<PAGE>

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

                                    ---------

                                    FORM 10-Q

                                    ---------

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

              FOR THE QUARTERLY PERIOD ENDED NOVEMBER 28, 1998

                                      OR

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


                        COMMISSION FILE NUMBER: 333-20759

                                    ---------

                           COMMEMORATIVE BRANDS, INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                  13-3915801
(State or other jurisdiction of        (I.R.S. Employer Identification Number)
incorporation or organization)

                               7211 CIRCLE S ROAD
                               AUSTIN, TEXAS 78745
               (Address of principal executive offices) (Zip Code)

         REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (512) 444-0571

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]. (Effective December 31, 1997,
registrant is no longer subject to such filing requirements.)
<PAGE>

                           COMMEMORATIVE BRANDS, INC.
                                    FORM 10-Q
                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 28, 1998

                                     INDEX
<TABLE>
<CAPTION>
                                                                                                            Page
<S>                                                                                                          <C>
PART I. FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

         Consolidated Balance Sheets-
             As of November 28, 1998 (unaudited) and August 29, 1998 (audited)..............................  1

         Consolidated Income Statements-
             For the three months ended November 28, 1998 and November 30, 1997
             (all unaudited)................................................................................  2

         Consolidated Statements of Stockholders' Equity -
             As of  November 28, 1998 (unaudited), August 29, 1998 (audited) and August
             30, 1997 (audited).............................................................................  3

         Consolidated Statements of Cash Flows -
            For the three months ended November 28, 1998 and November 30, 1997
            (all unaudited).................................................................................  4

         Notes to Consolidated Financial Statements........................................................5-14

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
            OF OPERATIONS.................................................................................15-21


                                      PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.................................................................................. 22

ITEM 2.  CHANGES IN SECURITIES.............................................................................. 22

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................................................... 22

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................ 22

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K................................................................... 22

SIGNATURES ................................................................................................. 23
</TABLE>
<PAGE>




PART 1.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

                           COMMEMORATIVE BRANDS, INC.

                          CONSOLIDATED BALANCE SHEETS

                       (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                           November 28,      August 29,
                                                                               1998             1998
                                                                           ------------      ----------
                                                                           (Unaudited)       (Audited)
<S>                                                                        <C>               <C>
ASSETS
Current assets:                                                            
    Cash and cash equivalents                                              $   1,852         $     975
    Accounts receivable, net                                                  37,264            24,705
    Inventories                                                               15,075            14,299
    Prepaid expenses and other current assets                                 10,263            10,517
                                                                            --------          --------
         Total current assets                                                 64,454            50,496

Property, plant and equipment, net                                            37,433            36,294

Trademarks, net                                                               29,235            29,427

Goodwill, net                                                                 79,990            80,517

Other assets                                                                   7,341             7,071
                                                                            --------          --------
Total assets                                                                $218,453          $203,805
                                                                            --------          --------
                                                                            --------          --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Bank overdraft                                                          $  4,737          $  3,138
    Accounts payable and accrued expenses                                     30,489            22,116
    Current portion of long-term debt                                          2,375             1,983
                                                                            --------          --------
         Total current liabilities                                            37,601            27,237

Long-term debt, net of current portion                                       136,757           132,339

Other long-term liabilities                                                    9,562             9,383
                                                                            --------          --------

Total liabilities                                                            183,920           168,959

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $.01 par value, 750,000 shares
     authorized (in total)-
        Series A, 100,000 shares issued and outstanding                            1                 1
        Series B, 377,156 and 377,156 shares issued and outstanding                4                 4
    Common Stock, $.01 par value, 750,000 shares authorized, 
     377,156 and 377,156 shares issued and outstanding                             4                 4
    Additional paid-in capital                                                50,391            50,391
    Retained earnings (deficit)                                              (15,867)          (15,554)
                                                                            --------          --------
        Total stockholders' equity                                            34,533            34,846
                                                                            --------          --------
        Total liabilities and stockholders' equity                          $218,453          $203,805
                                                                            --------          --------
                                                                            --------          --------
</TABLE>
                The accompanying notes are an integral part of these 
                        consolidated financial statements.

                                       -1-
<PAGE>


                           COMMEMORATIVE BRANDS, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                 (In thousands, except share and per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      For Three Months   For Three Months
                                                            Ended              Ended
                                                         November 28,       November 30,
                                                             1998               1997
                                                         ------------       ------------
<S>                                                        <C>               <C>
Net sales                                                  $ 41,178          $ 38,364
Cost of sales                                                17,207            17,226
                                                           --------          --------
Gross profit                                                 23,971            21,138

Selling, general and administrative expenses                 20,208            16,560
                                                           --------          --------
Operating income                                              3,763             4,578
Interest expense, net                                         3,746             3,600
                                                           --------          --------
         Income before provision for income taxes                17               978
Provision for income taxes                                       30                --
                                                           --------          --------
         Net income (loss)                                 $    (13)         $    978
Preferred dividends                                            (300)             (300)
                                                           --------          --------
         Net income (loss) to common stockholders          $   (313)         $    678
                                                           --------          --------
                                                           --------          --------
         Basic and diluted earnings
           (loss) per share                                $  (0.83)         $   1.81
                                                           --------          --------
                                                           --------          --------
Weighted average common shares outstanding and
 common and common equivalent shares outstanding            377,156           375,000
                                                           --------          --------
                                                           --------          --------
</TABLE>

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

                                          -2-
<PAGE>

                                COMMEMORATIVE BRANDS, INC.

                                CONSOLIDATED STATEMENTS OF
                                   STOCKHOLDERS' EQUITY

                             (In thousands, except share data)
                                         (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Additional Retained
                                                                                    paid-in  earnings
                                            Preferred Stock          Common Stock   capital  (deficit)     Total
                                 --------------------------------  ---------------  -------  ---------     -----
                                    Series A         Series B
                                 ---------------  ---------------  ---------------
                                 Shares   Amount  Shares   Amount  Shares   Amount
                                 ---------------  ---------------  ---------------
<S>                             <C>        <C>    <C>       <C>    <C>       <C>    <C>         <C>       <C>
Balance, August 30, 
 1997 (audited)                 100,000    $ 1    375,000   $ 4    375,000   $ 4    $50,161     (9,717)   $40,453

Issuance of Common stock             --     --         --    --      2,156    --         14         --         14

Issuance of Preferred Stock          --     --      2,156    --         --    --        216         --        216

Accrued Preferred Stock 
 Dividends                           --     --         --    --         --    --         --     (1,200)    (1,200)

Net Loss                             --     --         --    --         --    --         --     (4,637)    (4,637)
                                -------    ---    -------   ---    -------   ---    -------   --------    -------
Balance, August 29, 1998 
 (audited)                      100,000      1    377,156     4    377,156     4     50,391    (15,554)    34,846

Accrued Preferred Stock 
 Dividends                           --     --         --    --         --    --         --       (300)      (300)

Net loss                             --     --         --    --         --    --         --        (13)       (13)
                                -------    ---    -------   ---    -------   ---    -------   --------    -------
Balance, November 28, 1998 
 (unaudited)                    100,000    $ 1    377,156   $ 4    377,156   $ 4    $50,391   ($15,867)   $34,533
                                -------    ---    -------   ---    -------   ---    -------   --------    -------
                                -------    ---    -------   ---    -------   ---    -------   --------    -------
</TABLE>

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

                                            -3-
<PAGE>

                                COMMEMORATIVE BRANDS, INC.

                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       (In thousands)
                                         (Unaudited)
<TABLE>
<CAPTION>
                                                                        For the Three Months Ended
                                                                       ------------------------------
                                                                       November 28,      November 30,
                                                                           1998             1997
                                                                       ------------      ------------
<S>                                                                      <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                               $    (13)        $    978
  Adjustments to reconcile net loss to net
    cash used in operating activities-                                      
         Depreciation and amortization                                      1,738            1,678
         Provision for doubtful accounts                                      195              177
         Changes in assets and liabilities-
            Increase in receivables                                       (12,754)         (10,652)
            Increase in inventories                                          (776)          (2,450)
            Decrease in prepaid expenses and other current assets             254            1,510
            Increase in other assets                                         (271)            (390)
            Increase in bank overdraft, accounts payable and
              accrued expenses                                              9,851            4,125
                                                                         --------         --------
                  Net cash used in operating activities                    (1,776)          (5,024)
                                                                         --------         --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                               (2,157)          (1,448)
                                                                         --------         --------
                  Net cash used in investing activities                    (2,157)          (1,448)
                                                                         --------         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
         Payments on term loan facility, net                                 (250)            (125)
         Note borrowings, net                                               5,060            6,700
                                                                         --------         --------
                  Net cash provided by financing activities                 4,810            6,575

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          877              103

CASH AND CASH EQUIVALENTS,  beginning of period                               975            2,174
                                                                         --------         --------
CASH AND CASH EQUIVALENTS, end of period                                 $  1,852         $  2,277
                                                                         --------         --------
                                                                         --------         --------
SUPPLEMENTAL DISCLOSURE
         Cash paid during the period for -
               Interest                                                  $    988         $    346
                                                                         --------         --------
                                                                         --------         --------
               Taxes                                                     $     17               --
                                                                         --------         --------
                                                                         --------         --------
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
 ACTIVITIES
         Accrued preferred stock dividends                               $    300         $    300
                                                                         --------         --------
                                                                         --------         --------
</TABLE>
                   The accompanying notes are an integral part of 
                      these consolidated financial statements.

