<PAGE>

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                                 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 the Fiscal Year Ended December 30, 2000

                                       OR

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

                         Commission file number 1-5064

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

                                 Jostens, Inc.
             (Exact name of Registrant as specified in its charter)

              Minnesota                                41-0343440
   (State or other jurisdiction of           (I.R.S. Employer Identification
   incorporation or organization)                        number)

      5501 Norman Center Drive
       Minneapolis, Minnesota                             55437
   (Address of principal executive                     (Zip code)
              offices)

    Registrant's telephone number, including area code: (952) 830-3300

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

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

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

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

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

   The aggregate market value of voting stock held by nonaffiliates of the
Registrant on March 1, 2001: not applicable. The numbers of shares outstanding
of each of the Registrant's classes of common stock on March 1, 2001, were as
follows: Class A: 2,862,277; Class B: 5,300,000; Class C: 811,020; Class D;
20,000; Class E: 0; and Undesignated: 0.

   Documents incorporated by Reference: None

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                 Jostens, Inc.
                           Annual Report on Form 10-K
                      For the Year Ended December 30, 2000

<TABLE>
<CAPTION>
                                                  PART I
<S>       <C>                                                                                     <C>
                                                                                                  Page
                                                                                                  ----
ITEM 1.   Business...............................................................................    1
ITEM 2.   Properties.............................................................................    6
ITEM 3.   Legal Proceedings......................................................................    7
ITEM 4.   Submission of Matters to a Vote of Security Holders....................................    7

                                                  PART II

ITEM 5.   Market for Registrant's Common Stock and Related Security Holder Matters...............    8
ITEM 6.   Selected Financial Data................................................................    9
ITEM 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..   11
ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk.............................   22
ITEM 8.   Financial Statements and Supplementary Data............................................   23
ITEM 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...   50

                                                 PART III

ITEM 10.  Directors and Executive Officers of the Registrant.....................................   50
ITEM 11.  Executive Compensation.................................................................   52
ITEM 12.  Security Ownership of Certain Beneficial Owners and Management.........................   57
ITEM 13.  Certain Relationships and Related Transactions.........................................   59

                                                  PART IV

ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K........................   61

Signatures......................................................................................    65
</TABLE>
<PAGE>

                                     PART I

ITEM 1. BUSINESS

   We are a leading provider of school-related affinity products and services
including yearbooks, class rings and graduation products. We also have the
leading market share for school photography services in Canada. In addition, we
are a leading provider of corporate employee service recognition programs and
achievement awards and products for athletic champions. Our 104-year history of
manufacturing and providing quality products and superior service has enabled
us to develop long-standing and extensive relationships with schools throughout
the country.

   Our two major business segments are School Products and Recognition. The
School Products segment serves the high school, college and elementary school
markets and accounted for 88.9% of our net sales in 2000. The School Products
segment is comprised of four principal lines of products and services: Printing
& Publishing, Jewelry, Graduation Products and Photography.

   The Recognition segment accounted for 10.0% of our net sales in 2000. This
segment provides products and services that assist companies in recognizing and
rewarding employee service and achievement of performance objectives. The
Recognition segment also produces awards for professional sports team
accomplishments and affinity products for special interest associations.

 Merger and Recapitalization

   On May 10, 2000, we were acquired by affiliates of Investcorp along with
other investors. The acquisition was part of a recapitalization of Jostens,
which resulted in affiliates of Investcorp and the other investors acquiring
approximately 92% of our post-merger common stock. The remaining 8% of our
common stock is held by pre-recapitalization shareholders and five members of
senior management. As a result of the transaction, our shares were de-listed
from the New York Stock Exchange.

   The recapitalization was funded by (a) $495.0 million of borrowings under a
senior credit facility with a syndicate of banks which included term loans and
a revolving credit facility (collectively the "senior secured credit
facility"), (b) issuance of $225.0 million in principal amount of senior
subordinated notes (the "notes") and warrants to purchase 425,060 shares of our
common stock, (c) issuance of $60.0 million in principal amount of redeemable
preferred stock and warrants to purchase 531,325 shares of our common stock and
(d) $208.7 million of proceeds from the sale of shares of common stock to
affiliates of Investcorp and the other investors.

   The proceeds from these financings funded (a) the payment of approximately
$823.6 million to holders of common stock representing $25.25 per share, (b)
repayment of $67.6 million of outstanding indebtedness, (c) payment of $10.0
million in consideration for cancellation of employee stock options, (d)
payments of approximately $72.1 million of fees and expenses associated with
the recapitalization and (e) a pre-payment of $7.5 million for a management and
consulting services agreement for a five-year term with an affiliate of
Investcorp.

BUSINESS SEGMENTS

   We classify our operations into the following business segments:

  .  SCHOOL PRODUCTS -- This segment manufactures and markets school-related
     affinity products primarily for the high school and college markets.
     School Products is comprised of four product lines: Printing &
     Publishing, Jewelry, Graduation Products and Photography.

                                       1
<PAGE>

  .  RECOGNITION -- This segment manufactures and supplies corporate-based
     affinity products that help companies and other organizations promote
     and recognize achievement in people's careers. We concentrate our
     efforts in service recognition and incentive programs designed to help
     companies achieve their business objectives through improved employee
     performance. Products include jewelry and other brand name merchandise
     from industry leading manufacturers.

  .  OTHER -- This segment represents the operating units which do not meet
     the quantitative threshold for determining reportable segments. The
     "Other" segment primarily is comprised of corporate expenses, the
     results of the direct marketing sales channel to college alumni (exited
     in 1999), international (excluding Canada) sales and expenses and
     expenses associated with new product development.

   Business segment financial information is contained in ITEM 8, Note 13 of
the Notes to Consolidated Financial Statements, included in this Form 10-K and
is incorporated herein by reference.

SCHOOL PRODUCTS SEGMENT

 Product Lines

   Printing & Publishing

     We manufacture and sell student-created yearbooks in high schools,
  elementary and middle schools and colleges. Our independent and employee
  sales representatives and their associates work closely with each school's
  yearbook staff (both students and a faculty adviser), assisting with the
  planning, editing, layout and printing scheduling until the yearbook is
  completed. Our independent and employee sales representatives work with the
  faculty advisers to renew yearbook contracts. We also print commercial
  brochures and promotional books and materials.

   Jewelry

     We manufacture and sell class rings primarily to high school and college
  students. Most schools have only one school-designated supplier to its
  students each year. Class rings are sold within the schools, through
  bookstores, other campus stores, retail jewelry stores, and the Internet.
  Our independent and employee sales representatives manage the in-school
  process of interacting with the students through ring design, promotion and
  ordering.

   Graduation Products

     We manufacture and sell graduation announcements and accessories,
  diplomas and caps and gowns to students and administrators in high schools
  and colleges. Our independent and employee sales representatives take sales
  orders through in-school access, telemarketing programs, college bookstores
  and the Internet.

   Photography

     Photography provides class and individual school pictures to students in
  high schools and elementary and middle schools in Canada and the United
  States. Additionally, photography provides high school senior portrait
  photography, photography for proms and other special events and other
  photo-based products such as student ID cards. Our independent dealers and
  employee sales force arrange the sittings at individual schools or in their
  own studios.

 Seasonality

   Our School Products segment experiences seasonality concurrent with the
North American school year, with about 45% of full-year segment sales and about
55 to 65% of full-year segment operating income occurring in the second
quarter. This seasonality requires us to carefully manage our cash flows over
the course of the year.

                                       2
<PAGE>

 Competition

   Consumers differentiate school products principally on the basis of
quality, price, marketing and service.

   We are one of four primary competitors in the sale of yearbooks along with
Herff Jones, Inc., Taylor Publishing Company and Walsworth Publishing Company.
Each competes on the basis of print quality, price, product offerings and
service. Technological offerings in the way of computer-based publishing are
becoming significant market differentiators.

   Customer service is particularly important in the sale of class rings
because of the high degree of customization and the emphasis on timely
delivery. Class rings are marketed through different channels that have
different quality and price points. Competitors in the sale of class rings
primarily consist of two firms: Herff Jones, Inc. and Commemorative Brands,
Inc. (CBI), which markets the Balfour and ArtCarved brands. Herff Jones, Inc.
distributes its product in schools, while CBI distributes its product through
multiple distribution channels, including schools, independent and chain
jewelers and mass merchandisers.

   In Graduation Products, several national and numerous local and regional
competitors offer products similar to ours.

   In Photography products, we compete with Lifetouch, Inc., Herff Jones, Inc.
and a variety of regional and locally owned and operated photographers.

RECOGNITION SEGMENT

   Our Recognition business segment helps companies and other organizations
achieve their objectives through improved employee retention and performance.
We provide our clients with recognition program design and administration
services that allow them to effectively manage their corporate recognition
efforts to maximum organizational benefit.

   We serve customers ranging from small and mid-size companies to global
corporations, professional sports teams and special interest associations. We
design, communicate and administer programs tailored to an individual
organization's needs. We sell our products primarily through independent sales
representatives.

   We team with our Recognition customers to:

  .  design recognition programs that help drive work force recruitment,
     retention and performance;

  .  provide an administration platform that allows companies to cost
     effectively implement recognition including custom brochures and web
     sites as well as award fulfillment and reporting; and

  .  create award selections that uniquely embrace and reinforce corporate
     culture, mission and values.

   We manufacture approximately half the products utilized within the client
programs we design--including jewelry, rings, watches and engraved
certificates. In addition, we market items manufactured by other companies,
such as Waterman, Howard Miller, Oneida and Waterford.

 Competition

   Principal competitors in the service recognition and incentive program
market include O.C. Tanner Recognition Company, The Robbins Company and The
Tharpe Company, Inc.

 Subsequent Event--Restructuring Plans

   In March 2001, we announced our decision to consolidate three Recognition
plants and implement a new customer service model as part of our effort to
realign resources and streamline the Recognition segment's infrastructure and
enhance profitability.

                                       3
<PAGE>

   We will close our distribution facility in Memphis, Tennessee., and our
manufacturing facility in Sherbrooke, Quebec, and shift these functions to our
existing plant in Princeton, Illinois. In addition, the Recognition segment's
customer service function, currently operated from the Princeton and Memphis
facilities, along with some financial functions, will be relocated to the
Owatonna, Minnesota, facility. A new customer service model will be implemented
to leverage new technologies at the Owatonna location. The consolidation is
scheduled to be completed in the summer of 2001.

   The total cost of the consolidation project, which will be expensed in 2001,
is estimated to be approximately $4.0 million for severance benefits and costs
associated with closing the facilities. These costs will be partially offset by
a gain on sale of the Memphis facility of approximately $2.4 million.
Approximately 100 full-time positions will be eliminated from the Memphis plant
and approximately 40 full-time positions will be eliminated from the Sherbrooke
plant. In Princeton, 44 new positions will be created and in Owatonna about 30
new customer service positions will be added.

INFORMATION REGARDING ALL BUSINESS SEGMENTS

 Backlog

   Because of the nature of our business, all orders are generally filled
within a few months from the time of placement. However, our School Products
segment obtains student yearbook contracts in one year for a significant
portion of the yearbooks to be delivered in the next year. Often the prices of
the yearbooks are not established at the time of the order because the content
of the books may not be finalized. Subject to the foregoing qualifications, we
estimate the backlog of orders related to continuing operations was
approximately $292.4 million as of the end of 2000, compared with $291.2
million as of the end of 1999, primarily related to student yearbooks, jewelry
and graduation products. We expect most of the 2000 backlog to be confirmed and
filled in 2001.

 Environmental

   Matters pertaining to the environment are discussed in ITEM 7 and in ITEM 8,
Note 14 of the Notes to Consolidated Financial Statements, included in this
Form 10-K and are incorporated herein by reference.

 Raw Materials

   The principal raw materials that we purchase are gold, paper products, and
precious, semiprecious and synthetic stones. Any material increase in the price
of gold could adversely impact our cost of sales.

   We purchase substantially all synthetic and semiprecious stones from a
single supplier, located in Germany, who is also a supplier to almost all of
the class ring manufacturers in the United States. We believe that the loss of
this supplier could adversely affect our business during the time period in
which alternate sources adapted their production capabilities to meet increased
demand.

   Matters pertaining to our market risks are discussed in ITEM 7A,
Quantitative and Qualitative Disclosures about Market Risk, included in this
Form 10-K and are incorporated herein by reference.

 Intellectual Property

   We have licenses, trademarks and copyrights that, in the aggregate, are an
important part of our business. However, we do not regard our business as being
materially dependent upon any single license, trademark or copyright. We have
trademark registration applications pending and will pursue other registrations
as appropriate to establish and preserve our intellectual property rights.

                                       4
<PAGE>

 Employees

   As of the end of February 2001, we had approximately 6,500 employees, of
which approximately 300 were members of two separate unions. Because of the
seasonality of our business, the number of employees tends to vary. We have
never suffered an interruption of business that had a material impact on our
operations as a result of a labor dispute and consider our relationship with
our employees to be good.

 Foreign Operations

   Our foreign sales are derived primarily from operations in Canada. The
accounts and operations of our foreign businesses, excluding Canada, are not
significant. Local taxation, import duties, fluctuation in currency exchange
rates and restrictions on exportation of currencies are among risks attendant
to foreign operations, but these risks are not considered significant with
respect to our business. The profit margin on foreign sales is approximately
the same as the profit margin on domestic sales.

   Foreign operations financial information is contained in ITEM 8, Note 13 of
the Notes to Consolidated Financial Statements, included in this Form 10-K and
are incorporated herein by reference.

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

   Jostens is a Minnesota corporation. Unless otherwise indicated, all
references to "Jostens," "we," "our," and "us" refer to Jostens, Inc., and its
subsidiaries. Our principle executive offices are located at 5501 Norman Center
Drive, Minneapolis, Minnesota 55437. Our main phone number is (952) 830-3300.
Our home page on the Internet is www.jostens.com. The information on our web
site is not incorporated into this annual report.

                                       5
<PAGE>

ITEM 2. PROPERTIES

   Our properties are summarized below:

<TABLE>
<CAPTION>
                                                               Owned  Approximate
                                                                 or     square
   Business segment         Location        Type of property   leased   footage
   ----------------   -------------------- ------------------- ------ -----------
   <S>                <C>                  <C>                 <C>    <C>
   School
    Products.......   Anaheim, CA          Office              Leased    12,000
                      Attleboro, MA        Manufacturing        Owned    52,000
                      Burnsville, MN       Manufacturing       Leased    47,000
                      Clarksville, TN      Manufacturing        Owned   105,000
                      Clarksville, TN      Warehouse           Leased    13,000
                      Denton, TX           Manufacturing        Owned    56,000
                      Laurens, SC          Manufacturing        Owned    98,000
                      Laurens, SC          Warehouse           Leased    74,000
                      Owatonna, MN         Office               Owned    88,000
                      Owatonna, MN         Manufacturing        Owned    30,000
                      Owatonna, MN         Warehouse           Leased    29,000
                      Red Wing, MN         Manufacturing        Owned   132,000
                      Shelbyville, TN      Manufacturing        Owned    87,000
                      State College, PA    Manufacturing        Owned    66,000
                      State College, PA    Warehouse           Leased     6,000
                      Topeka, KS           Manufacturing        Owned   236,000
                      Visalia, CA          Manufacturing        Owned    96,000
                      Visalia, CA          Warehouse           Leased    13,000
                      Winnipeg, MAN        Manufacturing        Owned    69,000
                      Winnipeg, MAN        Office              Leased    28,000
                      Winnipeg, MAN        Warehouse           Leased     6,000
                      Etobicoke, Ontario   Office              Leased     3,000
                      Winston-Salem, NC    Manufacturing        Owned   132,000
                      Winston-Salem, NC    Warehouse           Leased     7,000
                      Webster, NY (1)      Manufacturing        Owned    60,000
   Recognition.....   Memphis, TN (3)      Distribution center Leased    67,000
                      Princeton, IL        Manufacturing        Owned    65,000
                      Princeton, IL        Warehouse           Leased     6,000
                      Saddle Brook, NJ (2) Office              Leased     6,000
                      Sherbrooke, QUE (3)  Distribution center Leased    15,000
   Other...........   Bloomington, MN      Office               Owned   116,000
                      Bloomington, MN      Office              Leased    37,000
</TABLE>
--------
(1)  Closed and currently held for sale
(2)  Currently under sublease to another business
(3)  Facilities to be closed due to restructuring plans relating to our
     Recognition segment.

   Our School Products segment also has office space that we both lease and own
in 23 locations totaling 37,000 square feet.

   We believe that our production facilities are suitable for their purpose and
are adequate to support our businesses. The extent of utilization of individual
facilities varies due to the seasonal nature of the business.

                                       6
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

   A federal antitrust action was served on Jostens on October 23, 1998. The
complainant, Epicenter Recognition, Inc. ("Epicenter"), alleges that Jostens
has attempted to monopolize the market of high school graduation products in
the state of California. Epicenter is a successor to a corporation formed by
four of our former sales representatives. The plaintiff is claiming damages of
approximately $3 million to $10 million under various theories and differing
sized relevant markets. Trial is scheduled to begin April 3, 2001 in which
Epicenter has waived its right to a jury, so the case will be tried before a
judge in U.S. District Court in Orange County, California. We believe the
effect on our consolidated results of operations, cash flows and financial
position, if any, for the disposition of these matters will not be material.

   In February 1998, we entered into an Information Technology Master Services
Agreement with Ernst & Young LLP to provide guidance and consulting services
for implementation of a company wide enterprise resource planning ("ERP")
system. Under the Master Agreement, Ernst & Young LLP provided project
management, guidance and consulting. We claim this work was deficient and
substandard in various material respects constituting a breach of the Master
Agreement entitling us to significant damages. In August 2000, the parties
conducted a mandatory mediation which proved unsuccessful resulting in pending
arbitration. Ernst & Young LLP claims are $0.3 million in unpaid fees. We claim
damages in excess of $150.0 million, including over $9.0 million paid to Ernst
& Young LLP on account of the engagement.

   We are a party to other litigation arising in the normal course of business.
We regularly analyze current information and, as necessary, provide accruals
for probable liabilities on the eventual disposition of these matters. We
believe the effect on our consolidated results of operations, cash flows and
financial position, if any, for the disposition of these matters will not be
material.

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

   NONE

                                       7
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS

   As a result of the merger and recapitalization on May 10, 2000 as discussed
in ITEM 1, our common shares were de-listed from the New York Stock Exchange.
Currently, there is no established public trading market for our common stock.
Shares of Class A common stock are not quoted but are sporadically traded over-
the-counter on the so called "pink sheets." We believe that the information we
have been able to obtain may not represent a reliable market indicator for our
Class A common shares. Shares of Class B, Class C and Class D common stock are
not traded. Quarterly market and dividend information for pre-merger common
stock for fiscal year 1999 and for the first two quarters of fiscal 2000 up
until May 10, 2000 are as follows:

<TABLE>
<CAPTION>
                                           2000                                     1999
                         ----------------------------------------- --------------------------------------
                                       Second Quarter
                         First Quarter    through     Year through  First  Second   Third  Fourth
                          Pre-merger    May 10, 2001  May 10, 2001 Quarter Quarter Quarter Quarter  Year
                         ------------- -------------- ------------ ------- ------- ------- ------- ------
<S>                      <C>           <C>            <C>          <C>     <C>     <C>     <C>     <C>
Stock price:
  High..................    $24.44         $25.25        $25.25    $27.13  $22.63  $21.00  $24.31  $27.13
  Low...................     23.44          23.94         23.44     21.25   20.44   19.13   17.56   17.56
Dividends declared per
 share..................      0.22            --           0.22      0.22    0.22    0.22    0.22    0.88
</TABLE>

   Our ability to pay dividends is limited by the terms of our senior secured
credit facility and the notes, therefore we do not intend to pay dividends to
any class of our common shareholders.

   The numbers of shareholders of record for each class of common stock at
March 1, 2001 are as follows: Class A: 258; Class B: 12; Class C: 1; Class D:
11; and Class E: None.

 Recent Sales of Unregistered Securities

   We have not issued or sold securities within the past three years pursuant
to offerings that were not registered under the Securities Act of 1933, as
amended (the "Securities Act") except on May 10, 2000 as part of the merger and
recapitalization, we:

  .  sold shares of our common stock at a price per share of $25.25 at an
     aggregate offering price of $208.7 million,

  .  issued $60.0 million in principal amount of redeemable, payment-in-kind,
     preferred shares with detachable warrants to purchase 531,325 shares of
     our common stock (at an exercise price of $0.01 per share and a term of
     11 years) to DB Capital Investors for $60.0 million, and

  .  issued $225.0 million in principal amount of 12.75% senior subordinated
     notes (the "notes") with detachable warrants to purchase 425,060 shares
     of our common stock (at an exercise price of $0.01 per share and
     exercisable through 2010) to Deutsche Bank Securities Inc., UBS Warburg
     LLC and Goldman, Sachs & Co. for $215.9 million.

   The transactions set forth above were undertaken in reliance upon exemption
from the registration requirements of the Securities Act afforded by Section
4(2) and/or Regulation D promulgated thereunder, as sales not involving a
public offering. In October 2000, we consummated a registered exchange offer
with respect to the 12.75% senior subordinated notes described above, pursuant
to which all such privately placed securities were exchanged for registered
securities.

                                       8
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

   The table below sets forth summary consolidated historical data relating to
Jostens. The summary historical financial information for the years ended
December 30, 2000, January 1, 2000, January 2, 1999, January 3, 1998; the six
month period ended December 28, 1996; and for the year ended June 30, 1996, was
derived from the audited historical Consolidated Financial Statements of
Jostens.

