<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)

 X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---   EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1998, OR

---  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO
     __________________.


                         COMMISSION FILE NUMBER 33-66342

                            COLE NATIONAL GROUP, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                                                         <C>       
                                      DELAWARE                                              34-1744334
         (State or other jurisdiction of incorporation or organization)        (I.R.S. employer identification no.)


         5915 LANDERBROOK DRIVE, MAYFIELD HEIGHTS, OHIO                                        44124
            (Address of principal executive offices)                                         (Zip code)
</TABLE>

Registrant's telephone number, including area code:      (440) 449-4100

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

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

The registrant meets the conditions set forth in General Instruction J(1)(a) and
(b) of Form 10-K and is therefore filing this form in the reduced disclosure
format.

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.  X  YES     NO
                                  -----   -----

All of the outstanding capital stock of the registrant is held by Cole National
Corporation.

As of March 25, 1998, 1,100 shares of the registrant's Common Stock, $.01 par
value, were outstanding.

Documents incorporated by reference: None

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                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Cole National Group, Inc. ("CNG"), a wholly owned subsidiary of Cole
National Corporation, ("CNC"), was incorporated as a Delaware corporation in
July 1993. The Company is a leading provider of eyewear products, optometric
services and personalized gifts with over 2,800 retail locations in 49 states,
Canada and the Caribbean. References herein to the "Company" include CNG, its
direct and indirect subsidiaries, and its predecessor companies, which have
operated for more than 50 years, where applicable. The Company's businesses are
conducted through two principal operating units: (i) Cole Optical, consisting of
Cole Vision Corporation ("Cole Vision") and Pearle, Inc. ("Pearle"), which was
acquired on November 15, 1996; and (ii) Things Remembered Inc. ("Things
Remembered"). The Company believes that, based on industry data and after the
acquisition of American Vision Centers, Inc. ("AVC") in August 1997, Cole
Optical is the largest optical retailing company in North America. Things
Remembered operates the only nationwide chain of gift stores offering "while you
shop" gift personalization, key duplicating, and related merchandise. The
Company differentiates itself from other specialty retailers by providing
value-added services at the point of sale at all of its retail locations.

         In January, 1998, the Company announced the closing of its Cole Gift
Centers ("CGC") operations which included 445 personalized gift and greeting
card departments on the premises of hosts' stores. The closings were completed
by February 28, 1998. CGC has been accounted for as a discontinued operation in
the accompanying financial statements.

COLE OPTICAL

         Cole Optical contributed 77.3% of the Company's net revenue in fiscal
1997 with over 2,000 company-owned and franchised locations throughout the
United States, Canada and the Caribbean as of January 31, 1998. Cole Vision and
Pearle share management leadership, purchasing power and corporate support
functions. Cole Vision's managed vision care programs give participants access
to a network of company-owned, franchised and third-party optical locations.

  COLE VISION

         Cole Vision operates principally under the "Sears Optical", "Ward's
Optical" and "BJ's Optical Department" names. As of January 31, 1998, Cole
Vision operated 1,157 locations in 46 states and Canada, including 767
departments on the premises of Sears department stores, 192 departments in
Montgomery Ward stores, 79 departments in BJ's Wholesale Club stores, 11
departments in Target stores, 104 freestanding stores operated under the name
"Sears Optical" and four other locations. Cole Vision departments are generally
operated under a lease or license arrangement through which the host store



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collects the sales receipts, retains an agreed upon percentage of sales and
remits the remainder to Cole Vision on a weekly basis.

         Cole Vision locations are, in most cases, full-service retail eyecare
stores offering brand name and private label prescription eyeglasses, contact
lenses and accessories, with an on-premises doctor of optometry who performs
complete eye examinations and prescribes eyeglasses and contact lenses. Most
Cole Vision optical departments, which are typically 1,000 square feet in size,
operate with a doctor of optometry, a department manager, and from one to seven
opticians depending on store sales volume. A majority of the doctors of
optometry are independent, as is often required by state law, with the remainder
being employed by Cole Vision. The independent doctors sublease space and
equipment from Cole Vision where permitted by law, or from the host, and retain
their examination fees.

         Each of Cole Vision's locations is computer linked to Cole Vision's
five centralized manufacturing laboratories, which grind, cut and fit lenses to
order and ship them to the stores. Cole Vision provides next day delivery on
most of the eyewear it offers when requested by its customers. Cole Vision
purchases all of the frames and lenses used in its eyeglasses from outside
suppliers, both in the United States and several foreign countries.

         Cole Vision conducts a variety of marketing and promotional efforts to
build and maintain its customer base. Cole Vision primarily uses newspaper,
direct mail, yellow pages and host advertising. Host advertising includes the
placement of promotional material within sales circulars or credit card billings
sent out by the host store to its customers. Cole Vision also promotes its next
day service as "Eyewear Express."

  MANAGED VISION CARE

         In the last several years, Cole Vision has expanded its managed vision
care program that provides low cost, comprehensive eyecare benefits marketed
directly to employers, other employee benefit plan sponsors and insurance
companies, primarily under the name "Vision One." Vision One's basic program
gives employers the opportunity to offer their employees a group discount at
locations within the managed vision care network with minimal direct cost to the
employer. An enhanced Vision One program allows employers to provide their
employees with prepaid eye examinations, as well as pricing discounts or
reimbursements. Cole Vision added the Pearle company-owned and a majority of
franchised locations to its managed vision care programs in fiscal 1997.

  PEARLE

         At January 31, 1998, Pearle's operations, including AVC's locations,
consisted of 444 company-owned and 401 franchised stores located in 43 states,
Canada, and the Caribbean. All Pearle stores operate in either an "Express" or
"Mainline" store format. Express stores contain a full surfacing lab that can
manufacture most glasses



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in approximately one hour. Mainline stores can manufacture over 50% of
prescriptions on-site in approximately one hour. Other prescriptions are sent to
a nearby Express location or to the main laboratory in Dallas. The main
laboratory generally is able to complete orders for next day delivery if
requested. At January 31, 1998, 325 of the company-owned stores and 128 of the
franchised stores were Express, with the balance being Mainline. Most of the AVC
locations, which included 80 company-owned and 75 franchised stores at January
31, 1998, have been integrated into the Pearle system.

         The Express stores typically are located in high traffic freestanding,
strip center and mall locations with most stores averaging 3,000 square feet.
The Express stores are usually staffed with two managers and a support staff of
four to eight people. Mainline stores have an average size of 1,700 square feet
and are also located in freestanding buildings, or in smaller strip or regional
centers. Mainline stores generally carry a smaller assortment of inventory than
Express stores and are usually staffed with one manager and two to three
associates. Most Pearle stores have a doctor of optometry on site with
approximately 80% leasing space from Pearle on an independent basis and the
remaining being direct employees of Pearle.

         Pearle's marketing strategy employs a wide range of media at both the
national and local levels. The franchised and company-owned stores each
contribute a percentage of revenues to Pearle's marketing budget with
approximately half of Pearle's marketing expenditures devoted to television.
Pearle's brand positioning of high quality eyecare products and services has
been reinforced by an advertising and promotions program, which includes
Pearle's advertising slogans, Nobody Cares for Eyes More Than Pearle and Put
your Pearle's on.

         Pearle operates a warehouse facility in Dallas that inventories and
distributes a comprehensive product line, including frames, eyeglass lenses,
contact lenses, optical supplies and eyewear accessories to company-owned and
franchised locations.

  FRANCHISE OPERATIONS

         Pearle has maintained a franchise program since 1980. Most of the
franchised stores are single franchise operations, with no franchisee operating
more than eight stores. With the proper financial approvals, a franchise
purchase can be financed through Pearle. Currently, Pearle offers financing over
periods up to ten years at variable interest rates ranging from prime plus one
point to prime plus three points adjusted periodically.

         Each franchisee is required to enter into a Franchise Agreement
requiring payment of an initial franchise fee. The term of the typical Franchise
Agreement is equal to the earlier of ten years or the expiration or termination
of the underlying base lease. Royalty and advertising contributions typically
are based on a percentage of the franchisee's gross revenues from the retail
operation and/or non-surgical professional fee revenues. The total monthly
advertising



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contribution is distributed between Pearle's system-wide advertising fund and
the local co-op market advertising fund.

         During 1997 Pearle modified its Franchise Agreement to reduce the
royalty and advertising fees the franchisees pay and, among other things,
provide for the franchisees' participation in Cole Vision's managed vision care
programs. Approximately 75% of existing franchisees have accepted the modified
agreement.

THINGS REMEMBERED

         Things Remembered contributed 22.7% of the Company's net revenue in
fiscal 1997. As of January 31, 1998, Things Remembered operated 831 stores and
kiosks generally located in large, enclosed shopping malls located in 45 states.
Each location carries a wide assortment of engravable items and provides "while
you shop" personalization and engraving services for any occasion including
holiday, business and special occasion gift events. Things Remembered offers
engraving for items purchased at the store as well as for items purchased
elsewhere.

         Merchandise sold at Things Remembered stores consists of a broad
assortment of gift categories and items at prices generally ranging from $10 to
$75. Things Remembered's offering of gifts includes writing instruments, clocks,
music boxes, picture frames and albums, executive desk sets and accessories, ID
bracelets, glassware, lighters, keys and key rings, door knockers and Christmas
ornaments. Things Remembered features brand name merchandise as well as higher
margin private label merchandise. At some locations, the Company utilizes
computer-controlled embroidery equipment for the personalization of merchandise
such as throws, sweaters, bathrobes, jackets, baseball caps, towels and baby
blankets. These softgoods were added to most of Things Remembered's other
locations in 1996 with personalization services provided from a central
fulfillment facility.

         At January 31, 1998, Things Remembered locations consisted of 456
stores and 375 kiosks. The typical store consists of about 1,000 square feet,
while kiosks, which are units generally located in the center of the common mall
area, are typically 200 square feet in size.

         Things Remembered locations are usually operated by one or two
employees during non-peak periods and up to 15 employees during the peak
Christmas season. Locations typically employ a store manager on a full-time
basis and a full or part-time assistant manager, while the balance of the
employees is part-time sales associates.

         Nearly all locations are equipped with computerized gift engravers and
key duplicating machines. Many stores also have equipment for etching glassware
items. All locations are equipped with point- of-sale terminals.

         The Company ships most of Things Remembered's store merchandise through
its centralized warehouse and distribution facility located



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near Youngstown, Ohio. Completed in July 1997, this facility is expected to
improve distribution efficiencies. The warehouse utilizes a computerized
carousel system to automate the process of locating merchandise needed to fill a
store order.

HOST RELATIONSHIPS

         The Company believes it has developed excellent relationships with the
host stores in which Cole Vision operates. The Company has maintained its
relationships with Sears and Montgomery Ward over 35 years in the optical
business. Of the Sears and Montgomery Ward stores that offer optometric
services, the vast majority are operated by Cole Vision. Although leases with
major hosts are terminable by either party upon relatively short notice, Cole
Vision has never had a lease terminated other than in connection with a store
closing, relocation or major remodeling.

PURCHASING

         The merchandise, supplies and component parts required for the various
products sold by the Company are purchased from a large number of suppliers and
manufacturers and are generally readily available. In most cases, such purchases
are not made under long-term contracts. In fiscal 1997, no single supplier or
manufacturer accounted for as much as 10% of total purchases.

COMPETITION

         The Company operates in highly competitive businesses. Cole Optical
competes with other optical companies, private ophthalmologists, optometrists
and opticians and a growing number of HMOs in a highly fragmented marketplace.
Pearle competes on the basis of its highly recognized brand name, one-hour
express service and by offering quality eyecare products. Cole Vision competes
primarily on the basis of the patient service it provides, as well as price and
product quality and the reputation of its host stores. The Company believes
that, based on industry data and after the acquisition of AVC in August 1997,
Cole Optical is the largest optical retailing company in North America. Although
Things Remembered operates the only nation-wide chain of gift stores offering
"while you shop" gift engraving, key duplicating, glass etching and
monogramming, as well as related merchandise, it competes with many other
retailers that sell gift items. Things Remembered competes with such other
retailers primarily on the basis of the value-added point of sale services that
it provides, as well as price and product quality. Some of the Company's
competitors have greater financial resources than the Company.

