UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 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 JUNE 30, 1999

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

                             SECURITIES ACT OF 1934

                         COMMISSION FILE NUMBER 0-19835

                                DAY RUNNER, INC.
             (Exact name of registrant as specified in its charter)

       DELAWARE                                                  95-3624280
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                  15295 ALTON PARKWAY, IRVINE, CALIFORNIA 92618
               (Address of principal executive offices) (Zip Code)

        Registrant's Telephone Number including Area Code: (714) 680-3500
        Securities Registered Pursuant To Section 12(B) Of The Act: NONE
           Securities Registered Pursuant To Section 12(G) Of The Act:

                         COMMON STOCK, $0.001 PAR VALUE
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  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. |_|

         The aggregate  market value of the voting stock held by  non-affiliates
of the  registrant,  based upon the closing price of the Common Stock on October
  1, 1999 as reported on The Nasdaq Stock Market, was approximately $77,000,000.

     The  number of  shares  outstanding  of the  registrant's  Common  Stock on
October 1, 1999 was 11,900,736.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's definitive Proxy Statement to be delivered
to  stockholders  in connection  with their Annual Meeting of Stockholders to be
held on December 9, 1999 are  incorporated  by  reference  into Part III of this
Annual Report.



<PAGE>



<TABLE>
<CAPTION>




                                TABLE OF CONTENTS

    PART I                                                                                              PAGE
   <S>                    <C>                                                                         <C>

    Item 1.                Business                                                                       3

    Item 2.                Properties                                                                    18

    Item 3.                Legal Proceedings                                                             19

    Item 4.                Submission of Matters to a Vote of Security Holders                           19

    PART II.

    Item 5.                Market for Registrant's Common Equity and Related                             19
                           Stockholder Matters

    Item 6.                Selected Financial Data                                                       20

    Item 7.                Management's Discussion and Analysis of Financial
                           Condition and Results of Operation                                            22

    Item 7A.               Quantitative and Qualitative Disclosures about Market Risk                    30

    Item 8.                Financial Statements and Supplementary Data                                   30

    Item 9.                Changes in and Disagreements with Accountants
                           on Accounting and Financial Disclosure                                        31

    PART III.

    Item 10.               Directors and Executive Officers of the Registrant                            31

    Item 11.               Executive Compensation                                                        31

    Item 12.               Security Ownership of Certain Beneficial Owners and
                           Management                                                                    31

    Item 13.               Certain Transactions                                                          31

    PART IV.

    Item 14.               Exhibits, Financial Statement Schedules, and Reports on
                           Form 8-K                                                                      32

    Signatures                                                                                           36

    Exhibit Index
</TABLE>



<PAGE>




                                     PART I

FORWARD LOOKING STATEMENTS

         With the  exception  of actual  reported  financial  results  and other
historical  information,  the statements contained in this Annual Report on Form
10-K ("Annual Report")  including,  but not limited to, statements found in Item
1. "Business," Item 3. "Legal Proceedings," Item 7. "Management's Discussion and
Analysis  of  Financial  Conditions  and  Results  of  Operations"  and Item 7A.
"Quantitative   and  Qualitative   Disclosures  about  Market  Risk"  constitute
"forward-looking  statements"  within the meaning of the federal securities laws
and involve a number of risks and  uncertainties.  Such  statements are based on
current  expectations and involve known and unknown risk and  uncertainties  and
certain  assumptions,  referred to below,  and are indicated by words or phrases
such as "anticipate," "estimate," "project," "expect," "believes," "intends" and
similar  words  or  phrases.  These  forward  looking  statements  are  based on
management's expectations as of the date set forth on the signature page of this
document,  and the Company does not  undertake  any  obligation to update any of
these statements.

           There  can  be  no  assurance   that  the  Company's   actual  future
performance  will meet its  expectations.  The Company is subject to a number of
risks, and its future operating  results are difficult to predict and subject to
significant fluctuations.

          Factors that may cause future  results to differ  materially  from the
Company's current  expectations  include,  among others:  the timing and size of
orders from large customers;  timing and size of orders for new products;  large
customers' inventory management; competition, especially for retail shelf space;
general  economic  conditions,  especially  the  sustainability  of the  current
economic expansion; the health of the retail environment;  foreign exchange rate
fluctuations;  supply and manufacturing constraints;  supplier performance;  and
the Company's  ability to meet its cash  requirements  to finance its operations
and growth.  Among the effects of these  factors may be: lower than  anticipated
sales; higher than anticipated product returns and/or excess inventory; negative
effects on consumer  purchases;  lower than anticipated gross profit; and higher
than anticipated operating expenses.

         Discussions  of certain of these  factors  and other  factors  that may
cause  future  results  to  differ   materially   from  the  Company's   current
expectations  are contained in this document in "Risk Factors," under Item 1, in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" under Item 7 and in "Quantitative and Qualitative  Disclosures about
Market Risk" under Item 7A.

ITEM 1.      BUSINESS

THE COMPANY


         Day Runner(R) develops, manufactures and markets organizing products to
broad-based  consumer  audiences  through  retail  channels.  The Company is the
leading developer,  manufacturer, and marketer of paper-based organizers for the
retail  market.  Day Runner also  develops,  manufacturers  and markets  related
organizing products.

         Day Runner markets its products under two major brands,  Day Runner and
Filofax(R),  and a number of  sub-brands.  The Company  estimates  its  products
occupy an aggregate of more than 900,000 linear feet of shelf space in more than
22,000 retail stores  across the U.S. and  approximately  8,000 retail stores in
other markets around the world.

         The vast majority of the Company's sales are to resellers,  with direct
sales to organizations and to individuals accounting for a very small portion of
sales. The Company markets its products to its customers in the U.S. through its
own sales force and also makes selective use of  manufacturers'  representatives
and the Internet.  The Company markets its products  outside the U.S.  primarily
through its subsidiaries and secondarily through independent  distributors.  The
Company's  domestic  sales are primarily to the office  products and mass market
channels  of  distribution  and are  concentrated  among  relatively  few  major
customers,  including office products superstores Office Depot, Inc., OfficeMax,
Inc. and Staples,  Inc. and mass market retailers  Wal-Mart and Kmart.  Sales to
the U.S. office products and mass market  channels  accounted for  approximately
35% and  36%,  respectively,  of  fiscal  1999  sales.  With  its  October  1998
acquisition of Filofax Group plc, the Company substantially  increased its focus
on international markets. Sales to foreign customers accounted for approximately
23% of fiscal 1999 sales.

         The Company groups its products into three  categories:  organizers and
planners;  their refills, which include calendars,  other pages and accessories;
and related organizing products.

         The Company's  organizers and planners are loose-leaf and  spiral-bound
time and information management systems that range from simple to sophisticated.
The Company offers multiple  product lines aimed at market segments ranging from
students  to  women  managing  a  home  to  business  and  professional  people.
Organizers and planners  accounted for  approximately 41% of Day Runner's fiscal
1999 sales.

         The  great  majority  of the  Company's  organizers  and  planners  are
refillable.  Refills,  which  include  calendars,  other pages and  accessories,
accounted for approximately 32% of sales in fiscal 1999.

         The  Company's  related  organizing  products  include,  among  others:
telephone/address  books,  business  accessories,  products  for  students  from
elementary school through college and organizing and other wall boards.  Related
organizing products accounted for approximately 27% of fiscal 1999 sales.

         All of the Company's  current  major product lines have been  developed
internally  by  the  parent  company  or one of the  companies  Day  Runner  has
acquired.  The Company  manufactures  and assembles a portion of its products at
its  facilities  in the U.S.  and  abroad  and also uses  foreign  and  domestic
contractors to supply both product components and finished goods.

          Day  Runner,   Inc.  was   incorporated  in  California  in  1980  and
reincorporated in Delaware in 1993. Unless the context requires  otherwise,  all
references to the "Company" or to "Day Runner" herein refer to Day Runner,  Inc.
and its  consolidated  subsidiaries.  The Company's  corporate  headquarters are
located  at  15295  Alton  Parkway,  Irvine,   California  92618  (phone  number
714/680-3500).

         Day Runner, Filofax, PRO Business System,  Timeposters and Wipe-Out are
registered  trademarks of Day Runner,  Inc. Business  Manager,  Cubicle Manager,
Everything  in One Place,  FactCentre,  4-1-1,  Home Manager,  Message  Manager,
Microfile, org.board, Perennials and Phone Manager are trademarks of Day Runner,
Inc. DILBERT is a trademark of United Feature Syndicate,  Inc. THE FAR SIDE is a
registered  trademark of FarWorks,  Inc. LOONEY TUNES characters,  names and all
related  indicia are  trademarks  of Warner  Bros.  Star Wars is a trademark  of
Lucasfilm  Ltd. All other  trademarks  remain the  property of their  respective
companies.

BUSINESS STRATEGY

         Day  Runner  sells  broad-based   organizing  products  through  retail
distribution channels.

         North America. Key elements of the Company's strategy for North America
include:  leveraging its brand names and distribution strength to maximize sales
of existing products,  to extend those product lines and to introduce new lines;
conducting major marketing initiatives;  and building distribution in additional
channels,   including   the  Web  sites  of   brick-and-mortar   retailers   and
cyber-retailers.

         Outside  North  America.  Key  elements of the  Company's  strategy for
markets  outside  North  America  include:  further  segmenting  the  market for
organizers  and  planners;   entering  related  organizing  product  categories;
building  sales through the emerging mass market  channel of  distribution;  and
building a second busy season in the back-to-school  time frame in markets where
such an opportunity exists.

         E-Commerce.  The Company  believes many of its products are well suited
for online sale via the Company's own Web site,  those of its current  retailers
and, ultimately, those of cyber-retailers.

ACQUISITIONS

         Fiscal 1999. In October  1998,  Day Runner  acquired  Filofax Group plc
("Filofax"),  a UK-based company traded on the London Stock Exchange. Filofax is
a manufacturer and supplier of stationery products, including Filofax, Lefax and
Microfile brand organizers,  with sales primarily through retail channels. For a
number of years,  Filofax has been the leader in developing,  manufacturing  and
marketing  paper-based  organizers  for the UK retail market and has had a solid
presence in a number of other key international markets. In addition to its core
organizer business, Filofax markets business forms and high-end pens.

         With the Filofax acquisition,  Day Runner  substantially  increased its
presence in  international  markets.  Filofax's  sales for its fiscal year ended
March 31, 1998 were  approximately  $63.3  million,  with 86%, or  approximately
$54.6  million,  to markets  outside  the U.S.  At the time of the  acquisition,
Filofax  had wholly  owned sales  subsidiaries  in France,  Germany,  Hong Kong,
Scandinavia, the UK and the U.S.

         Fiscal  1998.  Day  Runner  acquired  Ultima  Distribution,  Inc.,  its
Toronto-based Canadian distributor based in Toronto; Ram Manufacturing,  Inc., a
developer,  manufacturer  and marketer of wall boards,  headquartered  in Little
Rock,   Arkansas;   and   Timeposters(R),   Inc.,  a  Toronto-based   developer,
manufacturer  and  marketer of planning  and  presentation  products,  including
laminated wall planners. These three small companies were acquired in July 1997,
October 1997 and February  1998,  respectively.  The Company has since  combined
Timeposters' manufacturing and distribution with Ultima's operations and renamed
that subsidiary Day Runner Canada Inc.



<PAGE>




SEEKING STRATEGIC ALTERNATIVES

         In July 1999,  Day Runner  announced  that its Board of  Directors  had
decided unanimously to seek possible strategic  alternatives,  which may include
new equity partners,  joint ventures, asset sales, additional financing and/or a
potential sale of the Company.  Day Runner has retained the  investment  banking
firm Wasserstein  Perella & Co. to act as advisers in this process.  The Company
has not made a decision as to any  specific  strategic  alternatives,  and there
cannot be any assurance that a transaction will result from this process.

INDUSTRY OVERVIEW

         The  Company's  roots are in  paper-based  organizers  and planners and
their refills,  and  approximately  73% of the Company's  fiscal 1999 sales were
generated by this core business.  In the past five years,  however,  the Company
has diversified its product lines and now markets a number of related organizing
products that help people become better organized in a variety of ways.

                  Paper-based  Organizers.  Awareness of the  organizer  product
                  category is  widespread,  and the  usefulness of organizers is
                  well recognized.  (Because the distinctions between organizers
                  and  planners  have become  blurred,  except  where  otherwise
                  specified,  the  terms  "organizer"  and  "planner"  are  used
                  interchangeably  in this report.)  Paper-based  organizers and
                  their  refills are sold both  through a wide variety of retail
                  channels  and  directly  to  organizations   and  individuals.
                  Retailers   selling   organizers   include:   office  products
                  superstores,  wholesalers and dealers;  mass retailers;  book,
                  department,  gift,  leather and luggage and stationery stores;
                  and other specialty retailers.

                  Related Organizing Products. Product categories Day Runner has
                  entered  include,  among  others:   telephone/address   books;
                  appointment  books;  assignment books;  business  accessories;
                  organizing and other wall boards; laminated wall planners; and
                  other planning and presentation products.

                  The Company  groups all these products under the umbrella term
                  "related  organizing  products."  Some of these  products  are
                  office supplies,  and some are school  supplies.  Others share
                  features and functions with office and/or school  supplies but
                  are intended for use in the home. These products are generally
                  marketed through the same channels as organizers.

         Market  Potential.  The Company  believes that the appeal of organizers
and other  organizing  products  is  attributable  to a number of  economic  and
cultural trends that have substantially  affected the United States and that are
having an increasing impact on a number of other markets around the world. These
trends  include:  the  increased  percentage  of women in the work force and the
resulting prevalence of two-income families;  the increased percentage of single
parent families; the continuing trend toward corporate downsizing; the growth of
the small business sector;  the rising percentage of business done away from the
office;  the greater  emphasis on  productivity;  the ongoing shift to a service
economy;  and  the  trend  toward  global  competition.  Many  of  these  trends
contribute  to  widespread  concerns  with  saving  and  better  using  time and
increasing personal productivity.

         The Company's products address these concerns. The Company targets both
potential  first-time organizer users and existing users who may need refills or
replacements  for  their  organizers.  The  Company's  expansion  into  related,
non-organizer  products  that  provide  other ways for  people to become  better
organized  offers the Company an opportunity to reach  consumers that do not use
an  organizer  and to  market  additional  products  to  consumers  who do.  The
Company's  goal is to offer  one or more  products  that  appeal to and meet the
organizing needs of virtually every consumer,  no matter what that  individual's
income, occupation or age, in the U.S. and in key markets around the world.

         Industries  Marketing  Similar or  Substitute  Products.  Day  Runner's
products  have  features,  functions or  components in common with products in a
number of other  industries.  The Company's  market overlaps to a limited extent
that of companies  marketing products and services designed to improve group and
individual   productivity  and  to  upgrade   management  skills.  In  addition,
electronic  organizers,  PIM  software  and  Internet-resident   organizers  are
designed to fill many of the same needs  addressed  by  paper-based  organizers,
although virtually all PIM software products provide for paper-based output, and
a number of such  products  allow users to print out pages in sizes that fit the
Company's organizers. (See Item 1. "Business - Competition.")

          Supply  Chain   Management.   The   Company's   primary   channels  of
distribution  are office  products and the mass market.  As part of their supply
chain management, retailers in these channels have been substantially tightening
their inventories, with the goals of reducing on-hand inventories and increasing
inventory  turns.  Retailers'  methods  of  accomplishing  these  goals vary but
generally can include the following,  among others: selling down inventory until
they reach their new, lower target levels;  giving  promotions a shorter time on
the shelf to sell through to consumers and returning  other  merchandise  they
might  otherwise have ultimately  sold.  This inventory  tightening may manifest
itself in a number of ways that can reduce the Company's  sales and increase its
costs,  including but not limited to, retailers'  reductions of on-hand supplies
of the Company's  products;  retailers'  reduction of everyday  selection of the
Company's  products;  accelerated  and  increased  product  returns;  unexpected
cancellations  of commitment for product;  and reductions in minimum and average
order quantities,  with potentially related increases in the frequency of orders
and the Company's associated costs of distribution.

PRODUCTS

         Day  Runner's  products  are designed to help people of all ages and in
all walks of life become  better  organized.  The Company  aims its  products at
various  segments  of a  broad-based  consumer  audience.  The  goal is to offer
consumers in each target  market the  perception  of broad choice and good value
for the money and a variety of organizing products that meet their needs.

         The Company's products include:

              o   Multiple lines of paper-based organizers and planners.

              o   Refills, which include calendars, other pages and accessories.

              o   Related organizing products.

         Organizers  and  planners.  The Company's  organizers  and planners are
available in varying systems, sizes, styles, cover materials and colors and at a
wide range of prices.  These loose-leaf and spiral-bound "books" help users keep
"Everything  in One  Place(TM)."  For  example,  in addition to the  traditional
planner components of appointment calendar,  telephone/address  section and note
pad, Day Runner System  organizers  include,  among other  things,  interrelated
pages for managing time and information,  tracking expenses,  establishing goals
and planning  projects.  Certain of the  Company's  organizers  and planners are
available in a number of languages  in addition to English,  including:  Danish,
French, German, Italian and Swedish.

         Refills. The great majority of the Company's  organizers,  planners and
telephone/address  books and  certain of its  related  organizing  products  are
refillable.  Users may customize  their  loose-leaf  organizers  and planners by
choosing from a variety of additional  pages and  accessories.  Day Runner brand
refills  range  from  Mileage  Record,  Strategy  and  Things  To  Do  pages  to
Currency/Checkbook  Insert and a solar powered  Calculator/Ruler.  Filofax brand
refills  include  such pages as  Shopping  List and  Meetings  Planner  and such
accessories as Diskette Holders and a variety of maps.

         Related Organizing Products.  The Company's related organizing products
include, among others:  telephone/address books; appointment books; products for
students ranging from elementary  school through college;  business  accessories
such as travel  document  holders and business card files;  organizing and other
wall  boards,  such as the  patented  Home  Manager(TM),  Business  Manager(TM),
org.board(TM)   and  a   variety   of   bulletin   boards,   combination   white
boards/bulletin  boards and laminated wall planners; and PC software designed to
complement the Company's paper-based organizers and planners.

         The following table sets forth, for the periods indicated,  approximate
Day Runner sales by product category and as a percentage of total sales.
<TABLE>
<CAPTION>

                                   FISCAL                 FISCAL                   FISCAL
          PRODUCTS                  1999                   1998                     1997
          --------            -----------------     -------------------     ------------------
(Unaudited; dollars in thousands)

<S>                           <C>          <C>      <C>          <C>         <C>          <C>
Organizers and planners ...   $ 80,092     40.8%    $ 83,069     49.5%       $ 73,858     58.0%
Refills ...................     63,596     32.4       51,876     30.9          43,264     34.0
Related organizing products     52,524     26.8       32,896     19.6          10,254      8.0
                                ------     ----       ------     ----          ------      ---
               Total.......   $196,212    100.0%    $167,841    100.0%       $127,376    100.0%
                              ========    =====     ========    =====        ========    =====
</TABLE>

PRODUCT DEVELOPMENT

         Day Runner's  product  development  programs  emphasize (i) identifying
unmet consumer needs and developing  organizing products to meet those needs and
(ii) extending the Company's  existing product lines. All the Company's  current
major product lines have been  developed  internally by the parent company or by
one of the companies Day Runner has acquired.

         The Company  monitors its existing  products for  continued  viability,
needed  enhancements,  improvements in quality and potential reductions in cost.
In fiscal  1999,  the  Company  made the  decision to  discontinue  non-licensed
appointment  books, a seasonal  product line that proved  unprofitable,  and Day
Runner will therefore not be offering this product line in fiscal 2000.

         The Company's  product  lines reflect its focus on market  segmentation
and consumer needs. Here are examples:

         Expansion of Day Runner System  Organizer Line.  Since the introduction
of the first Day Runner System  organizer in 1982,  the Company has  transformed
this single  product into a broad line and has  introduced  multiple  additional
organizer  lines.  The  Company's  organizers  are now available in a variety of
sizes, styles and materials, designed to appeal to a broad spectrum of consumers
and at a wide range of prices.

         Products for Cost-conscious Consumers. In 1991, as part of its strategy
of offering products aimed at cost-conscious  consumers,  the Company introduced
the   FactCentre(TM)   line,  which  now  includes   organizers,   planners  and
telephone/address books.

