FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

For the quarterly period ended May 31, 1997

                                       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
          incorporation or organization)            Identification No.)

                      7211 Circle S Road, Austin, Texas 78745
             -------------------------------------------------------
              (Address of principal executive offices) (Zip Code)

              Registrant's telephone number, including area code (512) 440-0571

      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 |X| NO ___

<PAGE>

PART I -- FINANCIAL STATEMENTS
Items 1. Consolidated Financial Statements and Notes

                           COMMEMORATIVE BRANDS, INC.
                           CONSOLIDATED BALANCE SHEET
                  (In thousands, except share data - unaudited)

<TABLE>
<CAPTION>
                                                                       Predecessors
                                                                   ---------------------
                                                                   ArtCarved    Balfour
                                                         May 31,   August 31,  August 25,
                                                          1997       1996        1996
                                                       ---------   ----------  ---------
<S>                                                    <C>         <C>         <C>     
ASSETS
Current assets:
    Cash and cash equivalents                          $   1,011   $      --   $     59
    Accounts receivable, net                              33,849       9,391     13,234
    Inventories                                           15,912       5,402      8,507
    Prepaid expenses and other current assets              6,455       2,115      3,290
                                                       ---------   ---------   --------
          Total current assets                            57,227      16,908     25,090
Property, plant and equipment, net                        34,318      11,149      9,770
Trademarks, net                                           30,388      21,421         --
Goodwill, net                                             77,534      12,284         --
Intangible and other assets, net                           6,124      12,780      3,160
                                                       ---------   ---------   --------
         Total assets                                  $ 205,591   $  74,542   $ 38,020
                                                       =========   =========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
    Accounts payable and accrued expenses              $  34,558   $  11,845   $  9,582
    Current portion of long-term debt                        500       2,000        308
                                                       ---------   ---------   --------
         Total current liabilities                        35,058      13,845      9,890
Due to Parent, net                                            --          --     14,295
Long-Term Debt, net of current portion                   114,375      89,221         23
Other Long-Term Liabilities                               11,273          --        818
                                                       ---------   ---------   --------
    Total liabilities                                    160,706     103,066     25,026

Stockholders' Equity
    Preferred Stock, $.01 par value, 750,000 shares
     authorized
      Series A, 100,000 shares issued and outstanding     10,000          --         --
      Series B, 375,000 shares issued and outstanding     37,500          --         --
    Common Stock, $.01 par value, 750,000 shares               4          --          4
      authorized, 375,000 issued and outstanding
    Additional paid-in capital                             2,666          --     75,970
    Retained earnings (deficit)                           (5,285)         --    (62,980)
    Advances and equity (deficit)                             --     (28,524)        --
                                                       ---------   ---------   --------
         Total stockholders' equity                       44,885     (28,524)    12,994
                                                       ---------   ---------   --------
         Total liabilities & stockholders' equity      $ 205,591   $  74,542   $ 38,020
                                                       =========   =========   ========
</TABLE>

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

                           COMMEMORATIVE BRANDS, INC.
                          CONSOLIDATED INCOME STATEMENT
                  (In thousands, except share data - unaudited)

                                                For the Three Months Ended
                                              --------------------------------
                                                               Predecessors
                                                           -------------------
                                                           ArtCarved  Balfour
                                               May 31,      May 25,   May 26,
                                                1997         1996      1996
                                              ---------   ---------   --------
Net sales                                     $  36,927   $  18,933   $ 24,134
Cost of goods sold                               18,504       8,735     11,966
                                              ---------   ---------   --------
Gross profit                                     18,423      10,198     12,168
Selling, general and
 administrative expenses                         15,896       6,612     10,396
                                              ---------   ---------   --------
Operating income                                  2,527       3,586      1,772
Other (income) expense:
  Interest expense, net                           3,371       2,803        152
  Interest on Due to Parent, net                     --          --        555
                                              ---------   ---------   --------
     Other expense, net                           3,371       2,803        707
                                              ---------   ---------   --------
     Income (loss) before provision
     for income taxes                              (844)        783      1,065
Provision for income taxes                           30          --         25
                                              ---------   ---------   --------
     Net income (loss)                        $    (874)  $     783   $  1,040
                                              ---------   ---------   --------
Preferred dividends                                (300)         --         --
                                              ---------   ---------   --------
Net income (loss) to
 common stockholders                          $  (1,174)  $     783   $  1,040
                                              =========   =========   ========
Earnings (loss) per common
 and common equivalent shares
 outstanding                                  $   (3.13)
                                              =========
Common and common
equivalent shares outstanding                   375,000
                                              =========