EMPLOYEES

         As of January 31, 1998, the Company and its subsidiaries had
approximately 9,200 full-time and 5,200 part-time employees. During October,
November and December, the Company employs additional full- and part-time
employees. In fiscal 1997, approximately 5,000 additional employees were
employed during such period. Approximately



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190 employees at certain Pearle locations are represented by labor unions. The
Company considers its present labor relations to be satisfactory.

ITEM 2.  PROPERTIES

         The Company owns an office in Highland Heights, Ohio that is subject to
a mortgage, leases another office in Highland Heights, Ohio and leases its
executive offices and another office in Cleveland, Ohio. All of Cole Vision's
retail locations are leased or operated under a license with the host store, and
none of the individual retail locations are material to the Company's
operations. Leases for departments operated in Sears stores and freestanding
stores operated under the name "Sears Optical" are generally for terms of 90
days and five years, respectively. Leases for Things Remembered stores and
kiosks are generally for terms of ten and five years, respectively. The Company
believes that its relationships with its lessors are generally good. The Company
leases its five Cole Vision optical laboratories, located in Knoxville,
Tennessee (2 labs); Memphis, Tennessee; Salt Lake City, Utah; and Richmond,
Virginia, pursuant to leases expiring (including renewals at the option of the
Company) in 1999, 2005, 2002, 2006 and 2002, respectively.

         Pearle and AVC have 401 stores based in 39 states. Pearle also has 18
stores in Canada and 25 stores in the Caribbean. Stores are located in malls,
strip centers and freestanding locations. Pearle and AVC lease most of their
retail stores under non-cancelable operating leases with terms generally ranging
from five to ten years and which generally contain renewal options for
additional periods. Pearle or AVC is the principal lessee on a majority of
stores operated by franchisees who sublease the facilities from Pearle or AVC.
Pearle owns its Dallas Support Center, which comprises approximately 88,721
square feet of office space and 147,336 square feet of laboratory and
distribution facilities. Pearle also owns a small headquarters and laboratory in
Puerto Rico. AVC leases its Flint laboratory and distribution facility pursuant
to a lease expiring in 2000.

         In 1997, the Company completed construction of a 210,000 square foot
warehouse and distribution facility for Things Remembered near Youngstown, Ohio.
The Company currently owns this facility but is evaluating financing
alternatives.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is subject to a variety of routine legal proceedings.

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

           Information required by this item has been omitted pursuant to
General Instruction J of Form 10-K.



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                                     PART II

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

           The Registrant is a wholly owned subsidiary of Cole National
Corporation and has no equity securities that trade.

           The covenants in certain debt instruments to which CNG and certain of
its subsidiaries are parties restrict the ability of CNG and such subsidiaries
to make distributions to CNC or CNG, respectively. A credit facility to which
CNG and its subsidiaries are parties permits payment of dividends by CNG's
subsidiaries to CNG annually of up to $8.0 million plus 0.25% of the net annual
sales of CNG's subsidiaries to meet expenses of CNG or CNC, together with
amounts necessary to pay principal and interest on the Company's Senior Notes 
and Senior Subordinated Notes and to meet tax obligations. In addition,
dividends of up to $20.0 million are permitted to repurchase the Senior Notes
and/or the Senior Subordinated Notes. CNG's operating subsidiaries paid 
dividends in 1995 to CNG of $14.0 million. No dividends were paid during 1996 
or 1997.

           So long as no default or event of default has occurred under the
indentures relating to the Senior Notes and Senior Subordinated Notes
and CNG has met a specified fixed charge coverage ratio test, payments of 
dividends to CNC of amounts contributed by CNC to the equity of CNG subsequent 
to September 30, 1993, plus up to one-half of the consolidated net income of CNG
since October 31, 1993 are permitted. During 1996, CNG paid dividends to CNC in 
the amount of $15.4 million. No dividends were paid during 1997.

ITEM 6.  SELECTED FINANCIAL DATA

           Information required by this item has been omitted pursuant to
General Instruction J of Form 10-K.

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

           Certain information required by this item has been omitted pursuant
to General Instruction J of Form 10-K.

           The following is a discussion of certain factors affecting the
Company's results of operations for the fiscal years ended January 31, 1998 and
February 1, 1997. This discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 8 of this
Form 10-K.

           The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal years are identified according to the calendar year in which they begin.
For example, the fiscal year ended January 31, 1998 is referred to as "fiscal
1997." Fiscal 1997 and 1996 consisted of 52-week periods while fiscal 1995
consisted of a 53-week period.



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RESULTS OF OPERATIONS

         On January 13, 1998, the Company announced the closing of its CGC
business which included 445 key duplicating, greeting card and gift departments
on the premises of hosts' stores. CGC has been accounted for as a discontinued
operation in the accompanying financial statements. Accordingly, the results of
operations and loss on disposition of CGC have been excluded from the results of
continuing operations.

         The following is a discussion of the results of the Company's
continuing operations for the three fiscal years ended January 31, 1998.


FISCAL 1997 COMPARED TO FISCAL 1996

         On August 5, 1997, CNC contributed to the Company, all of the issued
and outstanding common stock of AVC which CNC had acquired for approximately
$28.9 million in cash, including debt assumed. The acquisition by CNC was
accounted for using the purchase method of accounting. Accordingly, AVC's
results of operations, which included 80 company-owned optical stores and 75
franchised locations at January 31, 1998, have been included in the Company's
consolidated statement of income for fiscal 1997 since the date of contribution.
For the six-month period, AVC's net revenue was approximately $25.0 million.

         Net revenue increased 58.5% to $996.2 million in fiscal 1997 from
$628.5 million in fiscal 1996. The increase in revenue was primarily
attributable to the acquisitions of Pearle and AOCO Limited ("Sears Optical of
Canada") in November 1996 and AVC in August 1997 (collectively "the Acquired
Companies"), which accounted for $290.7 million of the increase for the fiscal
year. See Notes 2 and 3 of the Notes to Consolidated Financial Statements for
further discussion of the Acquired Companies. The Company's consolidated
comparable store sales increased 3.6% in fiscal 1997 with a 5.9% comparable
store growth at Cole Optical and a 0.5% comparable store sales decline at Things
Remembered. The increase at Cole Optical was primarily a result of successful
eyewear promotions and growth in managed vision care sales. The net revenue
increase was also attributable to the Company's classification of capitation and
other fees associated with its growing managed vision care business as revenue.
Until the first quarter of fiscal 1997, such fees were netted with operating
expenses in the Company's financial statements. For fiscal 1997, these fees were
approximately $40.7 million. The opening of additional Cole Optical and Things
Remembered units also contributed to the revenue increase. At January 31, 1998,
the Company had 2,833 specialty service retail locations, including 401
franchised locations, compared to 2,657 at February 1, 1997.



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         Gross profit increased to $655.3 million in fiscal 1997 from $427.3
million in fiscal 1996. The gross profit increase was primarily attributable to
the Acquired Companies and classification of managed vision care fees as
revenue. Gross margins for fiscal 1997 and fiscal 1996 were 65.8% and 68.0%,
respectively. The lower gross margin percentage in fiscal 1997 resulted
primarily from the addition of Pearle which operates at a lower gross margin
than the Company has historically experienced due to the higher costs of
in-store laboratories and lower margin wholesale sales to franchised stores.
This was partially offset by revenue generated by Pearle's franchise royalties
and fees, interest income on Pearle's franchise notes receivable and the managed
vision care fees, each of which has no corresponding cost of goods sold.

         Operating expenses increased 54.5% to $555.2 million in fiscal 1997
from $359.4 million in fiscal 1996. As a percentage of revenue, operating
expenses decreased to 55.7% in fiscal 1997 from 57.2% in fiscal 1996. The
leverage improvement was primarily a result of the addition of Pearle, which has
lower operating expenses as a percentage of revenue than the rest of the
Company, along with leverage gains achieved by Cole Optical's comparable store
sales increase. This was offset in part by leverage losses at Things Remembered
resulting from the decline in comparable store sales. Operating expenses
increased primarily because of the Acquired Companies and the classification of
capitation and other fees as revenue. The expense increase reflected higher
advertising expenditures, payroll costs, and store occupancy expenses, as well
as expenses related to the growth of managed vision care. Advertising
expenditures at Cole Optical were increased for optical promotions and Pearle
name awareness. Payroll costs increased because of more higher-volume retail
units open in 1997 and additional payroll to support increased sales. Store
occupancy expenses increased primarily as a result of more locations and higher
percentage rents caused by increased comparable store sales. Fiscal 1997
depreciation and amortization expense of $29.1 million was $10.8 million more
than fiscal 1996 reflecting the addition of the Acquired Companies and an
increase in capital expenditures.

         The third and fourth quarter of fiscal 1997 included a total of $8.0
million of charges for non-recurring items related to integration of AVC into
the Company's operations. In the fourth quarter of fiscal 1996, the Company
recorded a $61.1 million pre-tax charge for certain unusual non-recurring items
primarily related to the integration and consolidation of Pearle. See Note 3 of
the Notes to Consolidated Financial Statements for further discussion of the
Business Integration and Other Non-Recurring Charges.

         Operating income, excluding charges for business integration and other
non-recurring items from each year, increased 43.2% to $71.0 million in fiscal
1997 from $49.6 million the prior year, primarily the result of the Acquired
Companies and comparable store sales growth at Cole Optical, offset in part by
soft sales performance at Things Remembered.



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         Net interest expense for fiscal 1997 of $28.5 million increased $7.6
million compared to fiscal 1996. The increase was primarily attributable to the
additional interest on $150.0 million of 9-7/8% Senior Subordinated Notes due
2006 (the "9-7/8% Notes") issued in connection with financing the Pearle
acquisition and $125.0 million of 8-5/8% Senior Subordinated Notes due 2007 (the
"8-5/8% Notes") issued in August 1997. This was partially offset by a decrease
in interest expense due to the purchase and subsequent retirement of $15.1
million of 11-1/4% Senior Notes due 2001 (the "Senior Notes") in the fourth
quarter of fiscal 1996 and the purchase and retirement of $150.9 million of
Senior Notes in conjunction with a tender offer in September 1997. The issuance
of the 8-5/8% Notes, combined with the redemption of the Senior Notes, is
expected to reduce fiscal 1998 interest expense by more than $3.0 million
compared to fiscal 1997.

         The income tax provisions for fiscal 1997 and 1996 include $3.4 million
and $20.0 million, respectively, of income tax benefits related to the charges
for business integration and other non-recurring items. The effective tax rate
on income excluding the charge for business integration and other non-recurring
items was 43.2% in fiscal 1997 and 44.3% in fiscal 1996. This rate reflects the
significant impact of non-deductible amortization of goodwill in both years. A
more complete discussion of income taxes is included in Note 8 of Notes to
Consolidated Financial Statements.

         The net loss in fiscal 1997 of $6.6 million included a $14.0 million
loss, net of an income tax benefit of $8.5 million, related to the operations
and closing of CGC and a $12.2 million extraordinary loss, net of an income tax
benefit of $7.5 million, recorded in the third quarter of fiscal 1997 in
connection with the early extinguishment of debt. The loss represented the
tender premium, write-off of related unamortized debt discount and other costs
associated with redemption of the Senior Notes.


FISCAL 1996 COMPARED TO FISCAL 1995

           On November 15, 1996, the Company acquired the North American and
Caribbean operations of Pearle. The acquisition of Pearle has been accounted for
under the purchase method of accounting. Accordingly, Pearle's results of
operations since the date of acquisition have been included in the Company's
consolidated statement of operations for fiscal 1996. For the eleven-week
period, Pearle operated at approximately a break-even level with net revenue of
$58.3 million reflecting the relatively lower level of optical retail sales
during the holiday season. At February 1, 1997, the Pearle system included 348
company-operated optical stores and 338 franchised locations in the United
States, Canada and the Caribbean. Except as otherwise indicated, the following
discussion of net revenue, gross profit and operating expenses relates to the
Company on an historical basis without giving effect to the Pearle acquisition.



                                      -10-
<PAGE>   12

           Net revenue increased 9.8% to $566.3 million in fiscal 1996 from
$515.9 million in fiscal 1995. The increase in consolidated revenue was due to a
comparable store sales increase of 7.2% and to the opening of additional Things
Remembered and Cole Vision units including 75 optical locations in Canada as a
result of the acquisition of AOCO Limited in November 1996. This was partially
offset by one less week of sales in fiscal 1996 compared to fiscal 1995.
Comparable store sales increased 10.7% at Cole Vision primarily as a result of
successful eyewear promotions and growth in the managed vision care program.
Comparable store sales increased 2.3% at Things Remembered, benefiting from the
roll-out of monogrammed softgoods and the introduction of new merchandise. At
February 1, 1997, the Company operated 1,971 specialty service retail locations,
excluding the Pearle system, versus 1,834 at the end of the prior year.