<TABLE>
<CAPTION>
                              (5)        (6)     (7)(8)      (8)        (9)
                                                                    Six months   Year
                                         Years ended                   ended     ended
                          ----------------------------------------- ----------- -------
                          December 30 January 1 January 2 January 3 December 28 June 30
                             2000       2000      1999      1998       1996      1996
                          ----------- --------- --------- --------- ----------- -------
                                      (In millions, except per-share data)
<S>                       <C>         <C>       <C>       <C>       <C>         <C>
Statement of Operations
Net sales (1)...........   $ 805.0     $801.3    $789.6    $762.2     $281.1    $711.8
Cost of products sold
 (1)....................     356.3      368.5     370.5     371.0      145.4     348.8
Transaction costs.......      46.4         --        --        --         --        --
Special charge..........       0.2       20.2        --        --         --        --
Operating income........      67.8       81.7     102.2      99.7        4.2      94.8
Net interest expense....      58.9        7.0       6.7       6.3        4.1       7.3
Provision for income
 taxes..................      14.9       31.5      41.7      36.2        0.8      35.9
Income (loss) before
 cumulative effect of
 accounting change......     (12.8)      43.2      41.8      57.2       (0.8)     51.6
Cumulative effect of
 accounting change, net
 of tax.................      (5.9)        --        --        --         --        --
Net income (loss).......     (18.7)      43.2      41.8      57.2       (0.8)     51.6
                           --------    -------   -------   -------    -------   -------
Balance Sheet Data
Current assets..........   $ 236.1     $286.3    $240.5    $252.5     $257.5    $251.3
Working capital (2).....     (20.0)       8.3      44.1      50.2      100.0      73.2
Property and equipment,
 net....................      79.3       84.6      88.6      74.1       67.6      67.0
Total assets............     388.3      408.2     366.2     390.7      383.8     384.0
Short-term borrowings...        --      117.6      93.9      50.0       90.9      27.6
Long-term debt,
 including current
 maturities.............     684.8        3.6       3.6       3.6        3.9      53.9
Redeemable preferred
 stock..................      48.8         --        --        --         --        --
Shareholders' equity
 (deficit)..............    (586.3)      36.5      58.6     127.1      112.6     121.8
                           --------    -------   -------   -------    -------   -------
Common Share Data
Basic EPS--before
 cumulative effect of
 accounting change......   $  (1.05)   $  1.27   $  1.14   $  1.47     $(0.02)  $  1.29
Basic EPS--net income
 (loss).................      (1.39)      1.27      1.14      1.47      (0.02)     1.29
Diluted EPS--before
 cumulative effect of
 accounting change......      (1.05)      1.27      1.14      1.47      (0.02)     1.28
Diluted EPS--net income
 (loss).................      (1.39)      1.27      1.14      1.47      (0.02)     1.28
Cash dividends declared
 per share (3)..........       0.22       0.88      0.88      0.88       0.22      0.88
Common shares
 outstanding at period
 end....................       9.0       33.3      35.1      38.4       38.7      38.7
Stock price--high (3)...        N/M      27.13     26.25     28.81      22.25     25.13
Stock price--low (3)....        N/M      17.56     19.00     20.00      17.25     19.50
                           --------    -------   -------   -------    -------   -------
Other Data
Depreciation and
 amortization of
 intangibles............   $  28.9     $ 25.3    $ 23.2    $ 22.1     $  9.9    $ 16.6
Adjusted EBITDA (4).....     143.4      127.2     125.4     121.8       14.0     111.4
Adjusted EBITDA margin..      17.8%      15.9%     15.9%     16.0%       5.0%     15.7%
Capital expenditures....      22.2       27.8      36.9      24.4        9.9      15.4
                           --------    -------   -------   -------    -------   -------
</TABLE>


                                       9
<PAGE>

--------
(1)  Sales and cost of products sold for all periods presented have been
     reclassified to include revenue derived from shipping and handling charges
     in net sales as discussed in Item 7 and in Item 8, Note 1 of the Notes to
     Consolidated Financial Statements, included in this Form 10-K.
(2)  Represents current assets (excluding cash and cash equivalents) less
     current liabilities (excluding short-term borrowings and current
     maturities of long-term debt).
(3)  As a result of the merger and recapitalization on May 10, 2000 as
     discussed in Item 1, our common shares were de-listed from the New York
     Stock Exchange. Currently, there is no established public trading market
     for our common shares. In addition, subsequent to the merger and
     recapitalization we did not pay nor do we plan to pay dividends to any
     class of our common shareholders.
(4)  Adjusted EBITDA represents earnings before interest, taxes, depreciation
     and amortization, transaction costs, special charges, equity losses and
     write-down of investments, and the loss on the write-off of the JLC notes.
     Adjusted EBITDA is not a measure of performance under generally accepted
     accounting principles ("GAAP") and it should not be considered in
     isolation or as a substitute for net income, cash flows from operations,
     or other income and cash flow statement data prepared in accordance with
     GAAP, or as a measure of profitability or liquidity. Moreover, adjusted
     EBITDA is not a standardized measure and may be calculated in a number of
     ways. Accordingly, the adjusted EBITDA information provided might not be
     comparable to other similarly titled measures provided by other companies.
     Adjusted EBITDA is included herein because management understands that
     adjusted EBITDA is customarily used as a criterion in evaluation of
     companies.
(5)  The cumulative effect of accounting change, net of tax, reflects changes
     in our accounting for certain sales transaction as discussed in Item 7 and
     in Item 8, Note 1 of the Notes to Consolidated Financial Statements,
     included in this Form 10-K. Net income in 2000 also reflects a $6.7
     million charge for equity losses and a write-down of two internet
     investments.
(6)  Net income in 1999 reflects a pre-tax special charge of $20.2 million
     ($13.3 million after tax).
(7)  Net income in 1998 reflects an after tax charge of $15.7 million for the
     write-off of JLC notes receivable of $12.0 million and related net
     deferred tax assets of $3.7 million.
(8)  Net income in 1998 and 1997 reflects pre-tax gains of $3.7 million ($2.2
     million after tax) and $6.8 million ($4.0 million after tax),
     respectively, resulting from a reduction in LIFO gold inventories.
(9)  In 1996, the company changed its fiscal year end from June 30 to the
     Saturday closest to December 31, resulting in a six-month transition
     period from July 1 to December 28, 1996.

                                       10
<PAGE>

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

   Our disclosure and analysis in this report may contain some "forward-looking
statements." Forward-looking statements give our current expectations or
forecasts of future events. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe," "project," or
"continue," or the negative thereof or similar words. From time to time, we
also may provide oral or written forward-looking statements in other materials
we release to the public. Any or all of our forward-looking statements in this
report and in any public statements we make may turn out to be wrong. They can
be affected by inaccurate assumptions we might make or by known or unknown
risks or uncertainties. Consequently, no forward-looking statement can be
guaranteed. Actual results may vary materially. Investors are cautioned not to
place undue reliance on any forward-looking statements. Investors should also
understand that it is not possible to predict or identify all such factors and
should not consider the following list to be a complete statement of all
potential risks and uncertainties.

   Any change in the following factors may impact the achievement of results:

  .  our ability to satisfy our debt obligations, including related
     covenants;

  .  our relationship with our independent sales representatives and
     employees;

  .  the fluctuating prices of raw materials, primarily gold;

  .  the seasonality of our School Products segment sales and operating
     income;

  .  our dependence on a key supplier for our synthetic and semiprecious
     stones;

  .  fashion and demographic trends;

  .  litigation cases, if decided against us, may adversely affect our
     financial results; and

  .  environmental regulations that could impose substantial costs upon us
     and may adversely affect our financial results.

   The foregoing factors are not exhaustive, and new factors may emerge or
changes to the foregoing factors may occur that would impact our business.

                                       11
<PAGE>

RESULTS OF OPERATIONS

   The following table sets forth selected information from our Consolidated
Statements of Operations, expressed as a percentage of net sales.

<TABLE>
<CAPTION>
                                          Percentage of net
                                                sales         Percentage change
                                        --------------------- -----------------
                                                              2000 vs. 1999 vs.
                                         2000    1999   1998    1999     1998
                                        ------- ------ ------ -------- --------
<S>                                     <C>     <C>    <C>    <C>      <C>
Net Sales.............................  100.0%  100.0% 100.0%    0.5%     1.5%
Cost of products sold.................   44.3%   46.0%  46.9%   (3.3%)   (0.5%)
                                        ------- ------ ------ -------- --------
  Gross profit........................   55.7%   54.0%  53.1%    3.7%     3.3%
Selling and administrative expenses...   41.5%   41.3%  40.1%    1.0%     4.4%
Transaction costs.....................    5.8%    0.0%   0.0%     --       --
Special charge........................    0.0%    2.5%   0.0%  (98.8%)     --
                                        ------- ------ ------ -------- --------
    Operating income..................    8.4%   10.2%  13.0%  (16.9%)  (20.1%)
Interest income.......................    0.2%    0.1%   0.0%  171.0%    33.1%
Interest expense......................    7.5%    0.9%   0.9%  704.9%     6.5%
Equity losses and write-down of
 investments..........................    0.8%    0.0%   0.0%     --       --
Write-off of JLC notes receivable,
 net..................................    0.0%    0.0%   1.5%     --   (100.0%)
                                        ------- ------ ------ -------- --------
  Income before income taxes..........    0.3%    9.3%  10.6%  (97.1%)  (10.6%)
Provision for income taxes............    1.9%    3.9%   5.3%  (52.6%)  (24.5%)
                                        ------- ------ ------ -------- --------
Income (loss) before cumulative effect
 of accounting change.................   (1.6%)   5.4%   5.3% (129.6%)    3.2%
Cumulative effect of accounting
 change, net of tax...................   (0.7%)   0.0%   0.0%     --       --
                                        ------- ------ ------ -------- --------
  Net income (loss)...................   (2.3%)   5.4%   5.3% (143.2%)    3.2%
Dividends and accretion on redeemable
 preferred shares.....................   (0.7%)   0.0%   0.0%     --       --
                                        ------- ------ ------ -------- --------
  Net income (loss) available to
   common shareholders................   (3.0%)   5.4%   5.3% (156.7%)    3.2%
                                        ======= ====== ====== ======== ========
</TABLE>

 Net sales

   The change in net sales from 1999 to 2000 was due to price increases
averaging approximately 2.2%, offset partially by volume/mix decreases of 1.7%.
The change in net sales from 1998 to 1999 was due to price increases averaging
approximately 3.1%, offset partially by volume/mix decreases of 1.6%.

   During the fourth quarter of 2000, we reclassified revenues derived from
shipping and handling charges to net sales in accordance with the Emerging
Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling
Fees and Costs. Distribution and freight expenses for products shipped to
customers continue to be included in cost of products sold. Previously, revenue
from customers was recorded as a reduction of distribution and freight expenses
within costs of products sold. Prior period revenues derived from shipping and
handling charges have been reclassified to net sales, which had no effect on
previously reported net income. This reclassification increased previously
reported net sales by $18.8 million and $18.7 million in 1999 and 1998,
respectively.

                                       12
<PAGE>

   Year-to-date sales by segment and the changes between years were as follows:

<TABLE>
<CAPTION>
                                                              Percentage change
                                                              -----------------
                                                              2000 vs. 1999 vs.
                                     2000     1999     1998     1999     1998
                                   -------- -------- -------- -------- --------
                                         (In thousands)
<S>                                <C>      <C>      <C>      <C>      <C>
School Products................... $715,644 $691,252 $669,804   3.5%     3.2%
Recognition.......................   80,265   99,800  106,358 (19.6%)   (6.2%)
Other.............................    9,138   10,234   13,417 (10.7%)  (23.7%)
                                   -------- -------- -------- -------  -------
Consolidated net sales............ $805,047 $801,286 $789,579   0.5%     1.5%
                                   ======== ======== ======== =======  =======
</TABLE>

 School Products

   The increase in School Products sales from 1999 to 2000 was primarily due
to:

  .  price increases in our product lines;

  .  sales increases in graduation announcements and caps and gowns due to
     winning new school accounts;

  .  increased sales of graduation accessories;

  .  increased sales dollars for yearbooks due to increased page count and
     add-on features;

  .  fewer yearbook rebates and returns resulting from improvements with
     Jostens Direct Solutions ("JDS") (a direct payment program for parents
     of high school students); and

  .  increased revenue from JDS processing fees due to more schools enrolled
     in the program.

   These increases were offset by decreases in jewelry sales due to:

  .  weak sales in the high school market;

  .  delays in school presentations caused by a new multi-media marketing
     tool which was recently put in place; and

  .  the loss of a large account in the college market.

   The increase from 1998 to 1999 was primarily due to:

  .  price increases in our product lines;

  .  increased sales dollars for yearbooks due to increased page count and
     add-on features; and

  .  a unit volume increase of 2.2% in Jewelry, primarily due to strong sales
     in the high school market and accelerated jewelry shipments into the
     fourth quarter of 1999.

   These increases were offset by:

  .  a decline in sales of approximately $9.9 million in Jewelry, Graduation
     Products and Printing resulting from an independent sales group that
     left in mid-1998;

  .  higher than expected yearbook rebates and returns due to problems
     encountered with JDS;

  .  a decline in commercial printing volume (used to fill excess capacity);
     and

  .  a decrease in photography sales due to closing eleven unprofitable
     retail sites and not renewing our relationships with a number of
     independent wholesale dealers.


                                       13
<PAGE>

 Recognition

   The decreases in Recognition sales in 1999 and 2000 were primarily due to
lost customers as a result of problems encountered with a system implementation
that took place in 1999. Adding to the sales decrease in 2000, was a reduction
in the number of sales representatives and a shift in sales to lower priced
programs and general merchandise.

 Other

   Other segment sales decreased in 2000 as a result of exiting the college
alumni direct marketing business in the fourth quarter of 1999. Sales from this
business had declined from $7.4 million in 1998 to $3.1 million in 1999 due to
fewer response rates and fewer mailings on direct marketing programs.
Offsetting this decrease was higher sales of jewelry in our international
business in 1999 and 2000 due to our replacing sales representatives in Puerto
Rico in the second half of 1999.

 Gross Margin

   Gross margin in 2000 was 55.7%, compared with 54.0% in 1999 and 53.1% in
1998. The 1.7 percentage point increase in gross margin from 1999 to 2000 and
the 0.9% increase from 1998 to 1999 were primarily the result of :

  .  increased pricing;

  .  continued emphasis on manufacturing efficiencies;

  .  exiting the ring production facility in Nuevo Laredo, Mexico in 1999,
     which experienced higher than expected costs compared to production in
     the United States; and

  .  closing eleven unprofitable retail photo sites in 1999.

   In addition, the increase in 2000 was partially due to favorable raw
material costs particularly for gold and stones.

   Offsetting the increases in 1999 were:

  .  approximately $2.5 million of expenses incurred to exit the Nuevo
     Laredo, Mexico facility; and

  .  higher costs due to problems encountered with JDS.

 Selling and Administrative Expenses

   Selling and administrative expenses in 2000, 1999 and 1998 were $334.3
million, $330.9 million and $316.9 million, respectively.

   The increases in 1999 and 2000 reflect:

  .  higher selling and marketing expenses related to programs and
     initiatives intended to increase our sales; and

  .  higher commission expense partially due to changes in the commission
     program for graduation products and partially due to the timing of those
     changes.

   In addition, we incurred higher information system expenses in 1999 to
ensure year 2000 readiness which resulted in higher depreciation expense in
2000.

   In 2000, the increases were offset by:

  .  lower labor costs and headcount realized from the special charge taken
     in the fourth quarter of 1999;


                                       14
<PAGE>

  .  lower costs as a result of exiting the college alumni direct marketing
     business in the fourth quarter of 1999;

  .  lower amortization expense due to the write-off of $3.0 million of
     goodwill as part of the 1999 special charge; and

  .  reduced spending on temporary labor and other lower costs in our
     Recognition segment in 2000 compared with 1999 due to added costs
     resulting from problems encountered during the transition to a new
     system implemented in 1999.

 Transaction Costs

   We incurred costs consisting of professional fees and transaction expenses
associated with the merger and recapitalization. Transaction costs of $46.4
million have been expensed as of December 30, 2000. The remaining costs of
$36.5 million were deferred and are being amortized over the applicable lives
of the associated debt for up to a maximum of ten years.

 Special Charge

   In the fourth quarter of 1999, we completed a strategic review of product
lines, manufacturing operations, infrastructure projects and support functions
based on performance trends. We decided to refocus our organization on sales
growth versus infrastructure improvement. As a result of this review, we
incurred a pre-tax special charge of $20.2 million ($13.3 million after tax) in
1999 and an additional $0.2 million to complete the project in 2000.

   Information relating to the special charge follows:

<TABLE>
<CAPTION>
                                                                Net     Balance
                                 Initial  Used in  Used in  Adjustments end of
                                 accrual   1999      2000     in 2000    2000
                                 ------- --------- -------- ----------- -------
                                                 (In thousands)
<S>                              <C>     <C>       <C>      <C>         <C>
Employee termination benefits..  $ 4,910 $    --   $(3,880)   $ 714     $1,744
Abandonment of internal use
 software under development....    6,455   (6,245)    (210)     --         --
Write-off of impaired goodwill
 related to retail class ring
 sales channel.................    4,560   (4,560)     --       --         --
Write-off of goodwill related
 to exiting the direct
 marketing sales channel to
 college alumni................    3,086   (3,086)     --       --         --
Other costs related to exiting
 the direct marketing sales
 channel to college alumni.....    1,183     (270)    (436)    (477)       --
                                 ------- --------- --------   ------    ------
                                 $20,194 $(14,161) $(4,526)   $ 237     $1,744
                                 ======= ========= ========   ======    ======
</TABLE>

   Of the $20.4 million total special charge, $4.8 million relates to the
School Products segment and $15.6 million relates to the "Other" segment.

   Of the total special charge, $5.6 million relates to employee termination
benefits for the elimination of about 140 full-time positions, in corporate,
recognition and executive functions as well as individuals affected by the
exiting of the direct marketing sales channel to college alumni. Headcount
reductions were completed in 2000 and termination benefits continue to be paid
over the benefit period as specified under our severance plan. We accrued $4.9
million in termination benefits in 1999 and took an additional $0.7 million net
charge in 2000 to revise our original exit plan to retain certain employees and
eliminate the remaining approximately 40 full-time positions to complete the
project. Included in other accrued liabilities on the consolidated balance
sheet is the unpaid portion of the special charge of $1.7 million, related to
these future termination benefits.


                                       15
<PAGE>

   As part of the special charge, we wrote off $6.5 million in system
development work primarily for account and product configuration software that
will not be put into service.

   We reviewed and modified our strategies for the retail class ring product
line and, as a result, determined that the carrying value of the related
goodwill was impaired based upon anticipated inadequate projected cash flows.
Accordingly, an impairment charge of $4.6 million was recorded as part of the
special charge for the write-off of the carrying value of all of the goodwill.

   We also reviewed Jostens Direct, our direct marketing sales channel to
college alumni, and decided, in the fourth quarter of 1999 to close down the
business due to our expectations of a continued decline in sales volume. As a
result, the remaining carrying value of the related goodwill of $3.1 million
was written-off and other exit costs of $1.2 million were recorded during the
fourth quarter of 1999. In 2000, we completed our exit activities and took
into income $0.5 million of our original accrual that was not utilized.

   We estimate the pre-tax savings resulting from the implementation of the
strategic review were approximately $8.0 million in 2000 and will provide
future pre-tax savings of approximately $12.0 million annually in 2001 and
thereafter.

 Subsequent Event--Restructuring Plans

   In March 2001, we announced our decision to consolidate three Recognition
plants and implement a new customer service model as part of our effort to
realign resources and streamline the Recognition segment's infrastructure and
enhance profitability.

   We will close our distribution facility in Memphis, Tennessee, and our
manufacturing facility in Sherbrooke, Quebec, and shift these functions to our
existing plant in Princeton, Illinois. In addition, the Recognition segment's
customer service function, currently operated from the Princeton and Memphis
facilities, along with some financial functions, will be relocated to the
Owatonna, Minnesota, facility. A new customer service model will be
implemented to leverage new technologies at the Owatonna location. The
consolidation is scheduled to be completed in the summer of 2001.

   The total cost of the consolidation project, which will be expensed in
2001, is estimated to be approximately $4.0 million for severance benefits and
costs associated with closing the facilities. These costs will be partially
offset by a gain on sale of the Memphis facility of approximately $2.4
million. Approximately 100 full-time positions will be eliminated from the
Memphis plant and approximately 40 full-time positions will be eliminated from
the Sherbrooke plant. In Princeton, 44 new positions will be created and in
Owatonna about 30 new customer service positions will be added.

 Operating Income (Loss)

   Year-to-date operating income (loss) by segment and the changes from 1999
and 1998 were as follows:

<TABLE>
<CAPTION>
                                                            Percentage change
                                                            ------------------
                                                             2000 to  1999 to
                                2000      1999      1998      1999      1998
                              --------- --------- --------- --------- --------
                                     (In thousands)
<S>                           <C>       <C>       <C>       <C>       <C>
School Products.............. $148,615  $141,947  $127,016      4.7%    11.8%
Recognition..................   (4,157)     (361)   10,430  (1051.5%) (103.5%)
Other........................  (76,636)  (59,928)  (35,257)   (27.9%)  (70.0%)
                              --------- --------- --------- --------- --------
Consolidated operating
 income...................... $ 67,822  $ 81,658  $102,189    (16.9%)  (20.1%)
                              ========= ========= ========= ========= ========
</TABLE>


                                      16
<PAGE>

 School Products

   The increases in operating income in both 1999 and 2000 were due to
manufacturing efficiencies and increased sales performance. Offsetting the
increases in both 1999 and 2000 were higher marketing and selling expenses,
higher commissions and an increase in the allocation of management information
system expenses. Operating income in 1999 included $4.8 million of the special
charge taken for the write-off of goodwill related to the retail class ring
sales channel and a portion of employee termination benefits. In addition,
operating income in 1999 included approximately $2.5 million of expenses
incurred to exit the Nuevo Laredo, Mexico facility and move all ring
manufacturing back to the United States. Operating income in 1998 included a
one-time pre-tax benefit of $2.3 million due to a reduction in the remaining
LIFO gold inventories resulting from our decision to consign gold.

 Recognition

   The decrease in operating income in 2000 was primarily due to a decrease in
sales, an increase in bad debt expense and an increase in the allocation of
management information system expenses as a result of 1999 system
implementations. The decrease in operating income in 1999 was primarily due to
a decrease in sales and higher spending on temporary labor and increases in
other costs due to problems encountered during the transition to a new system
implemented in 1999. In addition, 1998 operating income included a one-time
pre-tax benefit of $1.4 million due to a reduction in the remaining LIFO gold
inventories resulting from our decision to consign gold.

 Other

   The increase in operating loss from 1999 to 2000 was primarily due to
transaction related costs of $46.4 million associated with the merger and
recapitalization on May 10, 2000. This was partially offset by:

  .  lower selling and administrative expenses as a result of exiting the
     college alumni direct marketing business in the fourth quarter of 1999;

  .  lower spending in 2000 compared with 1999 related to our new product and
     channel development group; and

  .  lower information system expenses related to year 2000 compliance
     efforts.

   The increase in operating loss from 1998 to 1999 was primarily due to:

  .  costs of $15.4 million related to the special charge taken in the fourth
     quarter of 1999 including employee termination benefits, abandonment of
     internal use software under development and the write-off of goodwill
     and other costs related to exiting the direct marketing sales channel to
     college alumni;

  .  higher costs related to investments in information systems as part of
     our year 2000 compliance efforts; and

  .  higher costs associated with market development activities.

 Net Interest Expense

   Net interest expense was $58.9 million in 2000 compared with $7.0 million in
1999 and $6.7 million in 1998. The increase in 2000 is due to additional
interest expense resulting from the new senior secured credit facility and the
issuance of the senior subordinated notes in connection with the merger and
recapitalization.