                                           -4-

<PAGE>
                                       
                           COMMEMORATIVE BRANDS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BACKGROUND AND ORGANIZATION

Commemorative Brands, Inc., a Delaware corporation (together with its 
subsidiaries, CBI or the Company), is a manufacturer and supplier of class 
rings and other graduation-related scholastic products for the high school 
and college markets and manufactures and markets recognition and affinity 
jewelry designed to commemorate significant events, achievements and 
affiliations. CBI was initially formed in March 1996 by Castle Harlan 
Partners II, L.P. (CHPII), a Delaware limited partnership and private equity 
investment fund, for the purpose of acquiring ArtCarved and Balfour (as 
defined below) and, until December 16, 1996, engaged in no business 
activities other than in connection with the Acquisitions (as defined below) 
and the financing thereof. The Company is a leading manufacturer of class 
rings in the United States with its corporate office and primary 
manufacturing facilities located in Austin, Texas.

The accompanying consolidated financial statements have been prepared without 
audit pursuant to the rules and regulations of the Securities and Exchange 
Commission. Certain information and footnote disclosures normally included in 
financial statements prepared in accordance with generally accepted 
accounting principles have been condensed or omitted pursuant to such rules 
and regulations, although the Company believes the disclosures are adequate 
to make the information presented not misleading. In the opinion of 
management, all adjustments (consisting only of normal recurring adjustments) 
necessary for a fair presentation of the financial position and results of 
operations for the periods presented have been included. Operating results 
for the three months ended November 28, 1998 are not necessarily indicative 
of the results that may be expected for the fiscal year ending August 28, 
1999.

(2)  MERGERS AND ACQUISITIONS

On December 16, 1996, the Company completed the acquisitions (the 
Acquisitions) of substantially all of the scholastic and recognition and 
affinity product assets and businesses of the ArtCarved Class Rings 
(ArtCarved) operations of CJC Holdings, Inc. (CJC) from CJC and of L. G. 
Balfour Company, Inc. (Balfour) from Town & Country Corporation (Town & 
Country).

In consideration for ArtCarved, CBI paid CJC, in cash, the sum of $115.1 
million and assumed certain related liabilities. In consideration for 
Balfour, CBI paid Town & Country, in cash, the sum of $45.9 million and 
assumed certain related liabilities. In addition, CBI purchased the gold on 
consignment to L. G. Balfour Company, Inc. as of the closing date for a cash 
purchase price of approximately $5.4 million.

The following represents the allocation of the purchase prices for ArtCarved 
and Balfour to their respective assets and liabilities based on third-party 
appraisals and management's estimate of fair values. The allocation of the 
purchase prices (including transaction costs) for the Acquisitions is as set 
forth below (in thousands):

<TABLE>
<CAPTION>
                                                  ArtCarved          Balfour
                                                  ---------         ---------
<S>                                               <C>               <C>
     Current assets                               $  23,220         $  35,497
     Property, plant and equipment                   17,039            15,042
     Goodwill                                        64,127            17,885
     Trademarks                                      17,740            13,000
     Other long-term assets                           1,687               171
     Accounts payable and accrued expenses           (6,066)          (22,334)
     Other long-term liabilities                         --            (6,808)
                                                  ---------         ---------
                                                  $ 117,747         $  52,453
                                                  ---------         ---------
                                                  ---------         ---------
</TABLE>



                                      -5-

<PAGE>

(3)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR-END

CBI uses a 52/53-week fiscal year ending on the last Saturday of August.

CONSOLIDATION

The consolidated financial statements include the accounts of the Company and 
its subsidiaries. All material intercompany accounts and transactions have 
been eliminated in consolidation.

BUSINESS CONDITIONS

The results of operations of the Company for the fiscal year ended August 29, 
1998 were negatively impacted as a result of the consolidation of the 
Attleboro and North Attleboro, Massachusetts operations into the Austin, 
Texas facilities. The consolidation and integration of operations required 
substantial time and cost due to complications arising from the integration 
of the different order entry and manufacturing processes required for the 
Balfour ring product line. The time to train new personnel to implement the 
Balfour class ring operations was extensive and resulted in ring 
manufacturing headcount levels higher than those experienced by the 
predecessor companies through fiscal 1998. The consolidation of the Attleboro 
and North Attleboro, Massachusetts operations in Austin, Texas facilities 
occurred during the fiscal year ended August 30, 1997 and the integration of 
these operations was substantially completed in the fiscal year ended August 
29, 1998. There can be no assurance that the operations formerly conducted by 
each of the Company's predecessors will be fully integrated or as to the 
amount of any costs savings that may result from such integration.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments with original 
maturities of three months or less.

INVENTORIES

Inventories, which include raw materials, labor and manufacturing overhead, 
are stated at the lower of cost or market using the first-in, first-out 
(FIFO) method.

ADVERTISING

The Company incurs advertising and promotion costs that are directly related 
to a product in advance of the sale occurring. These amounts are included in 
prepaid expenses and other current assets and are amortized over the period 
in which the sale of products occurs.

SALES REPRESENTATIVE ADVANCES AND RESERVE FOR SALES REPRESENTATIVE ADVANCES

The Company advances funds to new sales representatives in order to open up 
new sales territories or makes payments to predecessor sales representatives 
on behalf of successor sales representatives. Such amounts are repaid by the 
sales representatives through earned commissions on product sales. The 
Company provides reserves to cover those amounts which it estimates to be 
uncollectible. These amounts are included in prepaid expenses and other 
current assets in the accompanying balance sheets.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, net of accumulated 
depreciation. Depreciation is provided principally using the straight-line 
method based on estimated useful lives of the assets as follows:
                                       


                                      -6-

<PAGE>

<TABLE>
<CAPTION>
     Description                               Useful Life
     -----------                               -----------
     <S>                                    <C>
     Land improvements                            15 years
     Buildings and improvements             10 to 25 years
     Tools and dies                         10 to 20 years
     Machinery and equipment                 2 to 10 years
</TABLE>

Maintenance, repairs and minor replacements are charged against income as 
incurred; major replacements and betterments are capitalized. The cost of 
assets sold or retired and the related accumulated depreciation are removed 
from the accounts at the time of disposition, and any resulting gain or loss 
is reflected as other income or expense for the period.

TRADEMARKS

The value of trademarks was determined based on a third-party appraisal and 
is being amortized on a straight-line basis over 40 years.

IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment 
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This 
statement deals with accounting for the impairment of long-lived assets, 
certain identifiable intangibles and goodwill related to assets to be held 
and used, and for long-lived assets and certain identifiable intangibles to 
be disposed of. This statement requires that long-lived assets (e.g., 
property, plant and equipment and intangibles) be reviewed for impairment 
whenever events or changes in circumstances, such as change in market value, 
indicate that the assets' carrying amounts may not be recoverable. In 
performing the review for recoverability, if future undiscounted cash flows 
(excluding interest charges) from the use and ultimate disposition of the 
assets are less than their carrying values, an impairment loss is recognized. 
Impairment losses are to be measured based on the fair value of the asset. 
When factors indicate that long-lived assets should be evaluated for possible 
impairment, the Company uses an estimate of the related product lines' 
undiscounted cash flows over the remaining lives of the assets in measuring 
whether the assets are recoverable.