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

<PAGE>

                           COMMEMORATIVE BRANDS, INC.
                          CONSOLIDATED INCOME STATEMENT
                  (In thousands, except share data - unaudited)

                                                For the Nine Months Ended *
                                              --------------------------------
                                                               Predecessors
                                                          --------------------
                                                           ArtCarved  Balfour
                                               May 31,      May 25,   May 26,
                                                1997         1996      1996
                                              ---------   ---------   --------
Net sales                                     $  61,678   $  58,267   $ 59,539
Cost of goods sold                               32,746      25,998     28,254
                                              ---------   ---------   --------
Gross profit                                     28,932      32,269     31,285
Selling, general and
 administrative expenses                         27,646      21,626     27,024
                                              ---------   ---------   --------
Operating income                                  1,286      10,643      4,261
Other (income) expense:
  Gain on sale of facility                           --          --       (418)
  Interest expense, net                           5,971       9,196        432
  Interest on Due to Parent, net                     --          --      1,675
                                              ---------   ---------   --------
     Other expense, net                           5,971       9,196      1,689
                                              ---------   ---------   --------
     Income (loss) before provision
     for income taxes                            (4,685)      1,447      2,572
Provision for income taxes                           50          --        120
                                              ---------   ---------   --------
     Net income (loss)                        $  (4,735)  $   1,447   $  2,452
                                              ---------   ---------   --------
Preferred dividends                                (550)         --         --
                                              ---------   ---------   --------
Net income (loss) to
 common stockholders                          $  (5,285)  $   1,447   $  2,452
                                              =========   =========   ========
Earnings (loss) per common
 and common equivalent shares
 outstanding                                  $  (14.09)
                                              =========
Common and common
equivalent shares outstanding                   375,000
                                              =========

----------
*Commemorative Brands, Inc. completed the acquisitions of ArtCarved and Balfour
 on December 16, 1996, and until such date, engaged in no business activities
 other than those in connection with the acquisition and financing thereof.

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

<PAGE>

                           COMMEMORATIVE BRANDS, INC.
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                  (In thousands, except share data - unaudited)

<TABLE>
<CAPTION>
                                             Preferred Stock                 Common Stock      
                                 --------------------------------------    ----------------     
                                      Series A            Series B                           Additional
                                 -----------------   -----------------                         paid-in        Retained
                                  Shares    Amount    Shares    Amount     Shares   Amount     capital   earnings (deficit)  Total
                                 -----------------   -----------------    -----------------  ----------  ------------------ --------
<S>                               <C>      <C>        <C>      <C>        <C>      <C>       <C>             <C>           <C>     
Balance, March 28, 1996                --  $     --        --  $     --        --  $     --  $     --        $     --      $     --
    (date of formation)                                                                                      
                                                                                                             
Issuance of Common Stock               --        --        --        --   375,000         4     2,666              --         2,670
                                                                                                             
Issuance of Preferred Stock       100,000    10,000   375,000    37,500        --        --        --              --        47,500
                                                                                                             
Accrued Preferred Stock dividends      --        --        --        --        --        --        --            (550)         (550)
                                                                                                             
Net loss                               --        --        --        --        --        --        --          (4,735)       (4,735)
                                  -----------------   -----------------   -----------------  --------        --------      --------
                                                                                                             
Balance, May 31, 1997             100,000  $ 10,000   375,000  $ 37,500   375,000  $      4  $  2,666        $ (5,285)     $ 44,885
                                  =================   =================   =================  ========        ========      ========
</TABLE>

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

<PAGE>

                           COMMEMORATIVE BRANDS, INC.
                             STATEMENT OF CASH FLOWS
                           (In thousands - unaudited)