         Products for Business and  Professional  People.  In 1993,  the Company
introduced  the PRO  Business  System(R)  organizer,  aimed at people  seeking a
sophisticated  but  easy-to-use  organizing  system  designed  specifically  for
business and  professional  use. In fiscal 1997,  Day Runner  launched a line of
business  accessories,  including travel document holders,  business card cases,
business card files and pad holders.

         Products for Students.  In 1994,  Day Runner began  shipping  4-1-1(TM)
Student  Planners,  a line  aimed at middle  school,  high  school  and  college
students and marketed  primarily  for sales during the  back-to-school  consumer
buying  season.  The 4-1-1 line is updated and refreshed  each year to keep pace
with the  changing  tastes of its  target  market  and  became  the first in the
Company's range of organizing products designed especially for young people.

         Simple  Organizing  Tools.  In fiscal 1995, the Company began to expand
into related organizing product categories,  adding  telephone/address  books to
its Day Runner and FactCentre lines.

         Products   for   Women.   In  fiscal   1995,   the   Company   launched
Perennials(TM), a line of organizers, planners and telephone/address books aimed
primarily at young women shopping at mass merchants. In fiscal 1997, the Company
introduced  the patented  Home  Manager,  a unique  product that builds upon the
American  family's  habit  of using  the  refrigerator  door as a  communication
center.  The Home  Manager  combines a dry-erase  board,  bulletin  board strip,
Post-it(R)  notes in a holder  and a dated,  monthly  calendar  and  mounts on a
refrigerator via heavy-duty magnetic backing or on a wall with hooks.

         Licensed  Products.  The  Company  develops,  manufactures  and markets
products  under  licenses from United  Feature  Syndicate,  Inc.  (DILBERT(TM)),
FarWorks,   Inc.  (THE  FAR  SIDE(R)),   Warner  Bros.   (LOONEY  TUNES(TM)  and
X-Toons(TM))  and Lucasfilm  Ltd.  (Star  Wars(TM)).  In fiscal 1996, Day Runner
launched a line of planners and  telephone/address  books featuring Warner Bros.
Looney Tunes cartoon characters.  In fiscal 1997, the Company introduced THE FAR
SIDE organizers featuring the classic cartoons created by Gary Larson. In fiscal
1998, the Company  launched  X-Toons,  student  products  featuring Warner Bros.
characters  engaged in extreme  sports and  designed to appeal to  middle-school
boys and a line of  DILBERT  organizers,  refills,  telephone/address  books and
pocket  calendars.  In fiscal 1999,  the Company  introduced a line of Star Wars
student planners, assignment books, telephone/address books and wall boards.

         Acquired Products. Since acquiring Ram Manufacturing and Timeposters in
fiscal 1998,  the Company has refined and further  developed  the wall board and
laminated  wall planner  product  lines it gained  through the purchase of these
companies.  These  lines  are  marketed  under  the  Day  Runner  brand  and the
Wipe-Out(R) and Timeposters sub-brands. Since acquiring Filofax in October 1998,
the  Company has  expanded  product  development  activities  for Filofax  brand
products and for Day Runner brand products intended for foreign markets.

         Continuing Product Innovation.  Ongoing development of new products and
line extensions  continues to be an important element of the Company's strategy.
Since its introduction in fiscal 1997, Day Runner has expanded Home Manager into
a broad line of organizing wall boards that includes Business  Manager,  Cubicle
Manager(TM),  Message  Manager(TM),  a Looney  Tunes  organizing  wall board for
children and Phone  Manager(TM).  The Company has  augmented  its product  lines
aimed  specifically  at women  with the  fiscal  1999  introduction  of  Regency
organizers,  planners and  telephone/address  books.  Recently,  the Company has
launched a new, higher-end line of Filofax refills.

SALES AND DISTRIBUTION

         The vast majority of Day Runner's  sales are to resellers,  with direct
sales to organizations and to individuals accounting for a very small portion of
sales.  The Company markets its products to its customers in the U.S.  primarily
through  its  own  sales  force  and  makes  selective  use  of   manufacturers'
representatives  and the Internet.  The Company markets its products outside the
U.S.  primarily  through its  subsidiaries and secondarily  through  independent
distributors.

         During fiscal 1998 and 1999, the Company sold products to approximately
700 and 6,000 different customers,  respectively,  with the increase from fiscal
1998  to  1999  attributable  primarily  to  the  Filofax  acquisition  and  the
non-consolidated  nature of Filofax's  distribution channels. The only customers
accounting  for 10% or more of the  Company's  fiscal  1999 sales were  Wal-Mart
Stores,  Inc., including Sam's Clubs;  OfficeMax,  Inc.; Office Depot, Inc.; and
Staples,  Inc.,  including  their  affiliates.  These  customers  accounted  for
approximately  25%,  13%,  11% and 11%,  respectively,  of  fiscal  1999  sales.
Including their affiliates,  the top five customers of the Company accounted for
an aggregate of approximately 64% of fiscal 1999 sales.

         The following table sets forth, for the periods indicated,  approximate
Day Runner sales by distribution channel and as a percentage of total sales.
<TABLE>
<CAPTION>

                                   FISCAL                 FISCAL                   FISCAL
    DISTRIBUTION CHANNEL            1999                   1998                     1997
    --------------------     ------------------     -------------------     --------------------
(Unaudited; dollars in thousands)

<S>                          <C>         <C>        <C>          <C>         <C>           <C>
Office products channel.     $  68,839   35.1%      $ 79,303     47.2%       $ 59,416      46.7%
Mass market.............        69,899   35.6         65,752     39.2          53,785      42.2
Foreign customers.......        45,987   23.4         12,182      7.3           5,583       4.4
Other channels..........        11,487    5.9         10,604      6.3           8,592       6.7
                                ------    ---         ------      ---           -----       ---
      Total.............      $196,212  100.0%      $167,841    100.0%      $ 127,376     100.0%
                              ========  =====       ========    =====       =========     =====
</TABLE>

                  U.S. Sales and Distribution. The Company's primary channels of
domestic distribution are office products and the mass market, and the Company's
products are carried by more than 22,000 retail outlets  across the country.  In
fiscal  1999,  the  Company  shipped  directly  to  approximately  7,700  retail
locations, to distribution centers serving approximately 14,400 retail locations
and to approximately 100 wholesalers, each of which serves a number of dealers.

     Office  Products  Channel.  Since 1987, Day Runner brand products have been
broadly distributed through the office products channel.

                           Office Products Superstores. Since their emergence in
                           1986, office products  superstores  offering discount
                           prices in a warehouse  atmosphere have become a major
                           force in office products distribution.  The Company's
                           products are carried by all the leading  superstores,
                           including  Office Depot,  Inc.,  OfficeMax,  Inc. and
                           Staples, and sales to these customers account for the
                           bulk  of  the  Company's  sales  in the  U.S.  office
                           products channel.

                           Office Products  Wholesalers.  The Company's products
                           are  distributed  by  a  number  of  office  products
                           wholesalers,   including  national   wholesaler  S.P.
                           Richards  Company and all three  regional  wholesaler
                           groups, MMA, NAMD and AMW.

                           Office Products Dealers.  The Company's  products are
                           also distributed  through traditional office products
                           dealers,  which buy directly from  manufacturers  and
                           indirectly  through   wholesalers.   These  customers
                           include   both   storefront   dealers  and   contract
                           stationers  (also known as  commercial  dealers) that
                           specialize  in selling to larger  businesses  through
                           catalogs and their direct sales forces.

                  Mass Market.  Discount chains  addressing the mass market have
                  become an increasingly important factor in the distribution of
                  a wide variety of consumer goods.  The Company's  products are
                  distributed   through  a  number  of  mass  market  retailers,
                  including:  Wal-Mart  and Kmart;  the major  wholesale  clubs,
                  Sam's Clubs and Costco  Companies,  Inc.; a number of discount
                  drug  chains,  including  Rite  Aid  Corp.,  Eckerd  Drug  and
                  American Drug; and a variety of other mass market resellers.

                  Other.  The  Company  also  distributes its  products  through
                  a number of additional channels, including book, department,
                  gift,leather and luggage stores and other specialty retailers,
                  to the U.S.  Government and via the Internet.  The  Company's
                  U.S.  sales of its  Filofax  brand  products are  concentrated
                  in these distribution channels.

          Foreign. The Company's products are marketed internationally primarily
through  its  foreign   subsidiaries   and   secondarily   through   independent
distributors.  The  Company has sales and  marketing  operations  in  Australia,
Canada,  Denmark,  France,  Germany,  Hong  Kong,  Italy,  Sweden and the United
Kingdom.

          Foreign  retailers   carrying  the  company's  products  include  both
traditional,  full-price  retailers  and emerging mass  marketers.  Prior to the
acquisition  of Filofax  Group plc,  which had built  strong  distribution  in a
variety of channels in its home UK market and through  high-end  specialty shops
and department stores in a number of other markets, Day Runner focused its sales
and  distribution   efforts  outside  North  America   primarily  on  developing
distribution through emerging mass merchants in key markets. The Company expects
to continue to serve this broad spectrum of distribution.

MARKETING

         Day  Runner  believes  that  for a  number  of years  its  product  and
merchandising  innovations  have been  instrumental in driving the growth of the
organizer product category at retail.  More recently,  the Company has also been
working  to  increase  the  visibility  of and  expand  demand  for its  related
organizing products.

         Day Runner  markets its products to consumers to increase  awareness of
its brand names and of specific  products,  to  communicate  the benefits of its
products, and to create and reinforce an image that its products enable the user
to  manage   time  and   personal   resources   more   effectively.   Packaging,
merchandising, and promotions are designed to appeal to the consumer shopping in
the retail store. The Company positions itself to retailers as the leader in the
retail organizer market, the primary innovator in the category,  and the logical
source  for well  designed,  good  quality  organizers,  planners,  and  related
organizing  products at a wide range of price  points and  appropriate  for both
broad-based consumer target markets (Day Runner brand) and consumers looking for
a prestige brand (Filofax brand).

         The Company works to protect and  strengthen its Day Runner and Filofax
brand names through consistent positioning, careful placement of new products in
the Company's price matrix, well thought out packaging, and the effective use of
secondary and heritage brands.

         Promotional  Programs.  The Company  offers  promotional  and incentive
programs (1) as part of its introduction of new products,  (2) to build sales at
specific times of year, and (3) to build  awareness,  expand  distribution,  and
increase sales of specific products.

         Advertising  and  Public  Relations.   Day  Runner   participates  with
retailers in co-op advertising and periodically  advertises in certain wholesale
flyers  and in  trade  publications.  Public  relations  campaigns  are  another
important element in the Company's marketing strategy. The Company has from time
to time  conducted  consumer  advertising  campaigns,  primarily in business and
lifestyle magazines, but generally does very little consumer advertising.

         Sales Support.  The Company  supports its retailers with  point-of-sale
materials  intended  to build  brand name  awareness  and  increase  sales.  The
Company's  displays are designed to be easy for  consumers to shop and for store
personnel to refill.  The Company  supplements its everyday display space of Day
Runner brand products with colorful,  pre-packed corrugated displays designed to
act as marketing  vehicles.  Packaging is intended to help consumers  choose the
right product and make the decision to buy.

          Trade Shows.  The Company  exhibits or is  represented  in a number of
international, national and regional trade shows.

         Market  Research.  The Company  regularly  conducts market research and
tests product concepts and prototypes  through the use of focus groups and other
consumer  research.  In addition,  the Company  maintains a database  containing
information  on users who have mailed in the Welcome  Cards  included in many of
its Day Runner brand products.

         User  Support.  To encourage  its current users to continue to purchase
and recommend its products and their refills,  the Company  provides a toll-free
consumer   hotline  in  the  U.S.  that  consumers  may  call  for  referral  to
conveniently   located  dealers  or  dealers  that  carry  specific  refills  or
accessories,  for customer  service,  to contribute  suggestions and to purchase
products directly from the Company.

         Although Day Runner's products are designed to be intuitive and easy to
use, the Company  provides a free user's guide in each Day Runner System and PRO
Business System organizer.  Each of these booklets illustrates  effective use of
the  system  and  includes  tips  on time  management,  project  management  and
organization.

         dayrunner.com.  In June 1999,  the Company  launched its  substantially
redesigned  Internet  site,  dayrunner.com.  Users may  purchase  certain of the
Company's  products  online via this web site.  The Company  makes  direct sales
primarily as a service to its users and,  except in certain cases,  charges full
suggested retail price plus shipping and handling.
<PAGE>

COMPETITION

         The  product   categories  in  which  the  Company   participates   are
competitive and subject to rapid change.

         The  Company   competes   directly  with  other   companies   marketing
paper-based  organizers  and  planners,  appointment  books,  assignment  books,
business  accessories,  calendars,  wall  boards,  laminated  wall  planners and
similar  organizing  products to consumers  through  retail  channels and on the
Internet and  indirectly  with companies  marketing  such products  through mail
order or via other means.

         The Company's  competitors also include companies marketing substitutes
for paper-based organizer and planner products,  such as electronic  organizers,
including  Palm Pilot and Windows CE products,  among  others,  PIM software and
Internet-resident organizers.

         In addition,  the Company competes  indirectly in the U.S. and directly
in certain foreign markets with companies marketing organizers and/or organizers
coupled with time  management  training via direct sales to  individuals  and to
organizations.

         The companies with which Day Runner  competes vary by product  category
and geography. Each product category is competitive and subject to rapid change,
and  none of the  lists  of  competitors  provided  here is  intended  to be all
inclusive.  The Company's competitors in paper-based organizers in North America
include At-A-Glance(R),  Day-Timer(R),  FranklinCovey(R), Mead School and Office
Products  division of The Mead Corporation and many leather goods  manufacturers
and companies  manufacturing  inexpensive,  non-branded  organizers overseas for
sale in North America.  In September  1999, Mead announced that it had agreed to
acquire the  At-A-Glance  Group from  Cullman  Ventures.  Paper-based  organizer
competitors  outside the U.S.  vary from market to market,  with none  holding a
dominant position in retail channels in multiple markets.

         The Company's  North American  competitors in  telephone/address  books
include  At-A-Glance,  Mead  and a number  of  companies  marketing  inexpensive
imported products. The primary company marketing appointment books and calendars
through  retail  channels  in North  America  is  At-A-Glance.  A number of U.S.
calendar  companies also produce laminated wall planners.  Business  accessories
are marketed in North  America by  Day-Timer,  Hazel(R)  and many leather  goods
manufacturers,  and wall board manufacturers include Boone(R) Boards and Quartet
Manufacturing Company.

         Day Runner believes that the current principal  competitive  factors in
the product  categories in which its  participates  are:  distribution  breadth,
depth and strength;  brand name  recognition;  product  development  capability;
product function,  design,  perceived quality and value;  marketing  capability;
breadth   of   product   lines;    financial   resources;    customer   service;
manufacturing/sourcing  expertise; and price. In the organizer/planner category,
the size and loyalty of a company's  user base is also a key factor.  Although a
number of its competitors have greater financial  resources than Day Runner, the
Company believes that it competes well against its direct competition on most of
the other principal competitive factors.

         The Company  believes that it has a number of  competitive  advantages.
Its products occupy significant  retail shelf space. Its leadership  position in
the retail organizer/planner market, leading brand names, ability to develop new
products,  broad  product  lines,  marketing  expertise,  manufacturing/sourcing
skill,  large user base and the appeal of its products to  consumers  constitute
additional competitive advantages. There can be no assurance,  however, that the
Company  will be able to maintain or  continue to benefit  from its  competitive
advantages or that the competitive  environment will not change to the Company's
detriment.



<PAGE>



MANUFACTURING

         Day  Runner's   manufacturing   strategy   combines   limited  internal
manufacturing with the domestic and foreign subcontracting of product components
and finished products.  The Company's policy is to develop and maintain multiple
sources for key raw materials,  product  components and the finished products it
subcontracts.  The  Company  has the  ability  to act as its own second or third
source for the manufacture of loose-leaf  binders,  for those of its wall boards
that it  subcontracts  and for the final assembly of many of its products.  This
provides a degree of  protection  against  vendor  problems  and,  under certain
conditions,  allows the Company to respond to higher than anticipated demand and
improve  turn-around  time.  The  Company's  manufacturing  activities  are  not
capital-intensive,  and the  manufacture  of most  of its  products  can be only
partially automated. The Company subcontracts all printing.

         Purchased  Components.  In addition to vinyl and leather raw materials,
the Company purchases from suppliers certain major product components, including
printed  pages,  loose-leaf  rings,  pens,  software  disks  containing  its PIM
software,  electronic  components and certain accessories.  With few exceptions,
these items are manufactured by a variety of outside  contractors and are widely
available.

         Day Runner Brand Products.

                  Asian   Suppliers.    The   Company's   Asian   subcontractors
                  manufacture  and assemble a portion of its finished Day Runner
                  brand  products,  including  the great  majority  of its lower
                  priced organizers,  planners and related organizing  products.
                  Day  Runner's  Hong Kong  subsidiary  acts as liaison with the
                  Asian suppliers of the Company's Day Runner brand products.

                  North American Manufacturing.  The flexibility of internal and
                  subcontracted  North American  manufacturing  helps Day Runner
                  meet unexpected demand and produce  "fill-ins" near the end of
                  a  season.  In  addition,   North  American  manufacturing  is
                  cost-effective for certain bulky products, where freight costs
                  are a key concern.

                  Internal  Manufacturing.  Day Runner manufactures a portion of
                  its binders,  assembles a portion of its finished products and
                  does refill  packaging at Day Runner de Mexico,  S.A. de C.V.,
                  its wholly owned manufacturing  subsidiary located in Tijuana.
                  The  Company  manufactures  wall  boards  and  laminated  wall
                  planners  at its  facilities  in  Little  Rock,  Arkansas  and
                  Toronto, Canada.

         Filofax Brand Products.  The Company's Filofax  operations also balance
internal  manufacturing  with  subcontracting  and subcontract the production of
certain product components and finished goods to Asian suppliers.  Manufacturing
in the UK is limited in scope, consisting primarily of binder manufacture,  book
assembly and refill  packaging,  and the Company also  outsources  some assembly
there.

CUSTOMER SERVICE

          Large U.S.  retailers'  focus on  lowering  inventory  and  increasing
inventory turns requires ever improving product  replenishment  through-put time
as measured at the retail shelf. Day Runner  recognizes that customer service is
an  ever-more  vital link  between  itself and its key  customers.  (Note:  This
discussion does not include  distribution  in the U.S. of the Company's  Filofax
products, which is outsourced.)

          Sophisticated,  Flexible  Distribution  Capabilities.  Day  Runner has
developed  sophisticated  distribution and customer service  capabilities in the
U.S.  The  Company's  facilities  have the ability to ship in whatever  form the
customer's logistics require. Day Runner ships directly to the individual retail
locations of a number of its customers and to the distribution centers of others
and participates in cross-docking programs.

          EDI. Day Runner receives more than 90% of domestic orders representing
approximately  85% of domestic  purchase order dollars via EDI (Electronic  Data
Interchange).   Transaction  sets  handled  via  EDI  include  purchase  orders,
acknowledgments,   invoices,  ASNs  (advance  ship  notices),  and  debit/credit
adjustments.

          WMS. Recently,  the Company has implemented WMS (Warehouse  Management
System)  software  in  its  Nashville,   Tennessee  and  Fullerton,   California
distribution   centers.   WMS  controls  a  multitude  of  warehouse  functions,
including, among others: receiving; quality inspection;  package labeling; cross
docking;  material  storage;  order picking;  automated  replenishment;  trailer
loading;  routing;  and inventory  control.  The Company believes WMS will offer
significant  longer term  benefits,  including  higher  productivity,  increased
inventory and shipping accuracy and more efficient facility utilization.

RISK FACTORS

          The Company  believes that risk factors that may cause future  results
to differ  materially from the Company's  expectations  and should be considered
carefully  in  evaluating  the Company  and its  business  include,  but are not
limited to, the following  (which,  with the exception of "Other Risk  Factors,"
are listed in alphabetical  order).  These risk factors are in addition to those
mentioned  elsewhere in this report and in documents  incorporated  by reference
into this report.