GOODWILL

Costs in excess of fair value of net tangible and identifiable intangible 
assets acquired and related acquisition costs are included in goodwill in the 
accompanying balance sheets. Goodwill is being amortized on a straight-line 
basis over 40 years. The Company continually evaluates whether events and 
circumstances have occurred that indicate that the remaining estimated useful 
life of goodwill may warrant revision or that the remaining balance of 
goodwill may not be recoverable. When factors indicate that goodwill should 
be evaluated for possible impairment, the Company would use an estimate of 
the related product lines' undiscounted cash flows over the remaining life of 
the goodwill in measuring whether the goodwill is recoverable.

OTHER ASSETS

Other assets include deferred financing costs which are amortized over the 
lives of the specific debt and ring samples to national chain stores and 
sales representatives which are amortized over three years.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax 
consequences attributable to differences between the financial statement 
carrying amounts of existing assets and liabilities and their respective tax 
bases. Deferred tax assets and liabilities are measured using enacted tax 
rates expected to apply to taxable income in the years in which those 
temporary differences are expected to be recovered or settled. Deferred tax 
assets are recognized net of any valuation allowance. The effect on deferred 
tax assets and liabilities of a change in tax rates is recognized in income 
in the period that includes the enactment date.
                                       


                                      -7-

<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash and cash 
equivalents, accounts receivable, bank overdraft, accounts payable and 
long-term debt (including current maturities). The carrying amounts of the 
Company's cash and cash equivalents, accounts receivable, bank overdraft and 
accounts payable approximate fair value due to their short-term nature. The 
fair value of the Company's long-term debt approximates the recorded amount 
based on current rates available to the Company for debt with the same or 
similar terms.

REVENUE RECOGNITION

Revenues from product sales are recognized at the time the product is shipped.

CONCENTRATION OF CREDIT RISK

Credit is extended to various companies in the retail industry which may be 
affected by changes in economic or other external conditions. The Company's 
policy is to manage its exposure to credit risk through credit approvals and 
limits.

USE OF ESTIMATES

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

SEASONALITY

The Company's scholastic product sales tend to be seasonal. Class ring sales 
are highest during October through December (which overlaps the Company's 
first and second fiscal quarters), when students have returned to school 
after the summer recess and orders are taken for delivery of class rings to 
students before the winter holiday season. Sales of the Company's fine paper 
products are predominantly made during February through April (which overlaps 
the Company's second and third fiscal quarters) for graduation in May and 
June. ArtCarved and Balfour historically experienced operating losses during 
the period of the Company's fourth fiscal quarter, which includes the summer 
months when school is not in session. The Company's recognition and affinity 
product line is not seasonal in any material respect, although sales 
generally are highest during the winter holiday season and in the period 
prior to Mother's Day. As a result, the effects of seasonality of the class 
ring business on the Company are tempered by the Company's relatively broad 
product mix. As a result of the foregoing, the Company's working capital 
requirements tend to exceed its operating cash flows from July through 
December.

NEW ACCOUNTING PRONOUNCEMENTS

In March 1997, the Financial Accounting Standards Board issued SFAS No. 128, 
"Earnings Per Share." SFAS No. 128 revises the standards for computing 
earnings per share currently prescribed by Accounting Principles Board (APB) 
Opinion No. 15. SFAS No. 128 retroactively revises the presentation of 
earnings per share in the financial statements. The Company adopted SFAS No. 
128 for the fiscal year ended August 29, 1998. Basic and diluted earnings 
(loss) per share are the same as the Company has losses from continuing 
operations and the computation for diluted earnings (loss) per share would be 
antidilutive.

The Company adopted SFAS No. 129, "Disclosure of Information about Capital 
Structure", for the fiscal year ended August 29, 1998. It requires an entity 
to explain in summary form within its financial statements the pertinent 
rights and privileges of the various securities outstanding. This information 
is included primarily in Notes 5 and 8.
                                       


                                      -8-
<PAGE>

SFAS No. 130, "Reporting Comprehensive Income", is required to be adopted by 
the Company for the fiscal year ending August 28, 1999, and the statement 
requires the presentation of comprehensive income in an entity's financial 
statements. Comprehensive income represents all changes in equity of an 
entity during the reporting period, including net income and charges directly 
to equity which are excluded from net income. This statement is not 
anticipated to have any impact on the Company's disclosures as the Company 
currently does not enter into any transactions which result in charges (or 
credits) directly to equity (such as additional minimum pension liability 
changes, currency translation adjustments, unrealized gains and losses on 
available-for-sale securities, etc.).

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related 
Information," is required to be adopted by the Company for the fiscal year 
ending August 28, 1999. SFAS No. 131 provides revised disclosure guidelines 
for segments of an enterprise based on a management approach to defining 
operating segments. The Company currently operates in only one industry 
segment and analyzes operations on a companywide basis; therefore, the 
statement is not expected to impact the Company's disclosures.

SFAS No. 132, "Employers Disclosure about Pensions and Other Postretirement 
Benefits", is required to be adopted by the Company for fiscal year ending 
August 28, 1999. It revises employers' disclosures about pension and other 
post-retirement benefit plans. It does not change the measurement or 
recognition of those plans.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", 
is required to be adopted by the Company in the first quarter of fiscal year 
2000 (November 1999). It establishes accounting and reporting standards for 
derivative instruments, including certain derivative instruments embedded in 
other contracts and for hedging activities. It requires that an entity 
recognize all derivatives as either assets or liabilities in the balance 
sheet and measure those instruments at fair value. Management believes that 
the adoption of this standard will not have a material effect on the 
Company's financial position or results of operations.

(4)  INVENTORIES

A summary of inventories is as follows (in thousands):

<TABLE>
<CAPTION>
                           November 28,      August 29,
                              1998             1998
                           -----------       ---------
     <S>                   <C>               <C>
     Raw materials          $ 8,697           $ 8,754
     Work in process          4,778             3,139
     Finished goods           1,600             2,406
                            -------           -------
                            $15,075           $14,299
                            -------           -------
                            -------           -------
</TABLE>

Cost of sales includes depreciation and amortization of $588,000 and 
$522,000, for the three months ended November 28, 1998 and November 30, 1997, 
respectively.

(5)  LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                  November 28,     August 29,
                                                     1998            1998
                                                  -----------      ---------
     <S>                                          <C>              <C>
     11% senior subordinated notes due 2007        $ 90,000        $ 90,000
     Term loan facility                              23,750          24,000
     Bank revolver                                   24,382          19,589
     Short-term revolving credit                      1,000             733
                                                   --------        --------
          Total debt                               $139,132        $134,322
     Less-current portion                             2,375           1,983
                                                   --------        --------
          Total long-term debt                     $136,757        $132,339
                                                   --------        --------
                                                   --------        --------
</TABLE>



                                      -9-

<PAGE>


11  PERCENT SENIOR SUBORDINATED NOTES

The Company's 11 percent senior subordinated notes mature on January 15, 
2007. The notes are redeemable at the option of the Company, in whole or in 
part, at any time on or after January 15, 2002, plus accrued and unpaid 
interest and Liquidated Damages (as defined in the Indenture), if any, 
thereon to the date of redemption. In the event the Company completes one or 
more Public Equity Offerings (as defined in the Indenture) on or before 
January 15, 2000, the Company may, in its discretion, use the net cash 
proceeds to redeem up to 33-1/3 percent of the original principal amount of 
the notes at a redemption price equal to 111 percent of the principal amount 
thereof, plus accrued and unpaid interest and liquidated damages, if any, 
thereon to the date of redemption, with the net proceeds of one or more 
public equity offerings, provided that at least 66-2/3 percent of the 
original principal amount of the notes remains outstanding immediately after 
each such redemption.

The 11 percent senior subordinated notes contain certain covenants that, 
among other things, limit the ability of the Company (a) to incur additional 
indebtedness and issue preferred stock, (b) to pay dividends or make certain 
other restricted payments, (c) to enter into transactions with affiliates, 
(d) to create certain liens, (e) to make certain asset dispositions and (f) 
to merge or consolidate with, or transfer substantially all of its assets to, 
another person. The Company was in compliance with all debt covenants as of 
November 28, 1998 and August 29, 1998.

REVOLVING CREDIT, TERM LOAN AND GOLD CONSIGNMENT AGREEMENT

The Company has a revolving credit, term loan and gold consignment agreement 
which was entered into as of December 16, 1996 (as amended, the Bank 
Agreement) with a group of banks pursuant to which the Company initially 
borrowed $25 million under a term loan facility and from time-to-time may 
borrow up to $35 million under a revolving credit and gold facility. Loans 
outstanding under the Bank Agreement bear interest at either fixed or 
floating rates based upon the interest rate option selected by the Company.