<TABLE>
<CAPTION>
                                                                             For the Nine Months Ended*
                                                                      ---------------------------------------
                                                                                           Predecessors
                                                                                      -----------------------
                                                                                      ArtCarved       Balfour           
                                                                                        May 25,       May 26,
                                                                      May 31, 1997       1996          1996
                                                                      ------------    ---------       -------
<S>                                                                    <C>            <C>            <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:                                                               
  Net income (loss)                                                    $  (4,735)     $   1,447      $   2,452
  Adjustments to reconcile net income (loss) to net cash provided                                   
    by operating activities-                                                                        
      Depreciation and amortization                                        2,541          3,789          2,227
      Provision for doubtful accounts                                        327            454            115
      Gain on sale of property, plant and equipment                           --             --           (418)
      Changes in assets and liabilities-                                                            
         Decrease (increase) in receivables                                1,270         (2,709)        (6,656)
         Decrease (increase) in inventories                                5,967         (1,074)         1,901
         Decrease in prepaid expenses and other current assets                89              2          1,154
         (Increase) in other assets                                       (1,703)        (1,751)          (529)
         Increase (decrease) in accounts payable and accrued expenses      2,248         (7,325)        (1,276)
         Increase (decrease) in deferred compensation                         --             --           (119)
                                                                       ---------      ---------      ---------
                                                                                                    
         Net cash provided by (used in) operating activities               6,004         (7,167)        (1,149)
                                                                       ---------      ---------      ---------
                                                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                                                               
    Proceeds from sale of fixed assets                                        --             --            939
    Purchases of property, plant and equipment                            (2,100)          (677)          (806)
    Cash paid for the acquisitions of ArtCarved                                                     
    and Balfour including transaction costs                             (169,032)            --             --
                                                                       ---------      ---------      ---------
                                                                                                    
         Net cash (used in) provided by investing activities            (171,132)          (677)           133
                                                                       ---------      ---------      ---------
                                                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                                                               
   Net change in advances                                                     --         24,129             --
   Proceeds from (payments on) borrowings from Parent, net                    --             --          1,391
   Proceeds from debt issuance                                           120,200             --             --
   Proceeds from issuance of common and preferred stock                   50,000             --             --
   Note payments                                                          (5,325)       (16,285)            --
   Borrowings (payments) on capital leases                                    --             --           (375)
   Additional paid-in capital                                                170             --             --
                                                                       ---------      ---------      ---------
                                                                                                    
         Net cash provided by financing activities                       165,045          7,844          1,016
                                                                       ---------      ---------      ---------
                                                                                                    
NET DECREASE IN CASH AND                                                                            
   CASH EQUIVALENTS                                                          (83)            --             --
                                                                                                    
CASH AND CASH EQUIVALENTS, beginning of period                             1,094             --             --
                                                                       ---------      ---------      ---------
                                                                                                    
CASH AND CASH EQUIVALENTS, end of period                               $   1,011      $      --      $      --
                                                                       =========      =========      =========
                                                                                                    
                                                                                                    
SUPPLEMENTAL DISCLOSURE                                                                             
   Cash paid during the period for-                                                                 
         Interest                                                      $     844      $   9,208      $      32
                                                                       =========      =========      =========
         Taxes                                                         $       3      $      --      $     141
                                                                       =========      =========      =========
                                                                                                    
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES                                             
    Accrued Preferred Stock dividends                                  $     550      $      --      $      --
                                                                       =========      =========      =========
</TABLE>

----------
*  Commemorative Brands, Inc., completed the acquisitions of ArtCarved and
   Balfour on December 16, 1996, and until such date, engaged in no business
   activities other than those in connection with the acquisition and financing 
   thereof.

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

                           COMMEMORATIVE BRANDS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND BASIS OF CONSOLIDATED FINANCIAL STATEMENT
PRESENTATION:

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. 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 (ArtCarved) operations of CJC Holdings, Inc.
(CJC) from CJC and the Balfour (Balfour) operations of L. G. Balfour Company,
Inc. from Town & Country Corporation (Town & Country). CBI was initially formed
in March, 1996 by Castle Harlan Partners II, L. P. (CHP II), a Delaware limited
partnership and private equity investment fund, for the purpose of acquiring
ArtCarved and Balfour and until December 16, 1996 engaged in no business
activities other than in connection with the Acquisitions and the financing
thereof.