          Competition.  The  paper-based  organizer  industry  and  the  various
related  organizing  products  industries in which the Company  participates are
intensely  competitive and subject to rapid change,  with competition for retail
shelf space of particular concern.  The Company competes primarily with a number
of companies that manufacture and market  paper-based  organizers and/or related
organizing  products through retail,  mail order or other direct sales channels.
The Company also competes to a lesser extent with companies that manufacture and
market  substitutes  for  paper-based   organizers  (e.g.,  handheld  electronic
organizers  such  as Palm  Pilot,  Windows  CE  products,  personal  information
management ("PIM") software and  Internet-resident  organizers).  Certain of the
Company's competitors have substantially greater financial, product development,
technical,  manufacturing and marketing resources than the Company. There can be
no assurance that the Company will be able to compete successfully in the future
or that  competitive  pressures  will not adversely  affect the Company's  sales
growth or gross or operating margins. (See Item 1. "Business Competition.")

          Customer Concentration. The Company's sales have been, and very likely
will continue to be,  concentrated among a small number of customers.  In fiscal
1999, sales to the Company's top five customers represented approximately 64% of
sales, with sales to Wal-Mart Stores, Inc., OfficeMax,  Inc., Office Depot, Inc.
and Staples, Inc., including their affiliates,  representing  approximately 25%,
13%, 11% and 11%, of sales,  respectively.  As a result, the Company's financial
results can be adversely  affected by the business  practices and actions of its
large  customers  in a number of ways,  including  timing and size of orders and
supply chain  management.  The loss of one or more of these customers or a shift
in the demand by, distribution  methods of or pricing to or terms of sale to one
or more of these customers could materially  adversely  affect the Company.  The
Company has no written agreement or other enforceable  understanding with any of
these  customers that relates to future  purchases by such  customers,  and thus
such  purchases  could be  delayed,  reduced  or  discontinued  at any  time.  A
termination  or other  adverse  change in the  Company's  relationship  with, an
adverse  change in the financial  condition  of, or a  significant  reduction in
sales to one or more of its top customers could have a materially adverse effect
on the Company. The write-off of any significant  receivable due from, delays in
payment by or return of product by these customers  could also adversely  impact
the Company. (See Item 1.  "Business -- Sales and Distribution.")

         Dependence on Continued Demand for Paper-based and other Low Technology
Organizing  Products.  The Company's future results depend upon ongoing consumer
demand for paper-based organizing products in general and the Company's products
in  particular.  In  recent  years,  technological  advances  have  led  to  the
proliferation of increasingly  powerful portable laptop and "palmtop"  computers
and handheld electronic  organizers,  such as Palm Pilot. Although many of these
products are currently  significantly  more  expensive and difficult to use than
the Company's comparable paper-based products, technological advances are likely
to improve the ease of use and  functionality and to continue to reduce the cost
of portable electronic products that contain features directly  competitive with
paper-based   organizers  and  planners  and  with  certain  related  organizing
products.  There can be no assurance that consumer  demand for  paper-based  and
other low  technology  products  will not decline or that the Company,  alone or
jointly with technology  companies,  will be able to  successfully  develop in a
timely  manner and market  new  paper-based  or  electronic  products  that will
achieve market acceptance.

         Dependence on Loans. Under the Amended and Restated Loan Agreement, the
Company  may  borrow,  subject to certain  conditions,  a maximum  aggregate  of
approximately   $120  million  in  bank  loans.   The  Company's   liquidity  is
significantly dependent upon its continued compliance with this loan agreement's
terms,  including,  among others, payment of interest and principal when due and
maintenance of certain  financial  ratios.  The Company believes that it will be
able to comply  with the terms of the loan  agreement  at least  through  fiscal
2000,  but there can be no assurance that it will be able to do so. (See Item 7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations Liquidity and Capital Resources - Bank Loans.")

          Dependence  on Key  Personnel.  The  Company's  success  depends  to a
significant extent upon certain of its officers, the loss of the services of any
of whom could  materially  adversely  affect the  Company.  The  Company  has no
employment  agreements with such persons. (See Item 10. "Directors and Executive
Officers of the Registrant.")

          Litigation.  The Company is a defendant in purported  securities class
action  lawsuits  related  to  allegations   concerning  the  Company's  alleged
misstatement of its financial  results of operations for the first through third
quarters of fiscal 1999. The Company believes it has meritorious defenses to the
actions and intends to defend them vigorously,  but there can be no assurance as
to the outcome. (See Item 3. "Legal Proceedings.")

         New  Products.  In  order  to  maintain  and  improve  its  competitive
position, the Company must continue to enhance its existing product lines and to
develop and introduce  innovative new products and line extensions that meet the
requirements of its existing and potential users. There can be no assurance that
such products will be developed and introduced in a timely fashion, or that they
will  achieve  market  acceptance  or that the timing and size of orders for new
products will not materially adversely affect the Company's financial results.

         Product Supply and Manufacturing  Risks. The Company depends on outside
foreign and  domestic  sources for the  manufacture  of a portion of its product
components  and finished  products and  subcontracts  the  production of all its
printed materials. The Company's partial reliance on outside vendors subjects it
to the risks of potential delays in the receipt,  or shortfalls in the levels or
quality,  of products or  components  and of possible  increases in its costs of
goods sold caused by, among other things,  increases in vendors'  prices,  trade
tariffs or duties. In addition,  due to the large number of sizes, materials and
styles of the  Company's  products and the inherent  uncertainty  of  predicting
customer demand levels, timing and mix, there is a risk that the Company may not
be able to  fulfill  certain  orders in a timely  fashion,  which may  result in
delayed  shipments  and/or lost business.  Day Runner seeks to reduce certain of
these risks by setting what it believes are  appropriate  safety stock inventory
levels of its most popular products and most frequently used product components,
having  multiple or alternative  supply  sources for key product  components and
possessing the internal  capability to manufacture  and/or  assemble many of its
core products. Nonetheless,  external or internal product or component supply or
manufacturing  delays,  shortfalls  or other  problems or cost  increases  could
adversely  affect the Company's  financial  results.  (See Item 1.  "Business --
Manufacturing.")

         Retailers' Supply Chain Management.  As publicly  announced by a number
of the  retailers  themselves  and many of their  suppliers,  certain large U.S.
retailers,   including  a  number  of  the  Company's  largest  customers,  have
intensified their focus on supply chain  management,  working to shift a greater
portion  of  the  inventory  burden  to  suppliers.  This  trend  increases  the
unpredictability of the Company's financial results.

          As  part  of  their  supply  chain  management,  retailers  have  been
substantially  tightening their inventories,  with the goals of reducing on-hand
inventories and increasing inventory turns.  Retailers' methods of accomplishing
these goals vary but generally can include the following,  among others: selling
down  inventory  until  they  reach  their  new,  lower  target  levels;  giving
promotions  a  shorter  time on the  shelf  to sell  through  to  consumers  and
returning other  merchandise  they might  otherwise have  ultimately  sold. This
inventory tightening may manifest itself in a number of ways that can reduce the
Company's sales and increase its costs, including but not limited to, retailers'
reductions of on-hand supplies of the Company's products;  retailers'  reduction
of everyday  selection of the  Company's  products;  accelerated  and  increased
product  returns;  unexpected  cancellations  of  commitments  for product;  and
reductions in minimum and average order  quantities,  with  potentially  related
increases  in the  frequency  of orders and the  Company's  associated  costs of
distribution.

         In addition,  the stress on minimizing  on-hand  inventories  in retail
stores can result in spotty stock  outages,  particularly  of popular  products,
which can result in lost or delayed sales to consumers. The Company believes the
trend toward  shifting the inventory  burden farther back in the supply chain is
likely to eventually include the vast majority of retail chains both in the U.S.
and abroad.

          Seasonal  Fluctuations.  The Company has historically  experienced and
expects to continue to experience significant seasonal fluctuations in its sales
and other financial  results that it believes have resulted and will continue to
result  primarily from its customers' and users' buying  patterns.  These buying
patterns  have  typically  adversely  affected  orders for the parent  Company's
products in the third quarter and for Filofax's products in the third and fourth
quarters of each fiscal year.

         Although it is  difficult to predict the future  seasonality  of sales,
the Company  believes that future  seasonality  should be influenced at least in
part  by  customer  and  user  buying  patterns   similar  to  those  that  have
historically affected the Company. Quarterly financial results are also affected
by new product  introductions  and line extensions,  the timing of large orders,
changes  in  product  sales  or  customer  mix,  vendor  and  customer  pricing,
production levels,  supply and manufacturing  delays, large customers' inventory
management and general industry and economic conditions.  The seasonality of the
Company's  financial results and the  unpredictability  of the factors affecting
such  seasonality  make the  Company's  quarterly and yearly  financial  results
difficult  to predict  and  subject  to  significant  fluctuation.  (See Item 7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Quarterly Results.")

         Small  Size.  The  Company   believes  that  the  retail   environment,
particularly  in the U.S. and Canada,  is  increasingly  comprised of very large
retailers and suppliers and that the Company's  relatively  small size magnifies
the effects upon it of shifts in this  environment.  Through its  exploration of
strategic  alternatives,  the  Company is seeking  ways in which to become  less
vulnerable,  whether  through  a  financial  partner,  some  form of  additional
financing,  or in alliance  with or as part of a larger  corporate  entity.  The
Company  believes  that the risks  associated  with its small size will  persist
until and unless it succeeds in reducing this vulnerability. The Company has not
made a decision as to any specific  strategic  alternative,  and there cannot be
any  assurance  that a  transaction  will result from the  Company's  process of
seeking strategic alternatives. (See Item 1.
"Business -- Seeking Strategic Alternatives.")

          Year 2000 Readiness.  The Company is surveying its vendors,  customers
and  others  on whom it relies to  assess  their  state of Year 2000  readiness.
However,  there can be no assurance  that the systems of other  parties on which
the  Company's  systems  rely will also be  compliant  or that any failure to be
compliant in this area by another  party will not have an adverse  effect on the
Company's  systems.  Furthermore,  although  the Company  believes  its internal
systems are Year 2000  compliant,  there can be no guarantee  that any or all of
the  Company's  systems are or will be Year 2000  compliant,  that the  ultimate
costs  required  to address  the Year 2000  issue  will not  exceed the  amounts
indicated  in  this  report  or  that  the  impact  of any  failure  to  achieve
substantial  Year 2000 compliance  will not have a materially  adverse effect on
the Company's  financial  condition.  (See Item 7. "Management's  Discussion and
Analysis of Financial Condition and Results of Operations Year 2000.")

         Other Risk Factors.  Other factors that may cause the Company's  future
performance to differ materially from its current expectations include:  general
economic  conditions,  especially  the  sustainability  of the current  economic
expansion;  the health of the retail  environment;  and  foreign  exchange  rate
fluctuations.



<PAGE>



PATENTS, COPYRIGHTS AND TRADEMARKS

             Day Runner  relies  upon,  among other  things,  a  combination  of
copyright, patent and trademark laws to protect its rights to certain aspects of
its products.  There can be no assurance,  however,  that the steps taken by Day
Runner to protect its proprietary  rights will be adequate to prevent  imitation
of its products or independent development by others of similar products.

         Day Runner  holds  numerous  patents in the United  States and  certain
foreign  countries.  The  Company  also has  several  United  States and foreign
patents  pending.  The patents the Company holds are related to  improvements in
the  structure of and devices  associated  with its  loose-leaf  binders and its
related  organizing  products.  We have also been issued United States copyright
registrations  covering  the text and the  compilation  and  editing  of data in
certain of our products.  Day Runner holds United  States and foreign  trademark
registrations  for a number of trademarks  including  "Day Runner" and "Filofax"
and various logos.

EMPLOYEES

             At  October 1, 1999,  Day  Runner  had 1,620  full-time  employees,
including  178  in  sales;  42 in  marketing;  210  in  executive,  finance  and
administration; 37 in product development; and 1,153 in manufacturing operations
and  distribution.  None of the Company's  employees is  represented  by a labor
union, and the Company has experienced no labor-related work stoppages.

ITEM 2.      PROPERTIES.

             Day  Runner's  principal   operating  facility  is  located  in  an
approximately  221,000  square-foot  building in  Fullerton,  California,  under
leases expiring in 2001. The leases include multiple, successive renewal options
that, if exercised in full,  would extend the lease terms to expire in 2011. The
Company's  corporate  headquarters  occupy  approximately  21,300 square feet in
Irvine,  California under a lease that expires in 2001. The Company's  LaVergne,
Tennessee  distribution  facility occupies an approximately  100,200 square-foot
facility under a lease expiring in 2004. The lease includes multiple, successive
renewal  options  that,  if exercised  in full,  would extend the lease terms to
expire in 2014.  The  Company's  Little Rock,  Arkansas  manufacturing  facility
occupies an approximately  84,000 square-foot facility under a lease expiring in
2002. This lease includes a renewal option that, if exercised,  would extend the
lease term to expire in 2007.  The  Company's  Canadian  subsidiary  occupies an
approximately  40,220  square-foot  facility under a lease expiring in 2008 that
includes  an option to extend the terms  through  2013.  The  Company's  Mexican
subsidiary occupies an approximately  70,000 square-foot  facility under a lease
expiring in 2006 that includes  options to extend the terms  through  2016.  The
Company's U.K. subsidiary's  principal  manufacturing  facility is located in an
approximately  23,300 square-foot  building in Burgess Hill,  England,  which is
owned  by the  Company's  U.K.  subsidiary.  Additionally,  the  Company's  U.K.
subsidiary's  corporate  headquarters occupy  approximately 5,700 square feet in
London,  England  under a lease  expiring in 2003.  The Company  believes it has
sufficient  space in its facilities or will be able to lease additional space on
acceptable terms to meet its needs for the foreseeable future.



<PAGE>



ITEM 3.      LEGAL PROCEEDINGS.

          In September 1999, two purported securities class action lawsuits were
filed in the United States  District Court for the Central  District  California
against the Company and certain of its officers and  directors.  The  complaints
allege that the Company  violated  Section 10(b) of the Securities  Exchange Act
and Rule 10b-5 thereunder  through the  misstatement of the Company's  financial
results of operations for the first through third quarters of fiscal 1999. These
alleged   misstatements   purportedly   consisted  of  improper  accounting  for
manufacturing  variances and other costs. The plaintiffs in both actions purport
to represent a class  consisting of all purchasers of the Company's Common Stock
between  October  20,  1998 and August 31,  1999.  The  plaintiffs  are  seeking
unspecified compensatory damages.

         The Company  expects  that these  actions will be  consolidated  into a
single action, that a lead plaintiff will be appointed,  and that a consolidated
amended complaint will be filed. None of these events has yet taken place. There
has been no discovery in any of the actions.  Based on the  allegations  and the
issues raised by the current complaint,  the Company believes it has meritorious
defenses to the actions and intends to defend them vigorously.

         The Company is not a party to any other litigation that, in the opinion
of management,  would reasonably be expected to have a materially adverse effect
on the Company.

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

             Inapplicable.

                                           PART II

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

              Day Runner's Common Stock is traded over-the-counter on The Nasdaq
Stock  Market  under the symbol  "DAYR."  The table below shows the high and low
closing sales prices for the Common Stock as reported on The Nasdaq Stock Market
for the fiscal years ended June 30, 1999 and 1998. As of October 1, 1999,  there
were 208  recordholders  of the  Company's  Common  Stock  based on  information
provided by the Company's transfer agent.

                                    FISCAL YEAR              FISCAL YEAR
                                      1999                     1998
                                ----------------        -----------------
             QUARTER            HIGH       LOW          HIGH         LOW

             First             $25-6/16  $16-14/16     $19-1/2      $16-1/4
             Second             22-1/2    11-14/16      21-1/16      18
             Third              14-1/16   10-3/8        23-1/16      18-7/16
             Fourth             13-3/16    9-5/8        25-1/4       18-1/8

       The Company has never paid cash  dividends.  It is the present  policy of
the  Company to retain  earnings to finance  the growth and  development  of its
business, and therefore the Company does not anticipate paying cash dividends on
its Common Stock in the foreseeable  future.  Certain financial covenants in the
Company's bank line of credit  agreement  restrict the Company's  ability to pay
cash dividends.

ITEM 6.      SELECTED FINANCIAL DATA.

         The selected  consolidated  statement of operations data for the fiscal
years ended June 30, 1999, 1998 and 1997 and the consolidated balance sheet data
at June 30, 1999 and 1998 are derived from,  and are qualified in their entirety
by reference to, the Company's  audited  consolidated  financial  statements and
notes thereto included elsewhere in this Annual Report that have been audited by
Deloitte & Touche LLP, independent auditors, as indicated in their report, which
is also  included  elsewhere in this Annual  Report.  The selected  consolidated
statement of  operations  data for the fiscal years ended June 30, 1996 and 1995
and the  consolidated  balance  sheet data at June 30,  1997,  1996 and 1995 are
derived from audited  consolidated  financial statements of the Company that are
not included herein.



<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                              FISCAL
                                       1999             1998             1997              1996             1995
                                   ------------    -------------     -------------    -------------     ------------
<S>                                <C>              <C>              <C>               <C>               <C>
Net sales......................    $ 196,212        $  167,841       $ 127,376         $  125,126        $  121,801
Cost of goods sold.............      108,087            80,663          60,452             59,920            62,175
                                   ---------        ----------       ---------         ----------        ----------
Gross profit...................       88,125            87,178          66,924             65,206            59,626
                                   ---------        ----------       ---------         ----------        ----------
Operating expenses:
   Selling, marketing and
    distribution...............       62,180            43,193          31,673             29,878            32,154
General and administrative.....       26,445            18,416          14,451             16,376            13,792
    Costs related to activities
     associated with the Filofax
     acquisition...............        1,072
    Costs incurred in pursuing
     acquisitions..............                                          1,451
                                   ---------        ----------       ---------         ----------        ----------
   Total operating expenses....       89,697            61,609          47,575             46,254            45,946
                                   ---------        ----------       ---------         ----------        ----------
(Loss) income from
    operations.................       (1,572)           25,569          19,349             18,952            13,680
Net interest expense (income)..        5,215              (172)         (1,301)              (706)             (161)
                                   ---------        ----------       ---------         ----------        ----------
(Loss) income before (benefit).
    provision for income taxes.       (6,787)           25,741          20,650             19,658            13,841
(Benefit) provision for
    income taxes...............       (2,789)            9,833           8,102              7,840             5,863
                                   ---------        ----------       ---------         ----------        ----------
Net (loss) income..............    $  (3,998)       $   15,908       $  12,548         $   11,818          $  7,978
                                   =========        ==========       =========         ==========          ========
(Loss) earnings per common share:
   Basic.......................    $   (0.34)       $     1.38       $    1.01         $     0.95           $  0.66
                                   ==========       ==========       =========         ==========           =======
   Diluted                         $   (0.34)       $     1.27       $    0.95         $     0.89           $  0.63
                                   ==========       ==========       =========         ==========           =======
Weighted average number of
   common  shares outstanding:
   Basic.......................       11,896            11,533          12,432             12,468            12,176
                                   =========        ==========       =========         ==========        ==========
Diluted........................       11,896            12,523          13,182             13,252            12,748
                                   =========        ==========       =========         ==========         =========
  </TABLE>


<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEET DATA:
   (IN THOUSANDS)

                                                                           JUNE 30,
                                  1999               1998             1997              1996               1995
                              ------------       ------------     ------------      -------------      -------------
<S>                           <C>                 <C>              <C>               <C>                    <C>
Working capital.............  $   70,491          $  57,922        $  50,710         $   51,653             38,260
Total assets................     216,311            101,179           78,880             77,931             63,650
Short-term debt.............       2,077              2,716              452                                   152
Long-term liabilities.......     105,568                                                                        12
Stockholders' equity........      70,397             74,532           59,484             59,498             44,787

</TABLE>


<PAGE>



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

         The following  discussion  should be read in  conjunction  with, and is
qualified in its entirety by, the  Consolidated  Financial  Statements and Notes
thereto  included  elsewhere  in this  Annual  Report.  Historical  results  and
percentage   relationships  among  any  amounts  included  in  the  Consolidated
Financial  Statements  are not  necessarily  indicative  of trends in  operating
results for any future period.

OVERVIEW

         Since  the  Company's  introduction  of the  first  Day  Runner  System
organizer in 1982, the Company's revenues have been generated by sales primarily
of  organizers  and planners and  secondarily  of refills.  Since fiscal 1995, a
majority of the Company's  growth has resulted from sales of related  organizing
products.  For a number of years,  the Company focused the great majority of its
product  development,  sales and marketing  efforts on the U.S.  office products
channel and the U.S. mass market channel.  With the October 30, 1998 acquisition
of Filofax, the Company substantially  increased its emphasis on markets outside
the U.S.  The office  products  channel,  the mass  market  channel and sales to
foreign customers accounted for 35.1%, 35.6% and 23.4%, respectively,  of fiscal
1999 net sales.