 Equity Losses and Write-down of Investments

   In 2000, we recorded equity losses and a write-down to zero of our
investments in two Internet companies resulting in a $6.7 million non-cash
charge.

                                       17
<PAGE>

 Write-off of JLC Notes Receivable, Net

   In June 1995, we sold our Jostens Learning Corp. ("JLC") curriculum software
subsidiary to a group led by Bain Capital, Inc. As partial consideration for
the sale, we received two notes receivable that were subsequently discounted
and recorded at their estimated fair values. In addition, a transaction gain of
$13.2 million was deferred in accordance with the SEC Staff Accounting Bulletin
No. 81, "Gain Recognition on the Sale of a Business or Operating Assets to a
Highly Leveraged Entity." The notes were subsequently recorded at their
estimated fair value of $12.9 million, net of deferred gain.

   In January 1999, we received information indicating to us that the carrying
value of the notes was permanently impaired. As a result, we wrote off $12.0
million in 1998 for the carrying value of the notes, net of miscellaneous JLC
related assets and liabilities, plus $3.7 million of net deferred tax assets
associated with the initial sale of JLC. We did not record a tax benefit
related to the write-off for financial reporting purposes because the tax
benefit may not be realized.

 Income Taxes

   Our 2000 provision for income taxes before the cumulative effect of
accounting change was $14.9 million resulting in an effective rate of 691.3%.
The deferred tax benefit of the cumulative effect of accounting change was $4.0
million. The provision for income taxes reflects the impact of non-deductible
transaction related costs of approximately $27.0 million and a deferred tax
asset valuation reserve of $2.7 million established for the equity losses and
write-down of $6.7 million of two Internet investments. In 1999, our effective
income tax rate was 42.2% compared to 49.9% in 1998. The 7.7 percentage point
decrease in 1999 from 1998 was primarily due to the write-off of $3.7 million
of net deferred tax assets related to the sale of JLC, and the fact that no tax
benefit was recorded for financial reporting purposes on the write-off of the
JLC notes.

   Other items that impacted our tax rates for 1999 and 1998 were the write-off
of $3.1 million of nondeductible goodwill in connection with the special charge
in 1999 and a benefit of $0.8 million for the reduction of a valuation reserve
in 1998 to reflect the utilization of previously reserved foreign tax credits
as a result of executed tax planning strategies.

   We expect our effective tax rate in 2001 to be approximately 41.5%.

LIQUIDITY AND CAPITAL RESOURCES

   Our primary cash needs are for debt service obligations, capital
expenditures, working capital, redeemable securities and general corporate
purposes.

 Operating Activities

   Operating activities generated cash of $35.5 million in 2000 compared with
$125.2 million in 1999 and $101.6 million in 1998. The decrease of $89.7
million in 2000 over 1999 was primarily due to lower net income as a result of
expenses incurred of $46.4 million related to the merger and recapitalization
and an increase in interest paid of $38.6 million. In addition, cash was
unfavorably impacted by the payment of $7.5 million for a deferred management
fee related to the transaction, severance payments of $3.9 million associated
with the special charge taken in 1999, and the timing of other accrued
liabilities all of which are included in the "Other" category on our
Consolidated Statement of Cash Flows. Cash was also unfavorably impacted by the
timing of customer deposits and accounts payable. In 2000, cash was favorably
impacted by reduced inventories and reduced accounts receivable due to
improvement in the number of days sales outstanding. The $23.6 million increase
in 1999 over 1998 was primarily due to increased customer deposits, partially
offset by other working capital decreases.


                                       18
<PAGE>

 Investing Activities

   Capital expenditures in 2000, 1999 and 1998 were $22.2 million, $27.8
million and $36.9 million, respectively. The $5.6 million decrease in 2000 over
1999 and the $9.1 million decrease in 1999 over 1998 was primarily due to
higher spending to replace information systems to ensure year 2000 compliance.
The decrease in 2000 was partially offset by increased spending on new
automation technology in our School Products segment. We anticipate capital
spending in 2001 to be about $30.0 million relating mainly to marketing and
sales initiatives.

   In 1999, we invested $10.6 million to take minority equity positions in
three privately-held Internet-based companies. In 2000, we funded an additional
investment of $1.1 million for one of these investments and sold our entire
ownership position in another one of these investments for $5.0 million which
resulted in no gain or loss. We recorded equity losses and a write-down of the
two remaining investments resulting in a non-cash charge of $6.7 million.

 Financing Activities

   Net cash used by financing activities in 2000, 1999 and 1998 was $29.3
million, $52.1 million and $69.8 million, respectively. The decrease in net
cash used by financing activities from 1999 to 2000 was primarily due to
proceeds from the new senior secured credit facility, issuance of the senior
subordinated notes, issuance of redeemable preferred stock and issuance of
common stock in connection with the transaction. In addition, no dividend was
paid in the second, third and fourth quarters of 2000. These decreases were
offset by payment of $25.25 for each share of common stock tendered in the
transaction, the pay-off of credit facilities existing prior to the transaction
and a $16.0 million voluntary pay down on our new senior secured credit
facility. The decrease in cash used by financing activities from 1998 to 1999
was primarily due to more share repurchases in 1998. In mid 1999, we suspended
our share repurchases due to the proposed merger and recapitalization.

   We experience seasonality that corresponds to the North American school
year. This seasonality requires us to manage our cash flows over the course of
the year. To help manage our cash flow, we entered into a $150 million, six
year revolving credit facility that expires on May 31, 2006. At December 30,
2000, we had $147.4 million available under this facility. We also have a
precious metals consignment arrangement with a major financial institution
whereby we have the ability to obtain up to $30.0 million in consigned
inventory. At December 30, 2000, we had $13.2 million available under this
arrangement.

   Mandatory principal payments obligations under term loan A are approximately
$4.5 million due June 30, 2001 and approximately $9.0 million due December 31,
2001. Thereafter, semi-annual principal payments increase approximately $1.12
million per semi-annual period through December 2005, with a final payment of
approximately $9.0 million due in May 2006. Mandatory principal payment
obligations under term loan B are approximately $0.5 million due June 30, 2001
and approximately $1.0 million semi-annually thereafter through December 2005.
Semiannual payments increase on an escalating scale from approximately $25.4
million in June 2006 to approximately $112.2 million in December 2007, with a
final payment of approximately $66.1 million due in May 2008. The $225.0
million in senior subordinated notes come due May 2010. In addition, mandatory
interest payment obligations on the senior subordinated notes are $14.3 million
semi-annually through May 2010.

   The redeemable, payment-in-kind, preferred shares have an initial
liquidation preference of $60.0 million and are entitled to receive dividends
at 14.0% per annum, compounded quarterly, and are payable either in cash or in
additional shares of the same series of preferred stock. We plan to pay
dividends in additional shares of preferred stock for the foreseeable future.
The redeemable preferred shares are subject to mandatory redemption by Jostens
in May 2011.

   The senior subordinated notes are not collateralized and are subordinate in
right of payment to the term loans and borrowings under the new revolving
credit facility (collectively the "senior secured credit facility").

                                       19
<PAGE>

The senior secured credit facility is collateralized by substantially all the
assets of our domestic operations and all of our capital stock (limited to 65%
in the case of foreign subsidiaries). The senior secured credit facility
requires that we meet certain financial covenants, ratios and tests, including
a maximum leverage ratio and a minimum interest coverage ratio. In addition, we
are required to pay certain fees in connection with the senior secured credit
facility, including letter of credit fees, agency fees and commitment fees.
Commitment fees will be payable quarterly, initially at a rate per annum of
0.5% on the average daily unused portion of the revolving credit facility. The
senior secured credit facility and senior subordinated notes contain certain
cross-default provisions whereby a violation of a covenant under one debt
obligation would, consequently, violate covenants under the other debt
obligations.

COMMITMENTS AND CONTINGENCIES

 Environmental

   As part of our environmental management program, we are involved in various
environmental remediation activities. As sites are identified and assessed in
this program, we determine potential environmental liabilities. Factors
considered in assessing liability include, but are not limited to: whether we
have been designated as a potentially responsible party, the number of other
potentially responsible parties designated at the site, the stage of the
proceedings and available environmental technology. As of the end of 2000, we
had identified three sites requiring further investigation. However, we have
not been designated as a potentially responsible party at any site.

   In 1996, we assessed the likelihood that a loss had been incurred at one of
these sites as probable based on findings included in remediation reports and
from discussions with legal counsel. As of the end of 2000, we had made
payments of $5.5 million for remediation, and at December 30, 2000, $1.1
million was accrued and is included in "other accrued liabilities" on the
consolidated balance sheet. While we may have a right of contribution or
reimbursement under insurance policies, amounts recoverable from other entities
with respect to a particular site are not considered until recoveries are
deemed probable. No assets for potential recoveries were established as of the
end of 2000. We believe the effect on our consolidated results of operations,
cash flows and financial position, if any, for the disposition of these matters
will not be material.

 Litigation

   A federal antitrust action was served on Jostens on October 23, 1998. The
complainant, Epicenter Recognition, Inc. ("Epicenter"), alleges that we
attempted to monopolize the market of high school graduation products in the
state of California. Epicenter is a successor to a corporation formed by four
of our former sales representatives. The plaintiff is claiming damages of
approximately $3 million to $10 million under various theories and differing
sized relevant markets. Trial is scheduled to begin April 3, 2001 in which
Epicenter has waived its right to a jury, so the case will be tried before a
judge in U.S. District Court in Orange County, California. We believe the
effect on our consolidated results of operations, cash flows and financial
position, if any, for the disposition of these matters will not be material.

   In February 1998, we entered into an Information Technology Master Services
Agreement with Ernst & Young LLP to provide guidance and consulting services
for implementation of a company wide enterprise resource planning ("ERP")
system. Under the Master Agreement, Ernst & Young LLP provided project
management, guidance and consulting. We claim this work was deficient and
substandard in various material respects constituting a breach of the Master
Agreement entitling us to significant damages. In August 2000, the parties
conducted a mandatory mediation which proved unsuccessful resulting in pending
arbitration. Ernst & Young LLP claims are $0.3 million in unpaid fees. We claim
damages in excess of $150.0 million, including over $9.0 million paid to Ernst
& Young LLP on account of the engagement.

   We are a party to other litigation arising in the normal course of business.
We regularly analyze current information and, as necessary, provide accruals
for probable liabilities on the eventual disposition of these

                                       20
<PAGE>

matters. We believe the effect on our consolidated results of operations, cash
flows and financial position, if any, for the disposition of these matters will
not be material.

NEW ACCOUNTING STANDARDS

 Accounting for Derivative Instruments and Hedging Activities

   In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities.
Subsequently in June 2000, the FASB issued SFAS No. 138, which amends SFAS No.
133. These statements modify the accounting and reporting for derivative
instruments and hedging activities and are required to be adopted in years
beginning after June 15, 2000. We adopted these new standards effective the
first quarter of 2001, and the effect of adoption is not currently expected to
have a material impact on our future financial position, cash flows or results
of operations.

 Revenue Recognition

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101), which among other guidance, clarified the Staff's views on various
revenue recognition and reporting matters. As a result, we changed our method
of accounting for certain sales transactions. Under our previous policy, we
recognized revenue upon shipment of the product from our production facility.
Under the new accounting method adopted retroactive to January 1, 2000, we now
defer revenue and direct costs until the product is delivered to the end
consumer.

   The cumulative effect of the change resulted in a non-cash charge to net
income of $5.9 million (net of an income tax benefit of $4.0 million) for the
year ended December 30, 2000. The effect of the change on the year ended
December 30, 2000, was to decrease operating income by $0.8 million. The pro
forma amounts presented in the consolidated statements of income were
calculated assuming the accounting change was made retroactively to prior
periods.

   The quarterly pro forma information after adopting this new accounting
method, retroactive to January 1, 2000, is as follows:

<TABLE>
<CAPTION>
                                                   2000
                               ----------------------------------------------
                                First    Second   Third     Fourth
                               Quarter  Quarter  Quarter   Quarter     Year
                               -------- -------- --------  --------  --------
                                              (In thousands)
<S>                            <C>      <C>      <C>       <C>       <C>
Net sales..................... $154,836 $344,712 $117,118  $188,381  $805,047
Gross profit..................   89,604  189,906   53,630   115,624   448,764
Selling and administrative
 expenses.....................   78,372  104,286   67,642    84,032   334,332
Operating income (loss).......   11,232   39,909  (14,151)   30,832    67,822
Net income (loss).............    5,849    3,062  (21,125)     (551)  (12,765)
</TABLE>

 Accounting for Shipping and Handling Fees and Costs

   Revenues derived from shipping and handling charges are included in net
sales in accordance with the Emerging Issues Task Force (EITF) No. 00-10,
Accounting for Shipping and Handling Fees and Costs. Additionally, distribution
and freight expenses for products shipped to customers are included in cost of
products sold. Previously, revenue from customers was recorded as a reduction
of distribution and freight expenses within costs of products sold. Prior
period revenues derived from shipping and handling charges have been
reclassified to net sales, which had no effect on previously reported net
income. This reclassification increased previously reported net sales by $18.8
million and $18.7 million in 1999 and 1998, respectively.


                                       21
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Market Risk

   We are subject to market risk associated with changes in commodity prices,
interest rates and foreign currency exchange rates. To reduce any one of these
risks, we may at times use financial instruments. All hedging transactions are
authorized and executed under clearly defined policies and procedures, which
prohibit the use of financial instruments for trading purposes.

 Commodity Price Risk

   Our results of operations could be significantly affected by changes in the
price of gold. To manage the risk associated with gold price changes, on an
annual basis we simultaneously set our pricing to customers and enter into gold
forward or option contracts based upon the estimated ounces needed to satisfy
customer requirements. We prepared a sensitivity analysis as of the end of 2000
to estimate our exposure to market risk on our open gold forward purchase
contracts. The fair market value of our gold positions was calculated by
valuing each position at quoted futures prices as of the end of 2000 and 1999,
and was $10.8 million and $18.0 million, respectively. The market risk
associated with these contracts was $1.1 million and $1.8 million as of the end
of 2000 and 1999, respectively, and is estimated as the potential loss in fair
value resulting from a hypothetical 10% adverse change in such prices.

 Interest Rate Risk

   For 1999, our earnings were affected by changes in short-term interest rates
as a result of issuing commercial paper. For 2000, our earnings were affected
by changes in the LIBOR as a result of our new senior secured credit facility.
If short-term interest rates or the LIBOR averaged 10% more or less in 2000 and
1999, our interest expense would have changed by approximately $2.9 million and
$0.7 million in 2000 and 1999, respectively. As of the end of 2000 and 1999,
the fair value of our debt, excluding the senior subordinated notes (the
"notes"), approximated its carrying value and is estimated based on quoted
market prices for comparable instruments. The fair value of the notes at
December 30, 2000 was $204.8 million and was estimated based on a quoted market
price of $910 per unit for the notes.

   Our senior secured credit facility bears a variable interest rate
predominantly linked to the London Interbank Offered Rate ("LIBOR"), as
determined in three month intervals, plus a fixed spread. To manage our
exposure to changes in the variable interest rate, we entered into an interest
rate swap agreement on July 7, 2000. The interest rate provided by the swap
agreement is fixed at 7.0% as opposed to LIBOR. The swap agreement became
effective on August 15, 2000 with a notional amount of $135.0 million,
decreasing to $70.0 million quarterly over the next three years. The notional
amount is used to measure the interest to be paid or received and does not
represent the amount of exposure to loss. The fair value of the interest rate
swap as of December 30, 2000 was a liability of $3.0 million. There were no
open interest rate swap agreements as of the end of 1999.

 Foreign Currency Risk

   We may enter into foreign currency forward contracts to hedge purchases of
inventory in foreign currency. The purpose of these hedging activities is to
protect us from the risk that inventory purchases denominated in foreign
currencies will be adversely affected by changes in foreign currency rates. Our
principal currency exposures relate to the Canadian dollar and German mark. We
consider our market risk in such activities to be immaterial. Our foreign
operations are primarily in Canada, and substantially all transactions are
denominated in the local currency. Therefore, the exposure to exchange risks is
not considered to be material.

                                       22
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Accountants

To the Shareholders and Directors of Jostens, Inc.:

   In our opinion, the accompanying consolidated balance sheet as of December
30, 2000 and the related consolidated statements of operations, of changes in
shareholders' equity (deficit) and comprehensive income (loss) and of cash
flows present fairly, in all material respects, the consolidated financial
position of Jostens, Inc. and its subsidiaries as of December 30, 2000, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Jostens Inc.'s management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted
in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

   As discussed in Note 1 to the consolidated financial statements, Jostens,
Inc. changed its method of recognizing revenue for certain transactions,
pursuant to Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements."

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 27, 2001

                                       23
<PAGE>

Report of Independent Auditors

To the Shareholders and Directors of Jostens, Inc.:

   We have audited the accompanying consolidated balance sheet of Jostens, Inc.
and subsidiaries as of January 1, 2000, and the related consolidated statements
of operations, changes in shareholders' investment and cash flows for each of
the two fiscal years in the period ended January 1, 2000. Our audits also
included the related financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jostens, Inc.
and subsidiaries as of January 1, 2000, and the consolidated results of their
operations and their cash flows for each of the two fiscal years in the period
ended January 1, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/ Ernst & Young LLP

Ernst & Young LLP
Minneapolis, Minnesota
February 2, 2000

                                       24
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                     2000      1999     1998
                                                   --------  -------- --------
                                                   (In thousands, except per-
                                                          share data)
<S>                                                <C>       <C>      <C>
Net sales......................................... $805,047  $801,286 $789,579
Cost of products sold.............................  356,283   368,539  370,457
                                                   --------  -------- --------
  Gross profit....................................  448,764   432,747  419,122
Selling and administrative expenses...............  334,332   330,895  316,933
Transaction costs.................................   46,373       --       --
Special charge....................................      237    20,194      --
                                                   --------  -------- --------
  Operating income................................   67,822    81,658  102,189
Interest income...................................    1,320       487      366
Interest expense..................................   60,252     7,486    7,026
Equity losses and write-down of investments.......    6,730       --       --
Write-off of JLC notes receivable, net............      --        --    12,009
                                                   --------  -------- --------
  Income before income taxes......................    2,160    74,659   83,520
Provision for income taxes........................   14,925    31,480   41,700
                                                   --------  -------- --------
Income (loss) before cumulative effect of
 accounting change................................  (12,765)   43,179   41,820
Cumulative effect of accounting change, net of
 tax..............................................   (5,894)      --       --
                                                   --------  -------- --------
  Net income (loss)...............................  (18,659)   43,179   41,820
Dividends and accretion on redeemable preferred
 shares...........................................   (5,841)      --       --
                                                   --------  -------- --------
  Net income (loss) available to common
   shareholders................................... $(24,500) $ 43,179 $ 41,820
                                                   ========  ======== ========
Earnings (loss) per common share
  Basic
    Before cumulative effect of accounting
     change....................................... $  (1.05) $   1.27 $   1.14
    Cumulative effect of accounting change........    (0.33)      --       --
                                                   --------  -------- --------
      Basic earnings (loss) per common share...... $  (1.39) $   1.27 $   1.14
                                                   ========  ======== ========
  Diluted
    Before cumulative effect of accounting
     change....................................... $  (1.05) $   1.27 $   1.14
    Cumulative effect of accounting change........    (0.33)      --       --
                                                   --------  -------- --------
      Diluted earnings (loss) per common share.... $  (1.39) $   1.27 $   1.14
                                                   ========  ======== ========
Weighted average common shares outstanding
  Basic...........................................   17,663    34,004   36,527
  Diluted.........................................   17,663    34,093   36,705
Proforma amounts assuming the accounting change
 had been in effect for all periods presented
 (unaudited)
  Net income (loss)............................... $(12,765) $ 43,747 $ 42,315
  Net income (loss) available to common
   shareholders................................... $(18,606) $ 43,747 $ 42,315
  Earnings (loss) available to common shareholders
   per common share
    Basic......................................... $  (1.05) $   1.29 $   1.16
    Diluted....................................... $  (1.05) $   1.28 $   1.15
</TABLE>

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

                                       25
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                     December 30, 2000 and January 1, 2000

<TABLE>
<CAPTION>
                                                            2000       1999
                                                          ---------  --------
                                                            (In thousands,
                                                           except per-share
                                                                data)
                         ASSETS
<S>                                                       <C>        <C>
Current assets
Cash and cash equivalents................................ $  26,552  $ 38,517
Accounts receivable, net of allowance of $4,361 and
 $5,775, respectively....................................    64,944   107,638
Inventories..............................................    91,230    87,839
Deferred income taxes....................................    17,995    17,400
Salespersons overdrafts, net of allowance of $5,568 and
 $6,332, respectively....................................    27,227    26,194
Prepaid expenses and other current assets................     8,154     8,721
                                                          ---------  --------
  Total current assets...................................   236,102   286,309
                                                          ---------  --------
Other assets
Intangibles, net.........................................    17,662    18,895
Deferred financing costs, net............................    33,360        23
Other....................................................    21,812    18,304
                                                          ---------  --------
  Total other assets.....................................    72,834    37,222
                                                          ---------  --------
Property and equipment, net..............................    79,345    84,640
                                                          ---------  --------
                                                          $ 388,281  $408,171
                                                          =========  ========
<CAPTION>
     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S>                                                       <C>        <C>
Current liabilities
Short-term borrowings.................................... $     --   $117,608
Accounts payable.........................................    24,430    23,641
Accrued employee compensation and related taxes..........    30,826    29,478
Commissions payable......................................    19,895    26,134
Customer deposits........................................   108,848   112,958
Income taxes payable.....................................    15,155    17,223
Interest payable.........................................    10,096     2,136
Current portion of long-term debt........................    14,974       --
Other accrued liabilities................................    20,347    27,964
                                                          ---------  --------
  Total current liabilities..............................   244,571   357,142
Long-term debt, net of current maturities................   669,807     3,600
Other noncurrent liabilities.............................    11,382    10,919
                                                          ---------  --------
  Total liabilities......................................   925,760   371,661
Commitments and contingencies
Redeemable preferred shares, $.01 par value, liquidation
 preference $64,056 authorized 307.5 shares, issued and
 outstanding; December 30, 2000 - 64.....................    48,841       --
Preferred shares, $.01 par value: authorized 4,000
 shares, issued and outstanding; December 30, 2000 - 64
 in the form of redeemable preferred shares listed above;
 3,936 undesignated......................................       --        --
Shareholders' equity (deficit)
Common shares (note 11)..................................     1,015    11,108
Additional paid-in-capital - warrants....................    24,733       --
Officer notes receivable.................................    (1,775)      --
Retained earnings (accumulated deficit)..................  (604,102)   31,072
Accumulated other comprehensive loss.....................    (6,191)   (5,670)
                                                          ---------  --------
  Total shareholders' equity (deficit)...................  (586,320)   36,510
                                                          ---------  --------
                                                          $ 388,281  $408,171
                                                          =========  ========
</TABLE>