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

The following represents the preliminary allocation of the purchase prices for
ArtCarved and Balfour to their respective assets and liabilities based on
management's estimate of fair values. This preliminary allocation is based upon
estimates and assumptions which are subject to subsequent determinations and
more detailed analyses, receiving final detailed appraisals and evaluations of
specific assets and liabilities. The Company has adjusted the purchase prices
for amounts known to date. The final allocation of the purchase prices for
the Acquisitions may differ from the amounts set forth below (in thousands):

                                          ArtCarved         Balfour
                                          ---------         -------

Current assets                              $23,220        $35,836
Property, plant and equipment                17,039         16,517
Goodwill                                     61,457         12,521
Trademarks                                   17,740         13,000
Other long-term assets                        1,687            171
Accounts payable and accrued expenses        (6,066)       (19,974)
Other long-term liabilities                      --         (6,808)
                                           --------       --------

                                           $115,077       $ 51,263
                                           ========       ========

<PAGE>

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 and revisions to
purchase 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 current quarter and year to date periods ending May
31, 1997 are not necessarily indicative of the results that may be expected for
the fiscal year ending August 30, 1997.

(2) THE PREDECESSORS:

The Company completed the Acquisitions of ArtCarved and Balfour on December 16,
1996. The accompanying financial statements include the predecessor operations
of ArtCarved as a division of CJC and Balfour as a wholly-owned subsidiary of
Town & Country for historical periods prior to the acquisition date of December
16, 1996.

The ArtCarved predecessor financial statements present information with respect
to the assets and businesses acquired by the Company from CJC (the Business).
Since the Business was not operated nor accounted for as a separate entity for
the periods presented in the accompanying financial statements, it was necessary
for management to make allocations (carve-outs) for certain accounts to reflect
the financial statements of the Business. Management considers the allocations
to be reasonable and believes the accompanying financial statements materially
represent the operations of the Business on a stand-alone basis.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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:

Description                                        Useful life
-----------                                        -----------

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

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.

<PAGE>

Intangible Assets

Costs in excess of fair value of net tangible assets acquired and related
acquisition costs are included in goodwill and identifiable intangible assets in
the accompanying balance sheets. Intangible assets are being amortized on a
straight-line basis over their estimated lives, not exceeding 40 years.

Other Assets

Other assets include debt issuance costs which are amortized over the lives of
the specific debt instrument.

Fair Value of Financial Instruments

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

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 sales are highly seasonal. Management anticipates that the Company
will achieve its highest sales and income levels in its first fiscal quarter
(September through November), followed in descending order by the third, second
and fourth fiscal quarters. This is primarily due to the fall "back-to-school"
selling season for class rings. The third fiscal quarter includes the spring
semester school activities including graduation events, while the fourth fiscal
quarter (and the second fiscal quarter to a lesser extent) includes the periods
when school is not in session.

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.

(4)   NEW FINANCIAL ACCOUNTING STANDARD:

In March, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share".
SFAS No. 128 revises the standards for computing earnings per share currently
prescribed by APB Opinion No. 15.

<PAGE>

SFAS No. 128 retroactively revises the presentation of earnings per share in the
financial statements and will be effective for the Company for the year ending
August 29, 1998. The earnings per share in the accompanying financial statements
was computed pursuant to APB Opinion No. 15 and is the same that would be
required for basic earnings per share under SFAS No. 128, which is determined
using only the weighted average shares outstanding. The Company also has
outstanding warrants that would not be included in the computation of diluted
earnings per share under SFAS No. 128 because to do so would be anti-dilutive.

(5)   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. Inventory for CBI as of May 31, 1997 includes gold on consignment to
CBI, consisting of 19,720 fine troy ounces. The liability for gold on
consignment is classified as an accounts payable item on the Company's balance
sheet. A summary of inventories is as follows (in thousands):

                                                   Predecessors
                                         ---------------------------------
                                CBI         ArtCarved          Balfour
                           May 31, 1997  August 31, 1996   August 25, 1996
                           ------------  ---------------   ---------------
Raw materials                $ 8,794         $4,007            $3,645
Works in process               5,115          1,010             2,919
Finished goods                 2,003            385             1,943
                             -------         ------            ------
                             $15,912         $5,402            $8,507
                             =======         ======            ======

Cost of goods sold includes depreciation and amortization of approximately $ 0.9
million, $ 1.3 million and $ 0.7 million for the nine months ended May 31, 1997,
May 25, 1996 and May 26, 1996 for CBI, ArtCarved and Balfour, respectively.