RESULTS OF OPERATIONS
          The  following  tables  set  forth,  for the  periods  indicated,  the
percentages  that selected  statement of operations  items bear to sales and the
percentage change in the dollar amounts of such items.
<TABLE>
<CAPTION>

                                                              PERCENTAGE OF NET SALES
                                                               YEARS ENDED JUNE 30,
                                                       1999             1998           1997
                                                     ---------       --------       ---------

<S>                                                    <C>            <C>             <C>
Net sales....................................          100.0%         100.0%          100.0%
Cost of goods sold...........................           55.1           48.1            47.5
                                                      ------          -----           -----
Gross profit.................................           44.9           51.9            52.5
                                                      ------          -----           -----
Operating expenses:
   Selling, marketing and distribution.......           31.7           25.7            24.9
   General and administrative................           13.5           11.0            11.3
   Costs related to activities associated with the
    Filofax acquisition......................            0.5
   Costs incurred in pursuing acquisitions...
    1.1
    Total operating expenses.................           45.7           36.7            37.3
                                                      ------          -----           -----
(Loss) income from operations................           (0.8)          15.2            15.2
Net interest expense (income)................            2.6           (0.1)           (1.0)
                                                      ------          -----           -----
(Loss) income before (benefit) provision
    for income taxes.........................           (3.4)          15.3            16.2
(Benefit) provision for income taxes.........           (1.4)           5.8             6.3
                                                      ------          -----           -----
Net (loss) income............................           (2.0)%          9.5 %           9.9%
                                                      ======          =====           =====

</TABLE>


<PAGE>



<TABLE>
<CAPTION>


                                                                 PERCENTAGE CHANGE
                                                        FISCAL 1998                FISCAL 1997
                                                            TO                         TO
                                                        FISCAL 1999                FISCAL 1998
                                                   --------------------      --------------------
<S>                                                       <C>                          <C>
Net sales.........................................        16.9%                        31.8%
Cost of goods sold................................        34.0                         33.4
Gross profit......................................         1.1                         30.3
Operating expenses:
   Selling, marketing and distribution............        44.0                         36.4
   General and administrative.....................        43.6                         27.4
   Costs related to activities associated with the
    Filofax acquisition...........................       100.0
   Costs incurred in pursuing acquisitions........                                   (100.0)
    Total operating expenses......................        45.6                         29.5
(Loss) income from operations.....................      (106.1)                        32.1
Net interest expense (income).....................      3132.0                        (86.8)
(Loss) income before (benefit)
 provision for income taxes.......................      (126.4)                        24.7
(Benefit) provision for income taxes..............      (128.4)                        21.4
Net (loss) income.................................      (125.1)                        26.8

</TABLE>

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED WITH  FISCAL YEAR ENDED JUNE 30, 1998

         Net Sales.  Net sales ("sales") consist of revenues from gross product
shipments net of allowances  for returns,  rebates and credits.  In fiscal 1999,
sales  increased by $28,371,000,  or 16.9%,  compared with fiscal 1998 primarily
because of the Filofax  acquisition  but were lower than  anticipated  primarily
because inventory tightening on the part of a number of the Company's large U.S.
customers  constrained the Company's sales and increased product returns.  Sales
were primarily to mass market  customers and  secondarily to the office products
channel.  Sales to the office  products  channel  decreased by  $10,464,000,  or
13.2%;  sales to foreign customers grew by $33,805,000 or 277.5%;  sales to mass
market  customers  grew by  $4,147,000,  or 6.3%;  and  sales  to  miscellaneous
customers  grouped  together as "other,"  grew by  $883,000,  or 8.3%.  Sales of
related organizing  products increased by $19,628,000 or 59.7%; sales of refills
increased  by  $11,720,000,  or 22.6%;  and  sales of  organizers  and  planners
decreased during the year by $2,977,000, or 3.6%.


         Gross Profit.  Gross profit is sales less cost of goods sold,  which is
comprised of materials,  labor, and manufacturing overhead.  Gross profit may be
affected by, among other  things,  product mix,  production  levels,  changes in
vendor and customer  prices and discounts,  sales volume and growth rate,  sales
returns  and  other  allowances,   purchasing  and  manufacturing  efficiencies,
tariffs,  duties,  and inventory carrying costs. Gross profit as a percentage of
sales  decreased  from 51.9% of sales in fiscal 1998 to 44.9% of sales in fiscal
1999 primarily  because of a shift in the Company's Day Runner brand product mix
(including sub-brands) to lower margin products and an increase in the provision
for sales returns based upon recent higher sales returns  experience  (which, in
addition to  lowering  net sales,  adversely  impacted  manufacturing  costs and
variances), both of which the Company believes were largely related to inventory
tightening.

          Operating Expenses. Total operating expenses increased as a percentage
of sales  from 36.7% for fiscal  1998 to 45.7% for  fiscal  1999  because of the
Company's  decreased  ability to absorb  costs as a result of the lower sales of
the parent company operation and because of Filofax's seasonality.  (The Company
had the benefit of only two months of Filofax's  four-month busy season, but had
the  expenses  associated  with six months of its  eight-month  slower  period.)
Excluding the $1,072,000 costs related to activities associated with the Filofax
acquisition, fiscal 1999 operating expenses would have been 45.2% of sales.

          Selling,  marketing and distribution expenses increased by $18,987,000
primarily because of expenses  associated with recently  introduced products and
secondarily  because of the  addition of Filofax's  expenses and  increased as a
percentage of sales from 25.7% to 31.7% due to the expenses  associated with the
recently introduced products.  General and administrative  expenses increased by
$8,029,000 and from 11.0% to 13.5% as a percentage of sales primarily because of
the addition of  Filofax's  expenses and  secondarily  because of the  Company's
inability to absorb higher costs as a result of lower than anticipated sales.

         Net  Interest  Expense.  Because  of  the  increase  in  the  Company's
long-term debt, which was incurred primarily to finance the Filofax acquisition,
net interest  expense for fiscal 1999 was $5,215,000  compared with net interest
income of $172,000 for fiscal 1998.

          Income Taxes.  The Company's  fiscal 1999 effective tax rate was 41.0%
compared with an effective tax rate of 38.2% for fiscal 1998.

         Net (Loss)  Income.  The Company  realized a net loss of  $3,998,000 in
fiscal 1999 compared with a net income of $15,908,000 in fiscal 1998.  Excluding
costs related to activities associated with the Filofax acquisition, fiscal 1999
net loss would have been $2,926,000.

         Earnings  Per  Share.  In  fiscal  1999,  the  Company  repurchased  an
aggregate of 96,000 shares of Common Stock under the Company's stock  repurchase
program.  These  repurchases  reduced the number of shares that would  otherwise
have been used to  calculate  earnings  per share  (see Note 17 to  Consolidated
Financial Statements).

FISCAL YEAR ENDED JUNE 30, 1998 COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1997

         Net Sales. In fiscal 1998,  sales  increased by $40,465,000,  or 31.8%,
compared  with  fiscal  1997  primarily  because of higher unit sales of related
organizing products. Product sales were primarily to the office products channel
and secondarily to mass market  customers.  Sales to the office products channel
increased  by  $19,887,000,  or 33.5%;  sales to mass market  customers  grew by
$11,967,000, or 22.2%; sales to foreign customers grew by $6,599,000, or 118.2%;
and sales to  miscellaneous  customers  grouped  together  as  "other,"  grew by
$2,012,000,  or  23.4%.  Sales  of  related  organizing  products  increased  by
$22,642,000,  or 220.8%;  sales of organizers and planners  increased during the
year by $9,211,000,  or 12.5%; and sales of refills increased by $8,612,000,  or
19.9%.

         Gross  Profit.  Gross profit as a percentage  of sales  decreased  from
52.5% in fiscal 1997 to 51.9% in fiscal 1998 primarily  because the gross profit
levels of certain of the Company's smaller  operations are lower as a percentage
of sales than those of the parent company.

         Operating Expenses.  Total operating expenses increased by $14,034,000,
or  29.5%,  for  fiscal  1998  compared  with  fiscal  1997 but  decreased  as a
percentage of sales from 37.3% to 36.7% primarily because operating expenses for
fiscal 1997 included $1,451,000 of costs incurred in pursuing  acquisitions that
did not come to fruition. No such costs were incurred in fiscal 1998.

         Excluding  the  fiscal  1997  costs  of  pursuing  acquisitions,  total
operating expenses would have grown by $15,485,000, or 33.6%, and increased as a
percentage of sales from 36.2% to 36.7%.

         Primarily  because  of  expenses   associated  with  new  and  recently
introduced products,  selling,  marketing and distribution expenses increased by
$11,520,000  and from  24.9% to 25.7% as a  percentage  of  sales.  General  and
administrative  expenses  increased by  $3,965,000,  but declined  from 11.3% to
11.0% as a percentage  of sales  primarily  because of the  Company's  increased
ability to absorb fixed costs as a result of higher sales.

         Net Interest Income.  Primarily  because of a decrease in the Company's
cash available for short-term investment resulting from the Company's repurchase
of Common  Stock,  net interest  income in fiscal 1998 compared with fiscal 1997
decreased by $1,129,000 and by 0.9% as a percentage of net sales.

         Income  Taxes.  Primarily  as  a  result  of  state  tax  planning  and
secondarily  the continued  growth of the Company's  Hong Kong  subsidiary,  the
Company's  fiscal 1998  effective  tax rate was 38.2%,  compared  with 39.2% for
fiscal 1997.

         Net  Income.  Compared  with  fiscal  1997,  net income for fiscal 1998
increased by $3,360,000,  or 26.8%.  Excluding the fiscal 1997 costs incurred in
pursuing  acquisitions,  fiscal 1998 net income would have grown $2,471,000,  or
18.4%, compared with fiscal 1997.

         Earnings  Per  Share.  In  fiscal  1998,  the  Company  repurchased  an
aggregate of 695,588 shares from certain  officers and directors of the Company.
Separately,  during fiscal 1997,  the Company  repurchased  1,026,200  shares of
Common Stock under the Company's stock  repurchase  program.  These  repurchases
reduced the number of shares that would  otherwise  have been used to  calculate
earnings per share. (See Note 13 to Consolidated Financial Statements).

QUARTERLY RESULTS

         The   following   tables  set  forth   selected   unaudited   quarterly
consolidated  financial  data and the  percentages  such items  represent of net
sales.  The quarterly  consolidated  financial  data reflect,  in the opinion of
management of the Company,  all adjustments (which include only normal recurring
adjustments)  necessary  to present  fairly the results of  operations  for such
periods.  Results of any one or more quarters are not necessarily  indicative of
annual results or continuing trends.


<PAGE>


<TABLE>
<CAPTION>

                                                                              QUARTERS ENDED
                                             JUNE 30,                MARCH 31,           DECEMBER 31,         SEPTEMBER 30,
                                               1999                    1999                  1998                  1998
                                               ----                    ----                  ----                  ----
                                                               (In thousands, except per share amounts)
<S>                                     <C>         <C>        <C>         <C>        <C>         <C>       <C>         <C>
Net sales...........................    $  47,700   100.0%     $  36,216   100.0%     $  64,565   100.0%    $  47,731   100.0%
Gross profit........................       17,700    37.1         16,495    45.5         31,059    48.1        22,871    47.9
Total operating expenses............       24,535    51.4         21,811    60.2         26,429    40.9        16,922    35.4
(Loss) income from operations.......       (6,835)  (14.3)        (5,316)  (14.7)         4,630     7.2         5,949    12.5
Net interest expense ...............        2,056     4.3          1,770     4.9          1,356     2.1            33     0.1
(Loss) income before (benefit)
    provision for income taxes......       (8,891)  (18.6)        (7,086)  (19.6)         3,274     5.2         5,916    12.4
Net (loss) income...................    $  (5,249)  (11.0)%    $  (4,448)  (12.3)%    $   2,030     3.1%     $  3,669     7.7%
(Loss) earnings per common share:
     Basic..........................    $  (0.44)              $   (0.37)             $    0.17               $  0.31
     Diluted........................    $  (0.44)              $   (0.37)             $    0.16               $  0.29
Weighted average number of
   common shares outstanding:
     Basic..........................       11,886                 11,900                 11,883                11,931
     Diluted........................       11,886                 11,900                 12,564                12,656

</TABLE>


<TABLE>
<CAPTION>

                                                                              QUARTERS ENDED
                                             JUNE 30,                MARCH 31,           DECEMBER 31,         SEPTEMBER 30,
                                               1998                    1998                  1997                  1997
                                               ----                    ----                  ----                  ----
                                                               (In thousands, except per share amounts)
<S>                                     <C>         <C>        <C>         <C>        <C>         <C>       <C>         <C>
Net sales...........................    $  50,927   100.0%     $  29,388   100.0%     $  49,388   100.0%    $  38,138   100.0%
Gross profit........................       26,057    51.2         15,253    51.9         25,762    52.2        20,106    52.7
Total operating expenses............       18,392    36.1         13,474    45.8         16,677    33.8        13,066    34.3
Income from operations..............        7,665    15.1          1,779     6.1          9,085    18.4         7,040    18.4
Net interest (income) expense.......         (123)   (0.2)            16     0.1             30     0.1           (95)   (0.3)
Income before provision for
   income taxes.....................        7,788    15.3          1,763     6.0          9,055    18.3         7,135    18.7
Net income..........................    $   4,957     9.7%     $   1,075     3.7%     $   5,524    11.2%     $  4,352    11.4%
Earnings per common share:
     Basic..........................    $   0.42               $    0.09              $    0.49              $   0.38
     Diluted........................    $   0.39               $    0.09              $    0.45              $  0.35
Weighted average number of
   common shares outstanding:
     Basic..........................       11,776                 11,571                 11,273               11,513
     Diluted........................       12,695                 12,520                 12,323               12,511
</TABLE>

SEASONAL FLUCTUATIONS

         The Company  has  historically  experienced  and expects to continue to
experience  significant  seasonal  fluctuations in its sales and other financial
results that it believes  have  resulted and will  continue to result  primarily
from its  customers'  and users'  buying  patterns.  These buying  patterns have
typically  adversely  affected orders for the parent  company's  products in the
third  quarter and for  Filofax's  products in the third and fourth  quarters of
each fiscal year.

         Although it is  difficult to predict the future  seasonality  of sales,
the Company  believes that future  seasonality  should be influenced at least in
part  by  customer  and  user  buying  patterns   similar  to  those  that  have
historically affected the Company. Quarterly financial results are also affected
by new product  introductions  and line extensions,  the timing of large orders,
changes  in  product  sales  or  customer  mix,  vendor  and  customer  pricing,
production levels,  supply and manufacturing  delays, large customers' inventory
management and general industry and economic conditions.  The seasonality of the
Company's  financial results and the  unpredictability  of the factors affecting
such  seasonality  make the  Company's  quarterly and yearly  financial  results
difficult to predict and subject to significant fluctuation.

LIQUIDITY AND CAPITAL RESOURCES

         General.  The  Company's  cash and cash  equivalents  at June 30,  1999
increased to $9,132,000  from  $2,923,000 at June 30, 1998. In fiscal 1999,  net
cash of $16,580,000 provided by operating activities and $87,640,000 provided by
financing  activities were partially  offset by net cash of $98,513,000  used in
investing activities.

         Of the  $16,580,000  net amount  provided  by the  Company's  operating
activities,  $19,039,000 was provided by the provision for doubtful accounts and
sales returns and other allowances, $10,240,000 was provided by depreciation and
amortization,   $7,432,000  was  provided  by  a  decrease  in  inventories  and
$4,508,000 was provided by an increase in accounts  payable.  These amounts were
partially  offset by an increase of  $15,268,000 in accounts  receivable,  a net
loss of  $3,998,000,  an increase of $3,971,000 in deferred  income tax benefit,
and a decrease of $1,831,000 in accrued expenses.

         Accounts receivable (net) at June 30, 1999 increased by $10,673,000, or
32.8%,  from the amount at June 30, 1998  primarily  due to the  acquisition  of
Filofax.

         Inventories  increased by $4,751,000,  or 12.6%, from the June 30, 1998
amount  primarily  because of the  inventories  of  Filofax,  which the  Company
acquired during fiscal 1999,  which amount was partially offset by a decrease in
inventories at the parent company.

         Of  the  $98,513,000  net  amount  used  in  the  Company's   investing
activities,  $88,017,000 was used to acquire Filofax and $10,495,000 was used to
acquire primarily machinery and equipment and secondarily computer equipment and
software.

         Of the  $87,640,000  net amount  provided  by the  Company's  financing
activities,  $89,924,000 was due to an increase in net borrowings on the line of
credit.  This  amount  was  partially  offset  by  $1,490,000  that  was used to
repurchase  96,000 shares of the Company's  Common Stock and $1,200,000 that was
used for the payment of financing fees in connection with the line of credit.

         Bank  Loans.  On  September  23,  1998,  the  Company  entered  into  a
$160,000,000  Revolving Loan Agreement (the "Loan  Agreement")  with Wells Fargo
Bank, National  Association  ("Wells Fargo").  Effective November 24, 1998, this
amount was voluntarily reduced to $145,000,000,  and unamortized  financing fees
of approximately $84,000 were charged to interest expense. The loan facility was
syndicated  with a group of banks in December  1998.  Borrowings  bore  interest
either at floating rates based on the higher of Wells Fargo's prime rate and the
Federal Funds Rate published by the Federal Reserve Bank of New York or at fixed
rates  calculated by reference to the interest rates at which Wells Fargo offers
deposits  in U.S.  dollars in amounts  approximately  equal to the amount of the
relevant  loan and for a period  of time  comparable  to the  number of days the
relevant loan remains outstanding, together with a margin. During the year ended
June 30, 1999,  the  weighted-average  interest rate was 6.33%.  During the year
ended June 30,  1999,  under the terms of the Loan  Agreement,  the Company paid
Wells Fargo a financing fee of $1,200,000, $205,000 of which was expensed in the
fiscal year ended June 30, 1999. At June 30, 1999, the Company had  $105,317,000
outstanding  under this Loan  Agreement  and had  outstanding  letters of credit
totaling approximately $218,000.

          On June 29, 1999, the Company  obtained from the banks a waiver of the
fixed charge  coverage ratio and the funded debt ratio covenants for the quarter
ended June 30, 1999. The waiver was  subsequently  extended  through October 15,
1999. On October 12, 1999,  the Company and the banks amended the Loan Agreement
(the  "Amended  and Restated  Loan  Agreement").  The Amended and Restated  Loan
Agreement  converts the entire  outstanding  revolving  loan balance into a term
loan portion of $90,400,000 and a revolving  credit loan portion of $29,600,000.
The term loan  matures on  September  30, 2001,  and the  revolving  credit loan
facility  matures on October 9, 2000. The maturity date of the revolving  credit
loan  facility  will be  automatically  extended  through  September  30,  2001,
provided  that the Company  achieves on September 30, 2000 a minimum  EBITDA,  a
minimum fixed charge  coverage ratio and a maximum senior funded debt ratio,  as
defined in the amended agreement. As a result, unamortized financing fees on the
Loan Agreement of approximately  $955,000 will be charged to interest expense in
October 1999.

          The Amended and Restated  Loan  Agreement is secured by the  Company's
assets and  includes,  among other  things,  financial  covenants  requiring the
maintenance  of a minimum fixed charge  coverage  ratio,  EBITDA,  stockholders'
equity and current  ratio,  and a maximum  senior funded debt coverage ratio and
operating expenses to net sales ratio, as defined in the amended agreement.  The
Amended and  Restated  Loan  Agreement  also  limits,  among other  things,  the
incurrence of liens and other indebtedness, mergers, consolidations, the sale of
assets,  annual capital  expenditures,  advances,  investments  and loans by the
Company  and  its  subsidiaries,   dividends,   stock  repurchases  and  certain
transactions  with affiliates.  It permits up to $10,000,000 of secured debt for
currency hedging purposes and up to $1,500,000 of unsecured overdraft borrowings
for foreign subsidiaries.