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

                                       26
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                    2000       1999      1998
                                                  ---------  --------  --------
                                                        (In thousands)
<S>                                               <C>        <C>       <C>
Operating activities
Net income (loss)...............................  $ (18,659) $ 43,179  $ 41,820
Depreciation....................................     26,875    23,329    20,587
Amortization of debt discount and deferred
 financing costs................................      3,741       --        --
Amortization....................................      2,064     2,009     2,584
Deferred income taxes...........................      3,079    (2,671)   15,712
Special charge (non-cash portion)...............        --     14,101       --
Equity losses and write-down of investments.....      6,730       --        --
Write-off of JLC notes receivable, net..........        --        --     12,009
Cumulative effect of accounting change, net of
 tax............................................      5,894       --        --
Changes in assets and liabilities, net of
 effects of business acquisition:
  Accounts receivable...........................     17,366    (1,291)    2,167
  Inventories...................................      5,694     2,655     1,568
  Salespersons overdrafts.......................     (1,033)   (5,505)    4,806
  Prepaid expenses and other current assets.....        567    (2,984)   (1,058)
  Accounts payable..............................        789     8,364    (1,171)
  Accrued employee compensation and related
   taxes........................................      1,348     1,918     8,114
  Commissions payable...........................         98     4,003     2,909
  Customer deposits.............................     (4,110)   20,866    (6,567)
  Interest payable..............................      7,960       --        --
  Income taxes payable..........................     (2,068)   12,593    (6,044)
  Other.........................................    (20,823)    4,653     4,179
                                                  ---------  --------  --------
   Net cash provided by operating activities....     35,512   125,219   101,615
                                                  ---------  --------  --------
Investing activities
Purchases of property and equipment.............    (22,158)  (27,830)  (36,936)
Proceeds from sale of equity investments........      4,691       --        --
Purchase of equity investments..................     (1,119)  (10,611)      --
Other...........................................        421     1,262     1,675
                                                  ---------  --------  --------
   Net cash used for investing activities.......    (18,165)  (37,179)  (35,261)
                                                  ---------  --------  --------
Financing activities
Net short-term borrowings (repayments)..........   (117,608)   15,281    38,248
Repurchases of common stock.....................   (823,659)  (39,853)  (80,001)
Principal payments on long-term debt............    (19,600)      --        --
Proceeds from issuance of long-term debt........    700,139       --        --
Proceeds from issuance of common shares.........    208,695       --        --
Net proceeds from issuance of preferred stock...     43,000       --        --
Proceeds from issuance of warrants to purchase
 common shares..................................     24,733       --        --
Debt financing costs............................    (36,459)      --        --
Dividends paid to common shareholders...........     (7,331)  (29,998)  (32,332)
Other...........................................     (1,222)    2,452     4,258
                                                  ---------  --------  --------
   Net cash used for financing activities.......    (29,312)  (52,118)  (69,827)
                                                  ---------  --------  --------
Change in cash and cash equivalents.............    (11,965)   35,922    (3,473)
Cash and cash equivalents, beginning of period..     38,517     2,595     6,068
                                                  ---------  --------  --------
Cash and cash equivalents, end of period........  $  26,552  $ 38,517  $  2,595
                                                  =========  ========  ========
Supplemental information
Income taxes paid...............................  $  13,914  $ 20,623  $ 32,357
Interest paid...................................  $  44,256  $  5,702  $  6,426
                                                  ---------  --------  --------
</TABLE>

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

                                       27
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) AND
                          COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                                                        Accumu-
                                                                             Retained    lated
                                            Additional                       earnings    other              Compre-
                          Common shares      paid-in-              Officer   (accumu-   compre-             hensive
                         -----------------   capital    Capital     notes      lated    hensive              income
                         Number    Amount    warrants   surplus   receivable deficit)    loss      Total     (loss)
                         -------  --------  ---------- ---------  ---------- ---------  -------  ---------  --------
                                                 (In thousands, except per-share data)
<S>                      <C>      <C>       <C>        <C>        <C>        <C>        <C>      <C>        <C>
Balance--January 3,
 1998..................   38,422  $ 12,853   $   --    $     --    $   --    $ 119,378  $(5,138) $ 127,093
Exercise of stock
 options and restricted
 stock, net............      234        78                 4,180                                     4,258
Cash dividends declared
 to common shareholders
 of $0.88 per share....                                                        (32,332)            (32,332)
Repurchases of common
 stock.................   (3,585)   (1,241)               (4,521)              (74,239)            (80,001)
Tax benefit of stock
 options...............                                      341                                       341
Net income.............                                                         41,820              41,820  $ 41,820
Change in cumulative
 translation
 adjustment............                                                                  (1,576)    (1,576)   (1,576)
Adjustment in minimum
 pension liability, net
 of $649 tax...........                                                                  (1,051)    (1,051)   (1,051)
                                                                                                            --------
Comprehensive income...                                                                                     $ 39,193
                         -------  --------   -------   ---------   -------   ---------  -------  ---------  ========
Balance--January 2,
 1999..................   35,071    11,690       --          --        --       54,627   (7,765)    58,552
Exercise of stock
 options and restricted
 stock, net............      129        43                 2,409                                     2,452
Cash dividends declared
 to common shareholders
 of $0.88 per share....                                                        (29,998)            (29,998)
Repurchases of common
 stock.................   (1,876)     (625)               (2,492)              (36,736)            (39,853)
Tax benefit of stock
 options...............                                       83                                        83
Net income.............                                                         43,179              43,179  $ 43,179
Change in cumulative
 translation
 adjustment............                                                                   1,078      1,078     1,078
Adjustment in minimum
 pension liability, net
 of $667 tax...........                                                                   1,017      1,017     1,017
                                                                                                            --------
Comprehensive income                                                                                        $ 45,274
                         -------  --------   -------   ---------   -------   ---------  -------  ---------  ========
Balance--January 1,
 2000..................   33,324    11,108       --          --        --       31,072   (5,670)    36,510
Exercise of stock
 options and restricted
 stock, net............       23         8                 1,520                                     1,528
Cash dividends declared
 to common shareholders
 of $0.22 per share....                                                         (7,331)             (7,331)
Issuance of common
 shares
 Class A...............    2,134       711                53,176    (2,050)                         51,837
 Class B...............    5,300        53               133,772                                   133,825
 Class C...............      811         8                20,470                                    20,478
 Class D...............       20       --                    505                                       505
Repurchases of common
 stock.................  (32,619)  (10,873)             (209,443)             (603,343)           (823,659)
Issuance of warrants to
 purchase common
 shares................                       24,733                                                24,733
Payment on officer note
 receivable............                                                275                             275
Preferred stock
 dividends.............                                                         (5,551)             (5,551)
Preferred stock
 accretion.............                                                           (290)               (290)
Net loss...............                                                        (18,659)            (18,659) $(18,659)
Change in cumulative
 translation
 adjustment............                                                                    (599)      (599)     (599)
Adjustment in minimum
 pension liability, net
 of $51 tax............                                                                      78         78        78
                                                                                                            --------
Comprehensive loss.....                                                                                --   $(19,180)
                         -------  --------   -------   ---------   -------   ---------  -------  ---------  ========
Balance--December 30,
 2000..................    8,993  $  1,015   $24,733   $     --    $(1,775)  $(604,102) $(6,191) $(586,320)
                         =======  ========   =======   =========   =======   =========  =======  =========
</TABLE>

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

                                       28
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

 Our Business

   We are a leading manufacturer and marketer of school-related affinity
products and one of the leading manufacturers and suppliers of corporate-based
affinity products that help people celebrate important moments, recognize
achievements and build affiliations.

 Fiscal Year

   Our fiscal year ends the Saturday closest to December 31. Fiscal years 2000,
1999 and 1998 ended on December 30, 2000, January 1, 2000 and January 2, 1999,
respectively. Normally each fiscal year consists of 52 weeks, but periodically,
there will be a 53-week year.

 Principles of Consolidation

   Our consolidated financial statements include the accounts of our company
and our wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated.

   Certain amounts have been reclassified to conform to the 2000 presentation.
These reclassifications had no impact on our net income, shareholders' equity,
or cash provided by operating activities.

 Use of Estimates

   The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the amounts reported
in our consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.

 Cash and Cash Equivalents

   Cash and cash equivalents include cash on hand, time deposits and commercial
paper all having an original maturity of three months or less.

 Inventories

   Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method for all inventories except gold and
certain other precious metals, which are determined using the last-in, first-
out (LIFO) method. LIFO inventories were $0.1 million as of the end of 2000 and
1999 and approximated replacement cost.

   Net income in 1998 reflects a pre-tax gain of $3.7 million ($2.2 million
after tax) resulting from a reduction in LIFO gold inventories.

 Intangibles

   Intangibles primarily represent the excess of the purchase price over the
fair value of the net tangible assets of acquired businesses and are amortized
over various periods of up to 40 years. Accumulated amortization of intangibles
as of the end of 2000 and 1999 was $15.2 million and $14.1 million,
respectively.


                                       29
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Property and Equipment

   Property and equipment are stated at cost. Depreciation and amortization is
computed for financial reporting purposes by principally using the straight-
line method over the following estimated useful lives:

<TABLE>
<CAPTION>
                                                                         Years
                                                                        --------
      <S>                                                               <C>
      Buildings........................................................ 15 to 40
      Machinery and equipment..........................................  3 to 10
      Capitalized software.............................................  2 to 5
</TABLE>

 Impairment of Long-Lived Assets

   We review long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If impairment indicators are present and the estimated future
undiscounted cash flows are less than the carrying value of the assets and any
related goodwill, the carrying value is reduced to the estimated fair value as
measured by the future discounted cash flows.

 Income Taxes

   Deferred taxes are recognized for the estimated taxes ultimately payable or
recoverable based on enacted tax law. Changes in enacted tax rates are
reflected in the tax provision as they occur.

 Revenue Recognition, Sales Returns and Warranty Costs

   We recognize revenue when the earnings process is complete, evidenced by an
agreement between Jostens and the customer, there has been delivery and
acceptance, collectibility is probable and pricing is fixed and determinable.
Provisions for sales returns and warranty costs are recorded at the time of
sale based on historical information and current trends.

 Foreign Currency Translation

   Assets and liabilities denominated in foreign currency are translated at the
current exchange rate as of the balance sheet date, and income statement
amounts are translated at the average monthly exchange rate. Translation
adjustments resulting from fluctuations in exchange rates are recorded in
comprehensive income (loss) in shareholders' equity (deficit).

 Supplier Concentration

   We purchase substantially all synthetic and semiprecious stones from a
single supplier located in Germany, who is also the supplier to substantially
all of the class ring manufactures in the United States.

 Financial Instruments

   From time to time, we may use derivative financial instruments to manage
market risks and reduce our exposure resulting from fluctuations in foreign
currency and interest rates. Financial instruments are not used for trading
purposes. See Note 7 for a description of our interest rate swap agreement and
Note 14 for a description of our gold forward contracts.

   We also may enter into foreign currency forward contracts to hedge purchases
of inventory in foreign currency. The purpose of these hedging activities is to
protect us from the risk that inventory purchases

                                       30
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

denominated in foreign currency will be adversely affected by changes in
foreign currency rates. The amount of contracts outstanding at December 30,
2000 was $1.9 million. There were no foreign currency contracts outstanding as
of the end of 1999.

   Gains or losses on forward contracts used to purchase inventory for which we
have firm purchase commitments qualify as accounting hedges and are therefore
deferred and recognized in income when the inventory is sold. Counter parties
expose us to credit loss in the event of nonperformance as measured by the
unrealized gains on the contracts. At December 30, 2000 and January 1, 2000,
there were no material unrealized gains or losses on outstanding foreign
currency forward contracts or gold forward contracts.

 Earnings (Loss) Per Common Share

   Basic earnings (loss) per share are computed by dividing net income (loss)
available to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings (loss) per share are computed by dividing
net income (loss) available to common shareholders by the weighted average
number of common shares outstanding, including the dilutive effects of
warrants, options and restricted stock. Unless otherwise noted, references are
to diluted earnings (loss) per share.

   Basic and diluted earnings (loss) per share were calculated using the
following:

<TABLE>
<CAPTION>
                                                    2000        1999    1998
                                                  --------     ------- -------
                                                   (In thousands, except
                                                      per-share data)
<S>                                               <C>          <C>     <C>
Net income (loss) before cumulative effect of
 accounting change............................... $(12,765)    $43,179 $41,820
Cumulative effect of accounting change, net of
 tax.............................................   (5,894)        --      --
                                                  --------     ------- -------
Net income (loss)................................  (18,659)     43,179  41,820
Dividends and accretion on redeemable preferred
 shares..........................................   (5,841)        --      --
                                                  --------     ------- -------
Net income (loss) available to common
 shareholders.................................... $(24,500)    $43,179 $41,820
                                                  ========     ======= =======
Weighted average number of common shares
 outstanding--basic..............................   17,663      34,004  36,527
Dilutive shares..................................      --  (1)      89     178
                                                  --------     ------- -------
Weighted average number of common shares
 outstanding--diluted............................   17,663      34,093  36,705
                                                  ========     ======= =======
--------
(1)  Options and warrants to purchase approximately 1.5 million shares were not
     included as their effect would have been antidilutive.

Earnings (loss) per common share
  Basic
    Before cumulative effect of accounting
     change...................................... $  (1.05)    $  1.27 $  1.14
    Cumulative effect of accounting change.......    (0.33)        --      --
                                                  --------     ------- -------
      Basic earnings (loss) per common share..... $  (1.39)    $  1.27 $  1.14
                                                  ========     ======= =======
  Diluted
    Before cumulative effect of accounting
     change...................................... $  (1.05)    $  1.27 $  1.14
    Cumulative effect of accounting change.......    (0.33)        --      --
                                                  --------     ------- -------
      Diluted earnings (loss) per common share... $  (1.39)    $  1.27 $  1.14
                                                  ========     ======= =======
</TABLE>


                                       31
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Stock-Based Compensation

   We use the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for stock options granted to employees and non
employee directors.

 New Accounting Standards

   Accounting for Derivative Instruments and Hedging Activities -- In June
1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. Subsequently in
June 2000, the FASB issued SFAS No. 138, which amends SFAS No. 133. These
statements modify the accounting and reporting for derivative instruments and
hedging activities and are required to be adopted in years beginning after June
15, 2000. We adopted these new standards effective the first quarter of 2001,
and the effect of adoption is not currently expected to have a material impact
on our future financial position, cash flows or results of operations.

   Revenue Recognition -- In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements (SAB 101), which, among other guidance, clarified the
Staff's views on various revenue recognition and reporting matters. As a
result, we changed our method of accounting for certain sales transactions.
Under our previous policy, we recognized revenue upon shipment of the product
from our production facility. Under the new accounting method adopted
retroactive to January 1, 2000, we now defer revenue and direct costs until the
product is delivered to the end consumer.

   The cumulative effect of the change resulted in a non-cash charge to net
income of $5.9 million (net of an income tax benefit of $4.0 million) for the
year ended December 30, 2000. The effect of the change on the year ended
December 30, 2000, was to decrease operating income by $0.8 million. The pro
forma amounts presented in the consolidated statements of income were
calculated assuming the accounting change was made retroactively to prior
periods.

   The (unaudited) quarterly pro forma information after adopting this new
accounting method, retroactive to January 1, 2000, is as follows:

<TABLE>
<CAPTION>
                                                   2000
                               ----------------------------------------------
                                First    Second   Third     Fourth
                               Quarter  Quarter  Quarter   Quarter     Year
                               -------- -------- --------  --------  --------
                                              (In thousands)
<S>                            <C>      <C>      <C>       <C>       <C>
Net sales..................... $154,836 $344,712 $117,118  $188,381  $805,047
Gross profit..................   89,604  189,906   53,630   115,624   448,764
Selling and administrative
 expenses.....................   78,372  104,286   67,642    84,032   334,332
Operating income (loss).......   11,232   39,909  (14,151)   30,832    67,822
Net income (loss).............    5,849    3,062  (21,125)     (551)  (12,765)
</TABLE>

   Accounting for Shipping and Handling Fees and Costs -- Revenues derived from
shipping and handling charges are included in net sales in accordance with the
Emerging Issues Task Force (EITF) No. 00-10, Accounting for Shipping and
Handling Fees and Costs. Additionally, distribution and freight expenses for
products shipped to customers are included in cost of products sold.
Previously, revenue from customers was recorded as a reduction of distribution
and freight expenses within costs of products sold. Prior period revenues
derived from shipping and handling charges have been reclassified to net sales,
which had no effect on previously reported net income. This reclassification
increased previously reported net sales by $18.8 million and $18.7 million in
1999 and 1998, respectively.

                                       32
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2. Merger and Recapitalization

   On December 27, 1999, we entered into a merger agreement with Saturn
Acquisition Corporation, an entity organized for the sole purpose of effecting
a merger on behalf of certain affiliates of Investcorp S.A. (Investcorp) and
other investors. On May 10, 2000, Saturn Acquisition Corporation merged with
and into Jostens, with Jostens as the surviving corporation. The merger was
part of a recapitalization of Jostens which resulted in affiliates of
Investcorp and the other investors acquiring approximately 92% of our post-
merger common stock. The remaining 8% of our common stock was retained by pre-
recapitalization shareholders and five members of senior management and was
redesignated as shares of Class A common stock. As a result of the transaction,
our shares have been de-listed from the New York Stock Exchange.

 Recapitalization Financing

   The recapitalization was funded by (a) $495.0 million of borrowings under a
senior credit facility with a syndicate of banks which included term loans and
a revolving credit facility (collectively the "senior secured credit
facility"), (b) issuance of $225.0 million in principal amount of senior
subordinated notes (the "notes") and warrants to purchase 425,060 shares of
Class E common stock, (c) issuance of $60.0 million in principal amount of
redeemable preferred stock and warrants to purchase 531,325 shares of Class E
common stock and (d) $208.7 million of proceeds from the sale of shares of
common stock to affiliates of Investcorp and the other investors.

   The proceeds from these financings funded (a) the payment of approximately
$823.6 million to holders of common stock representing $25.25 per share, (b)
repayment of $67.6 million of outstanding indebtedness, (c) payment of $10.0
million in consideration for cancellation of employee stock options, (d)
payments of approximately $72.1 million of fees and expenses associated with
the recapitalization, including approximately $12.7 million of advisory fees
paid to an affiliate of Investcorp and (e) a pre-payment of $7.5 million for a
management and consulting services agreement for a five-year term with an
affiliate of Investcorp. This pre-payment is being amortized on a straight-line
basis over the term of the agreement.

 Recapitalization Accounting

   The transaction was accounted for as a recapitalization and, as such, the
historical basis of our assets and liabilities has not been affected.
Recapitalization related costs of $46.4 million consisting of investment
banking fees, transaction fees, legal and accounting fees, transition bonuses,
stock option payments and other miscellaneous costs were expensed in the year
ended December 30, 2000. Additionally, $3.0 million of recapitalization costs
incurred related to the issuance of shares of redeemable preferred stock were
netted against the proceeds of $60.0 million. Finally, $36.5 million associated
with the debt financing was capitalized and is being amortized as interest
expense over the applicable lives of the debt for up to a maximum of ten years.

3. Special Charge

   In the fourth quarter of 1999, we completed a strategic review of product
lines, manufacturing operations, infrastructure projects and support functions
based on performance trends. We decided to refocus our organization on sales
growth versus infrastructure improvement. As a result of this review, we
incurred a pre-tax special charge of $20.2 million ($13.3 million after tax) in
1999 and an additional $0.2 million to complete the project in 2000.

                                       33
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Information relating to the special charge follows:

<TABLE>
<CAPTION>
                                                                Net     Balance
                                 Initial Used in   Used in  Adjustments end of
                                 accrual   1999     2000      in 2000    2000
                                 ------- --------  -------  ----------- -------
                                                (In thousands)
<S>                              <C>     <C>       <C>      <C>         <C>
Employee termination benefits..  $ 4,910 $    --   $(3,880)    $ 714    $1,744
Abandonment of internal use
 software under development....    6,455   (6,245)    (210)      --        --
Write-off of impaired goodwill
 related to retail class ring
 sales channel.................    4,560   (4,560)     --        --        --
Write-off of goodwill related
 to exiting the direct
 marketing sales channel to
 college alumni................    3,086   (3,086)     --        --        --
Other costs related to exiting
 the direct marketing sales
 channel to college alumni.....    1,183     (270)    (436)     (477)      --
                                 ------- --------  -------     -----    ------
                                 $20,194 $(14,161) $(4,526)    $ 237    $1,744
                                 ======= ========  =======     =====    ======
</TABLE>

   Of the $20.4 million total special charge, $4.8 million relates to the
School Products segment and $15.6 million relates to the "Other" segment.

   Of the total special charge, $5.6 million relates to employee termination
benefits for the elimination of about 140 full-time positions, in corporate,
recognition and executive functions as well as individuals affected by the
exiting of the direct marketing sales channel to college alumni. Headcount
reductions were completed in 2000 and termination benefits continue to be paid
over the benefit period as specified under our severance plan. We accrued $4.9
million in termination benefits in 1999 and took an additional $0.7 million net
charge in 2000 to revise our original exit plan to retain certain employees and
eliminate the remaining approximately 40 full-time positions to complete the
project. Included in other accrued liabilities on the consolidated balance
sheet is the unpaid portion of the special charge of $1.7 million, related to
these future termination benefits.

   As part of the special charge, we wrote off $6.5 million in system
development work primarily for account and product configuration software that
will not be put into service.

   We reviewed and modified our strategies for the retail class ring product
line and, as a result, determined that the carrying value of the related
goodwill was impaired based upon anticipated inadequate projected cash flows.
Accordingly, an impairment charge of $4.6 million was recorded as part of the
special charge for the write-off of the carrying value of all of the goodwill.

   We also reviewed Jostens Direct, our direct marketing sales channel to
college alumni, and decided, in the fourth quarter of 1999 to close down the
business due to our expectations of a continued decline in sales volume. As a
result, the remaining carrying value of the related goodwill of $3.1 million
was written-off and other exit costs of $1.2 million were recorded during the
fourth quarter of 1999. In 2000, we completed our exit activities and took into
income $0.5 million of our original accrual that was not utilized.