TERM LOAN FACILITY

The term loan facility (Term Loan) matures on December 16, 2003. The Company 
may prepay the Term Loan at any time. The Company must repay specified 
amounts of the Term Loan in 28 consecutive quarterly installments which 
commenced March 31, 1997.

REVOLVING CREDIT AND GOLD FACILITIES

The revolving credit and gold facilities (the Revolving Credit and Gold 
Facilities) permit borrowings of up to a maximum aggregate principal amount 
of $35 million based upon availability under a borrowing base based on 
eligible receivables and eligible inventory (each as defined in the Revolving 
Credit and Gold Facilities), with a sublimit of $5 million for letters of 
credit and $10 million for gold borrowing or consignment.

The Bank Agreement contains certain financial covenants that require the 
Company to maintain certain minimum levels of (a) senior funded debt to 
earnings before interest, taxes, depreciation and amortization (EBITDA, as 
defined in the Bank Agreement), (b) consolidated EBITDA and (c) interest 
coverage. The financial covenants were amended on November 27, 1998, and 
additional covenants were added pursuant to which the Company agreed that it 
would not (i) permit its Consolidated Net Worth (as defined in the Bank 
Agreement) as of March 30, 1999 to be less than $42 million, (ii) pay the 
management fee payable to Castle Harlan, Inc. (see Note 9) unless at the time 
of payment (A) no Event of Default (as defined under the Bank Agreement) 
shall have occurred and be continuing or would result from the payment 
thereof; (B) the Short Term Revolving Credit (see "Short-Term Revolving 
Credit" below) shall have been paid in full; and (C) the Company meets the 
requisite Modified Funded Debt Ratio (as defined in the Bank Agreement) and 
(iii) permit or make certain capital expenditures for computer conversion 
projects in excess of $6,500,000 in the aggregate during fiscal 1998 and 1999 
and the first fiscal quarter of 2000. The Bank Agreement also contains 
covenants which, among other things, limit the ability of the Company and its 
subsidiaries to (a) incur additional indebtedness, (b) acquire and dispose of 
assets, (c) create liens, (d) make capital expenditures, (e) pay dividends on 
or redeem shares of the Company's capital stock, and (f) make
                                       


                                     -10-

<PAGE>
                                       
certain investments. The Company was in compliance with all debt covenants 
under the Bank Agreement as of November 28, 1998 and August 29, 1998. In 
light of the Company's current financial position and the results of 
operations for the three months ended November 28, 1998, there can be no 
assurance that the Company will in the future meet these net worth and other 
financial covenants under the Bank Agreement.

Availability under the Revolving Credit and Gold Facilities is subject to a 
borrowing base limitation (the Borrowing Base) based on the aggregate of 
certain percentages of Eligible Receivables (as defined in the Revolving 
Credit and Gold Facilities) and Eligible Inventory (as defined in the 
Revolving Credit and Gold Facilities) of the Company. The Borrowing Base is 
recalculated each month. If the aggregate amount of loans and other 
extensions of credit under the Revolving Credit and Gold Facilities exceeds 
the Borrowing Base, the Company must immediately prepay or cash collateralize 
its obligations under the Revolving Credit and Gold Facilities to the extent 
of such excess. At November 28, 1998, the Company had $618,000 available 
under the revolving credit facility and $3,804,000 available under the gold 
facility.

CONSIGNED GOLD

Under the Company's gold consignment/loan arrangements, the Company has the 
ability to have on consignment up to 26,000 ounces of gold or alternatively 
to borrow up to $10 million for the purchase of gold. Under these 
arrangements, the Company is limited to a maximum value of $10 million in 
consigned inventory and/or gold loan funds. For the three months ended 
November 28, 1998 and November 30, 1997 (see Note 1), the Company expensed 
approximately $62,000 and $78,000 respectively, in connection with 
consignment fees. Under the terms of the consignment arrangement, the Company 
does not own the consigned gold until it is shipped in the form of a ring to 
a customer. Accordingly, the Company does not include the value of consigned 
gold in inventory or the corresponding liability for financial statement 
purposes. As of November 28, 1998 and August 29, 1998, the Company held 
approximately 20,920 ounces and 13,846 ounces, respectively, valued at $6.2 
million and $3.8 million, respectively, of gold on consignment from one of 
its lenders.

SHORT TERM REVOLVING CREDIT

On August 26, 1998, the Company obtained a short-term line of credit (the 
Short Term Revolving Credit) pursuant to which the Company may borrow up to 
$8,000,000 from BankBoston, N.A. (BankBoston) from time to time, until March 
31, 1999. At November 28, 1998 and August 29, 1998, the Company had 
$7,000,000 and $7,267,000, respectively, available under the Short Term 
Revolving Credit. Amounts outstanding under the Short Term Revolving Credit 
bear interest at either fixed or floating rates based upon the interest rate 
option selected by the Company. All amounts borrowed pursuant to the Short 
Term Revolving Credit are due and payable on March 31, 1999. Any Event of 
Default under the Bank Agreement will also constitute an Event of Default 
under the Short Term Revolving Credit. Pursuant to the terms of the Company's 
Bank Agreement, the Company is prohibited from repaying the outstanding 
principal of the Short Term Revolving Credit unless at the time of repayment 
both before and after giving effect to such repayment, no Default or Event of 
Default (as defined in the Bank Agreement) exists under the Bank Agreement 
and the Borrowing Base exceeds all outstanding amounts under the Revolving 
Credit and Gold Facilities by at least $2 million. The Short Term Revolving 
Credit is unsecured. All of the Company's obligations under the Short Term 
Revolving Credit are guaranteed by CHPII. The Company has agreed to indemnify 
CHPII and pay CHPII upon demand any amounts that CHPII must pay pursuant to 
the guaranty (see Note 9). The Short Term Revolving Credit constitutes 
Designated Senior Indebtedness for purposes of the Indenture.
                                       


                                     -11-

<PAGE>
                                       
The long-term debt outstanding as of November 28, 1998, matures as follows 
(in thousands):

<TABLE>
<CAPTION>

                                    Amount 
                                  Maturing
     Fiscal Year Ending           --------
     <S>                          <C>
     1999                         $  2,375
     2000                            1,750
     2001                            2,500
     2002                           29,507
     2003                            8,500
     Thereafter                     94,500
                                  --------
                                  $139,132
                                  --------
                                  --------
</TABLE>

The weighted average interest rate of debt outstanding under the Bank 
Agreement as of November 28, 1998 and August 29, 1998 was 10.2% and 10.3%, 
respectively. The weighted average interest rate under the Short Term 
Revolving Credit as of November 28, 1998 and August 29, 1998 was 8.2% and 
8.5%, respectively.

(6)  COMMITMENTS AND CONTINGENCIES

Certain Company facilities and equipment are leased under agreements expiring 
at various dates through 2005.

The Company is a party to certain contracts with some of its sales 
representatives whereby the representatives have purchased from their 
predecessor the right to sell the Company's products in a territory. The 
contracts generally provide that the value of these rights is primarily 
determined by the amount of business achieved by a successor sales 
representative and is therefore not determinable in advance of performance by 
the successor sales representative.

The Company is not party to any pending legal proceedings other than ordinary 
routine litigation incidental to the business. In management's opinion, 
adverse decisions on those legal proceedings, in the aggregate, would not 
have a materially adverse impact on the Company's results of operations or 
financial position.

(7)  INCOME TAXES

For the three months ended November 28, 1998 and November 30, 1997, the 
Company expensed $0.3 million and $0 million, respectively, related to state 
income taxes. There is no federal income tax provision as a valuation 
allowance exists due to the net operating losses incurred by the Company.

(8)  STOCKHOLDERS' EQUITY

The Company is authorized to issue 750,000 shares of preferred stock, par 
value $.01 per share, and 750,000 shares of Common Stock, par value $.01 per 
share. The Company currently has issued and outstanding 100,000 shares of 
Series A Preferred, 377,156 shares of Series B Preferred and 377,156 shares 
of Common Stock.