         The  outstanding  balances bear  interest at the Company's  election at
either (i) the higher of the Agent Bank's  prime rate or the Federal  Funds Rate
plus 50.00 basis  points,  plus an interest  rate margin  ranging  from 12.50 to
200.00 basis points,  or (ii) the  applicable  eurodollar  rate plus an interest
rate margin  ranging from 112.50 to 300.00 basis points,  depending on the level
of the funded debt ratio at the end of each fiscal quarter.

         Under the Amended and Restated Loan Agreement, the Company is obligated
to pay certain fees including an unused  revolving  loan  commitment fee ranging
from 37.50 to 67.50 basis  points which varies with the level of the funded debt
ratio at the end of each fiscal quarter, payable quarterly in arrears; letter of
credit fees ranging from 112.50 to 300.00 basis points which vary with the level
of the  funded  debt  ratio at the time the  letter  of credit  is  issued;  and
amendment and other standard fees which are currently estimated at approximately
$1,500,000.

         Foreign  Currency.  The Company has not incurred  significant  gains or
losses  from  foreign  currency  exchange  rate  fluctuations.   The  continuing
expansion of the Company's  international  operations could, however,  result in
larger gains or losses as a result of fluctuations in foreign currency  exchange
rates as those  subsidiaries  conduct  business  in whole or in part in  foreign
currencies. The Company's exposure to the impact of interest changes and foreign
currency  fluctuations  has increased as a result of its  acquisition of Filofax
because the acquisition has significantly  expanded the Company's  international
operations and because a portion of the debt incurred to fund the acquisition is
in pounds  Sterling.  The Company entered into a call option with respect to the
purchase of Filofax  shares in the tender  offer to limit the effect of exchange
rate fluctuations.  The Company does not trade in financial instruments nor does
it enter into such contracts for speculative purposes.

         A single currency  called the euro was introduced in certain  countries
in Europe on January 1, 1999, but will not, at least for the foreseeable future,
be introduced in the United Kingdom. The use of a single currency may affect the
ability of Day Runner and other companies to price their products differently in
various  European  markets.  The Company is evaluating  the impact of the single
currency in these markets.

         Adequacy  of  Capital.   The  Company  believes  that  cash  flow  from
operations,  vendor  credit,  its  existing  working  capital  and its  term and
revolving  credit loans will be sufficient to satisfy the Company's  anticipated
cash  requirements  at least through fiscal 2000.  Nonetheless,  the Company may
seek  additional  sources of  capital as  necessary  or  appropriate  to finance
acquisitions  or to  otherwise  finance  the  Company's  growth  or  operations;
however,  there can be no assurance  that such funds if needed will be available
on favorable terms, if at all.

YEAR 2000

          The year  2000  issue  refers to the  inability  of  certain  computer
systems,  as well as certain  hardware and equipment  containing  date-sensitive
data, to recognize  accurately dates commencing on or after January 1, 2000, and
even  possibly  certain  dates in 1999.  This has the  potential  to affect  the
operation of these systems adversely and materially.  The Company has identified
four  phases  in  its  year  2000  compliance  efforts:  discovery;  assessment;
remediation; and applicable testing and verification.  The Company has completed
the discovery and assessment phases for its own systems and applications and has
substantially  completed  the  remediation  phase  for  all its  major  business
systems.   The  Company  expects  the   remediation,   applicable   testing  and
verification  phases to be complete by November 30, 1999.  The Company  believes
that its  modification of existing  software and conversions to new software for
certain  tasks will  prevent the year 2000  transition  from posing  significant
internal operational problems.

          The Company  currently  estimates that total costs related to the year
2000  issue  will  be   approximately   $2,000,000  to   $2,500,000,   of  which
approximately $1,945,000 had been incurred as of June 30, 1999. The Company does
not anticipate that the costs of these  modifications  and  conversions  will be
material to its financial  position or results of operations.  Expenditures will
be expensed or capitalized  as  appropriate.  Although the Company  believes its
internal systems are year 2000 compliant,  there can be no guarantee that any or
all of the  Company's  systems  are or will be year  2000  compliant,  that  the
ultimate  costs  required  to  address  the year 2000  issue will not exceed the
amounts  indicated  above,  or  that  the  impact  of  any  failure  to  achieve
substantial  year 2000 compliance  will not have a materially  adverse effect on
the Company's financial condition.

          The Company has been  surveying  its vendors,  customers and others on
whom it relies to assess  their state of year 2000  readiness.  As of October 1,
1999,  the Company has:  defined Day Runner's year 2000  compliance  definition;
sent year 2000  questionnaires;  advised critical  suppliers and customers as to
Day Runner's year 2000 readiness; and received responses from a large portion of
these  parties.  There can be no  assurance,  however,  that the  systems of any
outside party on which the Company's systems rely will also be compliant or that
any failure to be  compliant  in this area by one or more of these  parties will
not have an adverse effect on the Company's systems.

          Suppliers of Raw Materials, Product Components and Finished Goods. The
Company has been assessing the year 2000 readiness of its significant suppliers.
A large portion have responded that their year 2000 readiness plans are complete
or that they plan to be year 2000 compliant prior to December 31, 1999.

          Potential  Materially  Adverse  Impact and  Contingency  Plans.  The
`         failure of multiple significant suppliers to supply raw materials,
          product components, finished   goods  and  ancillary   goods  for  a
          prolonged  period  could substantially impair the Company's ability to
          ship product to its customers in a timely and reliable manner and
          could, thus, have a materially adverse effect on the Company's
          business. The Company does not have a basis at this time to determine
          whether such a scenario is likely to occur.

          The Company is therefore  continuing to develop  contingency  plans to
cope with potential year 2000 failure on the part of its significant  suppliers.
The contingency  plans include,  where  appropriate,  (1) placing orders for the
receipt of  products  prior to  potential  business  disruptions;  (2)  defining
alternate  sources  for  suppliers  who are  determined  to be at a high risk of
noncompliance or business disruption; and (3) defining manual work processes.

          Suppliers of Other Goods and  Services.  In addition,  the Company has
identified and has been contacting its suppliers of business-critical  goods and
services and has received responses from a large portion of these parties.

          Potential Materially Adverse Impact and Contingency Plans. The failure
          in one or more geographic regions of  third-party systems over which
          the Company has no control  and for which the  Company  has  no  ready
          substitute,  such as, but not limited to, power and telecommunications
          service could make it necessary for the Company to temporarily  close
          facilities in the affected  geographic  areas and have  additional
          materially  adverse  effects on the  Company's  business.  The Company
          is developing appropriate contingency plans for any  business-critical
          supplier  that does not provide an adequate  response to the Company
          concerning its year 2000 readiness on a timely basis and has in place
          a business resumption plan  that  addresses  recovery  from  various
          types  of disasters, including significant interruptions to data flows
          and to distribution capabilities at the Company's major U.S.
          distribution centers.

         The Company has made the  necessary  preparations  for the execution of
         this contingency plan.  However, there can be no assurance that the
         Company will be able to complete its contingency preparations on that
         schedule.


EFFECTS OF INFLATION

                  The Company  believes  that  inflation  has not had a material
effect on its operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          The  primary  risk   inherent  in  the  Company's   market   sensitive
instruments is the risk of loss resulting from interest rate  fluctuations.  The
Company's term and revolving  credit loans bear interest either at the Company's
election at (i) the higher of the Agent Bank's  prime rate or the Federal  Funds
Rate plus 50.00 basis points, plus an interest rate margin ranging from 12.50 to
200.00 basis points,  or (ii) the  applicable  euro dollar rate plus an interest
rate margin  ranging from 112.50 to 300.00 basis points,  depending on the level
of the funded  debt ratio at the end of each  fiscal  quarter.  The table  below
provides information as of June 30, 1999 about the Company's long-term liability
obligations that are sensitive to changes in interest rates, including principal
cash flows by scheduled maturity,  weighted-average  interest rate and estimated
fair value.  The  weighted-average  interest rates presented are the rates as of
June 30, 1999 as calculated under the Amended and Restated Loan Agremeent.

<TABLE>
<CAPTION>


                                                             PRINCIPAL MATURING IN
                                                                                                                   FAIR
                        2000        2001        2002        2003         2004        THEREAFTER         TOTAL      VALUE
                        ----        ----        ----        ----         ----        ----------         -----      -----
                                                        (Dollars in thousands)

<S>                                          <C>                                                     <C>         <C>
Term and revolving
  credit loans                               $105,317                                                $105,317    $105,317
Average interest rate                            9.30%

Other debt:
Loan notes            $  2,077                                            $251                        $ 2,328     $ 2,328
Average interest rate     4.80%
</TABLE>


          The  Company's  future  earnings  and cash  flows  relating  to market
sensitive  instruments are primarily  dependent upon prevailing  market interest
rate. Based upon the Company's  borrowing mix as of June 30, 1999, a 1% increase
or decrease in the interest rates would increase or decrease pretax earnings and
cash flow by approximately $1,100,000.

FOREIGN CURRENCY EXPOSURE


         The Company's  reporting  currency is the U.S. dollar, and interest and
principal  payments on its  long-term  debts will be in U.S.  dollars and pounds
Sterling.  A portion of revenues and operating  costs are derived from sales and
operations  outside the United  States and are incurred in a number of different
currencies.  Accordingly,  fluctuations  in currency  exchange  rates may have a
significant  effect on the  Company's  results of  operations  and balance sheet
data. The Company has no significant  exposure from financial  instruments which
would require quantitative disclosure.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          See the  Consolidated  Financial  Statements  of the  Company  and its
subsidiaries included herein and listed in Item 14(a) of this Annual Report.

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

             Inapplicable.

                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The  information  required by this Item is incorporated by reference to
the sections of the Company's  definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on December 9, 1999, entitled "Election of Directors"
and "Executive Officers," to be filed with the Commission.

ITEM 11.     EXECUTIVE COMPENSATION.

         The  information  required by this Item is incorporated by reference to
the sections of the Company's  definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on December 9, 1999,  entitled "Election of Directors
-- Compensation of Directors,"  "Executive  Compensation and Other Information,"
"Compensation  Committee  Report on  Executive  Compensation"  and  "Performance
Graph," to be filed with the Commission.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT.

         The  information  required by this Item is incorporated by reference to
the section of the Company's  definitive  Proxy Statement for the Annual Meeting
of Stockholders to be held on December 9, 1999, entitled "Common Stock Ownership
of Principal Stockholders and Management," to be filed with the Commission.

ITEM 13.     CERTAIN TRANSACTIONS.

         The  information  required by this Item is incorporated by reference to
the sections of the Company's  definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on December 9, 1999,  entitled "Election of Directors
--   Compensation   of  Directors"  and  "Certain   Relationships   and  Related
Transactions," to be filed with the Commission.



<PAGE>

<TABLE>
<CAPTION>


                                           PART IV

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

<S>          <C>                                                                      <C>
(A)          THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:

             1.       CONSOLIDATED FINANCIAL STATEMENTS                                   PAGE

                      Independent Auditors' Report                                         F-1

                      Consolidated Balance Sheets at June 30, 1999 and
                      1998                                                                 F-2

                      Consolidated Statements of Operations for Each of the Three
                      Years in the Period Ended June 30, 1999                              F-3



                      Consolidated Statements of Stockholders' Equity for Each
                      of the Three Years in the Period Ended June 30, 1999                 F-4

                      Consolidated Statements of Cash Flows for Each of the
                      Three Years in the Period Ended June 30, 1999                        F-5

                      Notes to Consolidated Financial Statements                           F-6

             2.       FINANCIAL STATEMENT SCHEDULES

                      Independent Auditors' Report                                         S-1

                      Schedule II  -  Valuation and Qualifying Accounts                    S-2

                      Schedules  which are not listed  above  have been  omitted
                      because  they  are  not  applicable  or  the   information
                      required  to be  set  forth  therein  is  included  in the
                      Consolidated Financial Statements or notes thereto.

             3.       LIST OF EXHIBITS

                     3.1    Certificate  of  Incorporation   of  the  Registrant,
                            as amended(1)

                     3.2    Bylaws of the Registrant(2)

                    10.1     Amended and Restated 1986 Stock Option Plan, including forms of
                             Stock Option  Agreements and Stock  Purchase  Agreement(3)
                             and  Amendment  Nos.  1(4),  2(5),  3(5) and 4(6)  thereto
                             dated July 17, 1992,  February 28,  1993, May 10, 1993 and
                             May 12, 1994, respectively(7)


<PAGE>




                   10.2     1995 Stock Option  Plan, including forms of Stock Option Agreements(8)
                            and  Amendment  Nos.  1(9),  2(10) and 3(11) thereto dated
                            October 21, 1996,  September  19, 1997 and  September  15,
                            1998, respectively(7)

                   10.3     Employee Stock Purchase Plan(3) and Amendment No. 1 thereto dated
                            July 17, 1992(4)(7)

                   10.4     Day Runner Restated 401(k) Plan effective as of July 1, 1998 and Trust
                            Agreement  effective  as  of  July  1,  1998  between  the
                            Registrant and New York Life Trust Company(7)(12)

                   10.5     Non-Employee Director Stock Option Plan, including form of Stock
                            Option Agreement(7)(11)

                   10.6     Fiscal 1999 Officer Bonus Plan(7)(12)

                   10.7     Officer   Severance  Plan  effective  as  of
                            February   28,  1993,   including   form  of
                            Employment   Separation   Agreement(13)  and
                            First  Amendment  thereto  effective  as  of
                            August 17, 1998(7)(12)

                   10.8     Credit  Agreement  dated as of  February  1, 1998
                            between the  Registrant and Wells Fargo Bank,
                            National   Association,    including Revolving Line
                            of Credit Note(14)

                   10.9     Triple Net Lease,  as amended,  effective as of
                            March   22,   1991   between   Catellus  Development
                            Corporation  and the Registrant and  as  amended
                            by  Lease Amendment dated June 29, 1992(15)

                   10.10    Triple Net Lease dated July 28, 1992 between
                            Catellus  Development  Corporation  and  the
                            Registrant(13)

                   10.11    Koll Business Center Lease dated September 7, 1994 between the
                            Registrant  and Koll Alton Plaza and Aetna Life Insurance Co.(16)

                   10.12    Standard Commercial Lease Agreement dated as of July 31, 1996
                            between System Realty Nine, Inc. and the Registrant(16)

                   10.13    Standard  Commercial  Lease Agreement dated
                            as of October 1, 1997 between RDC Sales and
                            the Registrant(12)

                   10.14    Standard Commercial Lease Agreement dated as of May 11, 1998
                            between  GPM Real  Property  Ltd.  And Endow Inc.  and the
                            Registrant(12)



<PAGE>



                   10.15     Lease Agreement dated as of April 2, 1999 between Mrs.  Refugio  Victoria
                             Geffroy De Flourie and Mr. David  Bramzon  Stengel and the
                             Registrant

                   10.16     Form of  Warrant dated April 20, 1998 to  purchase
                             shares of the Registrant's  Common Stock issued to
                             certain directors and officers of the Registrant(3)
                             and Schedule of Warrants(7)(12)

                   10.17     Form of Warrant dated August 19, 1997 to purchase shares of the
                             Registrant's  Common Stock  issued to certain  officers of
                             the Company and Schedule of Warrants(7)(18)

                   10.18     Form  of  Stock  Purchase   Agreement  dated August 27, 1997
                             and Schedule of Sellers(18)

                   10.19     Form of  Warrant  dated  April  20,  1998 to
                             purchase shares of the  Registrant's  Common
                             Stock issued to the  non-employee  directors
                             of   the    Company    and    Schedule    of
                             Warrants(7)(12)


                   10.20     First  Amendment  to  Consulting  Agreement  effective  April 22,  1999
                             between  the Registrant and Alan R. Rachlin(7)

                   10.21     Consulting Agreement effective May 22, 1999 between the Registrant
                             and Mr. Alan R. Rachlin(7)

                   10.22     Revolving Loan Agreement dated September 23, 1998 between the
                             Registrant,  Day Runner UK plc, Ultima  Distribution  Inc.
                             and Wells  Fargo  Bank,  National  Association,  including
                             Revolving Line of Credit Note(20)

                   10.23     Amended and Restated Loan Agreement dated as of
                             September 30, 1999 among the Registrant, Day Runner UK plc,
                             Filofax Limited, the Lenders named therein and Wells Fargo Bank,
                             National Association, including Revolving and Term Loan Notes.


                     21.1    Subsidiaries of the Registrant

                     23.1    Consent of Deloitte & Touche LLP

                     27.1    Financial Data Schedule
</TABLE>

(B)      REPORTS ON FORM 8-K

         No  reports  on Form 8-K  were  filed  or  required  to be filed by the
         Registrant  during the fourth quarter of the fiscal year ended June 30,
         1999.

(C)      EXHIBITS

         See the list of Exhibits  under Item  14(a)3 of this  Annual  Report on
Form 10-K.

(D)      FINANCIAL STATEMENT SCHEDULES

         See the list of  Schedules  under Item 14(a)2 of this Annual  Report on
Form 10-K.

------------------------
(1)      Incorporated by reference to the Registrant's  Quarterly Report on Form
         10-Q (File No. 0-19835) filed with the Commission on May 15, 1998.
(2)      Incorporated  by reference to the  Registrant's  Current Report on Form
         8-K (File No. 0-19835) filed with the Commission on August 5, 1993.
(3)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-1  (Registration  No.  33-45391)  filed with the  Commission  on
         January 30, 1992.
(4)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  33-53422)  filed with the  Commission  on
         October 15, 1992.
(5)      Incorporated by reference to the Registrant's  Quarterly Report on Form
         10-Q (File No. 0-19835) filed with the Commission on August 16, 1993.
(6)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  33-84036)  filed with the  Commission  on
         September 15, 1994.
(7)      Constitutes a management  contract or compensatory  plan or arrangement
         required  to be  filed as an  exhibit  pursuant  to Item  14(c) of this
         Annual Report on Form 10-K.
(8)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  33-80819)  filed with the  Commission  on
         December 22, 1995.
(9)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  333-20247)  filed with the  Commission on
         January 23, 1997.
(10)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  333-44627)  filed with the  Commission on
         January 21, 1998.
(11)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-8  (Registration  No.  333-69023)  filed with the  Commission on
         December 16, 1998.
(12)     Incorporated by reference to Registrant's Annual Report on Form 10-K
         (File No. 0-19835) filed with the Commission on October 1, 1998.
(13)     Incorporated  by reference to the  Registrant's  Annual Report on Form
         10-K (File No. 0-19835) filed with the Commission on March 31, 1993.
(14)     Incorporated by reference to the Registrant's Quarterly Report on Form
         10-Q (File No. 0-19835) filed with the Commission on February 17, 1998.
(15)     Incorporated  by reference to the  Registrant's  Annual Report on Form
         10-K (File No. 0-19835) filed with the Commission on March 21, 1993.
(16)     Incorporated  by reference to the  Registrant's  Transition  Report on
         Form 10-K (File No. 0-19835) filed with the Commission on
         September 27, 1994.
(17)     Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K (File No.  0-19835)  filed with the  Commission  on September  27,
         1996.
(18)     Incorporated  by reference to the  Registrant's  Annual  Report on Form
         10-K (File No.  0-19835)  filed with the  Commission  on September  29,
         1997.
(19)     Incorporated by reference to the Registrant's  Quarterly Report on Form
         10-Q (File No. 0-19835) filed with the Commission on November 13, 1997.
(20)     Incorporated  by reference to the  Registrant's  Current Report on Form
         8-K (File No. 0-19835) filed with the Commission on September 24, 1998.



<PAGE>




                                          SIGNATURE

                  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,  in the
City of Irvine, California.

                                                 DAY RUNNER, INC.


                                           By:  /s/ James E. Freeman, Jr.
                                                -------------------------------
                                                   James E. Freeman, Jr.
                                                    Chief Executive Officer

Dated:   October 13, 1999

                  Pursuant to the  requirements  of the  Securities Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

           Signature                                           Title                    Date
           ---------                                           -----                    ----


<S>                                                   <C>                        <C>
    /s/ Mark A. Vidovich                             Chairman of the Board        October 13, 1999
    -------------------------------
       Mark A. Vidovich


     /s/ James E. Freeman, Jr.                       Chief Executive Officer      October 13, 1999
     -------------------------------                (Principal Executive Officer)
        James E. Freeman, Jr.