In accordance with purchase price accounting, at the purchase date (December 16,
1996), the inventory balance was increased by $4.7 million to restate inventory
at fair market value. During the period from December 16, 1996 to May 31, 1997,
approximately $4.5 million of this increase was expensed to cost of goods sold.

(6)   LONG-TERM DEBT:

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

<TABLE>
<CAPTION>
                                                           Predecessors
                                                  ---------------------------------
                                         CBI         ArtCarved          Balfour
                                    May 31, 1997  August 31, 1996   August 25, 1996
                                    ------------  ---------------   ---------------
<S>                                   <C>             <C>                 <C>   
Predecessor Lease Obligation          $     --        $     --            $  331
Predecessor Subordinated Debt               --          34,521                --
Predecessor Secured Notes                   --          56,700                --
11% Senior Subordinated Notes           90,000              --                --
  Due 2000                               
Term Loan Facility                      24,875              --                --
                                      --------        --------            ------
Total Debt                             114,875          91,221               331
Less-                                  
Current Portion                            500           2,000               308
                                      --------        --------            ------
Total Long-Term Debt                  $114,375        $ 89,221            $   23
                                      ========        ========            ======
</TABLE>

<PAGE>

11% Senior Subordinated Notes

The Company's 11% 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), if any, thereon to the date of redemption. In
addition, at any time prior to January 15, 2002, the Company may, in its
discretion, 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.

The 11% senior subordinated notes contain certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to (i) incur
additional indebtedness and issue preferred stock, (ii) pay dividends or make
certain other restricted payments, (iii) enter into transactions with
affiliates, (iv) create certain liens, (v) make certain asset dispositions and
(vi) merge or consolidate with, or transfer substantially all of its assets to,
another person.

Bank Credit Facility

The Company has a credit facility with a group of banks (bank credit facility)
pursuant to which the Company initially borrowed $25 million under a term loan
facility and may borrow up to $35 million from time to time under a revolving
credit and gold 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.

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, commencing March 31,
1997.

Revolving Credit and Gold Facilities

The revolving credit and gold facilities permit borrowings of up to a maximum
aggregate principal amount of $35.0 million at any one time outstanding based
upon availability under a borrowing base based on eligible receivables at any
one time outstanding and eligible inventory (each as defined), with a sublimit
of $3.0 million for letters of credit and $10.0 million for gold borrowings or
consignments. Management believes that it will have sufficient availability
under these facilities to meet its working capital needs.

The bank credit facilities contain certain financial covenants that require the
Company to maintain certain minimum levels of (i) senior funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA), (ii)
consolidated EBITDA, and (iii) interest coverage. The bank credit facility also
contains other covenants which, among other things, limit the ability of the
Company and its subsidiaries to (i) incur additional indebtedness, (ii) acquire
and dispose of assets, (iii) create liens, (iv) make capital expenditures, (v)
pay dividends on or redeem shares of the Company's capital stock, and (vi) make
certain investments.

<PAGE>

(7) 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, 375,000 shares of Series B Preferred and 375,000 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, commencing on January 31, 1997.
Dividends on the Series A Preferred accrue at a rate of 12% 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% senior subordinated notes
and bank debt restrict the Company's ability to pay dividends on the Series A
Preferred. (See Note 6.)

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% senior subordinated notes and bank debt restrict the Company's
ability to redeem the Series A Preferred (see Note 6). 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. 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 stockholders 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 out of funds of the Company legally available therefor. The
Series B Preferred is non-redeemable. 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 stockholders, including the
election of directors, and vote together as one class with the holders of the
Series B Preferred.

<PAGE>

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% 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 CHP
II 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 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.

