to which  Benesse  agreed to  acquire,  through a Merger of the Company
with an  indirect  wholly  owned  U.S.  subsidiary  of Benesse  (the  "Merger"),
approximately 6.7 million shares of the Common (which currently represents 71.6%
of the outstanding Common). Subsequent to the Merger, public shareholders of the
Company held the remaining  outstanding  Common.  Mr.  Soichiro  Fukutake is the
President, Representative Director and principal shareholder of Benesse.

In September 1994, the Company borrowed $20.0 million from a U.S.  subsidiary of
Benesse,  as  evidenced  by a  subordinated  promissory  note (the "U.S.  Note")
bearing  interest  at a rate of 6.93% per  annum.  In 1994,  Berlitz-Japan  also
borrowed  (Yen)1.0  billion   (approximately  $10.1  million)  from  Benesse  as
evidenced by an interest-free  subordinated  promissory note (the "Japan Note").
In March 1996, the Company received the proceeds of a $6.0 million  subordinated
promissory  note  payable to a U.S.  subsidiary  of Benesse  (the "FHAI  Note"),
bearing  interest  at a rate of the six month  LIBOR  plus 1% per  annum,  reset
semi-annually.  Such notes,  (collectively,  the "Benesse  Notes") mature on the
earlier  of June 30,  2003 or  twelve  months  from the  date  that all  payment
obligations  under a bank term loan and senior notes  established  in connection
with the Merger (the "Acquisition Debt Facilities") have been satisfied.  To the
extent that interest  payments on the U.S. or FHAI Notes are not permitted while
any amounts remain  outstanding  under the  Acquisition  Debt  Facilities,  such
accrued  interest  will  roll over  semiannually  into the note  principal.  The
Company recorded $1.8 million in interest expense on the Benesse Notes in 1996.

The Benesse Notes rank PARI PASSU with one another and are subordinate in rights
of payment to debt under the Acquisition Debt Facilities, including the currency
coupon swap agreements.  Payment  obligations under the U.S. Note are guaranteed
by the  Company  and  its  significant  U.S.  subsidiaries,  subject  to  senior
guarantees of the Acquisition Debt  Facilities.  The Company and its significant
U.S.  subsidiaries  have also executed a guarantee of payment  obligations under
the Japan  Note,  effective  as of the day  following  the date  upon  which all
payment obligations under the Acquisition Debt Facilities are satisfied.

The  Company  and  Benesse  maintain  a joint  Directors  and  Officers  ("D&O")
insurance policy covering acts by directors and officers of both Benesse and the
Company. Consequently, the premium on the D&O policy is allocated 60% to Benesse
and 40% to the Company,  except for,  commencing in 1997, the premium for entity
coverage  which  benefits the Company only and is allocated 100% to the Company,
resulting  in a total D&O  allocation  of 57% to Benesse and 43% to the Company.
Since May 1995,  the Company has maintained a stand-alone  Employment  Practices
Liability  ("EPL")  insurance  policy  covering  the  Company,  its officers and
directors  (including  the  Benesse  directors  who are  also  directors  of the
Company).  The premium on the EPL policy is allocated  30% to Benesse and 70% to
the Company.

The  Company  and  Benesse   participated   in  certain  other  joint   business
arrangements  during 1996,  in the ordinary  course of business,  including  the
following:  i) pursuant to an extended industrial block contract renewed in 1996
for a  prepayment  of (Y)10.0  million  (approximately  $90,000),  Berlitz-Japan
provided lessons to Benesse at an industrial lesson rate which was approximately
20% below  the rate  charged  for  individual  instruction;  ii)  pursuant  to a
services  agreement,  Benesse  periodically  offered its customers  language and
homestay programs arranged and operated by the Company's  specialty  instruction
program, Berlitz Study Abroad(R), and iii) Benesse also periodically offered its


                                       72

<PAGE>



customers  language study and homestay programs arranged and operated by Berlitz
on Campus(TM), another of the Company's specialty instruction programs.

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





                                       73


<PAGE>



                                     PART IV

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


A.  Index to Financial Statements and Financial Statement Schedules

    1.  FINANCIAL STATEMENTS

    2.  FINANCIAL STATEMENT SCHEDULES

         The Financial Statements and the Financial Statement Schedules included
         in the Annual Report on Form 10-K are listed in Item 8 on page 33.