     /s/ Dennis K. Marquardt                         Executive Vice President,     October 13, 1999
     --------------------------------                Finance & Administration and
        Dennis K. Marquardt                          Chief Financial Officer
                                                     (Principal Financial Officer
                                                     and Accounting Officer)

    /s/ James P.  Higgins                            Director                      October 13, 1999
    ---------------------------------
       James P. Higgins


    /s/ Jill Tate Higgins                            Director                     October 13, 1999
    ----------------------------------
       Jill Tate Higgins




    /s/ Charles Miller                               Director                      October 13, 1999
    -----------------------------------
       Charles Miller


    /s/ Alan R. Rachlin                              Director                       October 13, 1999
    -----------------------------------
       Alan R. Rachlin


    /s/ Boyd I. Willat                               Director                       October 13, 1999
    ------------------------------------
       Boyd I. Willat


   /s/ Felice Willat                                 Director                       October 13, 1999
   -------------------------------------
      Felice Willat


</TABLE>

<PAGE>


INDEPENDENT AUDITORS' REPORT


Day Runner, Inc.:

We have audited the accompanying consolidated balance sheets of Day Runner, Inc.
and  subsidiaries  (the "Company") as of June 30, 1999 and 1998, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the three  years in the period  ended  June 30,  1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Day Runner,  Inc. and subsidiaries
as of June 30, 1999 and 1998, and the results of their operations and their cash
flows  for  each of the  three  years  in the  period  ended  June  30,  1999 in
conformity with generally accepted accounting principles.

Los Angeles, CA
October 12, 1999
















                                             F-1

<PAGE>

<TABLE>
<CAPTION>


                              DAY RUNNER, INC. AND SUBSIDIARIES

                                 CONSOLIDATED BALANCE SHEETS

                                    (DOLLARS IN THOUSANDS)

                                            ASSETS

                                                                                                JUNE 30,
                                                                                          1999             1998
                                                                                       ---------         ---------
Current assets:
<S>                                                                                   <C>              <C>
    Cash and cash equivalents......................................................   $   9,132        $   2,923
    Accounts receivable (less allowance for doubtful  accounts and sales returns
       and other allowances of $11,481 and $9,942 at
       June 30, 1999 and 1998, respectively).......................................      43,215           32,542
    Inventories....................................................................      42,361           37,610
    Prepaid expenses and other current assets......................................       4,506            1,670
    Income taxes receivable........................................................         434            2,606
    Deferred income taxes..........................................................      11,189            7,218
                                                                                      ---------         --------
       Total current assets........................................................     110,837           84,569

Property and equipment, net .......................................................      17,851           11,888
Goodwill and other intangible assets (net of accumulated amortization of $1,934
    and $108 at June 30, 1999 and 1998, respectively)..............................      85,830            3,564
Other assets (net of accumulated amortization of $410 and $60 at June 30, 1999
     and 1998, respectively).......................................................       1,793            1,158
                                                                                      ---------         --------
TOTAL  ............................................................................    $216,311         $101,179
                                                                                       ========         ========

                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Lines of credit................................................................                    $   2,716
    Accounts payable...............................................................   $  18,722            9,969
    Accrued expenses...............................................................      19,547           13,962
    Loan notes.....................................................................       2,077
                                                                                      ---------         --------
       Total current liabilities...................................................      40,346           26,647
                                                                                      ---------         --------

Long-term liabilities:
    Line of credit.................................................................     105,317
    Loan notes.....................................................................         251
                                                                                      ---------
       Total long-term liabilities.................................................     105,568
                                                                                      ---------

Commitments and contingencies

Stockholders' equity:
    Preferred stock (1,000,000 shares authorized; $0.001 par value; no shares
       issued or outstanding)
    Common stock (29,000,000  shares  authorized;  $0.001 par value;  13,718,524
      shares  issued  and  11,900,736  shares  outstanding  at  June  30,  1999;
      13,677,386
      shares issued and 11,955,598 shares outstanding at June 30, 1998)............          14               14
    Additional paid-in capital.....................................................      21,709           21,813
    Retained earnings..............................................................      61,078           65,076
    Cumulative translation adjustment..............................................         954              102
    Treasury stock - At cost (787,858 and 732,996 shares at June 30, 1999 and
      1998, respectively)..........................................................     (13,358)         (12,473)
                                                                                      ---------         --------
       Total stockholders' equity..................................................      70,397           74,532
                                                                                      ---------         --------
TOTAL  ............................................................................    $216,311         $101,179
                                                                                       ========         ========

                 See accompanying notes to consolidated financial statements.

    </TABLE>
                                         F-2

<PAGE>


<TABLE>
<CAPTION>

                               DAY RUNNER, INC. AND SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF OPERATIONS

                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                                                        YEARS ENDED JUNE 30,
                                                                1999            1998            1997
                                                              ---------     ----------        ---------

<S>                                                           <C>            <C>              <C>
Net sales...................................................  $ 196,212      $ 167,841        $ 127,376
Cost of goods sold..........................................    108,087         80,663           60,452
                                                              ---------      ---------        ---------
Gross profit................................................     88,125         87,178           66,924
                                                              ---------      ---------        ---------
Operating expenses:
    Selling, marketing and distribution.....................     62,180         43,193           31,673
    General and administrative..............................     26,445         18,416           14,451
    Costs related to activities associated with the
       Filofax acquisition..................................      1,072
    Costs incurred in pursuing acquisitions.................                                      1,451
                                                              ---------      ---------        ---------
Total operating expenses....................................     89,697         61,609           47,575
                                                              ---------      ---------        ---------
(Loss) income from operations...............................     (1,572)        25,569           19,349
                                                              ---------      ---------        ---------
Interest expense (income):
    Interest income.........................................       (340)          (390)          (1,431)
    Interest expense........................................      5,555            218              130
                                                              ---------      ---------        ---------
Net interest expense (income)...............................      5,215           (172)          (1,301)
                                                              ---------      ---------        ---------
(Loss) income before (benefit) provision for income taxes...     (6,787)        25,741           20,650
(Benefit) provision for income taxes........................     (2,789)         9,833            8,102
                                                              ---------      ---------        ---------
Net (loss) income...........................................  $  (3,998)     $  15,908        $  12,548
                                                              =========      =========        =========

(Loss) earnings per common share:
       Basic................................................  $  (0.34)      $    1.38        $   1.01
                                                              ========       =========        ========
       Diluted..............................................  $  (0.34)      $    1.27        $   0.95
                                                              ========       =========        ========

Weighted-average number of common shares outstanding:
       Basic................................................     11,896         11,533           12,432
                                                              =========      =========        =========
       Diluted..............................................     11,896         12,523           13,182
                                                              =========      =========        =========




                 See accompanying notes to consolidated financial statements.



                                              F-3
</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                              DAY RUNNER, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                    (DOLLARS IN THOUSANDS)


                                                                                   ADDITIONAL
                                                          COMMON STOCK              PAID-IN         RETAINED
                                                    SHARES          AMOUNT           CAPITAL        EARNINGS
                                                  -----------   ---------------  ----------------   --------
<S>           <C>                                  <C>             <C>              <C>           <C>
Balance, July 1, 1996.......................       12,609,542      $     12         $  22,863     $   36,620
Treasury stock..............................       (1,026,200)
Exercis  of warrants........................           11,000                              22
Exercise of options.........................          108,316             1               139
Tax benefit of options......................                                              157
Compensation cost associated with
    warrant grant...........................                                               50
Comprehensive income:
   Net income...............................                                                           12,548
   Other comprehensive income -
      foreign currency translation adjustments

Comprehensive income........................
                                                  -----------      --------         ---------      ----------
Balance, June 30, 1997......................       11,702,658            13            23,231          49,168
Treasury stock..............................         (695,588)
Exercise of warrants........................          278,000                          (2,932)
Exercise of options.........................          670,528             1            (3,927)
Tax benefit of options......................                                            5,208
Compensation cost associated with
    warrant grant...........................                                              233
Comprehensive income:
   Net income...............................                                                           15,908
   Other comprehensive income -
      foreign currency translation adjustments
Comprehensive income........................
                                                 ------------      --------         ---------      ----------
Balance, June 30, 1998......................       11,955,598            14            21,813          65,076
Treasury stock..............................          (96,000)
Exercise of options.........................           41,138                            (199)
Tax benefit of options......................                                               20
Compensation cost associated with
    warrant grant...........................                                               75
Comprehensive income:
   Net loss.................................                                                           (3,998)
   Other comprehensive income -
      foreign currency translation adjustments

Comprehensive income........................
                                                  ------------     --------         ---------      ----------
Balance, June 30, 1999......................       11,900,736      $     14         $  21,709      $   61,078
                                                   ==========      ========         =========       ==========
</TABLE>

                                       1
<PAGE>

<TABLE>
<CAPTION>


                                                       ACCUMULATED
                                                         OTHER                                   TREASURY STOCK
                                                         INCOME            INCOME            SHARES        AMOUNT
                                                   -----------------     --------------     --------     ---------
<S>                                                  <C>                  <C>               <C>             <C>
Balance, July 1, 1996.......................          $     3
Treasury stock..............................                                                (1,026,200)  $(13,541)
Exercise of warrants........................
Exercise of options.........................                                                    40,264        521
Tax benefit of options......................
Compensation cost associated with
    warrant grant...........................
Comprehensive income:
   Net income...............................                             $12,548
   Other comprehensive income -                            89                 89
      foreign currency translation adjustments                           -------
Comprehensive income........................                             $12,637
                                                                         =======
Balance, June 30, 1997......................               92                                  (985,936)  (13,020)
Treasury stock..............................                                                   (695,588)  (11,564)
Exercise of warrants........................                                                    278,000     3,605
Exercise of options.........................                                                    670,528     8,506
Tax benefit of options......................
Compensation cost associated with
    warrant grant...........................
Comprehensive income:
   Net income...............................                             $15,908
   Other comprehensive income -
      foreign currency translation adjustments             10                 10
                                                          ---                ---
Comprehensive income........................                             $15,918
                                                                         =======

Balance, June 30, 1998......................              102                                   (732,996) (12,473)
Treasury stock..............................                                                     (96,000)  (1,490)
Exercise of options.........................                                                      41,138      605
Tax benefit of options......................
Compensation cost associated with
    warrant grant...........................
Comprehensive income:
   Net loss.................................                            $ (3,998)
   Other comprehensive income -
      foreign currency translation adjustments            852                852
                                                          ---                ---
  Comprehensive income........................                          $ (3,146)
                                                                        ========
                                                                                               --------  --------
Balance, June 30, 1999......................             $954                                  (787,858) $(13,358)
                                                         ====                                  ========  ========




</TABLE>






























        See accompanying notes to consolidated financial statements.
                                       F-4


<PAGE>
<TABLE>
<CAPTION>





                              DAY RUNNER, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (DOLLARS IN THOUSANDS)
                                                                        YEARS ENDED JUNE 30,
                                                                1999            1998            1997
                                                              ---------     ----------       ----------

Cash flows from operating activities:
<S>                                                            <C>           <C>              <C>
    Net (loss) income.......................................   $ (3,998)     $ 15,908         $12,548
    Adjustments to reconcile net (loss) income to net cash
          provided by (used in) operating activities:.......
      Depreciation and amortization.........................     10,240         5,517           3,869
      Provision for doubtful accounts and sales returns
       and other allowances.................................     19,039         9,799          14,264
Loss on disposal of property and equipment..................        199
    Write-off of barter credits.............................                                      200
    Utilization of barter credits...........................                      100
Compensation expense related to issuance of warrants........         75           233              50
    Deferred income tax benefit.............................     (3,971)         (832)         (1,186)
Changes in operating assets and liabilities, net of
     acquisition of businesses:
        Accounts receivable.................................    (15,268)      (17,899)        (15,103)
Inventories  ...............................................      7,432       (11,050)         (3,294)
Prepaid expenses and other current assets...................       (813)          595            (689)
Income taxes receivable.....................................        968         2,087           1,930
        Accounts payable....................................      4,508          (725)            225
Accrued expenses............................................     (1,831)        3,755            (872)
Income taxes payable........................................                     (453)          1,206
                                                               --------      ---------        -------
          Net cash provided by operating activities.........     16,580         7,035          13,148
                                                               --------      --------         -------
Cash flows from investing activities:
    Acquisition of businesses...............................    (88,017)       (4,626)
Acquisition of property and equipment.......................    (10,495)       (7,175)         (4,972)
    Other assets............................................         (1)         (110)              5
                                                               --------      --------        --------
        Net cash used in investing activities...............    (98,513)      (11,911)         (4,967)
                                                               --------      --------         -------

Cash flows from financing activities:
    Net borrowings (repayments) under lines of credit.......     89,924          (338)            452
    Financing fees..........................................     (1,200)
    Repayment under long-term liabilities...................                     (990)
    Repayment under capital lease obligations...............                      (58)            (13)
    Exercise of warrants....................................                      673              22
Exercise of options.........................................        406         4,580             661
    Repurchase of common stock..............................     (1,490)      (11,564)        (13,541)
                                                               --------      --------         -------
        Net cash provided by (used in) financing activities.     87,640        (7,697)        (12,419)
                                                               --------      --------         -------

Effect of exchange rate changes on cash and cash equivalents        502           (54)             23
                                                               --------       -------         -------
Net increase (decrease) in cash and cash equivalents........      6,209       (12,627)         (4,215)
Cash and cash equivalents, beginning of year................      2,923        15,550          19,765
                                                               --------      --------         -------

Cash and cash equivalents, end of year......................   $  9,132      $  2,923         $15,550
                                                               ========      ========         =======

                   See accompanying notes to consolidated financial statements.

</TABLE>

                                               F-5

<PAGE>







                        DAY RUNNER, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Day Runner, Inc. and subsidiaries (the "Company") develop, manufacture,
and market  paper-based  organizers  for the retail  market.  The  Company  also
develops,  manufactures  and  markets a number of related  organizing  products,
including  telephone/address books, business accessories,  products for students
and  organizing  and other  wallboards.  A substantial  portion of the Company's
sales is to office  products  and mass market  retailers  throughout  the United
States  and to a variety of  retailers  abroad.  The  Company  grants  credit to
substantially all of its customers.

         CONSOLIDATION  - The  consolidated  financial  statements  include  the
accounts of the  Company  and its wholly  owned  subsidiaries.  All  significant
intercompany balances and transactions have been eliminated in consolidation.

         USE OF  ESTIMATES  IN THE  PREPARATION  OF  FINANCIAL  STATEMENTS - The
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

         CASH EQUIVALENTS - The Company considers all highly liquid  investments
purchased with a maturity of three months or less to be cash equivalents.

         CONCENTRATION  OF CREDIT RISK - Financial  instruments that potentially
subject the Company to concentration of credit risk consist  principally of cash
equivalents and accounts receivable.

         The  Company  places  its  cash  equivalents  with  various   financial
institutions  and,  by policy,  limits the amount of credit  exposure to any one
financial  institution.  The Company  believes that no  significant  credit risk
exists, as these investments are made with high quality financial institutions.

         In fiscal 1999, sales to four customers accounted for 25%, 13%, 11% and
11% of the  Company's  net  sales.  In  fiscal  1998,  sales  to four  customers
accounted for 28%, 16%, 15% and 14% of the Company's net sales.  In fiscal 1997,
sales to four customers accounted for 25%, 15%, 14% and 11% of the Company's net
sales.

         FAIR VALUE OF FINANCIAL  INSTRUMENTS - The carrying  values of cash and
cash  equivalents,  accounts  receivable and accounts  payable  approximate fair
value due to the short-term nature of these instruments.

         The  carrying  value of the  Company's  line of credit at June 30, 1999
approximates  fair value.  The fair values were  estimated  by  discounting  the
future  cash flows  using  rates  currently  available  to the  Company for debt
instruments with similar terms and remaining maturities.

         PROPERTY  AND  EQUIPMENT - Property and  equipment  are stated at cost.
Depreciation  is provided for over the estimated  useful lives of the respective
assets, using the straight-line method.  Estimated useful lives range from three
to seven years.  Leasehold  improvements  are amortized using the  straight-line
method over the lesser of the estimated  useful life of the asset or the life of
the lease.

         GOODWILL AND OTHER INTANGIBLE  ASSETS - Goodwill  represents the excess
of the  purchase  price over the fair value of net assets  acquired  in business
combinations  and is  amortized  using the  straight-line  method  over  periods
ranging  from 20 to 35 years.  Other  intangible  assets  consist of trade names
acquired in business  combinations  and are  amortized  using the  straight-line
method over periods ranging from 15 to 40 years.

         OTHER  ASSETS  -  Other  assets   consist  of  financing   fees  and  a
non-competition  agreement.  Financing fees represent fees in connection  with a
loan  agreement  and are  amortized  using  the  straight-line  method  over the
remaining term of the loan agreement (see Note 7). The non-competition agreement
is amortized using the straight-line method over five years.

         IMPAIRMENT  OF  LONG-LIVED  ASSETS - The Company  evaluates  long-lived
assets for impairment whenever events or changes in circumstances  indicate that
the carrying value of an asset may not be recoverable.  If the estimated  future
cash  flows  (undiscounted  and  without  interest  charges)  are less  than the
carrying  value, a write-down  would be recorded to reduce the related  carrying
value of the asset to its estimated fair value.

         INCOME TAXES - Income taxes are recognized for (a) the amount of income
taxes payable or refundable for the current  period and (b) deferred  income tax
assets and liabilities for the future tax  consequences of events that have been
recognized in the  Company's  financial  statements  or income tax returns.  The
effects of income  taxes are  measured  based on enacted  tax laws and rates.  A
valuation  allowance is established,  when necessary,  to reduce deferred income
tax assets to the amount expected to be realized.

         FOREIGN  CURRENCY  TRANSLATION  - Balance  sheet  accounts  for foreign
operations  are  translated at the exchange rate at the balance sheet date,  and
statement of operations accounts are translated at the weighted-average exchange
rate for the year. Resulting translation adjustments are included in accumulated
other  comprehensive  income.  Transaction  gains and losses  included in (loss)
income were not significant during the years ended June 30, 1999, 1998 and 1997.

         NET SALES - Revenue  is  recognized  upon  shipment  of  product to the
customer, with allowances for estimated returns, rebates and other allowances.

          NEW ACCOUNTING  PRONOUNCEMENT - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial  Accounting Standards ("SFAS") No.
133, Accounting for Derivative Instruments and Hedging Activities.  SFAS No. 133
is effective for all fiscal  quarters of all fiscal years  beginning  after June
15,  2000,  which  will be  September  30,  2000 for the  Company.  SFAS No. 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other  contracts,
collectively  referred to as derivatives,  and for hedging activities.  SFAS No.
133 requires the  recognition of all derivatives as either assets or liabilities
in the statement of financial  position and the measurement of those instruments
at fair value.  The Company  expects  that the adoption of SFAS No. 133 will not
have a  material  impact on the  Company's  financial  position  or  results  of
operations.

         RECLASSIFICATIONS  - Certain  reclassifications  were made to the prior
year financial statements to conform to the current year presentation.

2.    ACQUISITIONS

         On October 30,  1998,  the Company  announced  that it had control of a
majority of the outstanding  shares of Filofax Group plc ("Filofax") as a result
of its previously  announced  cash tender offer for Filofax  stock.  The Company
acquired all the remaining  outstanding  shares of Filofax on December 26, 1998.
This acquisition was accounted for under the purchase method of accounting.

         The total  purchase price of  $92,803,000,  which includes costs of the
transaction,  was paid in cash and Loan Notes (see Note 8). The Company borrowed
the cash  portion of this amount  under a loan  agreement  with a group of banks
(see Note 7).

         The  following  table  sets  forth  the  unaudited  proforma  condensed
combined  statements  of  operations  data for the years ended June 30, 1999 and
1998 as if the acquisition had occurred on July 1, 1997 (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                           YEARS ENDED JUNE 30,
                                                                                       1999                   1998
                                                                                    ------------           -----------

<S>                                                                                   <C>                     <C>
       Net sales                                                                      $220,904                $231,190
       (Loss) income before (benefit) provision for income taxes                      $ (4,413)               $ 27,040
       Net (loss) income                                                              $ (2,603)               $ 16,495
       (Loss) earnings per common share:
           Basic                                                                      $  (0.22)               $   1.43
           Diluted                                                                    $  (0.22)               $   1.32
       Weighted average number of common shares outstanding:
           Basic                                                                         11,896                 11,533
           Diluted                                                                       11,896                 12,523
</TABLE>

         On  July  29,  1997,   the  Company   purchased  the  stock  of  Ultima
Distribution,  Inc.  ("Ultima"),  which  was the  distributor  of the  Company's
products in Canada,  for approximately  $130,000.  The Company also entered into
non-competition agreements with certain of Ultima's former stockholders.