           Gross profit increased to $391.4 million in fiscal 1996 from $354.2
million in fiscal 1995. Gross margins for fiscal 1996 and fiscal 1995 were 69.1%
and 68.7%, respectively. The increase in gross margin percentage was the result
of lower product costs, improved optical lab productivity and a higher level of
personalization in the sales mix at Things Remembered.

           Operating expenses increased 10.2% to $326.3 million in fiscal 1996
from $296.1 million the prior year. As a percentage of revenue, operating
expenses increased slightly to 57.6% in fiscal 1996 from 57.4% in fiscal 1995.
Operating expenses increased primarily due to higher advertising expenditures,
payroll costs and store occupancy expenses, partly offset by one less week in
fiscal 1996. Advertising expenditures at Cole Vision were increased for optical
promotions to encourage continued sales growth above last year's successful
promotions. Payroll costs increased because of more higher-volume retail units
open in 1996, including an increased number of Things Remembered personalization
superstores, and additional payroll to support increased sales. Store occupancy
expenses increased primarily as a result of the increased number of Things
Remembered personalization superstores and higher percentage rents caused by
increased comparable store sales. Fiscal 1996 depreciation and amortization
expense of $15.7 million was $1.2 million more than fiscal 1995 reflecting an
increase in capital expenditures.

           In the fourth quarter of fiscal 1996, the Company recorded a $61.1
million pre-tax charge for certain unusual and non-recurring items. Such charge
was primarily related to the acquisition of Pearle and included costs incurred
related to the integration and consolidation of Pearle into the Company's
operations, as well as certain other non-recurring charges. See Note 3 of the
Notes to Consolidated Financial Statements for further discussion of the
business integration and other non-recurring charges.

           Operating income, excluding the charge for non-recurring items,
increased 13.2% to $49.4 million in fiscal 1996 from $43.6



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<PAGE>   13

million the prior year. The increase was primarily attributable to increased
revenue and higher gross margin.

           Net interest expense for fiscal 1996 of $20.9 million was $1.7
million more than that of the prior year. This increase was primarily due to
$3.4 million of additional interest expense related to the financing of the
Pearle acquisition offset by decreases in interest expense due to the retirement
of $5.0 million of Senior Notes in November 1995, the purchase and subsequent
retirement of $15.1 million of Senior Notes in November 1996, the elimination of
working capital borrowings and increased interest income from an increase in
temporary cash investments.

           The income tax benefit of $7.3 million for fiscal 1996 includes a
$20.0 million income tax benefit related to the charge for business integration
and other non-recurring items. The effective income tax rate on income excluding
the charge for business integration and other non-recurring items was 44.3% in
fiscal 1996 and 43.7% in fiscal 1995. This rate reflects the significant impact
of non-deductible amortization of goodwill in both years.

           The net loss in fiscal 1996 of $28.0 million included a $2.9 million
loss, net of an income tax provision of $0.2 million, from CGC's discontinued
operations, which included a write-off of CGC's goodwill of $3.3 million.

YEAR 2000

         In connection with the significant investment in the development of new
data processing systems, the Company has begun to evaluate the impact of issues
regarding the year 2000. The Company is developing an action plan, including
identifying required resources, to modify any computer systems and software
applications not already modified, to be year 2000 compliant. At the present
time, the Company anticipates completion of any modifications to critical
systems by the end of fiscal 1998. However, there can be no assurance that such
schedule will be met or that any similar failure to convert by the Company's
vendors and suppliers or consumer credit providers such as banks or credit card
companies would not have an adverse effect on the Company's business. Although
the Company does not anticipate the cost of any modifications, which will be
expensed, to have a material effect on its results of operations, financial
position or cash flows, the ultimate impact is unknown at this time.

NEW ACCOUNTING PRONOUNCEMENTS

         In fiscal 1998, the Company will adopt Statement of Financial
Accounting Standards (SFAS) No. 130 "Reporting Comprehensive Income" and No. 131
"Disclosures about Segments of an Enterprise and Related Information".

         SFAS No. 130 establishes standards for reporting comprehensive income
and its components in a full set of financial statements.



                                      -12-
<PAGE>   14

Comprehensive income is defined as "the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources". Comprehensive income is the total of net income and all
other non-owner changes in equity. SFAS No. 130 will require the Company to
report comprehensive income in a financial statement that is displayed with the
same prominence as other financial statements.

         SFAS No. 131 requires that the Company report certain information about
operating segments in its financial statements. Operating segments are
components of an enterprise whose results are regularly reviewed by the
Company's chief operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance, and for which discrete
financial information is available. The Company is currently evaluating which
parts of its business meet the definition of an operating segment.

         Adoption of the aforementioned standards is not expected to have a
material impact on the Company's results of operations, financial position or
cash flows.

FORWARD-LOOKING INFORMATION

         Certain sections of this report contain forward-looking statements.
Forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the Company. All forward-looking
statements involve risk and uncertainty.

         The Company operates in a highly competitive environment, and its
future liquidity, financial condition and operating results may be materially
affected by a variety of factors, some of which may be beyond the control of the
Company, including risks associated with the integration of Pearle and AVC, the
Company's ability to select and stock merchandise attractive to customers,
economic and weather factors affecting consumer spending, operating factors,
including manufacturing quality of optical and engraved goods, affecting
customer satisfaction, the Company's relationships with host stores, the mix of
goods sold, pricing and other competitive factors.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           Information required by this Item appears on pages F-1 through F-23
of this Form 10-K and is incorporated herein by reference. Other financial
statements and schedules are filed herewith as "Financial Statement Schedules"
pursuant to Item 14.

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

           None.




                                      -13-
<PAGE>   15

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

           Information required by this Item has been omitted pursuant to
General Instruction J of Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION

           Information required by this Item has been omitted pursuant to
General Instruction J of Form 10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

           Information required by this Item has been omitted pursuant to
General Instruction J of Form 10-K.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

           Information required by this Item has been omitted pursuant to
General Instruction J of Form 10-K.


                                     PART IV

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

(a)(1) and (2) Financial Statements and Financial Statement
               Schedules

           The financial statements and financial statement schedules filed as
part of this Form 10-K for the Company and its consolidated subsidiaries are
located as set forth in the index on page F-1.

(a)(3) Exhibits

           See Exhibit Index on pages X-1 through X-5.

(b)  Reports on Form 8-K

           The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year ended January 31, 1998.

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

           No annual report or proxy statement covering the Company's last
fiscal year has been or will be circulated to security holders.



                                      -14-
<PAGE>   16


                                   SIGNATURES

           PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                              COLE NATIONAL GROUP, INC.


April 30, 1998                By:     /s/ WAYNE L. MOSLEY
                                 -----------------------------
                                         Wayne L. Mosley
                                 Vice President and Controller

           PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT
AND IN THE CAPACITIES AND ON THE DATES INDICATED.


             *                Chairman and Chief      April 30, 1998
----------------------------- Executive Officer and
      Jeffrey A. Cole         Director (Principal  
                              Executive Officer and
                              Principal Financial  
                              Officer)             
                              

             *                President and Director  April 30, 1998
-----------------------------
       Brian B. Smith

     /s/ WAYNE L. MOSLEY      Vice President and      April 30, 1998
----------------------------- Controller (Principal
      Wayne L. Mosley         Accounting Officer)  
                              

             *                Director                April 30, 1998
-----------------------------
     Timothy F. Finley

             *                Director                April 30, 1998
-----------------------------
       Irwin N. Gold

             *                Director                April 30, 1998
-----------------------------
       Peter V. Handal

             *                Director                April 30, 1998
-----------------------------
      Charles A. Ratner

             *                Director                April 30, 1998
-----------------------------
      Walter J. Salmon

* The undersigned, by signing his name hereto, does sign and execute this report
  on Form 10-K pursuant to the Powers of Attorney executed by the above-named
  officers and directors of the Company and which are being filed herewith with
  the Securities and Exchange Commission on behalf of such officers and
  directors.


        /s/ WAYNE L. MOSLEY
-----------------------------------
  Wayne L. Mosley, Attorney-in-Fact



                                      -15-
<PAGE>   17




            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES



<TABLE>
<CAPTION>
                                                                                    Page
                                                                                    ----


<S>                                                                                 <C>
    Report of Independent Public Accountants                                        F-2

    Consolidated Balance Sheets as of January 31, 1998 and
       February 1, 1997                                                             F-3

    Consolidated Statements of Operations for the 52 weeks ended January 31,
       1998, the 52 weeks ended February 1, 1997, and the 53 weeks ended
       February 3, 1996                                                             F-4

    Consolidated Statements of Cash Flows for the 52 weeks ended January 31,
       1998, the 52 weeks ended February 1, 1997 and the 53 weeks ended February
       3, 1996                                                                      F-5

    Consolidated Statements of Stockholder's Equity (Deficit) for the 52 weeks
       ended January 31, 1998, the 52 weeks ended February 1, 1997, the 53 weeks
       ended February 3, 1996                                                       F-6

    Notes to Consolidated Financial Statements                                      F-7



FINANCIAL STATEMENT SCHEDULES:

    Report of Independent Public Accountants on the Financial Statement Schedule   F-24

    Schedule I - Condensed Financial Information of Registrant                     F-25
</TABLE>



All financial statement schedules not included have been omitted because they
are not applicable or because the required information is otherwise furnished.






                                      F-1
<PAGE>   18




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



TO THE BOARD OF DIRECTORS OF COLE NATIONAL GROUP, INC.:

         We have audited the accompanying consolidated balance sheets of Cole
National Group, Inc. (a Delaware corporation) and Subsidiaries (the Company) as
of January 31, 1998 and February 1, 1997, and the related consolidated
statements of operations, stockholder's equity (deficit) and cash flows for each
of the three years in the period ended January 31, 1998. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cole
National Group, Inc. and Subsidiaries as of January 31, 1998 and February 1,
1997, and the results of their operations and their cash flows for each of the
three years in the period ended January 31, 1998, in conformity with generally
accepted accounting principles.





ARTHUR ANDERSEN LLP



Cleveland, Ohio,
March 18, 1998.



                                      F-2
<PAGE>   19



                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                January 31,          February 1,
                                                                                   1998                 1997
                                                                                  --------            --------
<S>                                                                               <C>                 <C>     
Assets
------
Current assets:
    Cash and temporary cash investments                                           $ 67,989            $ 73,141
    Accounts receivable, less allowance for doubtful accounts
       of $4,334 in 1997 and $3,068 in 1996                                         51,491              38,313
    Current portion of notes receivable                                              4,177               6,060
    Inventories                                                                    119,970             104,360
    Prepaid expenses and other                                                       9,099               7,185
    Deferred income tax benefits                                                    20,950              24,925
    Net assets of discontinued operations                                                -              16,451
                                                                                  --------            --------
       Total current assets                                                        273,676             270,435

Property and equipment, at cost                                                    237,611             203,979
    Less - accumulated depreciation and amortization                              (113,954)            (94,359)
                                                                                  --------            --------
          Total property and equipment, net                                        123,657             109,620

Other assets:
    Notes receivable, excluding current portion                                     19,552              24,387
    Deferred income taxes and other                                                 52,373              24,688
    Intangible assets, net                                                         159,077             139,308
                                                                                  --------            --------
       Total assets                                                               $628,335            $568,438
                                                                                  ========            ========


Liabilities and Stockholder's Equity (Deficit)
----------------------------------------------
Current liabilities:
    Current portion of long-term debt                                             $ 15,078            $    477
    Accounts payable                                                                71,672              60,826
    Payable to affiliates                                                           88,776              65,590
    Accrued interest                                                                 6,615               9,630
    Net liabilities of discontinued operations                                       3,475                   -
    Accrued liabilities                                                            108,545             119,933
    Accrued income taxes                                                               965               6,978
                                                                                  --------            --------
       Total current liabilities                                                   295,126             263,434

Long-term debt, net of discount and current portion                                274,992             314,359

Other long-term liabilities                                                         30,664              27,000

Stockholder's equity (deficit):
    Common stock                                                                         -                   -
    Paid-in capital                                                                193,560             122,681
    Foreign currency translation adjustment                                           (436)                (26)
    Accumulated deficit                                                           (165,571)           (159,010)
                                                                                  --------            --------
       Total stockholder's equity (deficit)                                         27,553             (36,355)
                                                                                  --------            --------
       Total liabilities and stockholder's equity                                 $628,335            $568,438
                                                                                  ========            ========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.