SERIES A PREFERRED STOCK (SERIES A PREFERRED)

The holders of shares of Series A Preferred are not entitled to voting 
rights. Dividends on the Series A Preferred are payable in cash, when, as and 
if declared by the board of directors of the Company, out of funds legally 
available therefor, on a quarterly basis. Dividends on the Series A Preferred 
accrue from the date of issuance (December 16, 1996) to the last date to 
which dividends have been paid at a rate of 12 percent per annum, whether or 
not such dividends have been declared and whether or not there shall be funds 
legally available for the payment thereof. Any dividends which are declared 
shall be paid pro rata to the holders. No dividends or interest shall accrue 
on any accrued and unpaid dividends. The Company's 11 percent senior 
subordinated notes and bank debt restrict the Company's ability to pay 
dividends on the Series A Preferred.
                                       


                                      -12-

<PAGE>

The Series A Preferred is not subject to mandatory redemption. The Series A 
Preferred is redeemable at any time at the option of the Company; however, 
the Company's 11 percent senior subordinated notes and bank debt restrict the 
Company's ability to redeem the Series A Preferred. In the event of any 
liquidation, dissolution or winding up of the Company, the holders of the 
Series A Preferred shall receive payment of the liquidation value of $100 per 
share plus all accrued and unpaid dividends prior to the payment of any 
distributions to the holders of the Series B Preferred or the holders of the 
common stock of the Company (Common Stock). So long as shares of the Series A 
Preferred remain outstanding, the Company may not declare, pay or set aside 
for payment dividends on, or redeem or otherwise repurchase any shares of, 
the Series B Preferred or Common Stock.

SERIES B PREFERRED STOCK (SERIES B PREFERRED)

The holders of shares of Series B Preferred are entitled to one vote per 
share, voting together with the holders of the Common Stock as one class on 
all matters presented to the shareholders generally. No dividends accrue on 
the Series B Preferred.

Dividends may be paid on the Series B Preferred if and when declared by the 
board of directors of the Company out of funds legally available therefor. 
The Series B Preferred is nonredeemable. In the event of any liquidation, 
dissolution or winding up of the Company, the holders of the Series B 
Preferred shall receive payment of the liquidation value of $100 per share 
plus any accrued and unpaid dividends prior to the payment of any 
distributions to the holders of the Common Stock of the Company. So long as 
shares of the Series B Preferred remain outstanding, the Company may not 
declare, pay or set aside for payment any dividends on the Common Stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of 
record on all matters submitted to a vote of shareholders, including the 
election of directors, and vote together as one class with the holders of the 
Series B Preferred.

Dividends may be paid on the Common Stock if and when declared by the board 
of directors of the Company out of funds legally available therefor. The 
Company does not expect to pay dividends on the Common Stock in the 
foreseeable future.

COMMON STOCK PURCHASE WARRANTS

The Company has issued warrants, exercisable to purchase an aggregate of 
21,405 shares of Common Stock (or an aggregate of approximately 5.4 percent 
of the outstanding shares of Common Stock on a fully diluted basis), at an 
initial exercise price of $6.67 per share, at any time on or after December 
16, 1997, and on or before January 31, 2008.

In accordance with a subscription agreement entered into by the Company and 
CHPII and certain of its affiliates (the Castle Harlan Group), the Company 
granted the Castle Harlan Group certain registration rights with respect to 
the shares of capital stock owned by them pursuant to which the Company 
agreed, among other things, to effect the registration of such shares under 
the Securities Act of 1933, as amended, at any time at the request of the 
Castle Harlan Group. The Company also granted to the Castle Harlan Group 
unlimited piggyback registration rights on certain registrations of shares of 
capital stock by the Company.

STOCK-BASED COMPENSATION PLAN

The Company has a stock option plan (the 1997 Stock Option Plan), effective 
as of July 29, 1997, for which a total of 69,954 shares of Common Stock have 
been reserved for issuance and 36,109 of those shares were available for 
grant to directors and employees of the Company as of August 29, 1998. The 
1997 Stock Option Plan provides for the granting of both incentive and 
nonqualified stock options. Options granted under the 1997 Stock Option Plan 
have a maximum term of 10 years and are exercisable under the terms of the 
respective option agreements at the fair market value of the Common Stock at 
the date of grant. Payment of the exercise 
                                       


                                       -13-

<PAGE>

price must be made in cash or in whole or in part by delivery of shares of 
the Company's Common Stock. All Common Stock issued upon exercise of options 
granted pursuant to the 1997 Stock Option Plan will be subject to a voting 
trust agreement.

INCENTIVE STOCK PURCHASE PLAN

On July 7, 1998 the stockholders of the Company unanimously approved and 
adopted the Commemorative Brands, Inc. Incentive Stock Purchase Plan (the 
Plan). Pursuant to the terms of the Plan, the Company may from time to time 
offer shares of the Company's Series B Preferred Stock and Common Stock to 
employees, consultants and independent sales representatives who are 
determined to be eligible to purchase shares pursuant to the Plan by the Plan 
Administrator (as defined in the Plan) upon such terms and at such prices as 
are set forth in the Plan and as are determined by the Plan Administrator.

On July 20, 1998, the Company commenced an offering of up to an aggregate of 
18,750 shares of each of the Company's Common Stock and Series B Preferred 
Stock to eligible employees, consultants and independent sales 
representatives. The offering was terminated on December 22, 1998 prior to 
the consummation thereof and no Company shares were sold pursuant thereto.

(9)  RELATED - PARTY TRANSACTIONS

The Company has agreed to indemnify CHPII pursuant to an indemnification 
agreement, dated August 26, 1998 for any amounts that may be incurred by 
CHPII under CHPII's guaranty of the Company's obligations under the Short 
Term Revolving Credit (see Note 5).

On June 30, 1998, the Company sold shares of Common Stock and Series B 
Preferred Stock to certain executive officers of the Company including 
Jeffrey H. Brennan, President and Chief Executive Officer of the Company. In 
conjunction therewith, the Company lent Mr. Brennan $75,000 to purchase 
shares of the Company's stock pursuant to a promissory note in the original 
principal amount of $75,000, which is due and payable in full on June 16, 
2003, and which bears interest at the rate of 5.77% per annum, payable 
annually on the 15th of June. Mr. Brennan has granted to the Company a 
security interest in the shares acquired by him and his interest in the 
voting trust into which the shares have been deposited as collateral security 
for the repayment in full of the promissory note. The Company also lent 
another officer of the Company the sum of $25,000 to purchase shares of the 
Company's stock on substantially identical terms as the promissory note 
issued by Mr. Brennan. The balance of $100,000 is included in prepaid 
expenses and other current assets on the accompanying balance sheets as of 
November 28, 1998 and August 29, 1998.

The Company entered into a management agreement dated December 16, 1996 (the 
Management Agreement), with Castle Harlan, Inc. (the Manager), pursuant to 
which the Manager agreed to provide business and organizational strategy, 
financial and investment management and merchant and investment banking 
services to the Company upon the terms and conditions set forth therein. As 
compensation for such services, the Company agreed to pay the Manager $1.5 
million per year, which amount was paid in advance for the first year and is 
payable quarterly in arrears thereafter. The management fee for the three 
months ended November 28, 1998 has been accrued, but not paid. The agreement 
is for a term of 10 years, renewable automatically from year to year 
thereafter unless the Castle Harlan Group then owns less than 5 percent of 
the then outstanding capital stock of the Company. The Company has agreed to 
indemnify the Manager against liabilities, costs, charges and expenses 
relating to the Manager's performance of its duties, other than such of the 
foregoing resulting from the Manager's gross negligence or willful 
misconduct. The Indenture prohibits payment of the management fee in the 
Event of a Default by the Company in the payment of principal, Redemption 
Price, Purchase Price, (both as defined in the Indenture), Interest, or 
Liquidated Damages (if any) on the Notes. The Bank Agreement prohibits 
payment of the management fee unless at the time of payment (i) no Event of 
Default (as defined in the Bank Agreement) shall have occurred and is 
continuing or would result from the payment of the management fee; (ii) the 
Short Term Revolving Credit shall have been paid in full; and (iii) the 
Company meets the requisite Modified Funded Debt Ratio (as defined in the 
Bank Agreement).
                                       


                                      -14-


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         For purposes of the discussion contained in this Item 2, unless the 
context otherwise requires (i) the term "CBI" refers to Commemorative Brands, 
Inc. prior to the consummation of the Acquisitions, (ii) the term "ArtCarved" 
refers to the predecessor assets, businesses, and operations of CJC acquired 
by CBI, (iii) the term "Balfour" refers to the predecessor class rings 
assets, businesses and operations of L. G. Balfour Company, Inc. acquired by 
CBI, and (iv) the term "the Company" refers to CBI consolidated with its 
subsidiaries as combined with ArtCarved and Balfour after giving effect to 
the Acquisitions.