    3.  EXHIBITS

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

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

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

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

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

    4.1   Specimen  Certificate of Old Common Stock with Legend.  Exhibit 4.3 to
          the Company's Form 10-K for the fiscal year ended December 31, 1991 is
          incorporated by reference herein.

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

    4.5   Amended and Restated Safeguard Rights Agreement between the registrant
          and  United  States  Trust  Company  of  New  York.  Exhibit  1 to the
          Company's Form 8-K, dated March 6, 1992, is  incorporated by reference
          herein.



                                       74
<PAGE>




    10.1  Credit Agreement,  dated as of January 29, 1993, among the registrant,
          the several  lenders from time to time party thereto and Chemical Bank
          as Agent. Exhibit 10.1 to the Company's Annual Report on Form 10-K for
          the fiscal year ended December 31, 1992 is  incorporated  by reference
          herein.

    10.2  First  Amendment,  dated  as of  September  21,  1994,  to the  Credit
          Agreement,  dated as of January 29, 1993,  among the  registrant,  the
          several lenders from time to time parties thereto and Chemical Bank as
          Agent.  Exhibit 99.6 to the Company's  Form 8-K,  dated  September 21,
          1994, is incorporated by reference herein.

    10.3  Second  Amendment and Consent,  dated as of September 21, 1994, to the
          Credit Agreement,  dated as of January 29, 1993, among the registrant,
          the  lenders  from time to time  parties  thereto and  Chemical  Bank.
          Exhibit 99.7 to the Company's Form 8-K,  dated  September 21, 1994, is
          incorporated by reference herein.

    10.4  Form of Third  Amendment,  dated as of April 28,  1995,  to the Credit
          Agreement,  dated as of January 29, 1993,  among the  registrant,  the
          lenders from time to time parties  thereto and Chemical Bank.  Exhibit
          10.4 to the Company's  Form 10K for the fiscal year ended December 31,
          1995 is incorporated by reference herein.

    10.5  Form of Consent,  dated as of April 28, 1995, to the Credit Agreement,
          dated as of January 29, 1993,  among the registrant,  the lenders from
          time to time parties  thereto and Chemical  Bank.  Exhibit 10.5 to the
          Company's  Form 10K for the fiscal  year ended  December  31,  1995 is
          incorporated by reference herein.

    10.6  Form of Fourth  Amendment,  dated as of March 18, 1996,  to the Credit
          Agreement,  dated as of January 29, 1993,  among the  registrant,  the
          lenders from time to time parties  thereto and Chemical Bank.  Exhibit
          10.6 to the Company's  Form 10K for the fiscal year ended December 31,
          1995 is incorporated by reference herein.

    10.7  Form of Senior Note Agreement, dated as of January 29, 1993, among the
          registrant and each institutional  lender party thereto.  Exhibit 10.2
          to the Company's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1992 is incorporated by reference herein.

    10.8  Second  Amendment,  dated as of September 21, 1994, to the Senior Note
          Agreements,  dated as of January 29, 1993,  among the  registrant  and
          each  institutional  lender  party  thereto.   Exhibit  99.10  to  the
          Company's  Form 8-K,  dated  September  21, 1994, is  incorporated  by
          reference herein.

    10.9  Third  Amendment,  dated as of September  21, 1994, to the Senior Note
          Agreements, dated as of January 29, 1993 among the registrant and each
          institutional  lender party  thereto.  Exhibit  99.11 to the Company's
          Form 8-K,  dated  September  21, 1994,  is  incorporated  by reference
          herein.


                                       75
<PAGE>




    10.10 Form of Fourth  Amendment,  dated as of April 28, 1995,  to the Senior
          Note Agreements, dated as of January 29, 1993 among the registrant and
          each  institutional  lender  party  thereto.   Exhibit  10.10  to  the
          Company's  Form 10K for the fiscal  year ended  December  31,  1995 is
          incorporated by reference herein.

    10.11 Form of  Consent,  dated as of April  28,  1995,  to the  Senior  Note
          Agreements, dated as of January 29, 1993 among the registrant and each
          institutional  lender party  thereto.  Exhibit  10.11 to the Company's
          Form 10K for the fiscal year ended  December 31, 1995 is  incorporated
          by reference herein.