                                       34
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Comprehensive Income (Loss)

   The following amounts were included in accumulated other comprehensive loss
as of the end of 2000 and 1999:

<TABLE>
<CAPTION>
                                                               2000     1999
                                                              -------  -------
                                                              (In thousands)
      <S>                                                     <C>      <C>
      Minimum pension liability adjustments, net of tax...... $  (948) $(1,026)
      Foreign currency translation adjustments...............  (5,243)  (4,644)
                                                              -------  -------
      Accumulated other comprehensive loss................... $(6,191) $(5,670)
                                                              =======  =======
</TABLE>

5. Inventories

     As of the end of 2000 and 1999, inventories were comprised of:

<TABLE>
<CAPTION>
                                                                 2000    1999
                                                                ------- -------
                                                                (In thousands)
      <S>                                                       <C>     <C>
      Raw materials and supplies............................... $17,054 $17,886
      Work-in-process..........................................  30,490  29,772
      Finished goods...........................................  43,686  40,181
                                                                ------- -------
      Total inventories........................................ $91,230 $87,839
                                                                ======= =======
</TABLE>

 Precious Metals Consignment Arrangement

   We have a precious metals consignment arrangement with a major financial
institution whereby we have the ability to obtain up to $30.0 million in
consigned inventory. In 2000, 1999 and 1998, we expensed consignment fees
related to this facility of approximately $0.3 million, $0.3 million and $0.1
million, respectively. Under the terms of the consignment arrangement, we do
not own the consigned inventory until it is shipped in the form of a product to
a customer. Accordingly, we do not include the value of consigned inventory or
the corresponding liability in our financial statements. The value of our
consigned inventory as of the end of 2000 and 1999 was $16.8 million and $22.1
million, respectively.

6. Property and Equipment

   As of the end of 2000 and 1999, property and equipment, net consisted of:

<TABLE>
<CAPTION>
                                                                2000     1999
                                                              -------- --------
                                                               (In thousands)
      <S>                                                     <C>      <C>
      Land................................................... $  3,432 $  3,618
      Buildings..............................................   36,913   36,420
      Machinery and equipment................................  206,659  195,673
      Capitalized software...................................   38,172   36,079
                                                              -------- --------
      Total property and equipment...........................  285,176  271,790
      Less accumulated depreciation and amortization.........  205,831  187,150
                                                              -------- --------
      Property and equipment, net............................ $ 79,345 $ 84,640
                                                              ======== ========
</TABLE>

   Depreciation expense was $26.9 million, $23.3 million and $20.6 million in
2000, 1999, and 1998, respectively. Amortization related to capitalized
software is included in depreciation expense. Accumulated amortization of
capitalized software was $17.5 million and $11.1 million in 2000 and 1999,
respectively.

                                       35
<PAGE>

                        JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


7. Borrowings

   As of the end of 2000 and 1999, long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                   2000    1999
                                                                 -------- ------
                                                                 (In thousands)
<S>                                                              <C>      <C>
Borrowings under senior secured credit facility:
  Term loan A, variable rate, 9.76 percent at December 30, 2000,
   semi-annual principal and interest payments through May
   2006......................................................... $134,775 $  --
  Term loan B, variable rate, 10.26 percent at December 30,
   2000, semi-annual principal and interest payments through May
   2008.........................................................  344,225    --
Senior subordinated notes, 12.75 percent fixed rate, net of
   discounts of $19,219, semi-annual interest payments of $14.3
   million, principal due and payable at maturity - May 2010....  205,781    --
Industrial revenue bonds, 6.75 percent fixed rate, covering
 general offices................................................      --   3,600
                                                                 -------- ------
                                                                  684,781  3,600
Less current portion............................................   14,974    --
                                                                 -------- ------
                                                                 $669,807 $3,600
                                                                 ======== ======
</TABLE>

   Maturities of long-term debt, excluding $19.2 million of discount, as of
December 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                 (In thousands)
      <S>                                                        <C>       <C>
      2001...................................................... $  14,974
      2002......................................................    23,335
      2003......................................................    27,827
      2004......................................................    32,320
      2005......................................................    36,813
      Thereafter................................................   568,731
                                                                 ---------
                                                                 $ 704,000
                                                                 =========
</TABLE>

   In 2000, we voluntarily paid down $15.2 million of term loan A and $0.8
million of term loan B. Future mandatory principal payments obligations under
term loan A are approximately $4.5 million due June 30, 2001 and approximately
$9.0 million due December 31, 2001. Thereafter, semi-annual principal payments
increase approximately $1.12 million per semi-annual period through December
2005, with a final payment of approximately $9.0 million due in May 2006.
Future mandatory principal payment obligations under term loan B are
approximately $0.5 million due June 30, 2001 and approximately $1.0 million
semi-annually thereafter through December 2005. Semiannual payments increase
on an escalating scale from approximately $25.4 million in June 2006 to
approximately $112.2 million in December 2007, with a final payment of
approximately $66.1 million due in May 2008.

   As of the end of 2000 and 1999, the fair value of our debt, excluding the
senior subordinated notes (the "notes"), approximated its carrying value and
is estimated based on quoted market prices for comparable instruments. The
fair value of the notes at December 30, 2000 was $204.8 million and was
estimated based on the quoted market price of $910 per unit for the notes.

   In connection with the merger and recapitalization, we entered into a $150
million, six year revolving credit facility that expires on May 31, 2006. We
may borrow funds and elect to pay interest under the "alternative base rate"
or "eurodollar" interest rate provisions of the agreement. There was $2.6
million outstanding under this facility, in the form of letters of credit, as
of December 30, 2000. Our old credit facility, due to expire on December 31,
2000, was terminated as part of the transaction.

                                      36
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The senior subordinated notes (the "notes") are not collateralized and are
subordinate in right of payment to the term loans and borrowings under the new
revolving credit facility (collectively the "senior secured credit facility").
The senior secured credit facility is collateralized by substantially all the
assets of our domestic operations and all of our capital stock (limited to 65%
in the case of foreign subsidiaries). The senior secured credit facility
requires that we meet certain financial covenants, ratios and tests, including
a maximum leverage ratio and a minimum interest coverage ratio. In addition, we
are required to pay certain fees in connection with the senior secured credit
facility, including letter of credit fees, agency fees and commitment fees.
Commitment fees are payable quarterly, initially at a rate per annum of 0.5% on
the average daily unused portion of the revolving credit facility. The senior
secured credit facility and senior subordinated notes contain certain cross-
default provisions whereby a violation of a covenant under one debt obligation
would, consequently, violate covenants under the other debt obligations.

   Our senior secured credit facility bears a variable interest rate
predominantly linked to the London Interbank Offered Rate ("LIBOR"), as
determined in three month intervals, plus a fixed spread. To manage our
exposure to changes in the variable interest rate, we entered into an interest
rate swap agreement on July 7, 2000. The interest rate provided by the swap
agreement is fixed at 7.0% as opposed to LIBOR. The swap agreement became
effective on August 15, 2000 with a notional amount of $135.0 million,
decreasing to $70.0 million quarterly over the next three years. The notional
amount is used to measure the interest to be paid or received and does not
represent the amount of exposure to loss. The fair value of the interest rate
swap as of December 30, 2000 was a liability of $3.0 million. There were no
open interest rate swap agreements as of the end of 1999.

   The senior subordinated notes were issued with detachable warrants and an
original issuance discount, resulting in total discounts of $19.7 million. The
detachable warrants were valued at $10.7 million and are exercisable through
2010. The value of the warrants has been included as a component of
shareholders' deficit. If all the warrants were to be exercised, the holders
would acquire shares (at a price of $0.01 per share) of our Class E common
stock representing approximately 4.0% of the total number of shares
(outstanding immediately after the transaction) of our common equity on a fully
diluted basis. The entire discount is being amortized to interest expense
through 2010 and, during 2000, the amount of interest expense related to the
amortization of debt discount was $0.6 million.

   In 1999, we incurred annual fees and interest on borrowings that were based
on our commercial paper rating. Annual fees ranged from 0.075 to 0.15% of the
commitment. The weighted average interest rate on commercial paper outstanding
as of the end of 1999 was 5.9%.

8. Redeemable Preferred Stock

   In connection with the recapitalization, we issued redeemable, payment-in-
kind, preferred shares, which have an initial liquidation preference of $60.0
million and are entitled to receive dividends at 14.0% per annum, compounded
quarterly and payable either in cash or in additional shares of the same series
of preferred stock. The redeemable preferred shares are subject to mandatory
redemption by Jostens in May 2011. In connection with the redeemable preferred
shares, we ascribed $14.0 million of the proceeds to detachable warrants to
purchase 531,325 shares of our Class E common stock (at an exercise price of
$0.01 per share), which is reflected as a component of shareholders' deficit.
In addition, $3.0 million of issuance costs have been netted against the
initial proceeds and are reflected as a reduction to the carrying amount of the
preferred stock. The carrying value of the preferred stock is being accreted to
full liquidation preference value, plus unpaid preferred stock dividends, over
the eleven year period of the redeemable preferred stock through charges to the
retained earnings (accumulated deficit) account.


                                       37
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. Income Taxes

   The following summarizes the differences between income taxes computed at
the federal statutory rate and the provision for income taxes for financial
reporting purposes:

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                     -------  -------  -------
                                                         (In thousands)
   <S>                                               <C>      <C>      <C>
   Federal statutory income tax rate...............       35%      35%      35%
   Federal tax at statutory rate...................  $   756  $26,130  $29,232
   State income taxes, net of federal tax benefit..    1,215    3,086    4,509
   Write-off of JLC notes and related deferred tax
    assets.........................................      --       --     7,245
   Write-off of goodwill...........................      --     1,080      --
   Non deductible transaction costs................    9,473      --       --
   Increase (reduction) in deferred tax valuation
    allowance......................................    2,355      --      (750)
   Other differences, net..........................    1,126    1,184    1,464
                                                     -------  -------  -------
   Provision for income taxes......................  $14,925  $31,480  $41,700
                                                     =======  =======  =======
</TABLE>

   The U.S. and foreign components of income before income taxes and the
provision for income taxes were as follows:

<TABLE>
<CAPTION>
                                                       2000     1999     1998
                                                      -------  -------  -------
                                                          (In thousands)
   <S>                                                <C>      <C>      <C>
   Income before income taxes
   Domestic.......................................... $(5,935) $68,044  $77,756
   Foreign...........................................   8,095    6,615    5,764
                                                      -------  -------  -------
   Income before income taxes........................ $ 2,160  $74,659  $83,520
                                                      =======  =======  =======
   Provision for income taxes
   Federal........................................... $ 6,914  $25,828  $18,435
   State.............................................   1,385    5,276    4,439
   Foreign...........................................   3,547    3,047    3,114
                                                      -------  -------  -------
   Total current income taxes........................  11,846   34,151   25,988
   Deferred..........................................   3,079   (2,671)  15,712
                                                      -------  -------  -------
   Provision for income taxes........................ $14,925  $31,480  $41,700
                                                      =======  =======  =======
</TABLE>

                                       38
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the deferred income tax liabilities and assets as of the end of 2000 and
1999 consisted of:

<TABLE>
<CAPTION>
                                                             2000      1999
                                                           --------  --------
                                                            (In thousands)
   <S>                                                     <C>       <C>
   Deferred tax liabilities
   Tax over book depreciation............................. $ (3,285) $ (3,558)
   Capitalized software development costs.................   (7,195)   (8,712)
   Other..................................................   (5,901)   (3,616)
                                                           --------  --------
   Deferred tax liabilities...............................  (16,381)  (15,886)
                                                           --------  --------
   Deferred tax assets
   Reserves for accounts receivable and salespersons
    overdrafts............................................    5,776     6,936
   Reserves for employee benefits.........................    9,560    10,669
   Other reserves not recognized for tax purposes.........    6,825     4,025
   Foreign tax credit carryforwards.......................      185       838
   Reserves for investments...............................    2,661       --
   Other..................................................    5,329     4,483
                                                           --------  --------
   Deferred tax assets....................................   30,336    26,951
   Valuation allowance....................................   (2,846)     (838)
                                                           --------  --------
   Deferred tax assets, net...............................   27,490    26,113
                                                           --------  --------
   Net deferred tax asset................................. $ 11,109  $ 10,227
                                                           ========  ========
</TABLE>

   The net deferred tax asset as of the end of 2000 consisted of $18.0 million
current net deferred tax assets and $6.9 million noncurrent net deferred tax
liabilities. The net deferred tax assets as of the end of 1999 consisted of
$17.4 million current net deferred tax assets and $7.2 million noncurrent net
deferred tax liabilities.

   During 2000, we increased the deferred tax asset valuation allowance by $2.7
million because the tax benefit related to the reserves for investments may not
be realized. We also have a foreign tax credit carryforward of $0.2 million
that expires in 2002. The foreign tax credits of $0.2 million and $0.8 million
as of the end of 2000 and 1999 were fully reserved.

10. Benefit Plans

 Pension and Postretirement Benefits

   We have noncontributory defined-benefit pension plans that cover nearly all
employees. The benefits provided under the plans are based on years of service
and/or compensation levels. We also provide health care insurance benefits for
nearly all retirees. Generally, the health care plans require contributions
from retirees.

   The assumptions used for these plans consisted of:

<TABLE>
<CAPTION>
                               Pension benefits     Retiree health benefits
                               -------------------  -------------------------
                               2000   1999   1998    2000     1999     1998
                               -----  -----  -----  -------  -------  -------
   <S>                         <C>    <C>    <C>    <C>      <C>      <C>
   Discount rate..............  7.75%  7.75%  7.00%    7.75%    7.75%    7.00%
   Expected return on plan
    assets.................... 10.00% 10.00% 10.00%     --       --       --
   Rate of compensation
    increase..................  6.30%  6.30%  6.30%     --       --       --
   Initial health care cost
    trend rate................   --     --     --      6.00%    7.00%    8.00%
</TABLE>

                                       39
<PAGE>

                        JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Net periodic benefit (income) or expense for 2000, 1999 and 1998 included
the following components:

<TABLE>
<CAPTION>
                                                             Retiree health
                                    Pension benefits            benefits
                               ----------------------------  -----------------
                                 2000      1999      1998    2000   1999  1998
                               --------  --------  --------  -----  ----  ----
                                             (In thousands)
   <S>                         <C>       <C>       <C>       <C>    <C>   <C>
   Service cost..............  $  4,174  $  4,419  $  4,044  $  56  $ 74  $ 65
   Interest cost.............     9,992     9,462     8,838    292   351   372
   Expected return on plan
    assets...................   (17,105)  (14,942)  (13,447)   --    --    --
   Amortization of prior year
    service cost.............     1,869     1,869     1,716    (7)   (8)   (7)
   Amortization of transition
    amount...................      (875)     (885)     (894)   --    --    --
   Amortization of net
    actuarial gains..........    (1,833)     (341)     (929)  (110)  (41)  (95)
                               --------  --------  --------  -----  ----  ----
   Net periodic benefit
    (income) expense.........  $ (3,778) $   (418) $   (672) $ 231  $376  $335
                               ========  ========  ========  =====  ====  ====
</TABLE>

   The following tables present a reconciliation of the benefit obligation of
the plans, plan assets and funded status of the plans.

<TABLE>
<CAPTION>
                                  Pension benefits    Retiree health benefits
                                  ------------------  ------------------------
                                    2000      1999       2000         1999
                                  --------  --------  -----------  -----------
                                               (In thousands)
   <S>                            <C>       <C>       <C>          <C>
   Change in benefit obligation
   Benefit obligation beginning
    of year.....................  $132,503  $138,825  $     4,007  $     5,238
   Service cost.................     4,174     4,419           56           74
   Interest cost................     9,992     9,462          292          351
   Actuarial loss (gain)........     5,700   (12,284)       2,347         (894)
   Special termination
    benefits....................        91       --           --           --
   Benefits paid................    (7,880)   (7,919)      (1,588)        (762)
                                  --------  --------  -----------  -----------
   Benefit obligation end of
    year........................  $144,580  $132,503  $     5,114  $     4,007
                                  ========  ========  ===========  ===========
   Change in plan assets
   Fair value of plan assets
    beginning of year...........  $201,773  $164,103  $       --   $       --
   Actual return on plan
    assets......................    41,483    43,651          --           --
   Company contributions........     1,880     1,938        1,588          762
   Benefits paid................    (7,880)   (7,919)      (1,588)        (762)
                                  --------  --------  -----------  -----------
   Fair value of plan assets end
    of year.....................  $237,256  $201,773  $       --   $       --
                                  ========  ========  ===========  ===========
   Funded status
   Funded (unfunded) status end
    of year.....................  $ 92,676  $ 69,270  $    (5,114) $    (4,007)
   Unrecognized cost:
     Net actuarial gains........   (81,108)  (64,263)         510       (1,947)
     Transition amount..........    (2,419)   (3,294)         --           --
     Prior service cost.........     6,548     8,416          (43)         (50)
                                  --------  --------  -----------  -----------
   Prepaid (accrued) benefit
    cost........................  $ 15,697  $ 10,129  $    (4,647) $    (6,004)
                                  ========  ========  ===========  ===========
</TABLE>

   Plan assets consist primarily of corporate equity investments as well as
corporate and U.S. government debt and real estate.

                                      40
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The components in the consolidated balance sheets consist of:

<TABLE>
<CAPTION>
                                  Pension benefits    Retiree health benefits
                                  ------------------  ------------------------
                                    2000      1999       2000         1999
                                  --------  --------  -----------  -----------
                                               (In thousands)
   <S>                            <C>       <C>       <C>          <C>
   Prepaid benefit cost.......... $ 31,573  $ 25,612  $       --   $       --
   Accrued benefit liability.....  (18,272)  (18,185)      (4,647)      (6,004)
   Intangible asset..............      888     1,005          --           --
   Minimum pension liability.....    1,508     1,697          --           --
                                  --------  --------  -----------  -----------
   Net amount recognized......... $ 15,697  $ 10,129  $    (4,647) $    (6,004)
                                  ========  ========  ===========  ===========
</TABLE>

   Pension plans with obligations in excess of plan assets were as follows:

<TABLE>
<CAPTION>
                                                                 2000    1999
                                                                ------- -------
                                                                (In thousands)
   <S>                                                          <C>     <C>
   Projected benefit obligation................................ $19,284 $19,159
   Accumulated benefit obligation..............................  18,272  18,114
   Fair value of plan assets...................................     --      --
</TABLE>

   A one-percent change in the assumed health care cost trend rate would have
the following effects:

<TABLE>
<CAPTION>
                                         1-Percent Increase 1-Percent Decrease
                                         ------------------ ------------------
                                                    (In thousands)
   <S>                                   <C>                <C>
   Effect on total of service and
    interest cost components for 2000..         $ 17               $ 16
   Effect on postretirement benefit
    obligation at the end of 2000......         $254               $230
</TABLE>

 Savings Plan

   We have a retirement savings plan (401k plan), which covers nearly all
nonunion employees. We provide a matching contribution on amounts, limited to
6% of compensation, contributed by employees. Our contribution was $3.1
million, $2.9 million and $2.6 million in 2000, 1999 and 1998, respectively,
and this represents 50% of eligible employee contributions. In 1999 and 1998,
our contribution was made in the form of our common stock purchased in the open
market. These shares were converted to cash at a price of $25.25 as part of the
merger and recapitalization.

11. Shareholders' Equity

 Common Stock

   The post-merger common stock consists of Class A through Class E common
stock as well as undesignated common stock. Holders of Class A common stock are
entitled to one vote per share, whereas holders of Class D common stock are
entitled to 306.55 votes per share. Holders of Class B common stock, Class C
common stock and Class E common stock have no voting rights.

                                       41
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The par value and number of authorized, issued and outstanding shares for
December 30, 2000 for each class of common stock is set forth below:

<TABLE>
<CAPTION>
                                           Par     Authorized     Issued and
                                          Value      Shares   Outstanding Shares
                                          -----    ---------- ------------------
                                            (In thousands, except per-share
                                                         data)
   <S>                                    <C>      <C>        <C>
   Class A............................... $.33 1/3    4,200         2,862
   Class B...............................  $.01       5,300         5,300
   Class C...............................  $.01       2,500           811
   Class D...............................  $.01          20            20
   Class E...............................  $.01       1,900           --
   Undesignated..........................  $.01      12,020           --
                                          -----      ------         -----
   Total.................................            25,940         8,993
                                                     ======         =====
</TABLE>

   As of January 1, 2000 there were approximately 33.3 million shares of common
stock outstanding.

 Share Repurchases

   In December 1998, the Board of Directors authorized the repurchase of up to
$100.0 million shares of our common stock in open market or negotiated
transactions. During 1999, we repurchased 1.9 million shares for $39.9 million.
This share repurchase program was suspended in the fourth quarter of 1999 due
to the pending merger and recapitalization which occurred on May 10, 2000. A
similar $100.0 million repurchase program was authorized in July 1997 and
completed in the fourth quarter of 1998. Under this program we repurchased 4.4
million shares, including 3.6 million shares for $80.0 million in 1998.

 Shareholder Rights Plan

   In July 1998, the Board of Directors declared a distribution to shareholders
of one preferred share purchase right for each outstanding share of common
stock. The dividend was payable August 19, 1998 to shareholders of record at
the close of business on that date. As a result of the merger and
recapitalization on May 10, 2000, the rights were redeemed for one-tenth of a
cent per right as allowed under the Plan.

12. Stock Plans

 Stock Options

   As a result of the merger and recapitalization, outstanding options to
purchase approximately 3.0 million shares of our previously existing common
stock were cancelled and holders of those outstanding stock options were paid
cash of $25.25 per underlying share, less the applicable option exercise price,
resulting in an aggregate payment of approximately $10.0 million. Stock options
with an exercise price equal to or in excess of $25.25 per share were cancelled
as part of the merger for no consideration.

   In connection with the merger and recapitalization, we adopted a new
employee stock option plan to purchase shares of Class A common stock. The
number of shares available to be awarded under the new stock option plan is
676,908. The stock option plan is administered by the Compensation Committee of
the Board of Directors who designate the amount, timing and other terms and
conditions applicable to the option awards. Under the stock option plan, an
optionee has certain rights to put to us, and we have certain rights to call
from the optionee (after a six month waiting period), vested stock options
issued to the optionee under the stock option plan upon termination of the
optionee's employment prior to a public offering of Jostens' common stock. At
the time of the transaction, options to purchase 502,846 of our Class A common
stock were granted

                                       42
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

to five members of senior management. In addition, options to purchase 27,900
of our Class A common stock were granted on November 15, 2000. All options
granted have an exercise price of $25.25, representing the Board's estimated
fair value of our common stock, vest upon the seventh anniversary of the grant
with the possibility of accelerated vesting in one-fifth increments upon
Jostens meeting or exceeding target cumulative earnings before interest, taxes,
depreciation and amortization ("EBITDA") for each of the five calendar years
from the date of grant, and expire on the thirtieth day following the seventh
anniversary of the grant date. The stock option plan also provides for vesting
of certain percentages of the options in the event of an initial public
offering or approved sale as defined in the stock option plan. Options issued
pursuant to the plan expire on the thirtieth day following the seventh
anniversary of the grant date.