         On October 1, 1997,  the  Company  purchased  substantially  all of the
operating  assets  of  Ram  Manufacturing,   Inc.  ("Ram"),   an  Arkansas-based
developer,  manufacturer  and marketer of  wallboards.  The  purchase  price was
approximately $2,400,000.  The Company also assumed certain liabilities totaling
approximately $3,000,000.  In addition,  contingent payments may be paid through
December 31, 2000,  based upon Ram's operating  performance  during that period.
The owner of Ram, who now works for the Company,  entered into a non-competition
agreement with the Company.

         On February 1, 1998,  the Company  purchased the stock of  Timeposters,
Inc.  ("Timeposters"),  a  Canadian  developer,  manufacturer  and  marketer  of
planning  and  presentation  products,  including  flexible  planners,  planning
boards,  other wall boards and easels, and entered into certain  non-competition
agreements with the founders, who continue to work for the Company. The purchase
price was approximately $2,546,000. In addition, contingent payments may be paid
through December 31, 1999, based on Timeposters'  operating  performance  during
that period.

3.    INVENTORIES

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
determined  on  the  first-in,  first-out  basis.  Inventories  consist  of  the
following (in thousands):

                                                      JUNE 30,
                                               1999            1998
                                           ----------       ---------

         Raw materials...................  $   12,026       $  14,087
         Work in process.................       2,138             831
         Finished goods..................      28,197          22,692
                                            ----------       ---------
                             Total.......  $   42,361       $  37,610
                                            ==========       =========


4.    PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>

         Property and equipment consist of the following (in thousands):
                                                                         JUNE 30,
                                                                    1999            1998
                                                                ----------       ---------

<S>                                                            <C>               <C>
         Displays............................................  $   11,653        $  9,003
         Data processing equipment and software..............      14,697           8,785
         Machinery and equipment.............................      11,915           6,705
         Leasehold improvements..............................       5,106           2,229
         Vehicles............................................         715             250
                                                               ----------       ---------
                             Total...........................      44,086          26,972
         Accumulated depreciation and amortization...........     (26,235)        (15,084)
                                                               ----------       ---------
         Property and equipment - net........................  $   17,851       $  11,888

                                                               ==========       =========
</TABLE>

5.    FINANCIAL INSTRUMENTS

        On September 29, 1998,  the Company  entered into a call option in order
        to limit its foreign  exchange  risk on the purchase of Filofax  shares,
        which were paid for in pounds Sterling.  The Company's  objective was to
        protect  itself  from the risk that the  purchase  price of the  Filofax
        shares would be adversely affected by changes in exchange rates.  During
        the year ended June 30, 1999, the Company expensed $765,000 to operating
        expenses  for the call  option.  At June 30,  1999,  the Company had not
        entered into any additional  foreign currency  instruments.  The Company
        does not  trade in  financial  instruments  nor does it enter  into such
        contracts for speculative purposes.

6.    ACCRUED EXPENSES

        Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                                             JUNE 30,
                                                                       1999            1998
                                                                     --------        ---------
<S>                                                                  <C>             <C>
         Accrued sales and promotion costs....................       $  9,576        $   7,473
         Accrued payroll and related costs....................          5,366            2,955
         Other................................................          4,605            3,534
                                                                     --------        ---------
                             Total............................       $ 19,547        $  13,962

                                                                      ========        =========
</TABLE>

7.    LINES OF CREDIT

         On  September  23,  1998,  the  Company  entered  into  a  $160,000,000
Revolving Loan Agreement (the "Loan Agreement") with Wells Fargo Bank,  National
Association  ("Wells  Fargo").  Effective  November  24,  1998,  this amount was
voluntarily  reduced  to  $145,000,000,   and  unamortized   financing  fees  of
approximately  $84,000 were charged to interest  expense.  The loan facility was
syndicated  with a group of banks in December  1998.  Borrowings  bore  interest
either at floating rates based on the higher of Wells Fargo's prime rate and the
Federal Funds Rate published by the Federal Reserve Bank of New York or at fixed
rates  calculated by reference to the interest rates at which Wells Fargo offers
deposits  in U.S.  dollars in amounts  approximately  equal to the amount of the
relevant  loan and for a period  of time  comparable  to the  number of days the
relevant loan remains outstanding, together with a margin. During the year ended
June 30, 1999,  the  weighted-average  interest rate was 6.33%.  During the year
ended June 30,  1999,  under the terms of the Loan  Agreement,  the Company paid
Wells Fargo a financing fee of $1,200,000, $205,000 of which was expensed in the
fiscal year ended June 30, 1999. At June 30, 1999, the Company had  $105,317,000
outstanding  under this Loan  Agreement  and had  outstanding  letters of credit
totaling approximately $218,000.

          On June 29, 1999, the Company  obtained from the banks a waiver of the
fixed charge  coverage ratio and the funded debt ratio covenants for the quarter
ended June 30, 1999. The waiver was  subsequently  extended  through October 15,
1999. On October 12, 1999,  the Company and the banks amended the Loan Agreement
(the  "Amended  and Restated  Loan  Agreement").  The Amended and Restated  Loan
Agreement  converts the entire  outstanding  revolving  loan balance into a term
loan portion of $90,400,000 and a revolving  credit loan portion of $29,600,000.
The term loan  matures on  September  30, 2001,  and the  revolving  credit loan
facility  matures on October 9, 2000. The maturity date of the revolving  credit
loan  facility  will be  automatically  extended  through  September  30,  2001,
provided  that the Company  achieves on September 30, 2000 a minimum  EBITDA,  a
minimum fixed charge  coverage ratio and a maximum senior funded debt ratio,  as
defined in the amended agreement. As a result, unamortized financing fees on the
Loan Agreement of approximately  $955,000 will be charged to interest expense in
October 1999.

          The Amended and Restated  Loan  Agreement is secured by the  Company's
assets and  includes,  among other  things,  financial  covenants  requiring the
maintenance  of a minimum fixed charge  coverage  ratio,  EBITDA,  stockholders'
equity and current  ratio,  and a maximum  senior funded debt coverage ratio and
operating expenses to net sales ratio, as defined in the amended agreement.  The
Amended and  Restated  Loan  Agreement  also  limits,  among other  things,  the
incurrence of liens and other indebtedness, mergers, consolidations, the sale of
assets,  annual capital  expenditures,  advances,  investments  and loans by the
Company  and  its  subsidiaries,   dividends,   stock  repurchases  and  certain
transactions  with affiliates.  It permits up to $10,000,000 of secured debt for
currency hedging purposes and up to $1,500,000  unsecured  overdraft  borrowings
for foreign subsidiaries.

         The  outstanding  balances bear  interest at the Company's  election at
either (i) the higher of the Agent Bank's  prime rate or the Federal  Funds Rate
plus 50.00 basis  points,  plus an interest  rate margin  ranging  from 12.50 to
200.00 basis points,  or (ii) the  applicable  eurodollar  rate plus an interest
rate margin  ranging from 112.50 to 300.00 basis points,  depending on the level
of the funded debt ratio at the end of each fiscal quarter.

         Under the Amended and Restated Loan Agreement, the Company is obligated
to pay certain fees including an unused  revolving  loan  commitment fee ranging
from 37.50 to 67.50 basis  points which varies with the level of the funded debt
ratio at the end of each fiscal quarter, payable quarterly in arrears; letter of
credit fees ranging from 112.50 to 300.00 basis points which vary with the level
of the  funded  debt  ratio at the time the  letter  of credit  is  issued;  and
amendment and other standard fees which are currently estimated at approximately
$1,500,000.

         The  Company's  Canadian  subsidiary  had a  credit  agreement  with  a
Canadian  bank which  allowed for  borrowings  up to Canadian  $3,000,000,  bore
interest  at the  bank's  prime  rate and was due and  payable  on  demand.  The
borrowings  under this credit agreement were repaid in full on October 22, 1998,
and the Canadian  subsidiary  now borrows funds as a co-borrower  under the Loan
Agreement.


8.    LOAN NOTES

         Loan  Notes in the  amount of  (pound)1,477,000  (US  $2,328,000)  were
issued in connection with the Filofax acquisition,  are unsecured obligations of
the  Company's  U.K.  subsidiary  and bear  interest at LIBOR (5.90% at June 30,
1999) less 1%. Interest on the Loan Notes is paid annually in arrears  beginning
September 30, 1999. The Loan Notes are  redeemable,  in whole or in part, at the
holder's option on each interest payment date.  Unless they have previously been
redeemed, all Loan Notes will be redeemed on September 30, 2003. As of September
30, 1999, (pound)1,318,000 (US $2,077,000) of the Loan Notes had been redeemed.


9.    LEASES

         The Company has five  noncancelable  operating leases for its principal
operating facilities and its corporate  headquarters.  The leases expire through
2006. The leases include  renewal  options that, if exercised,  would extend the
lease terms through 2011, and the leases provide for increases in future minimum
annual rental  payments based on defined  increases in the Consumer Price Index,
subject to certain minimum  increases.  The Company also has entered into leases
for  certain  production,   warehouse,  computer,  and  office  equipment  under
noncancelable operating leases that expire through May 2003.



<PAGE>



         Future minimum lease  payments  under the operating  leases at June 30,
1999 are summarized as follows (in thousands):

      YEARS ENDING JUNE 30,

       2000....................................................   $    5,396
       2001....................................................        4,872
       2002....................................................        2,781
       2003....................................................        1,712
       2004....................................................          868
       Thereafter..............................................        1,634
                                                                  ----------
       Total future minimum lease payments.....................   $   17,263
                                                                  ==========

         Rent expense was  $5,626,000,  $4,025,000  and $3,841,000 for the years
ended June 30, 1999, 1998 and 1997, respectively.


10.   INCOME TAXES

          The components of (loss) income before (benefit)  provision for income
taxes are as follows (in thousands):
                                                            YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
                                                     1999          1998          1997
                                                   ----------    ---------   -----------
<S>                                                <C>          <C>          <C>
          United States.........................   $   (9,704)  $   22,856   $   18,765
          Other.................................        2,917        2,885        1,885
                                                   ----------   ----------   ----------
             Total..............................   $   (6,787)  $   25,741   $   20,650
                                                   ===========  ==========   ==========

         The (benefit)  provision for income taxes consists of the following (in
thousands):

                                                            YEARS ENDED JUNE 30,
                                                     1999         1998           1997
                                                   ----------   ---------     ---------
        Current:
          Federal...............................    $    (310)   $   8,565    $   7,076
          State.................................           (8)       1,477        1,825
          Foreign...............................        1,500          623          387
                                                    ---------    ---------    ---------
        Total current...........................        1,182       10,665        9,288
                                                    ---------    ---------    ---------
        Deferred:
          Federal...............................       (3,821)        (920)        (961)
          State.................................         (150)          88         (225)
                                                    ----------   ---------    ---------
        Total deferred..........................       (3,971)        (832)      (1,186)
                                                    ----------   ---------    ---------
        Total (benefit) provision
          for income taxes......................    $  (2,789)   $   9,833    $   8,102
                                                    ==========   =========    =========
</TABLE>

         Differences  between the total income tax  (benefit)  provision and the
amount  computed by applying  the  statutory  federal  income tax rate to (loss)
income  before  (benefit)   provision  for  income  taxes  are  as  follows  (in
thousands):
<TABLE>
<CAPTION>

                                                            YEARS ENDED JUNE 30,
                                                     1999             1998            1997
                                                   -----------    -----------      -----------
       <S>                                         <C>           <C>                <C>>
        Computed tax expense using the
          statutory federal income tax rate.....    $   (2,375)     $  9,009       $  7,228
        (Decrease) increase in taxes arising
           from:
           State taxes, net of
             federal benefit....................          (102)           769         1,000
          Foreign earnings taxed at other
            than federal statutory rate.........           (79)          (387)         (273)
          Foreign tax credit....................          (347)
          Other.................................           114            442           147
                                                    ----------     ----------      ---------
          Total.................................    $   (2,789)    $    9,833      $   8,102
                                                    ==========     ==========      =========

        Effective income tax rate...............            41%            38%           39%
                                                    ==========     ==========      =========
</TABLE>
<TABLE>
<CAPTION>

         Total  deferred  income  tax  assets  and  liabilities  consist  of the
following (in thousands):

                                                                                  JUNE 30,
                                                                         1999                1998
                                                                   ----------------    ----------------

         <S>                                                            <C>              <C>
          Net operating loss carryback/carryforward                  $   3,384
          Allowance for sales returns                                    2,433           $   2,918
          Inventory obsolescence reserve                                 1,988               1,220
          Allowance for doubtful accounts                                1,041               1,074
          State taxes                                                                          615
          Sales programs                                                   827                 608
          Other                                                          1,975               1,368
                                                                       ---------            -------
          Total deferred income tax assets                              11,648               7,803
          Deferred income tax liabilities                                 (459)               (585)
                                                                       ---------            -------
          Total                                                        $  11,189          $   7,218
                                                                       =========          =========
</TABLE>

         Cumulative  undistributed earnings of foreign subsidiaries for which no
deferred income taxes have been provided approximated  $6,942,000 and $4,153,000
at June 30, 1999 and 1998, respectively.  The additional income taxes payable on
the  earnings  of foreign  subsidiaries,  if  remitted,  would be offset by U.S.
income tax credits for foreign taxes paid.

11.   EARNINGS PER SHARE

         Basic  earnings  per share are  computed by dividing  net income by the
weighted-average  number  of common  shares  outstanding  for the year.  Diluted
earnings  per  share  are  computed  by  dividing  net  income by the sum of the
weighted-average  number of common  shares  outstanding  for the period plus the
assumed  exercise of all  dilutive  securities.  The  following  reconciles  the
numerator and  denominator of the basic and diluted per share  computations  for
net (loss) income (in thousands, except per share amounts):


<PAGE>

<TABLE>
<CAPTION>



                                                                    YEARS ENDED JUNE 30,
                                                      1999                 1998                  1997
                                                   ------------        -------------         -------------

       <S>                                           <C>                   <C>                   <C>
       NET (LOSS) INCOME                           $  (3,998)            $  15,908             $ 12,548
                                                   ===========           =========             ========

       BASIC WEIGHTED-AVERAGE SHARES
         Weighted-average number of
           common shares outstanding                  11,896                11,533               12,432

       Effect of dilutive securities
         Additional shares from the
          Assumed exercise of
          options and warrants                                               3,093                 2,757
         Shares assumed to be repurchased
           under the treasury stock method                                  (2,103)               (2,007)
                                                   ---------              ---------                ------

       DILUTED WEIGHTED-AVERAGE SHARES
         Weighted-average number of
           common shares outstanding and
           common share equivalents                   11,896                12,523                 13,182
                                                   =========             =========                 ======

       (LOSS) EARNINGS PER SHARE:

         Basic                                     $  (0.34)             $   1.38                 $  1.01
                                                   ========              ========                 =======
         Diluted                                   $  (0.34)             $   1.27                 $  0.95
                                                   ========              ========                 =======
</TABLE>

         For the year ended June 30, 1999,  dilutive  securities  equivalent  to
1,160,000  shares are not included as potential  common shares  because they are
antidilutive.  During  the years  ended  June 30,  1998 and 1997,  there were no
antidilutive common share equivalents.

12.   STOCK OPTION PLANS

         Under the Company's  1995 Stock Option Plan (the "Plan"),  an aggregate
of 1,925,000  shares of common stock is reserved for issuance to key  employees,
including  officers and directors of the Company.  Both incentive  stock options
and  nonstatutory  stock options are authorized for issuance under the Plan. The
terms of the options are determined at the time of grant.  Pursuant to the Plan,
the per share option price of incentive  stock  options may not be less than the
fair  market  value of a share of  common  stock  at the date of  grant,  and no
options may be granted after December 2005. The  outstanding  options  typically
become  exercisable  over a period of five years from the date of  issuance  and
have terms of up to ten years.

         The Company also  authorized the issuance of up to 3,450,000  shares of
the  Company's  common  stock under its Amended and  Restated  1986 Stock Option
Plan. Such options  typically become  exercisable  ratably over a period of five
years from the date of issuance  and have terms of six to ten years.  As of June
30, 1999,  options  covering  2,422,104  shares have been  exercised and options
covering  1,002,646  shares remain  outstanding.  No additional  options will be
granted under this plan.

         During the years ended June 30, 1999, 1998 and 1997,  certain  officers
and employees  exercised options to purchase an additional  17,040,  651,414 and
74,300 shares,  respectively,  of the Company's common stock for an aggregate of
$129,000, $4,278,000 and $381,000, respectively (see Note 15).

         In connection with the exercise of  nonstatutory  stock options and the
sale of shares  purchased  pursuant  to  incentive  stock  options,  the Company
realized a reduction  in its current tax  liability  during the years ended June
30,  1999,  1998 and  1997.  This  reduction  totaled  $20,000,  $5,208,000  and
$157,000, respectively, and was credited to additional paid-in capital.

         A summary of option activity is as follows:
<TABLE>
<CAPTION>
                                                                       WEIGHTED-                      WEIGHTED-
                                                                         AVERAGE                       AVERAGE
                                                        NUMBER OF       EXERCISE       OPTIONS        EXERCISE
                                                         OPTIONS          PRICE      EXERCISABLE        PRICE
                                                         -------          -----      -----------        -----

               <S>                                    <C>                 <C>        <C>             <C>
             Outstanding, July 1, 1996...........      1,732,150         $  6.85
                Granted..........................        465,000           13.00
                Exercised........................        (74,300)           5.13
                Cancelled........................        (31,250)          11.96
                                                    ------------
             Outstanding, June 30, 1997..........      2,091,600            8.20     1,102,314     $    6.90
                Granted..........................        565,000           17.10
                Exercised........................       (651,414)           6.57
                                                    ------------
             Outstanding, June 30, 1998..........      2,005,186           11.24        933,648         8.61
                Granted..........................        444,000           18.94
                Exercised........................        (17,040)           7.55
                Cancelled........................       (116,500)          16.41
                                                    ------------
             Outstanding, June 30, 1999..........      2,315,646           12.48      1,343,933         9.94
                                                    ============
</TABLE>


        At June 30, 1999,  the range of option  prices for shares under  options
        and the weighted average remaining contractual life is as follows:
<TABLE>
<CAPTION>


                                                           OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                                            WEIGHTED-    WEIGHTED-      WEIGHTED-    WEIGHTED-
                                              NUMBER OF      EXERCISE   CONTRACTUAL      NUMBER       EXERCISE
        RANGE OF OPTION EXERCISE PRICE         OPTIONS       PRICE        LIFE         EXERCISABLE      PRICE
        ------------------------------      ------------   --------   ------------     -----------   ---------
                <S>                           <C>           <C>            <C>         <C>              <C>
               $ 5.13 - $8.38                  799,596     $  6.68          4.84         720,408      $  6.50
                 9.75 - 13.00                  594,050       11.89          6.41         376,500        11.53
                16.88 - 20.63                  922,000       17.89          8.59         247,025        17.54
</TABLE>


          The Company  applies  Accounting  Principles  Board Opinion No. 25 and
related  interpretations in accounting for its stock option plans.  Accordingly,
no  compensation  cost  has  been  recognized  for  stock  option  awards.   Had
compensation  cost for the Company's stock option plans been determined based on
the fair value at the grant  dates for awards  under  those plans as required by
SFAS No. 123, Accounting for Stock-Based Compensation,  the Company's net (loss)
income and (loss)  earnings per common and common  equivalent  shares would have
been reduced to the pro forma amounts indicated below:


<PAGE>


<TABLE>
<CAPTION>



                                                                             YEARS ENDED JUNE 30,
                                                                      1999          1998             1997
                                                                  ----------      ----------     -----------
     <S>                                                         <C>             <C>             <C>
      Net (loss) income:
                  As reported                                     $  (3,998)      $   15,908      $  12,548
                  Pro forma                                       $  (6,694)      $   12,617      $  11,094

      (Loss) earnings per common and common equivalent shares:
           As reported:
               Basic                                              $   (0.34)      $     1.38      $    1.01
               Diluted                                            $   (0.34)      $     1.27      $    0.95

            Pro forma:
                   Basic                                          $   (0.56)      $     1.09      $    0.89
                   Diluted                                        $   (0.56)      $     1.01      $    0.84

</TABLE>

         The fair values of the options  granted  under the plans during  fiscal
1999, 1998 and 1997 were estimated on the date of grant using the  Black-Scholes
option-pricing  model.  The  weighted-average  fair values of the options at the
date of grant were $10.38,  $9.03 and $14.53 during fiscal 1999,  1998 and 1997,
respectively.  The following weighted-average  assumptions for fiscal 1999, 1998
and 1997,  respectively,  were used:  no dividend  yield;  volatility of 60.00%,
57.21% and 53.28%;  risk-free  interest rates of 5.245%,  5.877% and 6.246%; and
expected option lives of 4.85, 4.74 and 6.05 years. Pro forma  compensation cost
of options  granted under the Employee  Stock Purchase Plan is measured based on
the discount from market value (see Note 14).