    10.12 Form of Fifth  Amendment,  dated as of March 18,  1996,  to the Senior
          Note  Agreements,  dated as of January 29, 1993,  among the registrant
          and each  institutional  lender party  thereto.  Exhibit  10.12 to the
          Company's  Form 10K for the fiscal  year ended  December  31,  1995 is
          incorporated by reference herein.

    10.13 (Y)1 billion  (Japanese yen)  Subordinated  Non-Negotiable  Promissory
          Note,  dated as of September 21, 1994,  between the Berlitz Schools of
          Languages  (Japan),   Inc.  (as  Borrower)  and  Benesse   Corporation
          (formerly Fukutake Publishing Co., Ltd.) (as Lender).  Exhibit 99.2 to
          the Company's Form 8-K, dated  September 21, 1994, is  incorporated by
          reference herein.

    10.14 US$20,000,000 Subordinated Non-Negotiable Promissory Note, dated as of
          September 21, 1994,  among the  registrant  (as Borrower) and Fukutake
          Holdings  (America) (as Lender).  Exhibit 99.3 to the  Company's  Form
          8-K, dated September 21, 1994, is incorporated by reference herein.

    10.15 Spring  Guaranty  Letter,  dated as of September  21,  1994,  from the
          registrant to Benesse  Corporation  (formerly Fukutake Publishing Co.,
          Ltd).  Exhibit 99.4 to the  Company's  Form 8-K,  dated  September 21,
          1994, is incorporated by reference herein.

    10.16 Subsidiaries  Guaranty,  dated as of September  21,  1994,  by Berlitz
          Financial  Corporation,   Berlitz  Investment   Corporation,   Berlitz
          Languages,  Inc.  and  Berlitz  Publishing  Company,  Inc. in favor of
          Fukutake Holdings  (America),  Inc. Exhibit 99.5 to the Company's Form
          8-K, dated September 21, 1994, is incorporated by reference herein.

    10.17 Subordination Agreement, dated as of September 21, 1994, among Benesse
          Corporation  (formerly  Fukutake  Publishing Co.,  Ltd.),  The Berlitz
          Schools of Languages (Japan),  Inc. and Chemical Bank. Exhibit 99.8 to
          the Company's Form 8-K, dated  September 21, 1994, is  incorporated by
          reference herein.

    10.18 First Amendment,  dated as of September 21, 1994, to the Subordination
          Agreement,  dated as of January 29, 1993,  among  Benesse  Corporation
          (formerly Fukutake Publishing Co., Ltd.), Fukutake Holdings (America),
          Inc.,  the  registrant  and  Chemical  Bank  pursuant  to  the  Master
          Collateral and Intercreditor Agreement,  dated as of January 29, 1993.
          Exhibit 99.9 to the Company's Form 8-K,  dated  September 21, 1994, is
          incorporated by reference herein.


                                       76
<PAGE>




    10.19 Form of  US$6,000,000  Subordinated  Non-Negotiable  Promissory  Note,
          dated as of March 25, 1996,  among the  registrant  (as  Borrower) and
          Fukutake Holdings  (America),  Inc. (as Lender).  Exhibit 10.19 to the
          Company's  Form 10K for the fiscal  year ended  December  31,  1995 is
          incorporated by reference herein.

    10.20 Amended and Restated Tax Allocation  Agreement  among the  registrant,
          Macmillan,  Inc. and Macmillan  School of Publishing  Holding Company,
          Inc.,  dated as of October 11,  1989.  Exhibit  10.3 to the  Company's
          Annual Report on Form 10-K for the fiscal year ended December 31, 1992
          is incorporated by reference herein.

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

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

    10.23 Escrow   Agreement   among  the  registrant,   Maxwell   Communication
          Corporation plc, the beneficiaries named therein and IBJ Schroder Bank
          & Trust  Company,  dated as of January 29,  1993.  Exhibit 10.6 to the
          Company's  Annual  Report  on Form  10-K  for the  fiscal  year  ended
          December 31, 1992 is incorporated by reference herein.

    10.24 Amendment  dated  as of May 31,  1995  by and  among  the  registrant,
          Maxwell Communication Corporation plc (In Administration)("MCC"),  and
          IBJ  Schroder  Bank & Trust  Company as escrow agent  ("IBJ"),  to the
          Escrow  Agreement  dated  as of  January  29,  1993 by and  among  the
          registrant,  MCC and IBJ.  Exhibit  99.1 to the  Company's  Form 8- K,
          dated May 31, 1995, is incorporated by reference herein.