   We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for employee
and non-employee director stock options and long-term management incentive
plans. Accordingly, no compensation cost has been recognized for these plans.
The following table summarizes results as if we had recorded compensation
expense for our stock option and long-term management incentive plans under
SFAS No. 123, "Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
                                                     2000      1999    1998
                                                   ---------  ------- -------
                                                     (In thousands, except
                                                        per-share data)
   <S>                                             <C>        <C>     <C>
   Net income (loss) available to common
    shareholders
     As reported.................................. $ (24,500) $43,179 $41,820
     Pro forma.................................... $ (22,137) $41,038 $41,404
                                                   ---------  ------- -------
   Basic earnings (loss) per share
     As reported.................................. $   (1.39) $  1.27 $  1.14
     Pro forma.................................... $   (1.25) $  1.21 $  1.13
                                                   ---------  ------- -------
   Diluted earnings (loss) per share
     As reported.................................. $   (1.39) $  1.27 $  1.14
     Pro forma.................................... $   (1.25) $  1.20 $  1.13
</TABLE>

   These figures reflect only the impact of grants since July 1, 1995 and
reflect only part of the possible compensation expense that we would amortize
over the vesting period of the grants. In future years, therefore, the effect
on net income and earnings per share may differ from those shown above.

   The weighted average fair value of options granted in 2000, 1999 and 1998
was $9.04, $6.72 and $4.67 per option, respectively. We estimated the fair
values using the Black-Scholes option-pricing model, modified for dividends and
using the following assumptions:

<TABLE>
<CAPTION>
                                                               2000  1999  1998
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
   Risk-free rate............................................  4.9%  6.7%  4.7%
   Dividend yield............................................  0.0%  3.9%  3.8%
   Volatility factor of the expected market price of Jostens'
    common stock.............................................   20%   37%   26%
   Expected life of the award (years)........................  7.0   5.0   5.2
</TABLE>

                                       43
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                      Weighted-
                                       average
                            Shares  exercise price
                            ------  --------------
                            (Shares in thousands)
   <S>                      <C>     <C>
   Outstanding at January
    3, 1998................  2,215      $22.31
   Granted.................    946       23.47
   Exercised...............   (199)      19.34
   Canceled................    (62)      24.40
                            ------      ------
   Outstanding at January
    2, 1999................  2,900       22.69
   Granted.................    776       22.66
   Exercised...............    (53)      18.51
   Canceled................   (453)      24.85
                            ------      ------
   Outstanding at January
    1, 2000................  3,170       22.44
   Granted.................    531       25.25
   Exercised...............    (23)      19.10
   Canceled................   (141)      31.63
   Settled for cash in the
    merger and
    recapitalization....... (3,006)      21.95
                            ------      ------
   Outstanding at December
    30, 2000...............    531      $25.25
                            ======      ======
</TABLE>

   The weighted average remaining contractual life of the options at December
30, 2000 was approximately 6.4 years. At December 30, 2000 all outstanding
options had an exercise price of $25.25 and 106,149 options were exercisable.

   In connection with the merger and recapitalization, we further provided
that, in the event of either a sale of Jostens or a public offering of our
securities, we will grant to certain executives options to purchase 1% of our
common stock on a fully diluted basis. The ultimate terms of these options will
be dependent upon certain facts and circumstances at the date of grant.

 Restricted Stock Awards

   Prior to the merger and recapitalization, we had a stock incentive plan
under which eligible employees were awarded restricted shares of our common
stock. Awards would generally vest from three to five years, subject to
continuous employment and certain other conditions. The awards were recorded at
market value on the date of the grant as unearned compensation and amortized
over the vesting period. In connection with the merger and recapitalization in
2000, the restricted stock awards that were outstanding became fully vested
and, as a result, we incurred a compensation charge of $1.0 million which is
included in transaction costs on the Consolidated Statement of Operations.
Amortization of unearned compensation expense in 1999 and 1998 was $629,000 and
$416,000 million, respectively.

 Stock Loan Program

   In connection with the merger and recapitalization, we adopted a new stock
loan program to loan a total of $2.0 million to five members of senior
management in individual amounts to refinance up to 100% of their outstanding
loans existing at the time of the transaction. The proceeds of the loans were
used to purchase shares of our common stock. Loans made under the stock loan
program bear interest at our cost of funds under our new revolving credit
facility and are recourse loans. The loans are payable through May 10, 2005
with interest rates set annually. The loans are collateralized by the shares of
stock owned by such individuals, and

                                       44
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

each individual has entered into a pledge agreement and has executed a secured
promissory note. At December 30, 2000, there were $1.8 million of these loans
outstanding. The outstanding balance of these loans are classified as a
reduction in shareholders' equity (deficit) on the Consolidated Balance Sheet.

13. Business Segments

   We classify our operations into the following business segments:

  .  SCHOOL PRODUCTS -- This segment manufactures and markets school-related
     affinity products primarily for the high school and college markets.
     School Products is comprised of four product lines: Printing &
     Publishing, Jewelry, Graduation Products and Photography.

  .  RECOGNITION -- This segment manufactures and supplies corporate-based
     affinity products that help companies and other organizations promote
     and recognize achievement in people's careers. We concentrate our
     efforts in service recognition and incentive programs designed to help
     companies achieve their business objectives through improved employee
     performance. Products include jewelry and other brand name merchandise
     from industry leading manufacturers.

  .  OTHER -- This segment represents the operating units which do not meet
     the quantitative threshold for determining reportable segments. The
     "Other" segment primarily is comprised of corporate expenses, the
     results of the direct marketing sales channel to college alumni (exited
     in 1999), international (excluding Canada) sales and expenses and
     expenses associated with new product development.

   The accounting policies of our operating segments are the same as those
described in Note 1 "Summary of Significant Accounting Policies". We evaluate
performance based on the operating income of the segment. Revenues are reported
in the geographic area where the final sales to customers are made, rather than
where the transaction originates.

                                       45
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Financial information by reportable business segment

<TABLE>
<CAPTION>
                                                    2000      1999      1998
                                                  --------  --------  --------
                                                        (In thousands)
   <S>                                            <C>       <C>       <C>
   Net Sales From External Customers
   School Products............................... $715,644  $691,252  $669,804
   Recognition...................................   80,265    99,800   106,358
   Other.........................................    9,138    10,234    13,417
                                                  --------  --------  --------
   Consolidated.................................. $805,047  $801,286  $789,579
                                                  ========  ========  ========
   Operating Income (loss)
   School Products............................... $148,615  $141,947  $127,016
   Recognition...................................   (4,157)     (361)   10,430
   Other.........................................  (76,636)  (59,928)  (35,257)
                                                  --------  --------  --------
   Consolidated..................................   67,822    81,658   102,189
   Net interest expense..........................   58,932     6,999     6,660
   Equity losses and write-down of investments...    6,730       --        --
   Write-off of JLC notes receivable, net........      --        --     12,009
                                                  --------  --------  --------
   Income Before Income Taxes.................... $  2,160  $ 74,659  $ 83,520
                                                  ========  ========  ========
   Identifiable Assets
   School Products............................... $231,597  $247,514  $251,629
   Recognition...................................   35,046    54,109    43,089
   Other.........................................  121,638   106,548    71,449
                                                  --------  --------  --------
   Consolidated.................................. $388,281  $408,171  $366,167
                                                  ========  ========  ========
   Depreciation and Amortization
   School Products............................... $ 16,055  $ 15,560  $ 16,032
   Recognition...................................    2,150     2,649     2,749
   Other.........................................   10,734     7,129     4,390
                                                  --------  --------  --------
   Consolidated.................................. $ 28,939  $ 25,338  $ 23,171
                                                  ========  ========  ========
   Capital Expenditures
   School Products............................... $ 13,488  $ 12,509  $ 12,358
   Recognition...................................      937     1,074     1,966
   Other.........................................    7,733    14,247    22,612
                                                  --------  --------  --------
   Consolidated.................................. $ 22,158  $ 27,830  $ 36,936
                                                  ========  ========  ========
</TABLE>

 Operating Income

   School Products operating income included:

  .  $4.8 million of the $20.2 million special charge in 1999 as discussed in
     Note 3 "Special Charge;"

  .  charges of $2.5 million in both 1999 and 1998 for plant closing costs;
     and

  .  LIFO gains from converting owned gold to consigned gold of $2.3 million
     in 1998.

   Recognition operating income included LIFO gains from converting owned gold
to consigned gold of $1.4 million in 1998.


                                       46
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Operating loss for the Other segment included:

  .  $15.4 million of the $20.2 million special charge in 1999 as discussed
     in Note 3 "Special Charge"; and

  .  $46.4 million in transaction costs in 2000 related to the merger and
     recapitalization as discussed in Note 2 "Merger and Recapitalization."

 Identifiable Assets

   Capitalized deferred financing costs associated with obtaining financing for
the transaction have been included in the Other segment's identifiable assets

 Net Sales by Product and Geographical Information

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                    -------- -------- --------
                                                          (In thousands)
   <S>                                              <C>      <C>      <C>
   Net Sales by Classes of Similar Products or
    Services
   Printing & publishing, primarily yearbooks...... $288,255 $270,186 $263,790
   Jewelry, primarily class rings..................  204,787  207,374  194,976
   Graduation products.............................  183,592  174,151  168,948
   Photography.....................................   47,729   46,297   47,730
   Recognition, primarily jewelry and brand name
    merchandise....................................   80,265   99,800  106,358
   Other...........................................      419    3,478    7,777
                                                    -------- -------- --------
   Consolidated.................................... $805,047 $801,286 $789,579
                                                    ======== ======== ========
   Net Sales by Geographic Area
   United States................................... $764,672 $761,646 $750,377
   Other, primarily Canada.........................   40,375   39,640   39,202
                                                    -------- -------- --------
   Consolidated.................................... $805,047 $801,286 $789,579
                                                    ======== ======== ========
   Net Property and Equipment and Intangibles by
    Geographic Area
   United States................................... $ 93,212 $ 98,858 $111,911
   Other, primarily Canada.........................    3,795    4,677    4,901
                                                    -------- -------- --------
   Consolidated.................................... $ 97,007 $103,535 $116,812
                                                    ======== ======== ========
</TABLE>

14. Commitments and Contingencies

 Forward Purchase Contracts

   To manage the risk associated with gold price changes, on an annual basis we
simultaneously set our pricing to customers and enter into gold forward or
option contracts based upon the estimated ounces needed to satisfy customer
requirements. At December 30, 2000, we had open forward contracts of $10.8
million to purchase gold that mature at various times in 2001.

 Leases

   We lease buildings, equipment and vehicles under operating leases. Future
minimum rental commitments under noncancellable operating leases are $2.8
million, $2.2 million, $1.5 million and $0.8 million in 2001, 2002, 2003 and
2004, respectively. Rent expense was $3.4 million, $4.4 million and $3.7
million in 2000, 1999 and 1998, respectively.

                                       47
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Environmental

   As part of our environmental management program, we are involved in various
environmental remediation activities. As sites are identified and assessed in
this program, we determine potential environmental liabilities. Factors
considered in assessing liability include, but are not limited to: whether we
have been designated as a potentially responsible party, the number of other
potentially responsible parties designated at the site, the stage of the
proceedings and available environmental technology. As of the end of 2000, we
had identified three sites requiring further investigation. However, we have
not been designated as a potentially responsible party at any site.

   In 1996, we assessed the likelihood that a loss had been incurred at one of
these sites as probable based on findings included in remediation reports and
from discussions with legal counsel. As of the end of 2000, we had made
payments of $5.5 million for remediation, and at December 30, 2000, $1.1
million was accrued and is included in "other accrued liabilities" on the
consolidated balance sheet. While we may have a right of contribution or
reimbursement under insurance policies, amounts recoverable from other entities
with respect to a particular site are not considered until recoveries are
deemed probable. No assets for potential recoveries were established as of the
end of 2000. We believe the effect on our consolidated results of operations,
cash flows and financial position, if any, for the disposition of these matters
will not be material. We believe the effect on our consolidated results of
operations, cash flows and financial position, if any, for the disposition of
these matters will not be material.

 Litigation

   A federal antitrust action was served on Jostens on October 23, 1998. The
complainant, Epicenter Recognition, Inc. ("Epicenter"), alleges that Jostens
has attempted to monopolize the market of high school graduation products in
the state of California. Epicenter is a successor to a corporation formed by
four of our former sales representatives. The plaintiff is claiming damages of
approximately $3 million to $10 million under various theories and differing
sized relevant markets. Trial is scheduled to begin April 3, 2001 in which
Epicenter has waived its right to a jury, so the case will be tried before a
judge in U.S. District Court in Orange County, California. We believe the
effect on our consolidated results of operations, cash flows and financial
position, if any, for the disposition of these matters will not be material.

   In February 1998, we entered into an Information Technology Master Services
Agreement with Ernst & Young LLP to provide guidance and consulting services
for implementation of a company wide enterprise resource planning ("ERP")
system. Under the Master Agreement, Ernst & Young LLP provided project
management, guidance and consulting. We claim this work was deficient and
substandard in various material respects constituting a breach of the Master
Agreement entitling us to significant damages. In August 2000, the parties
conducted a mandatory mediation which proved unsuccessful resulting in pending
arbitration. Ernst & Young LLP claims are $0.3 million in unpaid fees. We claim
damages in excess of $150.0 million, including over $9.0 million paid to Ernst
& Young LLP on account of the engagement.

   We are a party to other litigation arising in the normal course of business.
We regularly analyze current information and, as necessary, provide accruals
for probable liabilities on the eventual disposition of these matters. We
believe the effect on our consolidated results of operations, cash flows and
financial position, if any, for the disposition of these matters will not be
material.

15. Equity Losses and Write-down of Investments


   In 2000, we recorded equity losses and a write-down to zero against our
investment in two Internet companies resulting in a $6.7 million non-cash
charge.

                                       48
<PAGE>

                         JOSTENS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


16. Write-off of JLC Notes Receivable, Net

   In June 1995, we sold our Jostens Learning Corp. ("JLC") curriculum software
subsidiary to a group led by Bain Capital, Inc. As partial consideration for
the sale, we received two notes which were subsequently discounted and recorded
at their estimated fair values. In addition, a transaction gain of $13.2
million was deferred in accordance with the SEC Staff Accounting Bulletin No.
81, "Gain Recognition on the Sale of a Business or Operating Assets to a Highly
Leveraged Entity." The notes were subsequently recorded at their estimated fair
value of $12.9 million, net of deferred gain.

   In January 1999, we received information indicating to us that the carrying
value of the notes was permanently impaired. As a result, we wrote off $12.0
million in 1998 for the carrying value of the notes, net of miscellaneous JLC-
related assets and liabilities, plus $3.7 million of net deferred tax assets
associated with the initial sale of JLC. We did not record a tax benefit
related to the write-off for financial reporting purposes because the tax
benefit may not be realized.

17. Subsequent Event--Restructuring Plans (unaudited)

   In March 2001, we announced our decision to consolidate three Recognition
plants and implement a new customer service model as part of our effort to
realign resources and streamline the Recognition segment's infrastructure and
enhance profitability.

   We will close our distribution facility in Memphis, Tennessee, and our
manufacturing facility in Sherbrooke, Quebec, and shift these functions to our
existing plant in Princeton, Illinois. In addition, the Recognition segment's
customer service function, currently operated from the Princeton and Memphis
facilities, along with some financial functions, will be relocated to the
Owatonna, Minnesota, facility. A new customer service model will be implemented
to leverage new technologies at the Owatonna location. The consolidation is
scheduled to be completed in the summer of 2001.

   The total cost of the consolidation project which will be expensed in 2001
is estimated to be approximately $4.0 million for severance benefits and costs
associated with closing the facilities. These costs will be partially offset by
a gain on sale of the Memphis facility of approximately $2.4 million.
Approximately 100 full-time positions will be eliminated from the Memphis plant
and approximately 40 full-time positions will be eliminated from the Sherbrooke
plant. In Princeton, 44 new positions will be created and in Owatonna about 30
new customer service positions will be added.

                                       49
<PAGE>

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

   NONE

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Executive officers and directors of Jostens as of March 1, 2001 are as
follows:

<TABLE>
<CAPTION>
           Name          Age                       Title
           ----          ---                       -----
   <C>                   <C> <S>
                             Chairman of the Board, President and Chief
   Robert C. Buhrmaster   53 Executive Officer
   William N. Priesmeyer  56 Senior Vice President and Chief Financial Officer
                             Senior Vice President--Manufacturing and
   Carl H. Blowers        61 Recognition
   Michael L. Bailey      45 Senior Vice President--School Solutions
   Gregory S. Lea         48 Vice President--Business Ventures
   Lee U. McGrath         44 Vice President and Treasurer
   Steven A. Tighe        49 Vice President--Human Resources
   Andrew W. Black        38 Vice President and Chief Information Officer
   James O. Egan          52 Director
   Charles K. Marquis     58 Director
   Charles J. Philippin   50 Director
   Steven G. Puccinelli   42 Director
   Robert G. Sharp        35 Director
   David A. Tayeh         34 Director
   George O. Visnyei      51 Director
</TABLE>

   Robert C. Buhrmaster joined Jostens in December 1992 as Executive Vice
President and Chief Staff Officer. He was named President and Chief Operating
Officer in June 1993; was named Chief Executive Officer in March 1994; and was
named Chairman in February 1998. Prior to joining Jostens, Mr. Buhrmaster
worked for Corning, Inc. for 18 years, most recently as Senior Vice President.
He is also a director of The Toro Company.

   William N. Priesmeyer joined Jostens in August 1997 in his current position.
From April to August 1997, Mr. Priesmeyer was Senior Vice President and CFO of
MVE Holdings. From 1994 to 1997, he was Senior Vice President and CFO for
Waldorf Corp.; and from 1993 to 1994 was Vice President and CFO for DataCard
Corp.

   Carl H. Blowers joined Jostens in May 1996 as an independent consultant
serving as Division Vice President--Manufacturing & Engineering and was hired
as an employee in 1997. He was appointed to his current position in February
1998. Prior to joining Jostens, Mr. Blowers worked for Corning, Inc. for 27
years, most recently as Vice President and General Manager of Corning's
Advanced Materials and Process Technologies Division.

   Michael L. Bailey joined Jostens in 1978. He has held a variety of
leadership positions, including director of marketing, planning manager for
manpower and sales, national product sales director, division manager for
Printing & Publishing, printing operations manager and Vice President--Jostens
School Solutions. He was appointed to his current position in February 2000.

   Gregory S. Lea joined Jostens in November 1993 as Vice President--Total
Quality Management. From June 1995 to January 2000, he was Vice President and
General Manager--College and Universities. He was named to his current position
in February 2000. Prior to joining Jostens, Mr. Lea spent 19 years with
International Business Machines Corp. in various financial, operations and
quality positions.

                                       50
<PAGE>

   Lee U. McGrath joined Jostens in May 1995 in his current position. For the
six years prior to joining Jostens, he was the assistant treasurer for H.B.
Fuller Company.

   Steven A. Tighe joined Jostens in September 2000 in his current position.
From January to September 2000, Mr. Tighe was Vice President of Human Resources
at RealNetworks. Prior to that, Mr. Tighe was Senior Vice President of Human
Resources, Communications & Corporate Services at Fortis Health from June 1997
to January 2000. Prior to that, from June 1995 to June 1997, Mr. Tighe was
Director of Human Resources at Cray Research and Sun MicroSystems. Sun
MicroSystems acquired Cray Research in 1996. Prior to that, Mr. Tighe was
Director of Human Resources and Quality at Weyerhaeuser from June 1987 to June
1995.

   Andrew W. Black joined Jostens in September 2000 in his current position.
Prior to joining Jostens, Mr. Black was an Information Systems Director with
Target Corporation.

   James O. Egan became one of our directors upon consummation of the
recapitalization. Mr. Egan has been an executive of Investcorp or one or more
of its wholly owned subsidiaries since January 1999. Prior to joining
Investcorp, Mr. Egan was a partner in the accounting firm of KPMG from October
1997 to December 1998. Prior to that, Mr. Egan was a Senior Vice President and
Chief Financial Officer of Riverwood International, a paperboard, packaging and
machinery company, from May 1996 to September 1997. Prior to that, Mr. Egan was
a partner in the accounting firm of Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP). Mr. Egan is a director of CSK Auto Corporation,
Harborside Healthcare Corporation, IWO Holdings, Inc., SIND Holdings, Inc., and
Werner Holding Co. (DE), Inc.

   Charles K. Marquis became one of our directors upon consummation of the
recapitalization. Mr. Marquis has been a senior advisor to Investcorp or one or
more of its wholly owned subsidiaries since January 1999. Prior to joining
Investcorp, Mr. Marquis was a partner in the law firm of Gibson, Dunn &
Crutcher LLP. Mr. Marquis is a director of CSK Auto Corporation, Stratus
Computer Systems International S.A., Tiffany & Co. and Werner Holding Co. (DE),
Inc.

   Charles J. Philippin became one of our directors upon consummation of the
recapitalization. Mr. Philippin was an executive of Investcorp or one or more
of its wholly owned subsidiaries from July 1994 until 2000. Prior to joining
Investcorp, Mr. Philippin was a partner in the accounting firm of Coopers &
Lybrand L.L.P. (now PricewaterhouseCoopers LLP). Since June 2000, Mr. Philippin
has been the Chief Executive Officer of Accordia, Inc.

   Steven G. Puccinelli became one of our directors in July 2000. Mr.
Puccinelli has been an executive of Investcorp or one or more of its wholly
owned subsidiaries since July 2000. Prior to joining Investcorp, Mr. Puccinelli
was a Managing Director at Donaldson, Lufkin & Jenrette.

   Robert G. Sharp became one of our directors upon consummation of the
recapitalization. Mr. Sharp has been an executive of DB Capital Partners, Inc.,
the general partner of DB Capital Investors, since October 1999. Prior to
joining DB Capital Investors, Mr. Sharp was an executive at Investcorp or one
or more of its wholly owned subsidiaries. Mr. Sharp is a director of
Displaytech, Inc., GlobalSight Corporation, NationsRent, Inc., PC On Call and
Stratus Computer Systems International S.A.

   David A. Tayeh became one of our directors upon consummation of the
recapitalization. Mr. Tayeh has been an executive of Investcorp or one or more
of its wholly owned subsidiaries since February 1999. Prior to joining
Investcorp, Mr. Tayeh was a Vice President in investment banking at Donaldson,
Lufkin & Jenrette.