         On December 16, 1996, CBI completed the Acquisitions. CBI was 
initially formed by Castle Harlan Partners II, L.P. ("CHPII"), a Delaware 
limited partnership and private equity investment fund, in March 1996 for the 
purpose of acquiring ArtCarved and Balfour. Until December 16, 1996, CBI 
engaged in no business activities other than in connection with the 
Acquisitions and the financing thereof.

         The Company uses a 52/53 week fiscal year ending on the last 
Saturday of August.

RESULTS OF OPERATIONS

         The results of operations of the Company for the three months ended 
November 30, 1997, were negatively impacted due to excess costs and 
inefficiencies resulting from additional labor and overhead incurred to 
manufacture Balfour rings during the consolidation of the former Balfour 
Attleboro and North Attleboro, Massachusetts operations into the Company's 
Austin, Texas facilities. Although the consolidation of the Attleboro and 
North Attleboro, Massachusetts operations into the Company's Austin, Texas 
facilities was substantially completed in the fiscal year ended August 29, 
1998, there can be no assurance that the operations formerly conducted by 
each of the Company's predecessors will be fully integrated or as to the 
amount of any costs savings that may result from such integration.

         During January 1998, the Company began a computer project which, 
among other things, is intended to (i) convert the more inefficient Balfour 
computer systems to the more efficient ArtCarved systems, (ii) unify the 
Company's computer system thereby reducing computer operation and maintenance 
costs, streamlining and making the Company's order entry system and process 
more accurate and (iii) eliminating any "Year 2000" problems that may be 
inherent in the Company's existing computer systems. Management believes that 
this computer conversion project will be completed by July 1999, although 
there can be no assurance that it will be completed by that date.

THE COMPANY

         THREE MONTHS ENDED NOVEMBER 28, 1998 AS COMPARED TO THE THREE MONTHS 
            ENDED NOVEMBER 30, 1997

         NET SALES - Net sales increased $2.8 million, or 7.3%, to $41.2 
million for the three months ended November 28, 1998, as compared to $38.4 
million for the three months ended November 30, 1997. The increase in net 
sales was primarily a result of the 6.7% increase in net sales of high school 
class rings in the high school in-school sales channel of which 5.3% is 
related to a volume increase. The remaining increase in net sales was a 
result of the 2.4% increase in fine paper products and the recognition and 
affinity jewelry.

         GROSS PROFIT - Gross profit increased $2.8 million, or 13.4%, to 
$24.0 million for the three months ended November 28, 1998, as compared to 
$21.1 million for the three months ended November 30, 1997. As a percentage 
of net sales, gross profit was 58.2% for the three months ended November 28, 
1998 compared to 55.1% for the three months ended November 30, 1997. The 
increase in gross profit was the result of the three months ended November 
30, 1997 being adversely affected by the additional costs incurred in 
connection with the consolidation of the Attleboro and North Attleboro, 
Massachusetts operations into the Austin, Texas facilities and the decrease 
in gold prices in the three months ended November 28, 1998.
                                       


                                     -15-

<PAGE>
                                       
         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and 
administrative expenses increased $3.6 million, or 22.0%, to $20.2 million 
for the three months ended November 28, 1998, compared to $16.6 million for 
the three months ended November 30, 1997. As a percentage of net sales, 
selling, general and administrative expenses increased to 49.1% for the three 
months ended November 28, 1998, compared to 43.2% for the three months ended 
November 30, 1997. The increase in selling, general and administrative 
expenses was primarily a result of increased commissions due to the increase 
in net sales volume of high school class rings in the in-school sales channel 
and the mix of product that had a higher commission rate.

         OPERATING INCOME - As a result of the foregoing, operating income 
decreased $0.8 million to $3.8 million for the three months ended November 
28, 1998 compared to $4.6 million for the three months ended November 30, 
1997. As a percentage of net sales, operating income decreased to 9.1% for 
the three months ended November 28, 1998 compared to 11.9% for the three 
months ended November 30, 1997.

         INTEREST EXPENSE, NET - Interest expense, net, was $3.7 million for 
the three months ended November 28, 1998 and $3.6 million for the three 
months ended November 30, 1997 primarily consisting of interest on the Bank 
Credit Facility which had an average outstanding balance of $45.1 million and 
$40.6 million for the three months ended November 28, 1998 and for the three 
months ended November 30, 1997, respectively, at rates ranging from 8.3% to 
10.5% and interest on the $90.0 million of notes, at a rate of 11%.

         PROVISION FOR INCOME TAXES - For the three months ended November 28, 
1998 and November 30, 1997, the Company expensed $0.3 million and $0, 
respectively, related to state income taxes. There is no federal income tax 
provision as a valuation allowance exists due to the net operating losses 
incurred by the Company.

         NET INCOME (LOSS) - As a result of the foregoing, net income 
decreased $1.0 million to a $0 net income for the three months ended November 
28, 1998 compared to a net income of $1.0 million for the three months ended 
November 30, 1997.

         PREFERRED DIVIDENDS - Preferred dividends of $0.3 million were 
accrued for the three months ended November 28, 1998 and for the three months 
ended November 30, 1997. No cash dividends were paid in the three months 
ended November 28, 1998 or in the three months ended November 30, 1997.

         NET LOSS TO COMMON STOCKHOLDERS - As a result of the foregoing, net 
loss to common stockholders decreased an aggregate of $1.0 million to a net 
loss to common stockholders of $0.3 million for the three months ended 
November 28, 1998 compared to a net income to common stockholders of $0.7 
million for the three months ended November 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

         As of November 28, 1998, the Company had a $35.0 million aggregate 
borrowing limit under the Revolving Credit and Gold Facilities (as defined 
below) and an $8.0 million short-term line of credit expiring March 31, 1999 
(the "Short Term Revolving Credit"). The Company had $24,382,000 outstanding 
under the Revolving Credit Facility, $6,196,000 outstanding under the Gold 
Facility and $1,000,000 outstanding under the Short Term Revolving Credit as 
of November 28, 1998. At November 28, 1998 the Company had $618,000 available 
under its Revolving Credit Facility, $3,804,000 available under its Gold 
Facility and $7,000,000 available under its Short Term Revolving Credit. 
Management believes that cash flows generated by existing operations and its 
available borrowings under its Bank Credit Facility and Short Term Revolving 
Credit will be sufficient to fund its ongoing operations. The Company's 
liquidity needs arise primarily from debt service on the Bank Credit 
Facility, the Short Term Revolving Credit and the Notes (as defined below), 
working capital and capital expenditure requirements, and payments required 
under a Management Agreement with Castle Harlan, Inc. ("CHP Management Fee") 
(See Related Party Transactions).
                                       


                                      -16-

<PAGE>

         The Company's cash used in operating activities for the three months 
ended November 28, 1998, was primarily the net result of the seasonality of 
the Company's scholastic product sales which are the highest between October 
and December. As a result, receivables and inventories are both at a peak 
during this time of the year. The increase in inventories for the three 
months ended November 28, 1998 is only $776,000 compared to the three months 
ended November 30, 1997 of $2,450,000 due to Balfour high school class rings 
being shipped late in the prior year as a result of problems encountered in 
the integration of the Balfour operations. Prepaid and other current assets 
are lower at this time of year as a result of prepaid advertising costs being 
amortized over the period in which the sale of product occurs.  Also, for the 
three months ended November 30, 1997, prepaid management fees were lower due 
to the management fee being prepaid as of January 1997 for a year. The 
increase in other assets for the three months ended November 28, 1998 and 
November 30, 1997 was a result of an increase in the manufacture of samples 
to support the increased sales volume. The increase in overdraft, accounts 
payable and accrued expenses was also a result of the seasonal nature of the 
class ring sales. The majority of the increase in overdraft, accounts payable 
and accrued expenses for the three months ended November 28, 1998 and the 
three months ended November 30, 1997, was a result of an increase in customer 
deposits on unshipped class rings of approximately $4,000,000 and $4,500,000, 
respectively. The remaining increase was due to increased vendor payables and 
increased commissions owed to the sales representatives and for the three 
months ended November 30, 1997, the increase was offset by approximately 
$800,000 of one-time costs associated with the closing of the Attleboro 
facilities, moving expenses and set-up expenses in Austin. As of November 28, 
1998 and August 29, 1998, there was a balance remaining of $0.8 million in 
reserves for expenses associated with the metal stamping and tooling 
operations currently in Attleboro.

         Also affecting cash usage in the three months ended November 28, 
1998 and November 30, 1997, were capital expenditures of $2.2 million and 
$1.4 million, respectively. The Company's projected capital expenditures for 
the fiscal year 1999 are $9.5 million for manufacturing equipment, tools and 
dies, software development, and the Balfour computer project.