    10.25 Settlement Agreement between the registrant and Macmillan, Inc., dated
          January 8, 1993. Exhibit 3 to the Company's Form 8-K, dated January 7,
          1993 is incorporated by reference herein.

    10.26 1989 Stock Option and Incentive  Plan.  Exhibit 10.13 to  Registration
          Statement No. 33- 31589 is incorporated by reference herein.

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

    10.28 Form of Berlitz  International,  Inc. 1996 Stock Option Plan.  Exhibit
          10.1 to the  Company's  Quarterly  Report  on Form  10-Q  for the nine
          months ended September 30, 1996 is incorporated by reference herein.


                                       77
<PAGE>




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

    10.30 1993 Long-Term Executive Incentive Compensation Plan. Exhibit 1 to the
          Company's  Form  8-K,  dated  December  2,  1993  is  incorporated  by
          reference herein.

    10.31 1996 New Long-Term Executive Incentive Compensation Plan. Exhibit 10.2
          to the  Company's  Quarterly  Report on Form 10-Q for the nine  months
          ended September 30, 1996 is incorporated by reference herein.

    10.32 1993 Short-Term  Executive  Incentive  Compensation Plan. Exhibit 2 to
          the Company's  Form 8-K,  dated  December 2, 1993 is  incorporated  by
          reference herein.

    10.33*Supplemental  Executive  Retirement  Plan,  effective as of January 1,
          1996.

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

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

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

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

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

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


                                       78
<PAGE>

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

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

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

    10.43 Employment Agreement dated December 4, 1992 between the registrant and
          Robert C. Hendon,  Jr.  Exhibit  10.30 to  Registration  Statement No.
          33-56566 is incorporated by reference herein.

    10.44 Employment  Agreement,  dated October 1, 1993,  between the registrant
          and Robert Minsky.

    21    List of principal  subsidiaries of the  registrant.  Exhibit 22 to the
          Company's  Annual  Report  on Form  10-K  for the  fiscal  year  ended
          December 31, 1992 is incorporated by reference herein.

    27*   Financial Data Schedule.


    *Filed herewith.


B.  Reports on Form 8-K:

    No reports on Form 8-K have been filed during the quarter ended December 31,
    1996.

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

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




                                       79
<PAGE>



                                   SIGNATURES

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

                                  BERLITZ INTERNATIONAL, INC.

                                  By: /s/ HIROMASA YOKOI
                                     -----------------------------
                                     Hiromasa Yokoi
                                     Vice Chairman of the Board,
                                     Chief Executive Officer and President

Dated:  March 31, 1997

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

<TABLE>
<S>                                    <C>                                         <C>
/s/  SOICHIRO FUKUTAKE                 Chairman of the Board                       March 31, 1997
----------------------------
     Soichiro Fukutake

/s/  HIROMASA YOKOI                    Vice Chairman of the Board,                 March 31, 1997
----------------------------
     Hiromasa Yokoi                    Chief Executive Officer,
                                       and President
                                       (Principal Executive Officer)

/s/  SUSUMU KOJIMA                     Executive Vice President,                   March 31, 1997
----------------------------
     Susumu Kojima                     and Director

/s/  ROBERT MINSKY                     Executive Vice President, Chief             March 31, 1997
----------------------------
     Robert Minsky                     Operating Officer-Translations and
                                       Publishing, and Director

/s/  MANUEL FERNANDEZ                  Executive Vice President, Chief             March 31, 1997
----------------------------
     Manuel Fernandez                  Operating Officer-Worldwide Language
                                       Instruction, and Director

/s/  HENRY D. JAMES                    Executive Vice President,                   March 31, 1997
----------------------------
     Henry D. James                    Chief Financial Officer, and Director
                                       (Principal Financial Officer)

/s/  EDWARD G. NELSON                  Director                                    March 31, 1997
----------------------------
     Edward G. Nelson

/s/  ROBERT L. PURDUM                  Director                                    March 31, 1997
----------------------------
     Robert L. Purdum

/s/  ARITOSHI SOEJIMA                  Director                                    March 31, 1997
----------------------------
     Aritoshi Soejima

/s/  KAZUO YAMAKAWA                    Director                                    March 31, 1997
----------------------------
     Kazuo Yamakawa
</TABLE>




                                       80