                                      F-3
<PAGE>   20



                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                 52 Weeks          52 Weeks          53 Weeks
                                                                   Ended             Ended             Ended
                                                                January 31,       February 1,       February 3,
                                                                   1998              1997              1996
                                                                -----------        -----------     -----------
<S>                                                              <C>                <C>              <C>     
    Net revenue                                                  $996,164           $628,496         $515,892

    Costs and expenses:
       Cost of goods sold                                         340,849            201,229          161,671
       Operating expenses                                         555,246            359,430          296,109
       Depreciation and amortization                               29,058             18,260           14,486
       Business integration and other
          non-recurring charges                                     8,000             61,091                -
                                                                -----------        -----------     -----------
              Total costs and expenses                            933,153            640,010          472,266
                                                                -----------        -----------     -----------

    Operating income (loss)                                        63,011            (11,514)          43,626

    Interest expense, net                                          28,507             20,879           19,155
                                                                -----------        -----------     -----------
    Income (loss) from continuing operations before 
      income taxes                                                 34,504            (32,393)          24,471

    Income tax provision (benefit)                                 14,915             (7,286)          10,681
                                                                -----------        -----------     -----------

    Income (loss) from continuing operations                       19,589            (25,107)          13,790

    Discontinued operations:
       Operating loss, net of income tax provision (benefit)
          of $(39), $180 and $118, respectively                       (67)            (2,935)             (40)

       Loss on disposal, net of income tax benefit of $8,500      (13,900)                 -                -
                                                                -----------        -----------     -----------

       Loss from discontinued operations                          (13,967)            (2,935)             (40)
                                                                -----------        -----------     -----------

    Income (loss) before extraordinary item                         5,622            (28,042)          13,750

    Extraordinary loss on early extinguishment of debt, net
       of income tax benefit of $7,467                            (12,183)                 -                -
                                                                -----------        -----------     -----------
    Net income (loss)                                           $  (6,561)         $ (28,042)      $   13,750
                                                                ==========         ===========     ===========

</TABLE>







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



                                      F-4
<PAGE>   21





                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                             52 Weeks        52 Weeks        53 Weeks
                                                                               Ended           Ended           Ended
                                                                             January 31,     February 1,     February 3,
                                                                                1998            1997            1996
                                                                               -------       --------        --------
<S>                                                                            <C>          <C>              <C>     
Cash flows from operating activities:
    Net income (loss)                                                          $(6,561)     $ (28,042)       $ 13,750
    Adjustments to reconcile net income (loss) to net cash 
      provided by operating activities:
         Extraordinary loss on early extinguishment
             of debt                                                            12,183              -               -
         Depreciation and amortization                                          29,058         18,260          14,486
         Non-recurring charges                                                     546         19,983               -
         Non-cash interest                                                         961            519             454
         Deferred income tax provision (benefit)                                12,966        (16,575)          4,394
         Change in assets and liabilities net of effects from
             acquisitions:
                Increase in accounts and notes receivable, prepaid
                 expenses and other assets                                      (9,015)        (4,319)         (4,752)
                Decrease (increase) in inventories                             (11,222)        (3,935)          2,377
                Decrease in net assets of discontinued operations               19,926          4,002             530
                Increase (decrease) in accounts payable, accrued
                   liabilities and other liabilities                           (11,944)        73,215           1,721
                Increase (decrease) in accrued interest                         (3,015)         2,586             109
                Increase (decrease) in accrued and deferred income taxes          (749)         1,305           1,419
                                                                              --------       --------        --------
                        Net cash provided by operating activities               33,134         66,999          34,488
                                                                              --------       --------        --------
Cash flows from financing activities:
    Repayment of long-term debt                                               (169,839)       (15,511)         (5,200)
    Payment of deferred financing fees                                          (3,191)        (6,066)              -
    Advances from affiliates, net                                               61,614         34,888               -
    Proceeds from long-term debt, net                                          125,000        148,875               -
    Other                                                                         (420)             -               -
                                                                              --------       --------        --------
      Net cash provided (used) by financing activities                          13,164        162,186          (5,200)
                                                                              --------       --------        --------
Cash flows from investing activities:
  Purchases of property and equipment, net                                     (32,634)       (24,925)        (17,981)
  Acquisition of businesses, net of cash acquired                                    -       (157,426)           (800)
  Systems development costs                                                    (17,922)        (2,933)           (706)
  Other, net                                                                      (894)           (20)           (271)
                                                                              --------       --------        --------
      Net cash used by investing activities                                    (51,450)      (185,304)        (19,758)
                                                                              --------       --------        --------
Cash and temporary cash investments:
  Net increase (decrease) during the period                                     (5,152)        43,881           9,530
  Balance, beginning of the period                                              73,141         29,260          19,730
                                                                              --------       --------        --------
  Balance, end of the period                                                  $ 67,989       $ 73,141        $ 29,260
                                                                              ========       ========        ========
</TABLE>

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



                                      F-5
<PAGE>   22





                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                             Foreign
                                                                            Currency         Notes
                                                                             Trans-       Receivable                        Total
                                                                             lation          Stock         Accum-          Stock-
                                                 Common        Paid-In       Adjust         Option         ulated         holder's
                                                 Stock         Capital        ment         Exercise        Deficit         Equity
                                                 ------        --------      ------        -------        ---------        -------

<S>                                              <C>           <C>           <C>           <C>            <C>              <C>    
Balance, January 28, 1995                        $     -       $118,065      $     -       $(1,108)       $(115,818)      $  1,139
                                                 -------       --------      -------       -------        ---------       --------

  Net income                                           -              -            -             -           13,750         13,750

  Transfer of notes receivable                         -              -            -         1,108                -          1,108

  Dividend to Parent                                   -              -            -             -          (13,500)       (13,500)
                                                 -------       --------      -------       -------        ---------       --------

Balance, February 3, 1996                              -        118,065            -             -         (115,568)         2,497
                                                 -------       --------      -------       -------        ---------       --------

  Net loss                                             -              -            -             -          (28,042)       (28,042)

  Stock options granted                                -          4,153            -             -                -          4,153

  Effect of foreign currency
    translation                                        -              -          (26)            -                -            (26)

  Tax benefit of stock option
    exercises                                          -            463            -             -                -            463

  Dividend to Parent                                   -              -            -             -          (15,400)       (15,400)
                                                 -------       --------      -------       -------        ---------       --------

Balance, February 1, 1997                              -        122,681          (26)            -         (159,010)       (36,355)
                                                 -------       --------      -------       -------        ---------       --------

  Net loss                                             -              -            -             -           (6,561)        (6,561)

  Effect of foreign currency
    translation                                        -              -         (410)            -                -           (410)

  Tax benefit of stock option
    exercises                                          -            755            -             -                -            755

  Capital contribution by Parent                       -         70,124            -             -                -         70,124
                                                 -------       --------      -------       -------        ---------       --------
Balance, January 31, 1998                        $     -       $193,560      $  (436)      $     -        $(165,571)      $ 27,553
                                                 =======       ========      =======       =======        =========       ========
</TABLE>

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



                                      F-6
<PAGE>   23


                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      Summary of Significant Accounting Policies

         Basis of Presentation -

                Cole National Group, Inc. (CNG) is a wholly owned subsidiary of
         Cole National Corporation (the Parent). The consolidated financial
         statements include the accounts of CNG and its wholly owned
         subsidiaries (collectively, the Company). CNG's subsidiaries include
         Pearle, Inc. (Pearle) which was acquired on November 15, 1996 (see Note
         2). All significant intercompany transactions have been eliminated in
         consolidation.

                The Company is a specialty service retailer operating in both
         host and non-host environments. The Company's primary lines of business
         are eyewear products and services, and personalized gifts. Eyewear
         products and services represented approximately 77.3%, 64.8% and 59.3%
         of consolidated net revenue in 1997, 1996, and 1995, respectively.

                The Company sells its products through over 2,400 company-owned
         retail locations and 400 franchised locations in 49 states, Canada, and
         the Caribbean, and differentiates itself from other specialty retailers
         by providing value-added services at the point of sale at all of its
         retail locations. The Company considers its operations to be in one
         business segment.

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

                The Company's fiscal year ends on the Saturday closest to
         January 31. Fiscal years are identified according to the calendar year
         in which they begin. Fiscal years 1997 and 1996 consisted of 52 weeks
         while fiscal year 1995 consisted of 53 weeks.

         Inventories -

                The Company's inventories are valued at the lower of first-in,
         first-out (FIFO) cost or market.

         Property and Depreciation -

                The Company's policy is to provide depreciation using the
         straight-line method over a period which is sufficient to amortize the
         cost of the asset over its useful life or lease term.




                                      F-7
<PAGE>   24


                The estimated useful lives for depreciation purposes are:

                             Buildings and improvements          5 to 40 years
                             Equipment                           3 to 10 years
                             Furniture and fixtures              2 to 10 years
                             Leasehold improvements              2 to 20 years

                Property and equipment, at cost, consist of the following as of
         January 31, 1998 and February 1, 1997 (000's omitted):

<TABLE>
<CAPTION>
                                                                      1998               1997
                                                                    --------           --------

<S>                                                               <C>               <C>          
                Land and buildings                                $       22,782    $      17,990
                Furniture, fixtures and equipment                        144,450          127,706
                Leasehold improvements                                    70,379           58,283
                                                                  --------------    -------------
                  Total property and equipment                    $      237,611    $     203,979
                                                                  ==============    =============
</TABLE>

         Store Opening Expenses -

                Store opening expenses are charged to operations in the year the
         store is opened, which is generally the year the expense is incurred.

         Notes Receivable -

                The Company's notes receivable are primarily from Pearle's
         franchisees throughout the U.S. and are collateralized by inventory,
         equipment, and leasehold improvements at each location. The notes
         generally bear interest at the prime rate plus 3% and require monthly
         payments of principal and interest over periods of up to ten years.

         Intangible Assets -

                Intangible assets, net, consist of the following at January 31,
         1998 and February 1, 1997 (000's omitted):

<TABLE>
<CAPTION>
                                                               1998             1997
                                                              ------           ------

<S>                                                       <C>              <C>         
                       Tradenames                         $      47,962    $     49,198
                       Goodwill                                 111,115          90,110
                                                          -------------    ------------
                                                          $     159,077    $    139,308
                                                          =============    ============
</TABLE>

                Tradenames acquired in connection with the Pearle acquisition
         are being amortized on a straight-line basis over 40 years and are
         presented net of accumulated amortization of $1,498,500 and $262,000 at
         January 31, 1998 and February 1, 1997, respectively.

                Goodwill is being amortized on a straight-line basis over 40
         years and is presented net of accumulated amortization of $34,008,000
         and $30,609,000 at January 31, 1998 and February 1, 1997, respectively.
         Management regularly evaluates its accounting for goodwill considering
         primarily such factors as historical profitability, current operating
         profits and cash flows. The Company believes that, at January 31, 1998,
         the asset is realizable and the amortization period is still
         appropriate.




                                      F-8
<PAGE>   25

         Other Assets -

                Financing costs incurred in connection with obtaining long-term
         debt are capitalized in other assets and amortized over the life of the
         related debt using the effective interest method.

                In March 1998 the Accounting Standards Executive Committee
         issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
         Computer Software Developed or Obtained for Internal Use." This SOP,
         which was issued as an exposure draft in December 1996, provides
         guidance on accounting for the costs of computer software developed or
         obtained for internal use. SOP 98-1 provides that direct costs to
         develop or obtain internal use software, including internal costs,
         should be capitalized and amortized over the estimated useful life of
         the software.

                Such costs incurred by the Company have been capitalized and are
         included in other assets. These costs are being amortized on a
         straight-line basis over periods ranging from two to seven years,
         beginning when the software is placed in service. At January 31, 1998
         and February 1, 1997, these costs, net of accumulated amortization,
         were $23,963,000 and $3,093,000, respectively.

         Other Long-Term Liabilities -

                Other long-term liabilities consist primarily of certain
         employee benefit obligations, deferred lease credits and other
         lease-related obligations not expected to be paid within 12 months, and
         deferred income taxes. Deferred lease credits are amortized on a
         straight-line basis over the life of the applicable lease.