         On September 7, 1999,  the Company  issued  options to key employees to
purchase  417,500 shares of the Company's common stock at $9.0625 per share. The
options vest over a period of five years and expire in 2009.


13.   NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         In November 1998, the Company authorized a non-employee  director stock
option plan.  The terms of the options are  determined at the time of grant.  No
options  may be granted  after  November  22,  2008.  Options  typically  become
exercisable one year from the date of issuance and have terms up to 10 years.
         During  the year  ended  June 30,  1999,  the  Board of  Directors  and
stockholders  approved the issuance of options to purchase  50,000 shares of the
Company's  common  stock.  Such  options  were granted at a price of $22.125 per
share, vest over a period of one year and expire in November 2008.


<PAGE>


<TABLE>
<CAPTION>


         A summary of option activity is as follows:
                                                                       WEIGHTED-                      WEIGHTED-
                                                                         AVERAGE                       AVERAGE
                                                        NUMBER OF       EXERCISE       OPTIONS        EXERCISE
                                                         OPTIONS          PRICE      EXERCISABLE        PRICE
                                                         -------          -----      -----------        -----

<S>                                                       <C>            <C>           <C>             <C>
             Granted.............................         50,000         $22.125
                                                    ------------
             Outstanding, June 30, 1999..........         50,000          22.125         25,000        $22.125
                                                    ============
</TABLE>


14.   EMPLOYEE STOCK PURCHASE PLAN

         During 1992, the Company  adopted an Employee Stock Purchase Plan under
which 350,000 shares of common stock were  authorized for issuance to employees.
Under the plan,  eligible  employees may purchase,  through  payroll  deductions
withheld  during an  offering  period,  an amount of common  stock not to exceed
approximately 5% of the employee's annual  compensation.  The purchase price per
share is the lower of 85% of the fair market value of a share of common stock on
the first day of the offering period or on the last day of the offering  period.
There are two offering periods during each year. During the years ended June 30,
1999,  1998 and 1997,  employees  purchased an  aggregate of 24,098,  19,114 and
34,016 shares of common stock for $277,000, $302,000 and $280,000, respectively,
under this plan. These amounts are included in the amounts shown for exercise of
options on the consolidated statements of stockholders' equity (see Note 13).


15.   WARRANTS

         During the years ended June 30, 1998 and 1997,  the Board of  Directors
approved the issuance of warrants to purchase an aggregate of 515,000  shares of
the Company's common stock. Such warrants are exercisable at prices ranging from
$11.781 to $20.625 per share,  vest over periods up to 48 months,  and expire at
various times through April 2008. No warrants were granted during the year ended
June 30, 1999.

         During  the  years  ended  June 30,  1998 and 1997,  certain  directors
exercised warrants to purchase 278,000 and 11,000 shares,  respectively,  of the
Company's  common stock for an aggregate of $673,000 and $22,000,  respectively.
No warrants were exercised during the year ended June 30, 1999.

         Included in the  issuance of  warrants  to purchase  515,000  aggregate
shares of the Company's common stock is a warrant to purchase 50,000 shares that
was issued  during  fiscal  1997 to a director  under the terms of a  consulting
agreement.  Such  issuance  was  accounted  for  under  SFAS No.  123  using the
Black-Scholes  option pricing model, which resulted in the recording of $75,000,
$233,000 and $50,000 in compensation  cost during the years ended June 30, 1999,
1998 and 1997, respectively.



<PAGE>

<TABLE>
<CAPTION>


         A summary of warrant activity is as follows:
                                                                       WEIGHTED-                      WEIGHTED-
                                                                         AVERAGE                       AVERAGE
                                                        NUMBER OF       EXERCISE       OPTIONS        EXERCISE
                                                        WARRANTS          PRICE      EXERCISABLE        PRICE
                                                        --------          -----      -----------        -----
            <S>                                       <C>               <C>          <C>              <C>

             Outstanding, July 1, 1996...........        477,000         $   4.44
                Granted..........................        300,000            11.95
                Exercised........................        (11,000)            2.00
                                                    ------------
             Outstanding, June 30, 1997..........        766,000             7.42       493,082       $   4.91
                Granted..........................        215,000            17.31
                Exercised........................       (278,000)            2.42
                                                    ------------
             Outstanding, June 30, 1998..........        703,000            12.42       482,166          12.20
                Cancelled........................        (30,000)           16.88
                                                    ------------            -----       -------          -----
             Outstanding, June 30, 1999..........        673,000            12.22       548,000          12.32
                                                    ============            =====       =======          =====

</TABLE>

       At June 30, 1999, the range of warrant prices for shares under warrants
and the weighted-average remaining contractual life is as follows:
<TABLE>

<CAPTION>

                                                     WARRANTS OUTSTANDING              WARRANTS EXERCISABLE
                                                           WEIGHTED-    WEIGHTED-                      WEIGHTED-
                                                            AVERAGE      AVERAGE                       AVERAGE
                                             NUMBER OF      EXERCISE   CONTRACTUAL        NUMBER       EXERCISE
        RANGE OF WARRANT EXERCISE PRICE       WARRANTS       PRICE        LIFE         EXERCISABLE      PRICE
        -------------------------------       --------       -----        ----         -----------      -----
                 <S>                         <C>            <C>            <C>         <C>              <C>
                  $6.00 - $9.50                200,000     $  7.81          4.83         200,000      $  7.81
                  11.78 - 12.81                288,000       11.96          5.02         163,000        12.10
                  16.88 - 20.63                185,000       17.38          8.23         185,000        17.38
</TABLE>

16.   STOCK SPLIT

         At a Special  Meeting of the Company's  stockholders  held on March 17,
1998,  the  Company's  stockholders  approved  an  amendment  to  the  Company's
Certificate of  Incorporation  to (i) effect a two-for-one  split of each of the
outstanding  shares of common stock of the Company and (ii)  increase the number
of authorized  shares of all classes of stock of the Company from  15,000,000 to
30,000,000,  consisting of 29,000,000  shares of common stock,  $0.001 par value
per share, and 1,000,000 shares of preferred stock,  $0.001 par value per share.
Both actions  were  effective  March 18, 1998.  All share and per share data has
been retroactively restated to reflect the two-for-one stock split.


17.   TREASURY STOCK

          In fiscal 1997,  the Board of Directors  authorized the purchase of up
to 1,200,000 shares of the Company's common stock, which may be used to meet the
Company's common stock requirements for its stock benefit plans. In fiscal 1998,
the Board of Directors  increased  the number of shares of common stock that the
Company is  authorized  to  repurchase  under  this plan by  200,000  shares and
authorized  the purchase of up to 720,000  shares of the Company's  common stock
from  officers and  directors.  During fiscal 1999,  1998 and 1997,  the Company
repurchased  96,000,  695,588 and 1,026,200 shares, at an average per share cost
of $15.53,  $16.63 and $13.20,  respectively.  The 695,588 shares repurchased in
fiscal 1998 were from  officers  and  directors at a per share cost equal to the
closing price of the stock on the day of the  repurchase.  In fiscal 1999,  1998
and 1997,  41,138,  948,528  and  40,264,  respectively,  treasury  shares  were
reissued  upon the  exercise of stock  options and  warrants and the issuance of
common stock under the Employee Stock Purchase Plan.


18.   OTHER TRANSACTIONS

         During fiscal 1995 and 1993, the Company entered into barter agreements
whereby it delivered  inventory in exchange for future  advertising  credits and
other  items.  The Company  had  recorded  barter  credits of $15,000 in prepaid
expenses and other current assets at June 30, 1998.  During the years ended June
30, 1999 and 1998, approximately $15,000 and $100,000, respectively, was charged
to expense  for barter  credits  used.  No amounts  were  charged to expense for
barter  credits used during the year ended June 30, 1997.  During the year ended
June 30, 1997,  the Company  charged  $200,000 to operations  for  impairment of
these credits.  No such impairment  losses were charged to operations during the
years ended June 30, 1999 and 1998.


19.   PROFIT-SHARING AND BONUS PLANS

         In January 1991, the Company  established a 401(k)  profit-sharing plan
in which eligible employees may contribute up to 15% of their eligible earnings.
The  Company  may  contribute  to the  plan at the  discretion  of the  Board of
Directors,  subject to applicable regulations. In the years ended June 30, 1999,
1998 and 1997,  the Board  elected to  contribute  an amount equal to 25% of the
first 6% of eligible earnings.  Participants vest in the Company's contributions
at a rate of 20%  after  two  years  of plan  participation  and 20%  each  year
thereafter until fully vested.

         During the years  ended June 30,  1999,  1998 and 1997,  the  Company's
matching contributions were $181,000, $156,000 and $133,000, respectively.

         The  Company has an  executive  bonus plan and  incentive  compensation
arrangements  for key  employees  based  on an  earnings  formula.  Compensation
expense  recorded under these plans was $628,000  during the year ended June 30,
1998. No amounts were recorded under these plans during the years ended June 30,
1999 and 1997.


20.   SEGMENT INFORMATION

         The Company's operating segments have similar economic  characteristics
and, as such, the Company has  aggregated  six operating  segments into a single
reportable  segment in conformity with SFAS No. 131,  Disclosures about Segments
of an  Enterprise  and  Related  Information.  The  business  activities  of the
Company's operating segment are the development,  manufacturing and marketing of
paper-based  organizers  for the retail  market.  In addition,  the Company also
develops,  manufactures  and  markets a number of  related  organizing  products
including  telephone/address books, business accessories,  products for students
and organizing and other wallboards.


<PAGE>




         The Company groups its products into three  categories:  organizers and
planners;  their refills, which include calendars,  other pages and accessories;
and related organizing products. The following table sets forth, for the periods
indicated,  approximate Day Runner sales by product category and as a percentage
of total net sales.
<TABLE>
<CAPTION>

                                   FISCAL                 FISCAL                   FISCAL
          PRODUCTS                  1999                   1998                     1997
          --------            -----------------     -------------------     ------------------
(Unaudited; dollars in thousands)

<S>                                <C>                       <C>                       <C>
Organizers and planners.           $  80,092               $ 83,069                   $ 73,858
Refills.................              63,596                 51,876                     43,264
Related organizing products           52,524                 32,896                     10,254
                                    ---------              --------                   --------
      Total.............           $ 196,212               $167,841                   $127,376
                                    =========              ========                   ========
</TABLE>

21.   OPERATIONS IN FOREIGN COUNTRIES

         The following is a summary of the financial  activity of the Company by
geographical area (in thousands):
<TABLE>
<CAPTION>
                                                                  YEAR ENDED JUNE 30, 1999
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL
                                   -------------           ------           -----         ------------           -----

<S>                                 <C>                  <C>             <C>             <C>                 <C>
Net sales to unaffiliated entities  $  136,603           $  39,173       $   20,436                          $  196,212
Transfers between geographic areas       2,396                                1,670       $  (4,066)
                                    ----------           ---------       ----------       ----------         ----------
Net sales                           $  138,999           $  39,173      $   22,106        $  (4,066)         $  196,212
                                    ==========           =========      ==========        =========          ==========

Income (loss) from operations       $      651           $   3,797       $     852        $  (6,872)         $   (1,572)
                                    ==========           =========       =========        =========          ==========

Long-lived assets                   $   87,144           $ 171,167       $   6,626        $(159,463)         $  105,474
                                    ==========           =========       =========        =========          ==========

                                                                 YEAR ENDED JUNE 30, 1998
                                   UNITED STATES           EUROPE           OTHER         ELIMINATIONS           TOTAL
                                   -------------           ------           -----         ------------           -----

Net sales to unaffiliated entities  $  152,939           $  2,745        $  12,157                            $  167,841
Transfers between geographic areas       2,347                               2,169        $  (4,516)
                                    ----------           --------        ----------       ------------        ----------
Net sales                           $  155,286           $  2,745       $   14,326        $  (4,516)          $  167,841
                                    ==========           ========       ===========       ============        ==========

Income from operations              $   31,883           $     23       $    2,648        $   (8,985)         $   25,569
                                    ==========           ========       ==========        ==========          ==========

Long-lived assets                   $   16,267           $     95       $    3,364        $   (3,117)         $   16,609
                                    ==========           ========       ==========        ==========          ==========


                                                                  YEAR ENDED JUNE 30, 1997
                                    UNITED STATES         EUROPE           OTHER         ELIMINATIONS           TOTAL
                                    -------------         ------           -----         ------------           -----

Net sales to unaffiliated entities   $  122,618          $  2,086       $    2,672                             $ 127,376
Transfers between geographic areas          490                              1,621        $   (2,111)
                                     ----------          --------       ----------        ----------           ---------
Net sales                            $  123,108          $  2,086       $    4,293        $   (2,111)          $ 127,376
                                     ==========          ========       ==========        ==========           =========


Income from operations               $   23,927          $     24       $    1,810        $   (6,412)          $  19,349
                                     ==========          ========       ==========        ==========           =========

Long-lived assets                    $    8,688          $    157       $       4         $      (61)          $   8,826
                                     ==========          ========       =========         ==========           =========
</TABLE>



22.   CONTINGENCIES

          In September 1999, two purported securities class action lawsuits were
filed in the United States  District Court for the Central  District  California
against the Company and certain of its officers and  directors.  The  complaints
allege that the Company  violated  Section 10(b) of the Securities  Exchange Act
and Rule 10b-5 thereunder  through the  misstatement of the Company's  financial
results of operations for the first through third quarters of fiscal 1999. These
alleged  misstatements   purportetdly   consisted  of  improper  accounting  for
manufacturing  variances and other costs. The plaintiffs in both actions purport
to represent a class  consisting of all purchasers of the Company's Common Stock
between  October  20,  1998 and August 31,  1999.  The  plaintiffs  are  seeking
unspecified compensatory damages.

         The Company  expects  that these  actions will be  consolidated  into a
single action, that a lead plaintiff will be appointed,  and that a consolidated
amended complaint will be filed. None of these events has yet taken place. There
has been no discovery in any of the actions.  Based on the  allegations  and the
issues raised by the current complaint,  the Company believes it has meritorious
defenses to the actions and intends to defend them vigorously.

         The Company is not a party to any other litigation that, in the opinion
of management,  would reasonably be expected to have a materially adverse effect
on the consolidated financial statements.

23.   SUPPLEMENTAL CASH FLOW INFORMATION

      DISCLOSURE OF CASH FLOW INFORMATION (IN THOUSANDS):
<TABLE>
<CAPTION>

                                                                       YEARS ENDED JUNE 30,
                                                                 1999            1998            1997
                                                             ------------    -----------     -------------
         Cash paid for:
             <S>                                             <C>             <C>               <C>
             Interest.......................                   $  4,944        $     91          $    130
             Income taxes                                      $  1,488        $  8,862          $   6,026
</TABLE>

         During the year  ended  June 30,  1999,  the net cash  expended  by the
Company in its  acquisition of Filofax was used as follows (in  thousands)  (See
Note 2):

         Fair value of assets acquired                           $  (117,203)
         Liabilities assumed                                          29,186
                                                                  -----------
         Cash paid                                               $   (88,017)
                                                                  ===========

         During the year ended June 30, 1998,  the Company  purchased all of the
capital stock of Ultima  Distribution,  Inc. and  Timeposters,  Inc. The Company
also purchased certain of the assets of Ram  Manufacturing,  Inc. In conjunction
with these  acquisitions,  net cash expended was as follows (in thousands)  (see
Note 2):

         Fair value of assets acquired                           $   (11,809)
         Liabilities assumed                                           7,183
                                                                 -----------
         Cash paid                                               $    (4,626)
                                                                 ===========

         During the year ended June 30,  1999,  the  Company  purchased  703,308
shares of Filofax's  outstanding  common stock by issuing  (pound)1,477,000  (US
$2,328,000) in Loan Notes (see Note 8) to former shareholders of Filofax.

         The Company  realized a reduction in its current  income tax  liability
during  fiscal  1999,  1998 and 1997 in the amount of  $20,000,  $5,208,000  and
$157,000, respectively. Such amounts were credited to additional paid-in capital
(see Note 12).


<PAGE>



                                 INDEPENDENT AUDITORS' REPORT

Day Runner, Inc.:

We have audited the consolidated  financial  statements of Day Runner,  Inc. and
its  subsidiaries  as of June 30, 1999 and 1998, and for each of the three years
in the period  ended June 30,  1999,  and have issued our report  thereon  dated
October  12,  1999;  such report is included  elsewhere  in this Form 10-K.  Our
audits  also  included  the  consolidated  financial  statement  schedule of Day
Runner,  Inc. and its  subsidiaries,  listed in Item 14(a)2.  This  consolidated
financial statement schedule is the responsibility of the Company's  management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such consolidated  financial statement schedule,  when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

/s/ DELOITTE & TOUCHE LLP

Los Angeles, California
October 12, 1999




























                                               S-1


<PAGE>
<TABLE>
<CAPTION>



                        DAY RUNNER, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                             (DOLLARS IN THOUSANDS)



                                                BALANCE AT                                                        BALANCE AT
                                                 JUNE 30,           FILOFAX        CHARGED TO                      JUNE 30,
CLASSIFICATION                                     1998           ACQUISITION      OPERATIONS      DEDUCTIONS        1999
--------------                               ----------------     -----------      ----------      ----------     ---------
<S>                                            <C>                 <C>             <C>             <C>            <C>
Allowance for doubtful accounts and
   sales returns and other allowances......     $  9,942         $   1,580          $ 19,039        $(19,080)     $  11,481
Reserve for obsolete inventories...........        3,052             4,782             4,286          (2,385)        9,735

                                                BALANCE AT                                                        BALANCE AT
                                                 JUNE 30,                          CHARGED TO                      JUNE 30,
CLASSIFICATION                                     1997                            OPERATIONS      DEDUCTIONS        1998
--------------                               ----------------                      ----------      ----------     ---------
Allowance for doubtful accounts and
   sales returns and other allowances......     $  8,664                            $  9,799       $( 8,521)      $  9,942
Reserve for obsolete inventories...........        3,259                                 898         (1,105)         3,052

                                                BALANCE AT                                                        BALANCE AT
                                                 JUNE 30,                          CHARGED TO                      JUNE 30,
CLASSIFICATION                                     1996                            OPERATIONS      DEDUCTIONS        1997
--------------                               ----------------                      ----------      ----------     ---------
Allowance for doubtful accounts and
   sales returns and other allowances......     $  7,374                            $ 14,264       $( 12,974)     $  8,664
Reserve for obsolete inventories...........        3,473                               1,267          (1,481)        3,259




</TABLE>














                                             S-2



<PAGE>








                                        EXHIBIT INDEX


Exhibit
Number               Description

10.15                Lease Agreement dated as of April 2, 1999 between Mrs.
                     Refugio  Victoria  Geffroy  De  Flourie  and  Mr.  David
                     Bramzon  Stengel  and  the  Registrant(7)

10.20                First Amendment to Consulting Agreement effective April 22,
                     1999 between the Registrant and Alan R. Rachlin(7)

10.21                Consulting Agreement effective May  22, 1999 between the
                     Registrant and Mr. Alan R. Rachlin(17)

 10.23               Amended and Restated Loan Agreement dated as of September
                     30, 1999 among the Registrant, Day Runner UK plc, Filofax
                     Limited, the Lenders named therein and Wells Fargo Bank
                     National Association, including Revolving and Term
                     Loan Notes.

21.1                 Subsidiaries of the Registrant

23.1                 Consent of  Deloitte & Touche LLP

27.1                 Financial Data Schedule