   George O. Visnyei became one of our directors in August 2000. Mr. Visnyei
has been an executive of Investcorp or one or more of its wholly owned
subsidiaries since 1996. Prior to joining Investcorp, Mr. Visnyei was a partner
with Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP). Mr. Visnyei is
a director of SIND Holdings, Inc.

                                       51
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

   The following table sets forth the cash and non-cash compensation for 2000,
1999 and 1998 awarded to or earned by the Chief Executive Officer, the four
other most highly compensated executive officers and one former executive
officer of Jostens.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                       Long-Term
                           Annual Compensation    Compensation Awards
                          ---------------------- ---------------------
                                                 Restricted Securities
Name and principal                       Bonus     Stock    Underlying    All Other
position                  Year  Salary    (1)    Awards (2)  Options   Compensation (3)
------------------        ---- -------- -------- ---------- ---------- ----------------
<S>                       <C>  <C>      <C>      <C>        <C>        <C>
Robert C. Buhrmaster,     2000 $561,808 $785,752  $    --    290,103      $3,047,224
Chairman of the Board,
 President                1999  536,154  273,266   243,873   100,000             --
and Chief Executive
 Officer                  1998  500,000  324,000       --     75,000         286,344

Carl H. Blowers,          2000 $308,617 $574,813  $    --     48,351      $  290,182
Senior Vice President--   1999  296,471  124,524   115,909    25,000             --
Manufacturing and
 Recognition              1998  290,097  118,288       --     70,000         100,221

William N. Priesmeyer,    2000 $278,891 $929,701  $    --     48,351      $  285,337
Senior Vice President
 and                      1999  262,490  153,536   120,144    50,000             --
Chief Financial Officer   1998  229,154  132,478    15,491    85,000         100,221

Michael L. Bailey         2000 $260,385 $624,200  $    --     77,361      $  333,999
Senior Vice President--   1999  219,029   82,486    66,244    35,000             --
School Solutions (4)      1998  168,000   78,686       --     61,500          42,953

Gregory S. Lea            2000 $203,798 $405,959  $    --     36,680      $  379,417
Vice President--          1999  182,765   46,056    33,110    17,000             --
Business Ventures (5)     1998  173,109   38,844       --     46,500          71,586

David J. Larkin           2000 $ 80,746 $    --   $    --        --       $1,030,353
Executive Vice President
 and                      1999  348,650  153,516   154,265    55,000         492,000
Chief Operating Officer
 (6)                      1998  304,927  181,458    10,639   100,000         183,260
</TABLE>
--------
(1) Amounts in 2000 include additional compensation approved by the Jostens
    Board of Directors for Messrs. Buhrmaster, Priesmeyer, Blowers, Bailey and
    Lea for services rendered in connection with our transition to new
    ownership, including managing the transition process from financial
    reporting, public relations and sales and marketing perspectives, in an
    amount equal to $2.5 million in aggregate. The additional compensation was
    allocated as follows: Mr. Buhrmaster, $500,000; Mr. Blowers, $400,000;
    Mr. Priesmeyer, $800,000; Mr. Bailey, $500,000 and Mr. Lea, $300,000. In
    addition, amounts in 2000 include payments under the Performance Pays bonus
    program as follows: Mr. Buhrmaster, not eligible; Mr. Blowers, $10,853;
    Mr. Priesmeyer, $11,278; Mr. Bailey, $10,800; and Mr. Lea, $8,344. Amounts
    in 1999 include payments under the Performance Pays bonus program as
    follows: Mr. Buhrmaster, not eligible; Mr. Blowers, $10,969; Mr.
    Priesmeyer, $9,712; Mr. Bailey, $8,104; Mr. Lea, $6,762 and Mr. Larkin,
    $12,900. Amounts in 1998 include payments under the Performance Pays bonus
    program as follows: Mr. Buhrmaster, not eligible; Mr. Blowers, $10,792; Mr.
    Priesmeyer, $8,525; Mr. Bailey, 6,250; Mr. Lea, $5,366 and Mr. Larkin,
    $11,343. The 1998 amounts listed for Mr. Larkin and Mr. Priesmeyer also
    include the portion of their 1998 bonus they elected to have paid in our
    common stock, $42,525 and $61,965, respectively.
(2) Amounts in 1999 include awards of restricted stock (valued as of the grant
    date) under the Executive Stock Purchase Program. Amounts in 1998 were for
    restricted stock awarded to Mr. Priesmeyer and Mr. Larkin as part of their
    bonus. In 2000, all restricted shares were redeemed for $25.25 per
    underlying share. The total number of restricted stock holdings and amounts
    paid to the named officers are as follows: Mr. Burhmaster, 10,135 shares
    redeemed for $255,908; Mr. Blowers, 4,817 shares redeemed for $121,629;

                                       52
<PAGE>

   Mr. Priesmeyer, 5,673 shares redeemed for $143,243; Mr Bailey, 2,753 shares
   redeemed for $69,513; Mr. Lea, 1,376 shares redeemed for $34,744 and Mr.
   Larkin, 6411 shares redeemed for $161,878.
(3) Amounts in 2000 include the redemption of options at $25.25 per underlying
    share less the applicable option exercise price. The number of option share
    holdings and amounts paid to the named officers are as follows: Mr.
    Buhrmaster, 601,000 shares in the amount of $3,047,224; Mr. Blowers,
    134,000 shares in the amount of $290,182; Mr. Priesmeyer, 156,000 shares in
    the amount of $285,337; Mr. Bailey, 130,750 shares in the amount of
    $333,999; Mr. Lea, 113,740 shares in the amount of $379,417 and Mr. Larkin,
    155,000 shares in the amount of $313,899. Also included in the amount for
    Mr. Larkin are salary continuation and other benefits paid or to be paid
    under his separation agreement with Jostens. Amounts in 1998 include
    conversion of performance shares granted in 1997 for 1998 company
    performance. Performance shares were earned at 110 % of targets. One-half
    of the amounts were paid in cash and the other-half was paid in our common
    stock based on the average of the high and low trading prices of our common
    stock on the last trading day of 1998 ($26.0313).
(4) Mr. Bailey joined Jostens in 1978. He was appointed to his current position
    in February 2000.
(5) Mr. Lea joined Jostens in 1993. He was appointed to his current position in
    February 2000.
(6) Mr. Larkin was terminated in March 2000 as part of a restructuring plan
    announced in the fourth quarter of 1999. Mr. Larkin and Jostens reached a
    mutually acceptable separation agreement in which his compensation and
    certain benefits will continue through June 2001.

 Option Grants in the Last Fiscal Year

   In connection with the merger and recapitalization, we adopted a new
employee stock option plan to purchase shares of Class A common stock. The
number of shares available to be awarded under the new stock option plan is
676,908. The stock option plan is administered by the Compensation Committee of
the Board of Directors who designates the amount, timing and other terms and
conditions applicable to the option awards. Under the stock option plan, an
optionee has certain rights to put to us, and we have certain rights to call
from the optionee (after a six month waiting period), vested stock options
issued to the optionee under the stock option plan upon termination of the
optionee's employment prior to a public offering of Jostens' common stock. At
the time of the transaction, options to purchase 502,846 of our Class A common
stock were granted to five members of senior management. All options granted
have an exercise price of $25.25 and vest upon the seventh anniversary of the
grant with the possibility of accelerated vesting in one-fifth increments upon
Jostens meeting or exceeding target cumulative earnings before interest, taxes,
depreciation and amortization ("EBITDA") for each of the five calendar years
from the date of grant. The stock option plan also provides for vesting of
certain percentages of the options in the event of an initial public offering
or approved sale as defined in the stock option plan. Options issued pursuant
to the plan expire on the thirtieth day following the seventh anniversary of
the grant date.

   The following table sets forth information concerning stock options granted
to the six members of senior management in 2000.

<TABLE>
<CAPTION>
                                       Individual Grants
                          -------------------------------------------
                           Number of  % of total
                          securities   options
                          underlying  granted to Exercise             Grant Date
                            options   employees    price   Expiration  Present
Name                      granted (#)  in 2000   ($/share)  date (1)  Value (2)
----                      ----------- ---------- --------- ---------- ----------
<S>                       <C>         <C>        <C>       <C>        <C>
Robert C. Buhrmaster.....   290,103     54.66%    $25.25     6/9/07   $2,621,323
Carl H. Blowers..........    48,351      9.11%     25.25     6/9/07      436,892
William N. Priesmeyer....    48,351      9.11%     25.25     6/9/07      436,892
Michael L. Bailey........    77,361     14.58%     25.25     6/9/07      699,021
Gregory S. Lea...........    38,680      7.29%     25.25     6/9/07      349,506
David J. Larkin..........       --       0.00%       --         --           --
</TABLE>

                                       53
<PAGE>

--------
(1) Options vest and become exercisable upon the seventh anniversary of the
    grant date with the possibility of accelerated vesting in one-fifth
    increments upon Jostens meeting or exceeding target cumulative earnings
    before interest, taxes, depreciation and amortization ("EBITDA") for each
    of the five calendar years from the date of grant. The stock option plan
    also provides for vesting of certain percentages of the options in the
    event of an initial public offering or approved sale as defined in the
    stock option plan. Options issued pursuant to the plan expire on the
    thirtieth day following the seventh anniversary of the grant date.
(2) The fair value of each stock option is estimated on the date of grant using
    the Black-Scholes pricing model with the following weighted-average
    assumptions: an expected life of seven years, no dividend yield, expected
    volatility of 20% and a risk-free interest rate of 4.9%.

 Aggregated Option Exercises in Fiscal Year 2000 and Fiscal Year End Option
 Values

   The following table sets forth information concerning the aggregate number
of exercisable and unexercisable options held as of the end of 2000. No options
by the named executive officers were exercised in 2000.

<TABLE>
<CAPTION>
                              Number of securities              Value of unexercised
                         underlying unexercised options        In-the-money options at
                             at fiscal year end 2000            fiscal year end 2000(1)
                         ----------------------------------   -------------------------
Name                      Exercisable       Unexercisable     Exercisable Unexercisable
----                      -----------      ----------------   ----------- -------------
<S>                      <C>               <C>                <C>         <C>
Robert C. Buhrmaster....           58,021             232,082    $ --         $ --
Carl H. Blowers.........            9,670              38,681      --           --
William N. Priesmeyer...            9,670              38,681      --           --
Michael L. Bailey.......           15,472              61,889      --           --
Gregory S. Lea..........            7,736              30,944      --           --
David J. Larkin.........              --                  --       --           --
</TABLE>
--------
(1) Currently, there is no established public trading market for our common
    shares. None of these options are considered to be in-the-money for
    purposes of this table.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   Former directors, Mr. Jack Eugster, Mr. Mannie Jackson and Ms. Brenda
Lauderback served as members of the Compensation Committee during fiscal year
2000 for the period prior to the merger and recapitalization. Neither Mr.
Eugster, Mr. Jackson, nor Ms. Lauderback was an officer or employee of Jostens
or any of its subsidiaries during 2000. Messrs. Buhrmaster, Egan, Marquis,
Philippin and Puccinelli became members of the Compensation Committee after the
consummation of the merger and recapitalization. Only Mr. Buhrmaster served as
an officer of Jostens during 2000.

EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS

 Management Bonus Arrangements

   In connection with the merger and recapitalization, we established a
Management Shareholder Bonus Plan providing for an annual bonus to be paid to
Messrs. Buhrmaster, Priesmeyer, Bailey, Blowers and Lea. Based upon
achievements of specific EBITDA targets, Mr Buhrmaster will be entitled to a
standard bonus equal to 60% of his base salary. No bonus will be paid to Mr.
Burhmaster if Jostens fails to achieve specified performance levels. Based upon
achievements of specific EBITDA targets, Messrs. Priesmeyer, Bailey, Blowers
and Lea will be entitled to a standard bonus as determined by the Chief
Executive Officer and the Board of Directors and approved by Investcorp.
Similarly, no bonus will be paid to them if Jostens fails to achieve specified
minimum performance levels.

                                       54
<PAGE>

   In connection with the merger, we further provided that, in the event of
either a sale of Jostens or a public offering of our securities, we will grant
to Messrs. Burhmaster, Priesmeyer, Bailey, Blowers and Lea options to purchase
1% of our common stock on a fully diluted basis, without taking into account
any shares issued following the merger, other than any shares issued upon
exercise of the options granted under our stock option plan, and without taking
into account any shares issued upon exercise of warrants issued to purchasers
of the redeemable preferred stock. In the event of a sale of Jostens, the
options would be immediately exercisable. In the event of a public offering of
our securities, the options would be exercisable for a period of two years
beginning one year after the date of the public offering. In either case, the
options will be exercisable only if Investcorp realizes a specified rate of
return in such transaction on its investment in Jostens. In either case, we
will allocate such options among Messrs. Burhmaster, Priesmeyer, Bailey,
Blowers and Lea provided that each is still employed by us at the time of such
sale or offering, based upon the recommendation of our Chief Executive Officer,
subject to the approval of our Board of Directors.

 Termination of Employment

   In April of 2000, we entered into a separation agreement with David J.
Larkin. The terms of the agreement provide Mr. Larkin salary, medical/dental
benefits and perquisites continuation through June 30, 2001 and a management
bonus of $131,200. In addition, Mr. Larkin received a $100,000 lump sum payment
as consideration for the waiver and release of claims under his employment
agreements and the Executive Change in Control Severance Pay Plan, $25,000 in
lieu of outplacement services and $9,000 for legal fees. Mr. Larkin's stock
options and restricted stock were redeemed by Jostens ($25.25 per share) at the
time of the merger and recapitalization.

   In April of 2000, we entered into a separation agreement with Thomas W.
Jans. The terms of the agreement provide Mr. Jans salary, medical/dental
benefits and perquisites continuation through December 31, 2000 and a
management bonus of $28,357 for the first six months of 2000. In addition, Mr.
Jans received standard and customary outplacement services for similarly
situated Jostens employees (approximately $23,000) and $3,000 for legal fees.
Mr. Jans' stock options and restricted stock were redeemed by Jostens ($25.25
per share) at the time of the merger and recapitalization.

 Executive Change in Control Severance Pay Plan

   In 1999, we implemented the Jostens' Executive Change in Control Severance
Pay Plan (the "Plan"). The primary purpose of the Plan is to provide severance
benefits for our Chief Executive Officer and other members of management or
highly compensated employees that are selected by our Chief Executive Officer,
whose employment is terminated during the 24 month period following a change in
control (as defined in the Plan). Plan participants are eligible to receive
severance benefits if their employment is terminated either voluntarily with
"good reason" (as defined in the Plan) or involuntarily for any reason other
than death or for "cause" (as defined in the Plan). The amount of severance
benefits received by a particular employee is based upon the employee's
position in Jostens and the employee's base salary plus the higher of the
target of the current year's annual incentive or the three year average of
actual payments of annual incentives. The range of severance benefits is from
15 months to 36 months of salary and would be paid in a lump sum upon
termination. Plan participants are also eligible to receive an additional cash
payment from us to the extent the total payments received from this Plan or any
other benefit plan is treated as an "excess parachute payment" within the
meaning of Section 280(G) of the Internal Revenue Code of 1986, as amended.

JOSTENS RETIREMENT PLANS

   We maintain a non-contributory pension plan, Pension Plan D (Plan D), that
provides benefits for substantially all salaried employees. Retirement income
benefits are based upon a participant's highest average annual cash
compensation (base salary plus annual bonus, if any) during any five
consecutive calendar years, years of credited service (to a maximum of 35
years) and the Social Security-covered compensation table in effect at
termination.

                                       55
<PAGE>

   We also maintain an unfunded supplemental retirement plan that gives
additional credit under Plan D for years of service as a Jostens' sales
representative to those salespersons who were hired as employees of Jostens
prior to October 1, 1991. In addition, benefits specified in Plan D may exceed
the level of benefits that may be paid from a tax-qualified plan under the
Internal Revenue Code of 1986, as amended. The benefits up to IRS limits are
paid from Plan D and benefits in excess, to the extent they could have been
earned in Plan D, are paid from the unfunded supplemental plan.

   The executive officers participate in pension plans maintained by us for
certain employees. The following table shows estimated annual retirement
benefits payable for life at age 65 for various levels of compensation and
service under these plans. The table does not take into account transition rule
provisions of the plan for employees who were participants on June 30, 1988.

<TABLE>
<CAPTION>
     Average                 Years of service at retirement (1)
      final         --------------------------------------------------------------
   compensation        15           20           25           30           35
   ------------     --------     --------     --------     --------     --------
   <S>              <C>          <C>          <C>          <C>          <C>
    $  150,000      $ 27,000     $ 36,000     $ 45,000     $ 54,000     $ 63,000
       200,000        38,200       51,000       63,700       76,500       89,200
       300,000        60,700       81,000      101,200      121,500      141,700
       400,000        83,200      111,000      138,700      166,500      194,200
       500,000       105,700      141,000      176,200      211,500      246,700
       600,000       128,200      171,000      213,700      256,500      299,200
       700,000       150,700      201,000      251,200      301,500      351,700
       800,000       173,200      231,000      288,700      346,500      404,200
       900,000       195,700      261,000      326,200      391,500      456,700
     1,000,000       218,200      291,000      363,700      436,500      509,200
     1,050,000       229,500      306,000      382,500      459,000      535,500
</TABLE>
--------
(1) The following individuals named in the Summary Compensation Table have the
    respective number of years of service under Plan D: Mr. Buhrmaster, 8.1
    years; Mr. Blowers, 4.6 years; Mr. Priesmeyer, 3.3 years; Mr. Bailey, 22.5
    years including sales service of 6.5 years; and Mr. Lea, 7.1 years.

   We also maintain a non-contributory supplemental pension plan for corporate
vice presidents. Under the plan, vice presidents who retire after age 55 with
at least seven full calendar years of service as a corporate vice president are
eligible for a benefit equal to 1 % of final base salary for each full calendar
year of service, up to a maximum of 30 %. Only service after age 30 is
recognized in the plan. The calculation of benefits is frozen at the levels
reached at age 60. If they continue in their current positions at their current
levels of compensation and retire at age 60, the estimated total annual pension
amounts from this plan for Messrs. Buhrmaster, Priesmeyer, Bailey and Lea would
be $79,380, $22,557, $40,500 and $38,592, respectively. Mr. Blowers waived his
eligibility in this plan.

DIRECTORS FEES

   We do not pay any remuneration to our employees or to executives of
Investcorp or its co-investors for serving as directors. We reimburse directors
for expenses incurred in attending any meetings.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   Following the completion of the merger and recapitalization, officers and
directors of Jostens are no longer subject to Section 16(a) reporting
requirements.

                                       56
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   We are authorized to issue shares of six classes of common stock, each with
a par value of $0.01 per share except for the Class A common stock which has a
par value of $0.33 1/3 per share. The classes of common stock consist of Class
A common stock, Class B common stock, Class C common stock, Class D common
stock, Class E common stock and common stock. Class A common stock, Class D
common stock and common stock are the only classes of common stock that have a
right to vote. Holders of Class B common stock, Class C common stock and Class
E common stock do not have any voting rights, except that the holders of such
classes of common stock have the right to vote as a class to the extent
required under the laws of the State of Minnesota.

   Holders of Class A common stock and common stock of the Company are entitled
to one vote per share, and holders of Class D common stock are entitled to
306.55 votes per share, in each case on all matters as to which shareholders
may be entitled to vote pursuant to the Minnesota Business Corporation Act.

   Investcorp and its co-investors (other than DB Capital Investors and First
Union Leveraged Capital) beneficially own all of the outstanding Class D common
stock, constituting approximately 68% of our voting power. DB Capital
Investors, First Union Leveraged Capital, Northwestern Mutual Life Insurance
Company and our pre-merger shareholders, including certain members of
management, beneficially own all of the outstanding Class A common stock,
constituting the remainder of our voting power. In addition, Investcorp and its
co-investors, other than DB Capital Investors and First Union Leveraged
Capital, own 5,300,000 shares of Class B common stock and 811,020 shares of
Class C common stock.

   The following table sets forth certain information regarding the beneficial
ownership of our voting stock as of March 1, 2001. The table sets forth, as of
that date:

  .  each person whom we know to be a beneficial owner of more than 5% of any
     class of our voting stock;

  .  each person who was a named executive officer of Jostens;

  .  all of our directors and executive officers as a group;

  .  other persons as required.

   None of our directors or executive officers own shares of our Class D common
stock. Unless otherwise indicated, we believe each of the shareholders shown in
the table below has sole voting and investment power with respect to the shares
beneficially owned. Except as set forth in the table none of our executive
officers beneficially owns shares of our common stock.

                                       57
<PAGE>

<TABLE>
<CAPTION>
                                         Options       Common stock   Percentage
Name and address of       Number of    exercisable     beneficially    of class
beneficial owner (1)       shares   within 60 days (2)  owned (4)   outstanding (5)
--------------------      --------- ------------------ ------------ ---------------
                               CLASS A COMMON STOCK
                       (approximately 32% of Voting Power)
<S>                       <C>       <C>                <C>          <C>
DB Capital Investors,
 L.P. (3)...............  2,003,679          --         2,003,679         70.0%
First Union Leveraged
 Capital (3)............    198,019          --           198,019          6.9%
Northwestern Mutual Life
 Insurance Company (3)..    463,682          --           463,682         16.2%
Robert C. Burhmaster
 (3)....................     93,205       58,021          151,226          5.3%
Carl H. Blowers (3).....     41,858        9,670           51,528          1.8%
William N. Priesmeyer
 (3)....................     28,034        9,670           37,704          1.3%
Michael L. Bailey (3)...     15,913       15,472           31,385          1.1%
Gregory S. Lea (3)......      9,522        7,736           17,258          0.6%
David J. Larkin.........        --           --               --           0.0%
All directors and
 executives officers as
 a group, including
 certain of the persons
 named above
 (14 persons)...........    189,418      108,669          298,087         10.4%
<CAPTION>
                               CLASS D COMMON STOCK
                       (approximately 68% of Voting Power)
<S>                       <C>       <C>                <C>          <C>
INVESTCORP S.A. (6)(7)..     20,000          --            20,000        100.0%
SIPCO Limited (7).......     20,000          --            20,000        100.0%
CIP Limited (7).........     18,400          --            18,400         92.0%
Ballet Limited (7)......      1,840          --             1,840          9.2%
Denary Limited (7)......      1,840          --             1,840          9.2%
Gleam Limited (7).......      1,840          --             1,840          9.2%
Highlands Limited (7)...      1,840          --             1,840          9.2%
Nobel Limited (7).......      1,840          --             1,840          9.2%
Outrigger Limited (7)...      1,840          --             1,840          9.2%
Quill Limited (7).......      1,840          --             1,840          9.2%
Radial Limited (7)......      1,840          --             1,840          9.2%
Shoreline Limited (7)...      1,840          --             1,840          9.2%
Zinnia Limited (7)......      1,840          --             1,840          9.2%
Investcorp Investment
 Equity Limited (7).....      1,600          --             1,600          8.0%
</TABLE>
--------
(1) As used in the table above, a beneficial owner of a security includes any
    person who, directly or indirectly, through contract, arrangement,
    understanding, relationship, or otherwise has or shares (i) the power to
    vote, or direct the voting of, such security or (ii) investment power which
    includes the power to dispose, or to direct the disposition of, such
    security.
(2) Represents options exercisable within 60 days from March 1, 2001.
(3) The address for DB Capital Investors, L.P. is 130 Liberty Street, 25th
    Floor, New York, New York 10006. The address for First Union Leveraged
    Capital is One First Union Center, 5th Floor, 301 South College Street,
    Charlotte, North Carolina 28288. The address for Northwestern Mutual Life
    Insurance Company is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202.
    The address of each other person listed in the table as a holder of our
    Class A Common Stock is c/o Jostens, Inc., 5501 Norman Center Drive,
    Minneapolis, Minnesota 55437.
(4) This number includes shares of stock that are subject to securities
    exercisable or convertible within 60 days of March 1, 2001.
(5) Less than 1% unless otherwise indicated.
(6) Investcorp does not directly own any of our stock. The number of shares of
    stock shown as owned by Investcorp includes all of the shares owned by
    Investcorp Investment Equity Limited (see note (7) below).