         Cash Flows -

                For purposes of reporting cash flows, the Company considers all
         temporary cash investments, which have original maturities of three
         months or less, to be cash equivalents. The carrying amounts of cash
         and cash equivalents approximate fair value due to the short maturity
         of those instruments.

                Net cash flows from operating activities reflect cash payments
         for income taxes and interest as follows (000's omitted):

<TABLE>
<CAPTION>
                                                      1997             1996           1995
                                                    --------         --------       ------

<S>                                                <C>             <C>              <C>        
                       Income taxes                $     4,889     $     5,300      $     4,264
                       Interest                    $    33,429     $    21,275      $    21,580
</TABLE>

                During 1997 and 1995, non-cash financing activities
         included incurring $622,000 and $887,000, respectively, in
         capital lease obligations.

                During 1997, in connection with the tender offer described in
         Note 5, the Parent made a capital contribution to the Company in the
         amount of $42,347,000. This contribution was recorded as a decrease to
         payable to affiliates.



                                      F-9
<PAGE>   26

                During 1995, a dividend in the amount of $13.5 million was
         declared and was payable to the Parent at February 3, 1996. During
         1996, a dividend in the amount of $15.4 million was declared and paid
         to the Parent. Payment of the dividends was recorded as an increase to
         payable to affiliates. No dividends were declared during fiscal 1997.

         Revenues -

                Revenues include sales of goods and services to retail customers
         at company-operated stores, sales of merchandise inventory to
         franchisees and other outside customers, and other revenues from
         franchisees such as royalties based on sales, interest income on notes
         receivable and initial franchise fees. Other revenues from franchisees
         totaled $19.8 million and $4.0 million in fiscal 1997 and 1996,
         respectively.

                Franchise revenues based on sales by franchisees are accrued as
         earned. Initial franchise fees are recorded as income when all material
         services or conditions relating to the sale of the franchises have been
         substantially performed or satisfied by the Company and when the
         related store begins operations.

                In fiscal 1997, the Company began classifying capitation and
         other fees associated with its growing managed vision care business,
         totaling $40.7 million for fiscal 1997, as revenues, which in prior
         years has been netted with operating expenses.

         Advertising -

                The Company expenses advertising production costs and
        advertising costs as incurred and is reimbursed by franchisees for
        certain advertising expenses based on a percentage of sales. Advertising
        expense is summarized as follows (000's omitted):

<TABLE>
<CAPTION>
                                                                 1997             1996           1995
                                                               --------         --------       ------

<S>                                                            <C>              <C>            <C>        
              Gross advertising expense                        $    74,553      $   37,427     $    23,238
              Less:  Franchisee contribution                        19,656           4,230               -
                                                               -----------      ----------     -----------
              Net advertising expense                          $    54,897      $   33,197     $    23,238
                                                               ===========      ==========     ===========
</TABLE>

         Foreign Currency Translation -

                The assets and liabilities of the Company's foreign subsidiaries
         and are translated to United States dollars at the rates of exchange on
         the balance sheet date. Income and expense items are translated at
         average monthly rates of exchange. Translation gains or losses are
         included in the foreign currency translation adjustment component of
         stockholder's equity.

         Capital Stock -

                At January 31, 1998 and February 1, 1997, there were 1,100
         shares of common stock, par value $.01 per share, authorized, issued
         and outstanding.



                                      F-10
<PAGE>   27



         Earnings Per Share -

                Earnings per share and weighted average number of common shares
         outstanding data for 1997, 1996 and 1995 have been omitted as the
         presentation of such information, considering the Company is a wholly
         owned subsidiary of the Parent, is not meaningful.

         Asset Impairment -

                In the first quarter of 1996 the Company adopted SFAS No. 121,
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to Be Disposed Of." Adoption of this standard did not have a
         material impact on the Company's results of operations, financial
         position or cash flows for the fiscal year-ended February 1, 1997.
         Management regularly evaluates its long-lived assets for impairment
         considering primarily such factors as store level profitability and
         cash flows. The Company believes that, at January 31, 1998, no asset
         impairment exists.

         New Accounting Pronouncements -

                In fiscal 1998, the Company will adopt Statement of Financial
         Accounting Standards (SFAS) No. 130 "Reporting Comprehensive Income"
         and No. 131 "Disclosures about Segments of an Enterprise and Related
         Information".

                SFAS No. 130 establishes standards for reporting comprehensive
         income and its components in a full set of financial statements.
         Comprehensive income is defined as "the change in equity of a business
         enterprise during a period from transactions and other events and
         circumstances from non-owner sources". Comprehensive income is the
         total of net income and all other non-owner changes in equity. SFAS No.
         130 will require the Company to report comprehensive income in a
         financial statement that is displayed with the same prominence as other
         financial statements.

                SFAS No. 131 requires that the Company report certain
         information about operating segments in its financial statements.
         Operating segments are components of an enterprise whose results are
         regularly reviewed by the Company's chief operating decision maker to
         make decisions about resources to be allocated to the segment and
         assess its performance, and for which discrete financial information is
         available. The Company is currently evaluating which parts of its
         business meet the definition of an operating segment.

                Adoption of the aforementioned standards is not expected to have
         a material impact on the Company's results of operations, financial
         position or cash flows.

         Reclassifications -

                Certain 1996 and 1995 amounts have been reclassified to conform
         with the 1997 presentation.



                                      F-11
<PAGE>   28

(2)      Acquisitions of Businesses

                  On November 15, 1996, the Company purchased from the Parent,
         for an aggregate purchase price of $157.7 million including the costs
         of acquisition, certain assets and all of the issued and outstanding
         common stock of Pearle. Pearle consisted of 346 company-operated
         optical stores and 340 franchised locations in the United States,
         Canada and the Caribbean. For its most recent fiscal year ended
         September 30, 1996, Pearle had annual net revenue of $302.2 million.

                  The Pearle acquisition was accounted for under the purchase
         method of accounting. The results of operations of Pearle have been
         included in the consolidated financial statements since the date of
         acquisition. The purchase price was allocated to the assets acquired
         and liabilities assumed based upon their relative fair values as of the
         closing date. This resulted in an excess of purchase price over net
         assets acquired of $24.5 million, including final adjustments of $4.3
         million. The relative fair values of the assets acquired and
         liabilities assumed were based upon valuations and other studies and
         included tradenames of $49.5 million, unfavorable leasehold interests
         of $7.5 million, accruals for involuntary severance and termination
         benefits of $4.4 million and deferred tax assets of $16.7 million.

                  On a pro forma basis, if the Pearle acquisition had taken
         place at the beginning of the respective periods, unaudited
         consolidated net revenues would have been $878.3 million for fiscal
         1996 and $812.5 million for fiscal 1995. After giving effect to certain
         pro forma adjustments, including adjustments to reflect the
         amortization of tradenames and goodwill, the elimination of
         transactions between Pearle and its former parent, the elimination of
         Pearle's provision for impairment of intangible assets and related
         costs which resulted from the acquisition, increased interest expense
         and reduced interest income associated with acquisition funding and the
         estimated related income tax effects, pro forma net loss in fiscal 1996
         would have improved by $1.5 million and pro forma net income in 1995
         would have decreased by $10.7 million. Anticipated efficiencies from
         the consolidation of the Company and Pearle have not been reflected in
         these amounts because their realization cannot be assured.

                  The unaudited pro forma results have been prepared for
         informational purposes only and should not be considered indicative of
         the actual results of operations which would have occurred had the
         acquisition been in effect at the beginning of the periods indicated,
         and do not purport to be indicative of results of operations which may
         occur in the future.

                The Company also made the following acquisitions, each of which
         has been accounted for under the purchase method of accounting. On
         August 5, 1997, CNC contributed to the Company all of the issued and
         outstanding common stock of American Vision Centers, Inc. (AVC), whose
         operations consisted of 79 company-owned and 85 franchised optical
         stores, which CNC had acquired for an aggregate purchase price of
         approximately $28.9 million, including debt assumed. The purchase price
         was allocated to the



                                      F-12
<PAGE>   29

         assets acquired and liabilities assumed based upon their relative fair
         values as of the closing date. This resulted in an excess of purchase
         price over net assets acquired of $20.0 million. The relative fair
         values of the assets acquired and liabilities assumed included
         unfavorable leasehold interests of $3.4 million, accruals for
         involuntary severance and termination benefits of $0.5 million,
         write-off of deferred assets of $1.4 million and deferred tax assets of
         $7.5 million. The purchase price allocation for AVC is substantially
         complete but is subject to adjustment, should actual costs differ from
         the recorded amounts. Such adjustments, if made within one year from
         the date of acquisition, will be recorded as adjustments to goodwill.
         Thereafter, any cost incurred in excess of the liability recorded will
         be included in the determination of net income.

                In November 1996, the Company acquired all of the issued and
         outstanding stock of AOCO Limited, which operated 73 Sears Optical
         Departments and two freestanding Vision Club stores in Canada, for a
         purchase price of $2.6 million. In May 1995, the Company acquired the
         assets of 59 optical departments located in BJ's Wholesale Clubs for a
         purchase price of $1.1 million. Pro forma financial results have not
         been presented for these acquisitions, including AVC, as they did not
         have a material effect on the Company's results of operations.

(3)      Business Integration and Other Non-recurring Charges

                During fiscal 1997, the Company recorded an $8.0 million pre-tax
         business integration charge associated with the AVC acquisition. Such
         charge included costs incurred related to the integration and
         consolidation of AVC into the Company's operations, including costs of
         store and other facility closings, transitional costs incurred to
         change the brand identity to Pearle and duplicate costs incurred
         through fiscal year end in connection with the consolidation of the AVC
         home office functions. The total pretax cash outlay for these charges
         is estimated to be $7.5 million, with approximately $3.1 million having
         been paid as of January 31, 1998. The remaining amount is expected to
         be incurred over the next 12 to 18 months, except for certain lease
         costs which may be incurred over the remaining life of the leases.

                In the fourth quarter of fiscal 1996, the Company recorded a
         $61.1 million pre-tax charge for certain unusual and non-recurring
         items. Such charge was primarily related to the acquisition of Pearle
         and included costs incurred related to the integration and
         consolidation of Pearle into the Company's operations, as well as
         certain other non-recurring charges. The charge included $17.6 million
         for store and other facility closings, $21.6 million related to
         computer systems, $6.1 million for asset impairment and $15.8 million
         of other charges. Total cash outlay related to these charges is
         approximately $41.1 million, of which $20.0 million has been paid as of
         January 31, 1998. The remaining amount is expected to be incurred
         within the next 12 to 18 months, except for certain lease costs which
         may be incurred over the remaining life of the leases.

                Subsequent to the effective date of the Pearle acquisition, the
         Company identified certain unprofitable Pearle stores which it intends



                                      F-13
<PAGE>   30

         to close. The Company also identified certain other on-going retail
         locations at which it intends to close the in-store labs and supply
         these locations from other facilities. In addition, the Company decided
         to retain Pearle's distribution and central lab facilities, but to
         close Pearle's home office facility in Dallas, Texas. The charge in
         fiscal 1996 for store and other facilities closings consists primarily
         of the remaining noncancellable term of operating leases and other
         obligations remaining on these facilities subsequent to their estimated
         date of closing along with the loss on fixed assets.

                In fiscal 1995, the Company entered into a ten-year agreement to
         outsource its systems integration needs and data processing operations.
         Due to the Pearle Acquisition, the Company reassessed its system
         requirements and decided to terminate its outsourcing agreement and
         install new systems utilizing the resources of internal and external
         systems integrators. The settlement cost of terminating the outsourcing
         agreement, as well as other related costs, were accrued as of February
         1, 1997.

                Following the Pearle acquisition and in light of current year
         operating results, the Company reviewed the strategic direction of
         certain other operations. In accordance with SFAS No. 121, the Company
         determined that the goodwill associated with portions of its gift and
         optical businesses would not be recoverable as the carrying values of
         these businesses exceeded fair value, as measured by projected future
         discounted cash flows.

                The other charges in fiscal 1996 include costs related to
         employee matters, including duplicate costs incurred through fiscal
         year-end and costs related to hiring employees in connection with the
         consolidation of the Pearle home office functions and other costs of
         management realignment. In addition, the other charges include
         incremental travel and professional fees incurred in connection with
         the integration of Pearle, along with costs of developing and
         implementing a new franchise agreement. Also, in February 1996, the
         Board of Directors of the Parent granted stock options to executive
         officers at a share price equal to the market price of the Parent's
         common stock on the date of grant, which were subject to stockholder
         approval. The increase in the price of the common stock between the
         grant date and the date of stockholder approval resulted in $4.2
         million of compensation expense. The options as approved contained
         accelerated vesting provisions if the common stock price rose to
         certain levels, which were reached in the fourth quarter of fiscal
         1996. Because future periods will not benefit by this plan, the Company
         recognized the full costs of the plan as expense.