         The following summarizes certain provisions of the bank credit 
agreement governing the Revolving Credit, Term Loan and Gold Consignment 
Agreement (as amended, the "Bank Credit Facility"), dated as of December 16, 
1996, by and among the Company, as borrower, BankBoston (formerly known as 
The First National Bank of Boston and successor by merger to Rhode Island 
Hospital Trust National Bank), Rhode Island Hospital Trust National Bank 
("RIHT", and together with BankBoston, as agent, the "Agents") and the 
financial institutions party thereto, and the Company's Short Term Revolving 
Credit.

The Bank Credit Facility consists of a senior secured credit facility of up 
to $60,000,000, including (i) a $25,000,000 term loan facility (the "Term 
Loan Facility"), (ii) a $25,000,000 revolving credit facility (with a letter 
of credit sublimit of $5,000,000) (the "Revolving Credit Facility") and (iii) 
a $10,000,000 gold consignment and revolving credit facility (the "Gold 
Facility" and, together with the Revolving Credit Facility, the "Revolving 
Credit and Gold Facilities").

         The Term Loan Facility of $23,750,000 matures on December 16, 2003. 
The Company may prepay the Term Loan Facility at any time, and must repay the 
Term Loan Facility in 28 consecutive quarterly installments, which commenced 
March 31, 1997. The final installment of principal of the Term Loan Facility 
is due and payable on December 16, 2003. In addition, subject to certain 
exceptions set forth in the Bank Credit Agreement, the Company must make 
mandatory prepayments of the Term Loan Facility from certain asset sales, 
equity issuances, and 50% of Consolidated Excess Cash Flow (as defined in the 
Term Loan Facility).

         Availability under the Revolving Credit and Gold Facilities is 
subject to a borrowing base limitation (the "Borrowing Base") based on the 
aggregate of certain percentages of Eligible Receivables (as defined in the 
Revolving Credit and Gold Facilities) and Eligible Inventory (as defined in 
the Revolving Credit and Gold Facilities) of the Company. The Borrowing Base 
is recalculated weekly. If the aggregate amount of loans and other extensions 
of credit under the Revolving Credit and Gold Facilities exceeds the 
Borrowing Base, the Company must immediately prepay or cash collateralize its 
obligations under the Revolving Credit Facility to the extent of such excess. 
At November 28, 1998 the Company had $618,000 available under its Revolving 
Credit Facility and $3,804,000 available under its Gold Facility.
                                       


                                     -17-

<PAGE>

         The Gold Facility consists of (a) a purchase and consignment 
facility, pursuant to which BankBoston, as gold agent, on behalf of the 
lenders under the Gold Facility, will purchase amounts of gold inventory for 
the Company and sell amounts to the Company, (b) a consignment facility, 
pursuant to which the gold agent, on behalf of the lenders under the Gold 
Facility, will obtain and consign amounts of gold to the Company and (c) a 
revolving loan facility.

         Loans outstanding under the Bank Credit Facility bear interest at 
either fixed or floating rates based upon the interest rate option selected 
by the Company. The weighted average interest rate of debt outstanding at 
November 28, 1998 and August 29, 1998, was 10.2% and 10.3%, respectively.

         The Revolving Credit and Gold Facilities may be borrowed, repaid and 
reborrowed from time to time until December 16, 2001, subject to certain 
conditions on the date of any such borrowing. Amounts of principal repaid on 
the Term Loan Facility may not be reborrowed.

         The Bank Credit Facility is secured by a first priority lien on 
substantially all assets of the Company, including all accounts receivable, 
inventory, equipment, general intangibles, real estate, buildings and 
improvements and the outstanding stock of its subsidiaries. The Company's 
U.S. subsidiary, CBI North America, Inc., has guaranteed the Company's 
obligations and granted a similar security interest.

         The Bank Credit Facility contains certain customary affirmative and 
negative covenants, including, among other things, requirements that the 
Company (i) periodically deliver certain financial information (including 
monthly borrowing base, consigned metal and receivables aging reports), (ii) 
not merge or make certain asset sales, (iii) not permit certain liens to 
exist on its assets, (iv) not incur additional debt or liabilities except as 
may be permitted under the terms of the Bank Credit Facility, (v) not make 
capital expenditures in excess of limits set forth in the Bank Credit 
Facility, (vi) not declare or make certain dividend payments, (vii) not make 
certain investments or consummate certain acquisitions, (viii) not enter into 
any consignment transactions as consignee (except for deliveries of 
diamonds), (ix) not create a new subsidiary, (x) not establish any new bank 
account, and (xi) establish concentration accounts with BankBoston and direct 
all of its depositary banks to transfer all amounts deposited (on a daily 
basis) to such concentration accounts (for application in accordance with the 
Bank Credit Facility). In addition, the Company must comply with certain 
financial covenants, including maintaining a specified minimum interest 
coverage ratio of Consolidated EBITDA to Consolidated Interest Expense, 
maximum Consolidated Senior Funded Debt to Consolidated EBITDA, minimum 
Consolidated EBITDA (as those terms are defined in the Bank Credit Facility) 
in amounts set forth in the Bank Credit Facility. The financial covenants 
were amended on November 27, 1998, and additional covenants were added 
pursuant to which the Company agreed that it would not (i) permit its 
Consolidated Net Worth (as defined) as of March 30, 1999 to be less than 
$42,000,000, (ii) pay the CHP Management Fee payable to Castle Harlan Inc. 
(see Related Party Transactions) unless at the time of payment (A) no Event 
of Default shall have occurred and be continuing or would result from the 
payment thereof; (B) the Short Term Revolving Credit shall have been paid in 
full; and (C) the Company meets the requisite Modified Funded Debt Ratio (as 
defined in the Bank Credit Facility) and (iii) permit or make certain capital 
expenditures for computer conversion projects in excess of $6,500,000 in the 
aggregate during fiscal 1998 and 1999 and the first fiscal quarter of 2000. 
Most of the covenants apply to the Company and its subsidiaries. The Company 
was in compliance with all of its covenants under the Bank Credit Facility as 
of November 28, 1998 and August 29, 1998. In light of the Company's current 
financial position and the results of operations for the three months ended 
November 28, 1998, there can be no assurance that the Company will in the 
future meet these net worth and other financial covenants under the Bank 
Agreement.

         The Bank Credit Facility contains certain customary events of 
default, including nonpayment, misrepresentation, breach of covenant, 
bankruptcy, ERISA, judgments, change of control and cross defaults. In 
addition, the Bank Credit Facility provides that it shall be an Event of 
Default if the Company or any of its subsidiaries (other than its Mexican 
subsidiary) shall be enjoined or restrained from conducting any material part 
of its business for more than 30 days.
                                       


                                      -18-

<PAGE>

         On August 26, 1998, the Company obtained the Short Term Revolving 
Credit from BankBoston pursuant to which the Company may, from time to time, 
borrow up to $8,000,000 from BankBoston, until March 31, 1999. At November 
28, 1998, the Company had $7,000,000 available under the Short Term Revolving 
Credit. Amounts outstanding under the Short Term Revolving Credit bear 
interest at either fixed or floating rates based upon the interest rate 
option selected by the Company. The weighted average interest rate at 
November 28, 1998 and August 29, 1998, was 8.2% and 8.5%, respectively. All 
amounts borrowed under the Short Term Revolving Credit are due and payable on 
March 31, 1999. Any Event of Default under the Bank Credit Facility will also 
constitute an Event of Default under the Short Term Revolving Credit. 
Pursuant to the terms of the Company's Bank Credit Facility, the Company is 
prohibited from repaying the outstanding principal on the Short Term 
Revolving Credit unless at the time of such repayment and both before and 
after giving effect to such payment, no Default or Event of Default exists 
under the Bank Credit Facility and the Borrowing Base exceeds all outstanding 
amounts under the Revolving Credit and Gold Facilities by at least $2 
million. The Short Term Revolving Credit is unsecured. All of the Company's 
obligations under the Short Term Revolving Credit are guaranteed by CHPII. 
The Company has agreed to indemnify CHPII and pay CHPII upon demand any 
amounts that CHPII must pay pursuant to such guaranty. The Short Term 
Revolving Credit constitutes Designated Senior Indebtedness for purposes of 
the Indenture.