                                       58
<PAGE>

   Investcorp owns no stock in Ballet Limited, Denary Limited, Gleam Limited,
   Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
   Limited, Shoreline Limited, Zinnia Limited, or in the beneficial owners of
   these entities (see note (7) below). Investcorp may be deemed to share
   beneficial ownership of the shares of voting stock held by these entities
   because the entities have entered into revocable management services or
   similar agreements with an affiliate of Investcorp, pursuant to which each
   such entities has granted such affiliate the authority to direct the voting
   and deposition of Jostens' voting stock owned by such entity for so long as
   such agreement is in effect. Investcorp is a Luxembourg corporation with
   its address at 37 rue Notre-Dame, Luxembourg.
(7) Investcorp Investment Equity Limited is a Cayman Islands corporation, and
    a wholly-owned subsidiary of Investcorp, with its address at P.O. Box
    1111, West Wind Building, George Town, Grand Cayman, Cayman Islands. SIPCO
    Limited may be deemed to control Investcorp through its ownership of a
    majority of a company's stock that indirectly owns a majority of
    Investcorp's shares. SIPCO Limited's address is P.O. Box 1111, West Wind
    Building, George Town, Grand Cayman, Cayman Islands. CIP Limited ("CIP")
    owns no stock of Jostens. CIP indirectly owns less than 0.1% of the stock
    of each of Ballet Limited, Denary Limited, Gleam Limited, Highlands
    Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial Limited,
    Shoreline Limited and Zinnia Limited. CIP may be deemed to share
    beneficial ownership of the shares of Jostens' voting stock held by such
    entities because CIP acts as a director of such entities and the ultimate
    beneficial shareholders of each of those entities have granted to CIP
    revocable proxies in companies that own those entities' stock. None of the
    ultimate beneficial owners of such entities beneficially owns individually
    more than 5% of Jostens' voting stock. Each of CIP Limited, Ballet
    Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble Limited,
    Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and
    Zinnia Limited is a Cayman Islands corporation with its address at P.O.
    Box 2197, West Wind Building, George Town, Grand Cayman, Cayman Islands.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Immediately prior to consummation of the recapitalization, we received
approximately $208.7 million of equity capital provided by Investcorp and its
co-investors. In connection with obtaining the financing for the
recapitalization, we paid Investcorp International, Inc., an affiliate of
Investcorp, advisory fees of approximately $12.7 million. In addition, we
entered into an agreement with Investcorp International for management
advisory and consulting services for a five-year term pursuant to which we
prepaid Investcorp International $7.5 million at the closing of the merger.

   Pursuant to the merger agreement, for six years after the closing date of
the merger, we had agreed to indemnify and hold harmless our present and
former officers and directors for acts or omissions occurring before the
completion of the merger to the extent provided under our articles of
incorporation and by-laws in effect on the date of the merger agreement. In
addition, all indemnification agreements with any current or former directors,
officers and employees of Jostens or any subsidiary will survive the merger
and terminate as provided in such agreements. For six years after the
completion of the merger, Jostens will provide officers' and directors' or
fiduciary liability insurance for acts or omissions occurring before the
completion of the merger covering each such person currently covered by our
officers' and directors' or fiduciary liability insurance policy on terms with
respect to coverage and amount no less favorable than those in effect on the
date of the merger agreement, provided that the cost of such insurance does
not exceed 200% of the most recent annual premium paid by us.

                                      59
<PAGE>

   Pursuant to the merger agreement, Messrs. Buhrmaster, Priesmeyer, Blowers,
Bailey and Lea retained shares of our common stock as follows:

<TABLE>
<CAPTION>
   Name                                                         Number of Shares
   ----                                                         ----------------
   <S>                                                          <C>
   Robert C. Buhrmaster........................................      93,205
   William N. Priesmeyer.......................................      41,858
   Carl H. Blowers.............................................      28,034
   Michael L. Bailey...........................................      15,913
   Gregory S. Lea..............................................       9,522
                                                                    -------
   Total.......................................................     188,532
                                                                    =======
</TABLE>

   These shares were redesignated as Class A common stock as of the effective
time of the merger, the same designation as the shares of common stock retained
by other existing Jostens shareholders. All other shares held by Messrs.
Buhrmaster, Priesmeyer, Blowers, Bailey and Lea were exchanged in the merger
for $25.25 in cash. We have entered into management shareholder agreements with
each of Messrs. Buhrmaster, Priesmeyer, Bailey, Blowers and Lea. Each agreement
allows us to repurchase shares of our common stock from the executive in the
event the executive ceases to be employed by us at any time prior to a public
offering of our common stock. In addition, in the event of termination of
employment under specified circumstances, the executive has the right to
require an affiliate of Investcorp to repurchase his shares of common stock.
The management shareholder agreements grant to the executives piggyback
registration rights in connection with a registration statement filed by us
with respect to our common equity securities following an initial public
offering of our common stock. The agreements also impose restrictions on each
executive's ability to sell shares in connection with or following an initial
public offering. The agreements with each of Messrs. Priesmeyer, Bailey,
Blowers and Lea further provide that if Mr. Buhrmaster is terminated without
cause or leaves Jostens for good reason prior to May 10, 2001, each of the
other executives will be entitled to resign within 60 days of such event and
receive severance benefits in an amount equal to the benefits he would have
received under our benefits plans as if a change in control had occurred and
the executive has resigned for good reason.

   At the time of the merger, we agreed to redeem all outstanding preferred
share purchase rights issued pursuant to our shareholder rights plan for
approximately $33,500. In addition, at the time of the merger we agreed to
terminate, by mutual consent, the shareholder rights plan which was promulgated
under a shareholder rights agreement dated as of July 23, 1998 between Norwest
Bank Minnesota, N.A. and Jostens.

 Stock Loan Program

   In connection with the merger and recapitalization, we adopted a new stock
loan program to loan a total of $2.0 million to five members of senior
management in individual amounts to refinance up to 100% of their outstanding
loans existing at the time of the transaction. The proceeds of the loans were
used to purchase shares of our common stock. Loans made under the stock loan
program bear interest at our cost of funds under our new revolving credit
facility and are recourse loans. The loans are payable through May 10, 2005
with interest rates set annually. The loans are collateralized by the shares of
stock owned by such individuals, and each individual has entered into a pledge
agreement and has executed a secured promissory note. At December 30, 2000,
there were $1.8 million of these loans outstanding. The principal amounts of
loans to the named executive officers are: Mr. Buhrmaster: $1,010,025; Mr.
Priesmeyer: $368,499; Mr. Bailey: $291,158 and Mr. Lea: $105,318.

                                       60
<PAGE>

                                    PART IV

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

(a) List of documents filed as part of this report:

  (1)  Financial Statements

    Reports of Independent Accountants

    Consolidated Statements of Operations for 2000, 1999 and 1998

    Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000

    Consolidated Statements of Cash Flows for 2000, 1999 and 1998

    Consolidated Statements of Changes in Shareholders' Equity (Deficit)
    and Comprehensive Income (Loss) for 2000, 1999 and 1998

    Notes to Consolidated Financial Statements

  (2)  Financial Statement Schedules

    Report of Independent Accountants

    Schedule II--Valuation and Qualifying Accounts

    All other schedules for which provision is made in the applicable
    accounting regulations of the Securities and Exchange Commission have
    been omitted because they are not applicable or the required
    information is shown in the financial statements or notes thereto.

  (3)  Exhibits

    2.1  Agreement and Plan of Merger, dated as of December 27, 1999, by
         and between Jostens, Inc. and Saturn Acquisition Corporation,
         incorporated by reference to Appendix A to the Proxy
         Statement/Prospectus which is a part of Jostens' registration
         statement on Form S-4 filed April 7, 2000.

    2.2  First Amendment to the Agreement and Plan of Merger, dated as of
         March 31, 2000, by and between Jostens, Inc. and Saturn
         Acquisition Corporation, incorporated by reference to Appendix A
         to the Proxy Statement/Prospectus which is a part of Jostens'
         registration statement on Form S-4 filed April 7, 2000.

    3.1  Form of Amended and Restated Articles of Incorporation of Jostens,
         Inc., incorporated by reference to Appendix D to the Proxy
         Statement/Prospectus which is a part of Jostens' registration
         statement on Form S-4 filed April 7, 2000.

    3.2  Certificate of Designation, effective May 10, 2000, of the Powers,
         Preferences and Rights of the 14 % Senior Redeemable Payment-In-
         Kind Preferred Stock, and Qualifications, Limitations and
         Restrictions Thereof. Incorporated by reference to Exhibit 4.3 to
         Jostens' Form 8-K filed on May 25, 2000.

    3.3  Bylaws of Jostens, Inc. Incorporated by reference to Exhibit 3.2
         contained in Jostens' Report on Form 10-Q for the quarterly period
         ended July 3, 1999.

    4.1  Indenture, dated as of May 10, 2000, including therein the form of
         Note, between Jostens, Inc. and The Bank of New York, as Trustee,
         providing for 12.75% Senior Subordinated Notes due 2010.
         Incorporated by reference to Exhibit 4.1 to Jostens' Form 8-K
         filed on May 25, 2000.

                                       61
<PAGE>

    4.2  Registration Rights Agreement, dated as of May 10, 2000, between
         Jostens, Inc. and American Yearbook Company, Inc. as Issuers, and
         Deutsche Bank Securities Inc., UBS Warburg LLC and Goldman, Sachs
         & Co. as Initial Purchasers. Incorporated by reference to Exhibit
         4.2 to Jostens' Form 8-K filed on May 25, 2000.

    4.3  Purchase Agreement dated May 5, 2000, for 225,000 Units Consisting
         of $225,000,000 12.75% Senior Subordinated Notes due 2010 and
         Warrants to Purchase 425,060 Shares of Class E Common Stock,
         between Jostens, Inc. and American Yearbook Company, and Deutsche
         Bank Securities Inc., UBS Warburg LLC and Goldman, Sachs & Co.
         Incorporated by reference to Exhibit 4.6 to Jostens' Form 8-K
         filed on May 25, 2000.

    4.4  Form of Exchange Note. Incorporated by reference to Exhibit 4.4
         contained in Jostens' registration statement on Form S-4 filed
         April 7, 2000.

    5.1  Opinion of William J. George, Esq., regarding the legality of the
         exchange notes issued by Jostens. Incorporated by reference to
         Exhibit 5.1 contained in Jostens' registration statement on Form
         S-4 filed April 7, 2000.

    10.1  Warrant Agreement, dated May 10, 2000, including therein the form
          of Warrant, between Jostens, Inc. and The Bank of New York, as
          Warrant Agent. Incorporated by reference to Exhibit 10.2
          contained in Jostens' registration statement on Form S-4 filed
          April 7, 2000.

    10.2  Warrant Registration Rights Agreement, dated May 10, 2000,
          between Jostens, Inc. and Deutsche Bank Securities Inc., UBS
          Warburg LLC and Goldman, Sachs & Co. Incorporated by reference to
          Exhibit 4.5 to Jostens' Form 8-K filed on May 25, 2000.

    10.3  Purchase Agreement, dated May 10, 2000, for 14 % Senior
          Redeemable Payment-In-Kind Preferred Stock with Warrants to
          Purchase Shares of Class E Common Stock, between Jostens, Inc.
          and DB Capital Investors, L.P. Incorporated by reference to
          Exhibit 4.6 to Jostens' Form 8-K filed on May 25, 2000.

    10.4  Warrant Agreement, dated May 10, 2000, including therein the form
          of Warrant, between Jostens, Inc. and The Bank of New York, as
          Warrant Agent. Incorporated by reference to Exhibit 10.5
          contained in Jostens' registration statement on Form S-4 filed
          April 7, 2000.

    10.5  Preferred Stock Registration Rights Agreement, dated May 10,
          2000, between Jostens, Inc. and DB Capital Investors, L.P.
          Incorporated by reference to Exhibit 4.8 to Jostens' Form 8-K
          filed on May 25, 2000.

    10.6  Shareholder Agreement, dated May 10, 2000, between Jostens, Inc.,
          and DB Capital Investors, L.P. and Certain Other Holders of Stock
          of Jostens, Inc. Incorporated by reference to Exhibit 4.9 to
          Jostens' Form 8-K filed on May 25, 2000.

    10.7  Shareholder Agreement, dated May 10, 2000, between Jostens, Inc.,
          and First Union Leveraged Capital, LLC and Certain Other Holders
          of Stock of Jostens, Inc. Incorporated by reference to Exhibit
          4.10 to Jostens' Form 8-K filed on May 25, 2000.

    10.8  Common Equity Registration Rights Agreement, dated May 10, 2000,
          between Jostens, Inc., and Certain Holders as Defined Therein.
          Incorporated by reference to Exhibit 4.11 to Jostens' Form 8-K
          filed on May 25, 2000.

    10.9  Management Shareholder Agreement, dated as of May 10, 2000,
          between Jostens, Inc. and Robert Buhrmaster. Incorporated by
          reference to Exhibit 10.10 contained in Jostens' registration
          statement on Form S-4 filed April 7, 2000.

    10.10  Management Shareholder Agreement, dated as of May 10, 2000,
           between Jostens, Inc. and William Priesmeyer. Incorporated by
           reference to Exhibit 10.11 contained in Jostens' registration
           statement on Form S-4 filed April 7, 2000.


                                       62
<PAGE>

    10.11  Management Shareholder Agreement, dated as of May 10, 2000,
           between Jostens, Inc. and Carl Blowers. Incorporated by
           reference to Exhibit 10.12 contained in Jostens' registration
           statement on Form S-4 filed April 7, 2000.

    10.12  Management Shareholder Agreement, dated as of May 10, 2000,
           between Jostens, Inc. and Michael Bailey. Incorporated by
           reference to Exhibit 10.13 contained in Jostens' registration
           statement on Form S-4 filed April 7, 2000.

    10.13  Management Shareholder Agreement, dated as of May 10, 2000,
           between Jostens, Inc. and Gregory Lea. Incorporated by reference
           to Exhibit 10.14 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000.

    10.14  Stock Option Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and William Priesmeyer. Incorporated by reference
           to Exhibit 10.15 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000. *

    10.15  Stock Option Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Carl Blowers. Incorporated by reference to
           Exhibit 10.16 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000. *

    10.16  Stock Option Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Michael Bailey. Incorporated by reference to
           Exhibit 10.17 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000. *

    10.17  Stock Option Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Gregory Lea. Incorporated by reference to
           Exhibit 10.18 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000. *

    10.18  Stock Option Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Robert Buhrmaster. Incorporated by reference
           to Exhibit 10.19 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000. *

    10.19  Loan and Pledge Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Robert Buhrmaster, together with form of proxy
           and promissory note. Incorporated by reference to Exhibit 10.20
           contained in Jostens' registration statement on Form S-4 filed
           April 7, 2000.

    10.20  Loan and Pledge Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and William Priesmeyer, together with form of
           proxy and promissory note. Incorporated by reference to Exhibit
           10.21 contained in Jostens' registration statement on Form S-4
           filed April 7, 2000.

    10.21  Loan and Pledge Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Michael Bailey, together with form of proxy
           and promissory note. Incorporated by reference to Exhibit 10.22
           contained in Jostens' registration statement on Form S-4 filed
           April 7, 2000.

    10.22  Loan and Pledge Agreement, dated as of May 10, 2000, between
           Jostens, Inc. and Gregory Lea, together with form of proxy and
           promissory note. Incorporated by reference to Exhibit 10.23
           contained in Jostens' registration statement on Form S-4 filed
           April 7, 2000.

    10.23  Management Stock Incentive Plan established by Jostens, Inc.
           dated as of May 10, 2000. Incorporated by reference to Exhibit
           10.24 contained in Jostens' registration statement on Form S-4
           filed April 7, 2000. *

    10.24  Jostens, Inc. 2000 Stock Loan Plan. Incorporated by reference to
           Exhibit 10.25 contained in Jostens' registration statement on
           Form S-4 filed April 7, 2000.

    10.25  Management Shareholder Bonus Plan established by Credit
           Agreement. Incorporated by reference to Exhibit 10.26 contained
           in Jostens' registration statement on Form S-4 filed April 7,
           2000. *

                                       63
<PAGE>

    10.26  Credit Agreement, dated as of May 10, 2000, between Jostens,
           Inc. and Chase Securities Inc., Deutsche Bank Securities Inc.,
           and Goldman Sachs Credit Partners L.P., as Co-Lead Arrangers,
           Bankers Trust Company, as Syndication Agent, Goldman Sachs
           Credit Partners L.P., as Documentation Agent, and The Chase
           Manhattan Bank, as Administrative Agent. Incorporated by
           reference to Exhibit 10.27 contained in Jostens' registration
           statement on Form S-4 filed April 7, 2000.

    10.27  Separation Agreement, dated as of April 11, 2000, between
           Jostens, Inc. and Mr. Thomas W. Jans. *

    10.28  Separation Agreement, dated as of April 26, 2000, between
           Jostens, Inc. and Mr. David J. Larkin. *

    10.29  Jostens, Inc. Executive Change in Control Severance Pay Plan
           effective January 1, 1999. Incorporated by reference to Exhibit
           10.8 contained in the Annual Report on Form 10-K for 1998. *

    10.30  Jostens, Inc. Executive Change in Control Severance Pay Plan
           First Declaration of Amendment, effective August 1, 1999.
           Incorporated by reference to Jostens' Report on Form 10-K for
           the quarterly period ended October 2, 1999. *

    10.31  Form of Contract entered into with respect to Executive
           Supplemental Retirement Plan. Incorporated by reference to
           Jostens' Registration Statement on Form 8 dated May 2, 1991. *

    12   Computation of Ratio of Earnings to Fixed Charges

    21   List of Jostens' subsidiaries.

  (b)  Reports on Form 8-K

     No reports on Form 8-K were filed by Jostens during the quarter ended
  December 30, 2000.
--------
*  Management contract or compensatory plan or arrangement required to be filed
   as an exhibit to Form 10-K pursuant to Item 14 (c) of this annual report.

                                       64
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 28, 2001.

                                          JOSTENS, INC.

                                                /s/ Robert C. Buhrmaster
                                          By __________________________________
                                                    Robert C. Buhrmaster
                                            Chairman of the Board, President
                                               and Chief Executive Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on March 28, 2001 in the
capacities indicated.

              Signature                                   Title

    /s/ Robert C. Buhrmaster
_____________________________________     Chairman of the Board, President and
        Robert C. Buhrmaster               Chief Executive Officer

    /s/ William N. Priesmeyer
_____________________________________     Senior Vice President and Chief
        William N. Priesmeyer              Financial Officer (Chief Accounting
                                           Officer)

    /s/ James O. Egan
_____________________________________     Director
        James O. Egan

    /s/ Charles K. Marquis
_____________________________________     Director
        Charles K. Marquis

    /s/ Charles J. Philippin
_____________________________________     Director
        Charles J. Philippin

    /s/ Steven G. Puccinelli
_____________________________________     Director
        Steven G. Puccinelli

    /s/ David A. Tayeh
_____________________________________     Director
        David A. Tayeh

    /s/ George O. Visnyei
_____________________________________     Director
        George O. Visnyei


                                       65
<PAGE>

                       Report of Independent Accountants

To the Board of Directors of Jostens, Inc.:

   Our audit of the consolidated financial statements as of December 30, 2000
and for the year then ended referred to in our report dated March 27, 2001
appearing in the 2000 Annual Report on Form 10-K also included an audit, as of
December 30, 2000 and for the year then ended, of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein as of December 30, 2000 and for the year then
ended when read in conjunction with the related consolidated financial
statements.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 27, 2001
<PAGE>

Schedule II--Valuation and Qualifying Accounts
Jostens, Inc. and subsidiaries

<TABLE>
<CAPTION>
                                          Additions
                                     -------------------
                                     Charged  Charged to
                            Balance  to costs   other                  Balance
                           beginning   and    accounts-- Deductions--  end of
                           of period expenses  describe    describe    period
                           --------- -------- ---------- ------------  -------
                                             (In thousands)
<S>                        <C>       <C>      <C>        <C>           <C>
Reserves and allowances
 deducted from asset
 accounts:
  Allowances for
   uncollectible accounts:
    Year ended December
     30, 2000.............  $5,775   $ 2,712     $--       $ 4,126(1)  $4,361
    Year ended January 1,
     2000.................  $7,308   $ 1,882     $--       $ 3,415(1)  $5,775
    Year ended January 2,
     1999.................  $7,446   $ 1,858     $--       $ 1,996(1)  $7,308

  Allowances for sales
   returns:
    Year ended December
     30, 2000.............  $7,130   $18,203     $--       $18,973(2)  $6,360
    Year ended January 1,
     2000.................  $5,500   $22,527     $--       $20,897(2)  $7,130
    Year ended January 2,
     1999.................  $5,569   $17,753     $--       $17,822(2)  $5,500

  Sales person overdraft
   reserves:
    Year ended December
     30, 2000.............  $6,332   $ 1,116     $--       $ 1,880(1)  $5,568
    Year ended January 1,
     2000.................  $7,061   $ 2,500     $--       $ 3,229(1)  $6,332
    Year ended January 2,
     1999.................  $8,322   $ 1,947     $--       $ 3,208(1)  $7,061
</TABLE>
--------
(1)  Uncollectible accounts written off, net of recoveries.
(2)  Returns processed against reserve.