(4)      Discontinued Operations

                On January 13, 1998 the Company announced the closing of its
         Cole Gift Centers ("CGC") chain of personalized gift and greeting card
         departments located in host stores. For financial statement purposes,
         the assets, liabilities, results of operations and cash flows of CGC
         are included in the Company's consolidated financial statements as
         discontinued operations. Prior year financial statements have been
         restated to reflect discontinued operations. The estimated loss on



                                      F-14
<PAGE>   31

         disposal of $13.9 million (net of an applicable income tax benefit of
         $8.5 million) includes provisions for severance and other closing
         costs, inventory and other asset write-offs and estimated operating
         losses for the period from January 13, 1998 through February 1998 when
         all locations were closed.

                CGC's net revenue was $50.9, $55.5 and $61.2 million in 1997,
         1996 and 1995, respectively. The Company's consolidated interest
         expense that was not directly attributable to other operations of the
         Company was allocated to discontinued operations based on the ratio of
         the net assets of discontinued operations to total net assets of the
         Company plus consolidated debt of the Company not directly attributable
         to other operations. As a result, the operating loss from discontinued
         operations includes allocated interest expense of $1.3 million, $1.9
         million and $2.2 million in fiscal 1997, 1996 and 1995, respectively.
         The net loss of discontinued operations also includes a non-recurring
         charge of $3.3 million in fiscal 1996, primarily related to the
         write-off of goodwill at CGC, in accordance with FAS No. 121.

                The net assets (liabilities) of discontinued operations, after
         recognition of the estimated loss on disposal included in the
         accompanying consolidated balance sheets consist of the following
         (000's omitted):

<TABLE>
<CAPTION>
                                                                                 1998            1997
                                                                                ------          ------

<S>                                                                            <C>            <C>        
                Accounts receivable                                            $   4,827      $     1,226
                Inventories                                                       11,723           14,876
                Property, equipment and other assets, net                          6,629            4,736
                Current liabilities                                              (26,654)          (4,387)
                                                                               ---------      ----------- 
                Net assets (liabilities) of discontinued operations            $  (3,475)     $    16,451
                                                                               =========      ===========
</TABLE>



                                      F-15
<PAGE>   32



(5)      Long-Term Debt

                Long-term debt at January 31, 1998 and February 1, 1997 is
         summarized as follows (000's omitted):

<TABLE>
<CAPTION>
                                                                                  1998              1997
                                                                                --------          --------

<S>                                                                            <C>               <C>      
                7-1/2% Obligation in connection with Industrial Revenue Bonds  $     168         $     338

                11-1/4% Senior Notes: Face value                                  14,476           165,838
                  Unamortized discount                                                 -            (1,455)
                                                                               ---------         ---------
                    Total 11-1/4% Senior Notes                                    14,476           164,383

                9-7/8% Senior Subordinated Notes: Face value                     150,000           150,000
                  Unamortized discount                                            (1,041)           (1,111)
                                                                               ---------         ---------
                    Total 9-7/8% Senior Subordinated Notes                       148,959           148,889

                8-5/8% Senior Subordinated Notes                                 125,000                 -

                Capital lease obligations (see Note 10)                            1,467             1,226
                                                                               ---------         ---------
                                                                                 290,070           314,836

                Less current portion                                             (15,078)             (477)
                                                                               ---------         ---------
                Net long-term debt                                             $ 274,992         $ 314,359
                                                                               =========         =========
</TABLE>

                The 11-1/4% Senior Notes (the Senior Notes) mature October 1,
         2001 with no earlier scheduled redemption or sinking fund payments.
         Interest on the Senior Notes is payable semi-annually on April 1 and
         October 1.

                On August 15, 1997, CNG announced a tender offer to purchase up
         to all of its Senior Notes at a price of $1,105.61 per $1,000 of
         principal, plus accrued interest. The tender offer expired on September
         12, 1997, at which time a total of $151.3 million principal amount of
         the Senior Notes were tendered, leaving $14.5 million outstanding. The
         Company plans to call the remaining Senior Notes in October 1998, the
         first call date, and accordingly, has reflected them as current
         liabilities in the accompanying consolidated balance sheet. As a result
         of the tender offer, in the third quarter of fiscal 1997 the Company
         recorded an extraordinary charge of $12.2 million, net of an income tax
         benefit of $7.5 million, representing the tender premium, the write-off
         of the related unamortized debt discount and other costs associated
         with redeeming the debt.

                On August 22, 1997, CNG issued $125.0 million of 8-5/8% Senior
         Subordinated Notes (the 8-5/8% Notes) that mature in 2007 with no
         earlier scheduled redemption or sinking fund payments. Proceeds from
         this debt issuance of approximately $121.8 million, along with cash on
         hand, were used to fund the above-described tender offer. Interest on
         the 8-5/8% Notes is payable semi-annually on February 15 and August 15.



                                      F-16
<PAGE>   33

                On November 15, 1996, CNG issued $150 million of 9-7/8% Senior
         Subordinated Notes (the 9-7/8% Notes) due in 2006. The Notes were used
         by the Company to finance a portion of the Pearle acquisition (see Note
         2). Interest on the 9-7/8% Notes is payable semi-annually in arrears on
         June 30 and December 31.

                The Senior Notes, the 8-5/8% Notes and the 9-7/8% Notes are
         general unsecured obligations of CNG, subordinated in right of payment
         to senior indebtedness of CNG and senior in right of payment to any
         current or future subordinated indebtedness of CNG.

                The indentures pursuant to which the Senior Notes, the 8-5/8%
         Notes and the 9-7/8% Notes were issued restrict dividend payments to
         the Company to 50% of CNG's net income after October 31, 1993, plus
         amounts due to the Parent under a tax sharing agreement and for
         administrative expenses of the Parent not to exceed 0.25% of CNG's net
         revenue. The indentures also contain certain optional and mandatory
         redemption features and other financial covenants. The Company was in
         compliance with these covenants at January 31, 1998.

                During the second quarter of fiscal 1996, the Parent used a
         portion of the net proceeds from its public stock offering to purchase
         approximately $15.1 million of the Senior Notes in the open market. In
         connection with the acquisition of Pearle, the Company purchased and
         retired the $15.1 million of Senior Notes held by the Parent at a price
         equal to net book value.

                During the second quarter of 1997, the Parent completed a public
         offering of 2,587,500 shares of the Parent's Common Stock at a price of
         $47.00 per share. Net proceeds from the offering were approximately
         $116 million. A portion of the net proceeds from the offering were used
         for the purchase of AVC and CNG's tender offer to purchase up to all of
         its $165.8 million outstanding Senior Notes.

                The agreement in connection with the Industrial Revenue Bonds
         provides for repayment of the final annual installment of $168,750 in
         1998. The Industrial Revenue Bonds are secured by office and
         distribution facilities with a net book value of $1,516,000 at January
         31, 1998.

                The Company plans to redeem the remaining Senior Notes in 1998.
         As a result, the Company will have no significant principal payment
         obligations under its outstanding indebtedness until the 9-7/8% Notes
         mature in 2006.

                At January 31, 1998, the fair value of the Company's long-term
         debt was approximately $304.0 million compared to a carrying value of
         $290.1 million. The fair value was estimated primarily by using quoted
         market prices.



                                      F-17
<PAGE>   34



 (6)     Credit Facility

                Concurrent with the Pearle acquisition, the principal operating
         subsidiaries of CNG (the Borrowers) entered into a Credit Facility. The
         Credit Facility replaced the existing revolving credit facility.

                The Credit Facility provides the Borrowers with a four-year
         revolving line of credit of up to the lesser of a "borrowing base" and
         $75 million. Up to $30 million of the Credit Facility is available for
         the issuance of letters of credit. Borrowings under the Credit Facility
         initially bear interest at a rate equal to, at the option of the
         Borrowers, either (a) the Eurodollar Rate plus 1.25% or (b) 0.25% plus
         the highest of (i) the prime rate, (ii) the three-week moving average
         of the secondary market rates for three-month certificates of deposit
         plus 1% and (iii) the federal funds rate plus 0.5%. The Company pays a
         commitment fee of 0.375% per annum on the total unused portion of the
         facility. Additionally, the Credit Facility requires the Borrowers to
         comply with various operating covenants that restrict corporate
         activities, including covenants restricting the Borrowers' ability to
         incur additional indebtedness, pay dividends, prepay subordinated
         indebtedness, dispose of certain investments or make acquisitions. The
         Credit Facility also requires the Borrowers to comply with certain
         financial covenants, including covenants regarding minimum interest
         coverage, maximum leverage and consolidated net worth. The Borrowers
         were in compliance with these covenants at January 31, 1998.

                The Credit Facility restricts dividend payments to CNG to
         amounts needed to pay interest on the Senior Notes, the 9-7/8% Notes
         and the 8-5/8% Notes, and certain amounts related to taxes, along with
         up to $8.0 million plus 0.25% of the Company's net revenue annually for
         other direct expenses of the Parent or CNG. In addition, dividends of
         up to $20.0 million are permitted to repurchase the Senior Notes, the
         8-5/8% Notes and/or the 9-7/8% Notes.

                No borrowings were outstanding as of January 31, 1998 or
         February 1, 1997, or at any time during fiscal 1997 or 1996.

 (7)     Stock Options

                The Parent has various stock option plans in which key
         employees of the Company are eligible to participate. The Company
         applies APB Opinion 25 and related Interpretations in accounting for
         the Parent's stock-based compensation plans. Accordingly, no
         compensation cost has been recognized for the Parent's stock option
         plans in fiscal 1995 and fiscal 1997. Compensation cost that has been
         charged against income for the Parent's stock-based plans in fiscal
         1996 was $4.2 million as discussed in Note 3. Had compensation cost for
         the Parent's stock-based compensation plans been determined based on
         the fair value at the dates of awards under those plans consistent with
         the method of SFAS No. 123, the Company's net loss would have been
         increased to $7,075,000 in fiscal 1997 and $29,961,000 in fiscal 1996
         and its net income in fiscal 1995 would have been reduced to
         $13,609,000.



                                      F-18
<PAGE>   35

                  The fair value of each option granted by the Parent was
         estimated on the date of grant using the Black-Scholes option-pricing
         model with the following assumptions: risk-free interest rates of 5.7%,
         6.2% and 6.4% for grants in fiscal 1997, 1996 and 1995, respectively,
         volatility of 35% in fiscal 1997 and 33% in fiscal 1996 and 1995 and
         expected lives of six years for options granted in all fiscal years.
         Because the SFAS No. 123 method of accounting has not been applied to
         options granted prior to January 29, 1995, the resulting pro forma
         expense may not be representative of that to be expected in the future.