         The Company's $90,000,000 aggregate principal amount of 11% Senior 
Subordinated Notes ("the Notes") mature on January 15, 2007. The Notes are 
redeemable at the option of the Company, in whole or in part, at any time on 
or after January 15, 2002, plus accrued and unpaid interest and Liquidated 
Damages (as defined), if any, thereon to the date of redemption. In the event 
the Company completes one or more Public Equity Offerings (as defined) on or 
before January 15, 2000, the Company may, in its discretion, use the net cash 
proceeds to redeem up to 33 1/3% of the original principal amount of the 
Notes at a redemption price equal to 111% of the principal amount thereof, 
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to 
the date of redemption, with the net proceeds of one or more Public Equity 
Offerings, provided that at least 66-2/3% of the original principal amount of 
the Notes remains outstanding immediately after each such redemption.

         In the event of a Change of Control (as defined), each holder of the 
Notes will have the right to require the Company to purchase all or any part 
of such holder's Notes at a purchase price in cash equal to 101% of the 
aggregate principal amount thereof, plus accrued and unpaid interest and 
Liquidated Damages, if any, thereon to the date of purchase. The Bank Credit 
Facility prohibits the Company from purchasing any Notes upon a Change of 
Control, and certain Change of Control events with respect to the Company 
would constitute a default thereunder.

         In the event of an Asset Sale (as defined), the Company is required 
to apply any Net Proceeds (as defined) to permanently reduce senior 
indebtedness, to acquire another business or long-term assets or to make 
capital expenditures. To the extent such amounts are not so applied within 
thirty days and the amount not applied exceeds $5.0 million, the Company is 
required to make an offer to all holders of the Notes to purchase an 
aggregate principal amount of Notes equal to such excess amount at a purchase 
price in cash equal to 100% of the principal amount thereof, plus accrued and 
unpaid interest and Liquidated Damages, if any, thereon to the date of 
purchase.

         The Indenture, dated as of December 16, 1996, between the Company 
and Marine Midland Bank, as trustee (the "Indenture") pursuant to which the 
Notes were issued contains certain covenants that, among other things, limit 
the ability of the Company and its subsidiaries to (a) incur additional 
indebtedness and issue preferred stock, (b) pay dividends or make certain 
other restricted payments, (c) enter into transactions with affiliates, (d) 
create certain liens, (e) make certain asset dispositions, and (f) merge or 
consolidate with, or transfer substantially all of its assets to, another 
person. The Company was in compliance with the Indenture covenants at 
November 28, 1998 and August 29, 1998.
                                       


                                      -19-


<PAGE>

YEAR 2000 COMPLIANCE

         YEAR 2000 ISSUES. Many software applications, hardware and equipment 
and embedded chip systems identify dates using only the last two digits of 
the year. These products may be unable to distinguish between dates in the 
year 2000 and dates in the year 1900. That inability (referred to as the 
"Year 2000" issue), if not addressed, could cause applications, equipment or 
systems to fail or provide incorrect information after December 31, 1999, or 
when using dates after December 31, 1999. This in turn could have an adverse 
effect on the company due to the Company's direct dependence on its own 
applications, equipment and systems and indirect dependence on those of other 
entities with which the Company must interact.

         COMPLIANCE PROGRAM. In order to address the Year 2000 issue, the 
Company has conducted a review of its computer systems, applications and 
equipment and has contacted external parties (such as suppliers) regarding 
their preparedness for year 2000 to identify the systems that could be 
affected by the "Year 2000" problem and is making certain investments in its 
software applications and systems to ensure that the Company's systems and 
applications function properly to and through the year 2000..

         COMPANY STATE OF READINESS. The awareness phase of the Year 2000 
project has begun with a corporate-wide awareness program which will continue 
to be updated throughout the life of the project. The assessment phase of the 
project involves, among other things, efforts to obtain representations and 
assurances from third parties, including third party vendors, that their 
hardware and equipment, embedded chip systems and software being used by or 
impacting the Company or any of its business units are or will be modified to 
be Year 2000 compliant. To date, the Company does not expect that responses 
from such third parties will be conclusive. As a result, management cannot 
predict the potential consequences if these or other third parties are not 
Year 2000 compliant. The exposure associated with the Company's interaction 
with third parties is also currently being evaluated.

         The Company expects its Year 2000 conversion project to be completed 
by July 1999, although there can be no assurance that it can be completed by 
that date. Failure to meet this schedule could have a material impact on the 
operations of the Company.

         COSTS TO ADDRESS YEAR 2000 COMPLIANCE ISSUES. While the total cost 
to the company of the Year 2000 project is still being evaluated, management 
currently estimates that the costs to be incurred by the Company in 1999 will 
range from $0.5 million to $1.0 million. The materiality of the costs of the 
project and the date when the Company believes it will complete the Year 2000 
project are based on management's best estimates, which were derived 
utilizing numerous assumptions of future events, including the continued 
availability of certain resources and other factors. However, there can be no 
guarantee that these estimates will be achieved, and actual results could 
differ materially from those anticipated. Specific factors that might cause 
such material differences include, but are not limited to, the availability 
and cost of personnel trained in this area, the ability to locate and correct 
all relevant computer codes and similar uncertainties. To date, the Company 
has not expended significant funds related to its Year 2000 compliance 
assessment.

         RISK OF NON-COMPLIANCE AND CONTINGENCY PLAN. The major applications 
which pose the greatest Year 2000 risks for the Company if implementation of 
the Year 2000 compliance program is not successful are order management 
applications, production applications, financial applications and related 
third party software. Potential problems if the Year 2000 compliance program 
is not successful include the Company's inability to produce product, loss of 
customers and the inability to perform its other financial and accounting 
functions.

         The goal of the Year 2000 project is to ensure that all of the 
critical systems and processes which are under the direct control of the 
Company remain functional. However, because certain systems and processes may 
be interrelated with systems outside of the control of the Company, there can 
be no assurance that all implementations will be successful. Accordingly, as 
part of the Year 2000 project, contingency and business plans will be 
developed to respond to any failures as they may occur. Such contingency and 
business plans are scheduled to be completed during 1999. Management does not 
expect the costs to the Company of the Year 2000 project to have a material 
adverse effect on the Company's financial position, results of operations or 
cash flows. However, based on information available at this time, the Company 
cannot conclude that any 
                                       


                                     -20-
<PAGE>

failure of the Company or third parties to achieve Year 2000 compliance will 
not adversely affect the Company.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

         This report includes forward-looking statements within the meaning 
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of 
the Securities Exchange Act of 1934, as amended. Although management believes 
that the expectations reflected in such forward looking statements are based 
upon reasonable assumptions, the Company can give no assurance that these 
expectations will be achieved. Any change in the following factors may impact 
the achievement of results in forward-looking statements: the price of gold 
and precious, semiprecious and synthetic stones; the Company's access to 
students and consumers in schools; the seasonality of the Company's business; 
regulatory and accounting rules; the Company's relationship with its 
independent sales representatives; fashion and demographic trends; general 
economic, business and market trends and events, especially during peak 
buying seasons for the Company's products; the Company's ability to respond 
to customer change orders and delivery schedules; development and operating 
costs; competitive pricing changes; successful completion of management 
initiatives designed to achieve operating efficiencies; and completion of 
Year 2000 compliance projects with respect to internal and external 
computer-based systems. The foregoing factors are not exhaustive. New factors 
may emerge or changes may occur that impact the Company's operations and 
businesses. Forward-looking statements attributable to the Company or persons 
acting on behalf of the Company are expressly qualified on the foregoing or 
such other factors as may be applicable.
                                       


                                     -21-
<PAGE>

                          PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS 

          There are no material pending legal proceedings to which the 
Company is a party or to which any of its property is subject. The Company 
monitors all claims, and the Company accrues for those, if any, which 
management believes are probable of payment. The Company has no pending 
administrative proceedings related to environmental matters involving 
governmental authorities.

ITEM 2.   CHANGES IN SECURITIES

             None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

             None.

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

             None.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

             (a)  Exhibits

                    27.   Financial Data Schedule for the period ended 
                          November 28, 1998.

             (b)  The Company did not file any reports on Form 8-K during the
                  three months ended November 28, 1998.
                                       




                                     -22-
<PAGE>

                           COMMEMORATIVE BRANDS, INC.

                                  SIGNATURES

         Commemorative Brands, Inc. has duly caused this report to be signed 
on its behalf by the undersigned thereunto duly authorized.

                                       COMMEMORATIVE BRANDS, INC.



                                       By: /s/ Sherice P. Bench
                                           --------------------------------
                                               Sherice P. Bench
                                               Vice President Finance and
                                               Principal Accounting Officer


Date:  January 12, 1999





                                      -23-