 (8)     Income Taxes

                Income tax provision (benefit) for continuing operations
         reflected in the accompanying statements of operations for fiscal 1997,
         1996 and 1995 is detailed below (000's omitted):

<TABLE>
<CAPTION>
                                                                  1997               1996                1995
                                                                 ------             ------              ------
<S>                                                             <C>                <C>                <C>     
         Currently payable -
           Federal                                              $     80           $   7,281          $  4,663
           State and local                                         1,869               2,008             1,624
                                                                --------           ---------          --------
                                                                   1,949               9,289             6,287
                                                                --------           ---------          --------
         Deferred -
           Federal                                                12,966             (16,575)            3,260
           Utilization of net operating
             loss carryforwards                                        -                   -             1,134
                                                                --------           ---------          --------
                                                                  12,966             (16,575)            4,394
                                                                --------           ---------          --------

           Income tax provision (benefit)                       $ 14,915           $  (7,286)         $ 10,681
                                                                ========           =========          ========
</TABLE>

                The income tax provision (benefit) for continuing operations
         differs from the federal statutory rate as follows (000's omitted):

<TABLE>
<CAPTION>
                                                                           1997             1996           1995
                                                                          ------           ------         ------

<S>                                                                      <C>             <C>             <C>    
         Tax provision (benefit) at statutory rate                       $ 12,077        $(11,338)       $ 8,565
         Tax effect of -
           State income taxes, net of
             federal tax benefit                                            1,215           1,305          1,055
           Amortization of cost in excess
             of net assets of purchased businesses                          1,176             897            859
           Non-recurring charges                                                -           1,496              -
           Other, net                                                         447             354            202
                                                                         --------       ---------        -------
                Tax provision (benefit)                                  $ 14,915       $  (7,286)       $10,681
                                                                         ========       =========        =======
</TABLE>


                                      F-19
<PAGE>   36



                The tax effects of temporary differences that give rise to
         significant portions of the Company's deferred tax assets and deferred
         tax liabilities at January 31, 1998 and February 1, 1997 are as follows
         (000's omitted):

<TABLE>
<CAPTION>
                                                                        1998               1997
                                                                      --------           --------
<S>                                                                   <C>                 <C>     
                Deferred tax assets:
                  Employee benefit accruals                           $  3,836            $  6,137
                  Business integration accruals                          8,530              13,373
                  Other non-deductible accruals                         26,152              15,066
                  State and local taxes                                  1,324               1,254
                  Tax credit and net operating
                    loss carryforwards                                   2,918                   -
                  Intangibles                                            5,939               6,148
                  Other                                                 10,013               8,569
                                                                       -------             -------
                  Total deferred tax assets                             58,712              50,547
                  Valuation allowance                                   (1,141)                  -
                                                                       -------             -------
                       Net deferred tax assets                          57,571              50,547
                                                                       -------             -------

                Deferred tax liabilities:
                  Depreciation and amortization                         (8,962)             (5,043)
                  Other                                                 (9,115)             (5,535)
                                                                       -------             -------
                    Total deferred tax liabilities                     (18,077)            (10,578)
                                                                       -------             -------

                Net deferred taxes                                     $39,494             $39,969
                                                                       =======             =======
</TABLE>

                At January 31, 1998, the Company has approximately $8.3 million
         of tax net operating loss (NOL) carryforwards acquired in connection
         with the acquisition of AVC, which expire between 2005 and 2010. Due to
         the change in ownership requirements of the Internal Revenue Code,
         utilization of the AVC NOL is limited to approximately $338,000 per
         year. A valuation allowance of $1.1 million has been established to
         reduce the deferred tax asset related to the NOL to the amount that
         will likely be realized.

(9)      Retirement Plans

                The Company maintains a noncontributory defined benefit pension
         plan (the Retirement Plan) that covers employees who have met
         eligibility service requirements and are not members of certain
         collective bargaining units. The Retirement Plan calls for benefits to
         be paid to eligible employees at retirement based primarily upon years
         of service with the Company and their compensation levels near
         retirement.

                The Company's policy is to fund amounts necessary to keep the
         Retirement Plan in full force and effect, in accordance with the
         Internal Revenue Code and the Employee Retirement Income Security Act
         of 1974. Actuarial present values of benefit obligations are determined
         using the projected unit credit method.



                                      F-20
<PAGE>   37



                Pension expense for fiscal 1997, 1996 and 1995 includes the
         following components (000's omitted):

<TABLE>
<CAPTION>
                                                                           1997          1996          1995
                                                                          ------        ------        -------
<S>                                                                      <C>           <C>           <C>    
             Service cost - benefits earned during the period            $   637       $   646       $   528

             Interest cost on the projected benefit obligation             1,490         1,467         1,369

             Less:
                Return on plan assets -
                   Actual                                                 (2,424)       (1,669)       (1,138)
                   Deferred                                                  893           477            11
                                                                         -------       -------       -------
                                                                          (1,531)       (1,192)       (1,127)
             Amortization of transition asset over 17.9 years               (179)         (179)         (179)
                                                                         -------       -------       -------
                   Net pension expense                                   $   417       $   742       $   591
                                                                         =======       =======       =======
</TABLE>

                The following sets forth the funded status of the Retirement
         Plan at December 31, 1997 and 1996 based upon the actuarial present
         values of benefit obligations (000's omitted):

<TABLE>
<CAPTION>
                                                                                 1997          1996
                                                                               -------       --------
<S>                                                                              <C>            <C>    
              Accumulated benefit obligations:
                Vested                                                           $19,526        $17,605
                Nonvested                                                            415            238
                                                                                 -------        -------
                   Total                                                         $19,941        $17,843
                                                                                 =======        =======

              Projected benefit obligation for service rendered to date          $21,272        $19,046
              Fair value of plan assets, primarily money market and
                 equity mutual funds                                              19,751         16,774
                                                                                 -------        -------
              Plan assets less than projected benefit obligation                  (1,521)        (2,272)
              Unrecognized prior service cost                                        111            140
              Net unrecognized loss                                                1,204          1,252
              Unamortized transition asset                                        (1,236)        (1,416)
                                                                                 -------        -------
              Pension liability included in accrued liabilities                  $(1,442)       $(2,296)
                                                                                 =======        =======
</TABLE>

                The weighted average discount rate used to measure the projected
         benefit obligation was 7.5% in 1997 and 8.0% in 1996. For both years,
         the rate of increase in future compensation levels was 5.0% and the
         expected long-term rate of return on plan assets was 9.5%.

                The Company has a defined contribution plan, including features
         under Section 401(k) of the Internal Revenue Code, which provides
         retirement benefits to its employees. Eligible employees may contribute
         up to 17% of their compensation to the plan. Prior to January 1, 1998,
         there was no mandatory matching of employee contributions by the
         Company, but discretionary matches of $374,000, $327,000, and $164,000
         were recorded for 1997, 1996 and 1995, respectively. Effective January
         1, 1998, the plan was amended to, among other things, provide for a
         mandatory company match of 10% of employee contributions.



                                      F-21
<PAGE>   38

                Prior to January 1, 1998, the Company had separate contributory
         profit-sharing plans for Pearle and AVC employees meeting certain
         service requirements as defined in the plans. The Company's
         contribution to the Pearle plan consisted of a minimum matching
         contribution of $861,000 in 1997 and $229,000 in 1996. There were no
         Company contributions required or made in connection with the AVC plan
         in 1997. Effective January 1, 1998, eligible employees of Pearle and
         AVC became eligible to participate in the Company's defined
         contribution plan. The Pearle and AVC plans will be merged into the
         Company's plan.

                The Company has two Supplemental Executive Retirement Plans that
         provide for the payment of retirement benefits to participating
         executives supplementing amounts payable under the Company's Retirement
         Plan. The first plan is an excess benefit plan designed to replace
         benefits that would otherwise have been payable under the Retirement
         Plan but that were limited as a result of certain tax law changes. The
         second plan is a defined contribution plan under which participants
         receive an annual credit based on a percentage of base salary, subject
         to vesting requirements. Expense for these plans for fiscal 1997, 1996
         and 1995 was $541,000, $468,000, and $447,000, respectively.

(10)     Commitments

                The Company leases a substantial portion of its facilities
         including laboratories, office and warehouse space, and retail store
         locations. These leases generally have initial terms of up to 10 years
         and often contain renewal options. Certain of the store locations have
         been sublet to franchisees. In most leases covering retail store
         locations, additional rents are payable based on store sales. In
         addition, the Company operates departments in various host stores
         paying occupancy costs solely as a percentage of sales under agreements
         containing short-term cancellation clauses. Generally, the Company is
         required to pay taxes and normal expenses of operating the premises for
         laboratory, office, warehouse and retail store leases; the host stores
         pay these expenses for departments operated on a percentage-of-sales
         basis. The following amounts represent rental expense for fiscal 1997,
         1996, and 1995 (000's omitted):

<TABLE>
<CAPTION>
                                                                    1997             1996              1995
                                                                   ------           ------            -------
<S>                                                               <C>               <C>               <C>    
                Occupancy costs based on sales                    $52,300           $46,058           $40,692
                All other rental expense                           87,103            45,199            32,434
                Sublease rental income                            (21,725)           (5,936)           (1,423)
                                                                 --------           -------           -------
                                                                 $117,678           $85,321           $71,703
                                                                 ========           =======           =======
</TABLE>

                The Company has entered into leases for equipment which have
         been accounted for as capital leases. At January 31, 1998 and February
         1, 1997, property under capital leases consisted of $1,967,000 and
         $1,375,000 in equipment with accumulated amortization of $469,000 and
         $159,000, respectively.




                                      F-22
<PAGE>   39


                At January 31,1998, future minimum lease payments and sublease
         income receipts under noncancellable leases, and the present value of
         future minimum lease payments for capital leases are as follows (000's
         omitted):

<TABLE>
<CAPTION>
                                                                                   Operating Leases
                                                                Capital         ----------------------- 
                                                                Leases          Payments       Receipts
                                                                -------         --------       --------      
<S>                                                              <C>             <C>            <C>    
                  1998                                           $  544          $70,650        $13,890
                  1999                                              465           61,175         10,750
                  2000                                              580           46,754          7,573
                  2001                                               49           34,946          5,067
                  2002                                               57           27,102          3,182
                  2003 and thereafter                                 -           63,848          6,078
                                                                 ------        ---------        -------   
                  Total future minimum lease payments             1,695        $ 304,475        $46,540
                                                                               =========        ======= 
                  Amounts representing interest                    (228)
                                                                 ------   
                  Present value of future minimum lease
                    payments                                     $1,467
                                                                 ======
</TABLE>

                  Certain assets utilized by the Company in its data processing
         operations are owned or leased by CNC. CNC charges the Company an
         amount equal to the expenses associated with these assets. The charges
         to the Company for these assets were $1,694,300, $370,003 and $20,800
         for fiscal 1997, 1996 and 1995, respectively.



                                      F-23
<PAGE>   40


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                       ON THE FINANCIAL STATEMENT SCHEDULE


TO COLE NATIONAL GROUP, INC.:

         We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of Cole National Group, Inc.
and Subsidiaries included in this Form 10-K and have issued our report thereon
dated March 18, 1998. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The financial statement schedule is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.





ARTHUR ANDERSEN LLP

Cleveland, Ohio,
March 18, 1998.



                                      F-24
<PAGE>   41


                                                                      SCHEDULE I


                   COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT

================================================================================


COLE NATIONAL GROUP, INC.
CONDENSED BALANCE SHEETS
JANUARY 31, 1998 AND FEBRUARY 1, 1997
(Dollars in millions)

<TABLE>
<CAPTION>
                                                                                   1998             1997
                                                                                  ------           ------
<S>                                                                               <C>            <C>     
Assets:

Cash                                                                              $ 54.9         $   64.5
Accounts receivable                                                                   .4              0.1
Deferred income tax benefits                                                           -              6.6
Investment in subsidiaries                                                         367.0            329.9
Property and equipment, net                                                          4.3              3.8
Other                                                                               10.3              6.7
                                                                                  ------           ------
     Total assets                                                                 $436.9           $411.6
                                                                                  ======           ======

Liabilities and Stockholder's Equity:

Accounts payable and accrued expenses                                             $ 27.9           $ 58.1
Payable to affiliates                                                               90.6             73.9
Long-term debt                                                                     289.6            314.0
Other                                                                                1.2              2.0
Stockholder's equity (deficit)                                                      27.6            (36.4)
                                                                                  ------           ------

     Total liabilities and stockholder's
       equity                                                                     $436.9           $411.6
                                                                                  ======           ======
</TABLE>



                                      F-25
<PAGE>   42


                                                                      SCHEDULE I
COLE NATIONAL GROUP, INC.                                            (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS AND CASH FLOWS
(Dollars in millions)

<TABLE>
<CAPTION>
                                                                         52 Weeks        52 Weeks       53 Weeks
                                                                           Ended           Ended          Ended
                                                                         Jan. 31,         Feb. 1,        Feb. 3,
                                                                           1998            1997           1996
                                                                         ---------       ---------     ----------
<S>                                                                      <C>              <C>            <C>  
Revenue:
    Dividends from subsidiaries                                           $     -         $     -        $14.0
    Services to affiliates                                                    8.4             8.4          6.9
                                                                          -------         -------        ----- 
      Total revenue                                                           8.4             8.4         20.9
  Operating expenses                                                         (8.4)           (8.4)        (6.9)
  Non-recurring charge                                                          -           (28.9)           -
  Interest expense                                                           (6.6)           (8.9)        (7.8)
                                                                          -------         -------        ----- 
    Pre-tax income (loss)                                                    (6.6)          (37.8)         6.2
  Income tax benefit                                                          2.5            11.9          2.9
                                                                          -------         -------        ----- 
  Income (loss) before equity in
    undistributed earnings (loss) of
    subsidiaries and extraordinary item                                      (4.1)          (25.9)         9.1
  Equity in undistributed earnings
    (loss) of subsidiaries                                                    9.7            (2.1)         4.6
                                                                          -------         -------        ----- 
  Income (loss) before extraordinary
    item                                                                      5.6           (28.0)        13.7
  Extraordinary loss                                                        (12.2)              -            -
                                                                          -------         -------        ----- 
  Net income (loss)                                                          (6.6)          (28.0)        13.7
                                                                          -------         -------        ----- 
  Adjustments to reconcile net income
    (loss) to cash provided by operations                                   (17.0)           29.0         16.9
                                                                          -------         -------        ----- 
  Net cash provided (used) by operating
    activities                                                              (23.6)            1.0         30.6
  Financing activities:
    Repayment of long-term debt                                            (167.5)          (15.3)        (5.0)
    Advances from affiliates                                                 59.8            67.3            -
    Proceeds from long-term debt                                            125.0           148.9            -
    Payment of financing fees                                                (3.2)           (6.1)           -
                                                                          -------         -------        -----  
 Net cash provided (used) by
    financing activities                                                     14.1           194.8         (5.0)
  Investing activities:
    Acquisition of business, net
      of cash acquired                                                          -          (157.6)           -
    Other                                                                     (.1)              -           .7
                                                                          -------         -------        ----- 
  Net cash provided (used) by
    investing activities                                                      (.1)         (157.6)          .7
  Net increase (decrease) in cash                                            (9.6)           38.2         26.3
  Cash, beginning of period                                                  64.5            26.3            -
                                                                          -------         -------        ----- 
  Cash, end of period                                                     $  54.9         $  64.5        $26.3 
                                                                          =======         =======        ===== 
</TABLE>



                                      F-26
<PAGE>   43


                                                                      SCHEDULE I
                                                                     (CONTINUED)

              NOTE TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT

================================================================================

The accompanying financial information of Cole National Group, Inc. (CNG), a
wholly-owned subsidiary of Cole National Corporation, is as of January 31, 1998
and February 1, 1997 and for the fiscal years ended January 31, 1998, 
February 1, 1997 and February 3, 1996. CNG is a holding company for its 
wholly-owned subsidiaries, Things Remembered, Inc., Cole Vision Corporation, 
Pearle, Inc., Pearle Service Corporation and Cole Gift Centers, Inc. and except 
for expenses associated with CNG's corporate offices, consisted of no other 
operations.

This financial information should be read in connection with the Notes to
Consolidated Financial Statements of Cole National Group, Inc. and Subsidiaries
contained elsewhere in this Form 10-K.



                                      F-27
<PAGE>   44








                                  EXHIBIT INDEX



EXHIBIT
NUMBER                                     DESCRIPTION
------                                     -----------

      3.1(i)        Certificate of Incorporation of the Company, incorporated by
                    reference to Exhibit 3.1(i) to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-66342).

      3.2(ii)       By-Laws of the Company, incorporated by reference to Exhibit
                    3.2(ii) to the Company's Registration Statement on Form S-1
                    (Registration No. 33-66342).

      4.1           Indenture dated as of September 30, 1993 between the Company
                    and Norwest Bank Minnesota, N.A., as trustee, relating to
                    the 11-1/4% Senior Notes due 2001 (the form of which Senior
                    Note is included in such Indenture), incorporated by
                    reference to Exhibit 4.1 to Cole National Corporation's
                    Annual Report on Form 10-K for the period ended February 3,
                    1996 (File No. 1-12814).

     4.2            First Supplemental Indenture, dated August 14, 1997, between
                    Cole National Group, Inc. and Norwest Bank Minnesota,
                    National Association, as Trustee, relating to the 11-1/4%
                    Senior Notes Due 2001, incorporated by reference to Exhibit
                    4.6 of Cole National Group, Inc.'s Registration Statement on
                    Form S-1 (Registration No. 333-34963).

     4.3            Second Supplemental Indenture dated September 15, 1997,
                    between Cole National Group, Inc. and Norwest Bank
                    Minnesota, National Association, as Trustee, relating to the
                    11-1/4% Senior Notes Due 2001, incorporated by reference to
                    Exhibit 4.7 of Cole National Group, Inc.'s Registration
                    Statement on Form S-1, Amendment No. 3, filed with the
                    Commission on December 5, 1997 (Registration No. 333-34963).

    4.4             Indenture dated November 15, 1996, by and among the Company
                    and Norwest Bank Minnesota, National Association, as
                    trustee, relating to the 9-7/8% Senior Subordinated Notes
                    due 2006 (the form of which Senior Subordinated Note is
                    included in such Indenture), incorporated by reference to
                    Exhibit 4.1 of Cole National Corporation's Report on Form
                    8-K, filed with the Commission on December 2, 1996 (File No.
                    1-12814).




                                      X-1
<PAGE>   45


EXHIBIT
NUMBER                      DESCRIPTION
------                      -----------


 4.5              Indenture, dated August 22, 1997, between Cole National Group,
                  Inc. and Norwest Bank Minnesota, National Association, as
                  Trustee, relating to the 8-5/8% Senior Subordinated Notes Due
                  2007, incorporated by reference to Exhibit 4.4 of Cole
                  National Group, Inc.'s Registration Statement on Form S-1
                  (Registration No. 333-34963).

 4.6              The Company by this filing agrees, upon request, to file with
                  the Commission the instruments defining the rights of holders
                  of long-term debt of the Company and its subsidiaries where
                  the total amount of securities authorized thereunder does not
                  exceed 10% of the total assets of the Company and its
                  subsidiaries on a consolidated basis.

10.9              Lease Agreement (Knoxville) dated as of November 28, 1979 by
                  and between Tommy Hensley, as agent for the real property of
                  Mrs. Don Siegel and Cole Vision Corporation, as amended and
                  supplemented, incorporated by reference to Exhibit 10.15 to
                  the Company's Registration Statement on Form S-1 (Registration
                  No. 33-66342).

10.10             Lease Agreement (Memphis) dated as of October 2, 1991 by and
                  between Shelby Distribution Park and Cole Vision Corporation,
                  incorporated by reference to Exhibit 10.16 to the Company's
                  Registration Statement on Form S-1 (Registration No.
                  33-66342).

10.11             Lease Agreement (Richmond) dated as of April 23, 1982 by and
                  between Daniel, Daniel & Daniel and Cole Vision Corporation,
                  as amended and supplemented, incorporated by reference to
                  Exhibit 10.17 to the Company's Registration Statement on Form
                  S-1 (Registration No. 33-66342).

10.12             Lease for Multi-Tenancy Space (Salt Lake) dated as of October
                  30, 1981 by and between East Centennial Joint Venture and Cole
                  Vision Corporation, as amended and supplemented, incorporated
                  by reference to Exhibit 10.18 to the Company's Registration
                  Statement on Form S-1 (Registration No. 33-66342).




                                      X-2
<PAGE>   46


EXHIBIT
NUMBER                         DESCRIPTION
------                         -----------


10.13             Form of Lease Agreement Finite 19518 dated as of December 29,
                  1988 between Sears, Roebuck and Co. and Cole Vision
                  Corporation, incorporated by reference to Exhibit 10.23 to the
                  Company's Registration Statement on Form S-1 (Registration No.
                  33-66342).

10.14             Lease Agreement (Knoxville) dated as of April 11, 1995 by and
                  between Richard T. Fox and Cole Vision Corporation,
                  incorporated by reference to Exhibit 10.29 to Cole National
                  Corporation's Annual Report on Form 10-K for the period ended
                  February 3, 1996 (File No. 1-12814).

10.15             Form of Indemnification Agreement for Directors of Cole
                  National Corporation, incorporated by Reference to Exhibit
                  10.19 to the Company's Registration Statement on Form S-1
                  (Registration No. 33-66342).

10.16             Form of Indemnification Agreement for Officers of Cole
                  National Corporation, incorporated by reference to Exhibit
                  10.20 to the Company's Registration Statement on Form S-1
                  (Registration No. 33-66342).

10.17             Master License Agreement dated as of October 2, 1986, between
                  Montgomery Ward & Co., Incorporated and Cole Vision
                  Corporation, as amended, incorporated by reference to Exhibit
                  10.21 to the Company's Registration Statement on Form S-1
                  (Registration No. 33-66342).

10.18             Master License Agreement dated as of June 12, 1986, between
                  Montgomery Ward & Co., Incorporated and Bay Cities Optical
                  Company, as amended, incorporated by reference to Exhibit
                  10.22 to the Company's Registration Statement on Form S-1
                  (Registration No. 33-66342).

10.19             Form of License Agreement (Optical), incorporated by reference
                  to Exhibit 10.24 to the Company's Registration Statement on
                  Form S-1 (Registration No. 33-66342).

10.20             Form of License/Lease Agreement (Optical), incorporated by
                  reference to Exhibit 10.25 to the Company's Registration
                  Statement on Form S-1 (Registration No. 33-66342).



                                      X-3
<PAGE>   47


EXHIBIT
NUMBER                                DESCRIPTION
------                                -----------

10.23             Agreement for the Allocation of Federal Income Tax Liability
                  and Benefits among Members of the Parent Group dated August
                  23, 1985, as amended, incorporated by reference to Exhibit
                  10.26 to the Company's Registration Statement on Form S-1
                  (Registration No. 33-66342).

10.24             Assignment and Assumption Agreement dated as of September 30,
                  1993 between Cole National Corporation and the Company,
                  incorporated by reference to Exhibit 10.24 to Cole National
                  Corporation's Annual Report on Form 10-K for the period ended
                  February 3, 1996 (File No. 1-12814).

10.25             Lease agreement (Salt Lake) dated as of November 1, 1996 by
                  and between Gibbons Realty Company and Cole Vision
                  Corporation, incorporated by reference to Exhibit 10.01 of
                  Cole National Corporation's quarterly report of Form 10-Q for
                  the period ended November 2, 1996 (File No. 1-12814).

10.26             Credit Agreement, dated as of November 15, 1996, among Cole
                  Vision Corporation, Things Remembered, Inc., Cole Gift
                  Centers, Inc., Pearle, Inc. and Pearle Service Corporation and
                  Canadian Imperial Bank of Commerce, incorporated by reference
                  to Exhibit 99.1 of Cole National Corporation's Report on Form
                  8-K, filed with the Commission on December 2, 1996 (File No.
                  1-12814).

10.27             CNG Guarantee and Cash Collateral Agreement, dated as of
                  November 15, 1996, by the Company and Cole National
                  Corporation, incorporated by reference to Exhibit 99.3 of Cole
                  National Corporation's Report on Form 8-K, filed with the
                  Commission on December 2, 1996 (File No. 1-12814).

10.28             Guarantee and Collateral Agreement, dated as of November 15,
                  1996, by Cole Vision Corporation, Things Remembered, Inc.,
                  Cole Gift Centers, Inc., Pearle, Inc. and Pearle Service
                  Corporation and Canadian Imperial Bank of Commerce,
                  incorporated by reference to Exhibit 99.4 of Cole National
                  Corporation's Report on Form 8-K, field with the Commission on
                  December 2, 1996 (File No. 1-12814).



                                      X-4
<PAGE>   48


EXHIBIT
NUMBER                               DESCRIPTION
------                               -----------


   10.29        First Amendment to the Credit Agreement, dated as of January 13,
                1997, among Cole Vision Corporation, Things Remembered, Inc.,
                Cole Gift Centers, Inc., Pearle, Inc., and Pearle Service
                Corporation and Canadian Imperial Bank of Commerce, incorporated
                by reference to Exhibit 10.33 of Cole National Group, Inc.'s
                Registration Statement on Form S-1 (Registration No. 333-34963).

   10.30        Second Amendment to Credit Agreement, dated as of August 8,
                1997, among Cole Vision Corporation, Things Remembered, Inc.,
                Cole Gift Centers, Inc., Pearle, Inc. and Pearle Service
                Corporation and Canadian Imperial Bank of Commerce, incorporated
                by reference to Exhibit 10.34 of the Cole National Group, Inc.'s
                Registration Statement on Form S-1 (Registration No. 333-34963).

   21           Subsidiaries of the Registrant -- This exhibit has been
                omitted pursuant to Instruction J of Form 10-K.

   24           Power(s) of Attorney.

   27           Financial Data Schedule.



                                      X-5