(8)   PRO FORMA INFORMATION:

The following unaudited pro forma summary presents information as if the
Acquisitions discussed in Note 1 had occurred at August 27, 1995. The pro forma
information is provided for informational purposes only. It is based on
historical information and does not necessarily reflect the actual results that
would have occurred had the Acquisition occurred on August 27, 1995 nor does it
purport to be indicative of future results of operations of the Company going
forward (in thousands except per share amounts):

                                           Nine Months    Nine Months
                                           Ended          Ended
                                           May 31,        May 25,
                                           1997           1996
                                           --------------------------
Pro forma net sales                        $113,823       $117,806
Pro forma gross profit                       58,584         65,501
Pro forma net income (loss)                  (2,444)         4,950
Pro forma earnings (loss) per common and
common equivalent share outstanding        $ ( 6.52)      $  13.20

The pro forma information for the nine months ended May 31, 1997 and the nine
months ended May 25, 1996 include adjustments for interest, depreciation,
amortization and management fee expenses for all periods prior to the
Acquisitions on December 16, 1996.

The nine months ended May 25, 1996 pro forma information also includes an
adjustment of $3.2 million to reflect a prorated nine month portion of annual
cost savings of $4.3 million, which management believes will result from the
elimination of duplicative personnel, occupancy and fixed overhead costs
resulting from the closure of certain Balfour facilities, which were not
acquired in the acquisition of Balfour. The nine months ended May 31, 1997 pro
forma information includes an adjustment of $1.1 million to reflect a prorated
three month portion of annual cost savings up to the date of Acquisition. The
actual annual cost savings will not be fully realized in the Company's fiscal
year ending August 31, 1997. There can be no assurances that such cost savings
will occur, or that the magnitude will not differ materially from the assumed
amounts.

<PAGE>

The pro forma information for the nine months ended May 31, 1997 includes the
impact of $4.5 million in higher cost of goods sold expense related to an
increase in inventory valuation at closing to reflect fair market value in
accordance with purchase price accounting. The pro forma information for the
nine months ended May 25, 1996 has not been adjusted to reflect the impact of an
increase in inventory valuation. (See Note 5.)

(9) NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:

Net earnings per common and common equivalent share is based on the weighted
average number of common shares outstanding and does not assume exercise of
outstanding warrants for Common Stock which are anti-dilutive.

(10) RELATED PARTY MATTERS:

      The Company entered into a Management Agreement, dated December 16, 1996,
with Castle Harlan, Inc., as 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. As
compensation for such services, the Company will pay the Manager $1.5 million
per year, which amount has been paid in advance for the first year and is
payable quarterly in arrears thereafter. The agreement is for a term of 10
years, and is renewable automatically from year to year thereafter unless the
Castle Harlan Group then owns less than 5% of the then outstanding capital stock
of the Company.

<PAGE>

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

      In the following discussion unless the context otherwise requires, (i)
the term "CBI" refers to Commemorative Brands, Inc. prior to the consummation
of the acquisitions referred to below, (ii) the term "ArtCarved" refers to
the predecessor assets, businesses, and operations of CJC Holdings, Inc.
("CJC") acquired by CBI, (iii) the term "Balfour" refers to the predecessor
assets, businesses and operations of L. G. Balfour Company, Inc. ("L. G.
Balfour Company") acquired by CBI, and (iv) the term "the Company" refers to
CBI as combined with ArtCarved and Balfour after giving effect to the
acquisitions.

General

      The Company is a manufacturer and supplier of class rings and
graduation-related scholastic products for the high school and college markets
and also manufactures and markets recognition and affinity jewelry designed to
commemorate significant events, achievements and affiliations.

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

      The Company's fiscal year consists of 52 or 53 weeks, as applicable,
ending on the last Saturday of August.

Results of Operations

      The financial statements of the Company for the nine months ended May 31,
1997 reflect operations for the period from December 16, 1996 (the purchase date
of the predecessor operations of both ArtCarved and Balfour) to May 31, 1997.
The financial statements are presented for the predecessors, ArtCarved and
Balfour, for the three and nine months ended May 25, 1996 and May 26, 1996,
respectively. The results of operations of CBI for the nine months ended May 31,
1997 are not comparable to the results of operations for the comparable prior
year periods for each of the predecessor companies, because CBI was not engaged
in business operations prior to December 16, 1996, and the information presented
for the predecessor companies includes the operations of such entities for the
full nine month period and because the predecessor companies' results of
operations are not otherwise directly comparable to or necessarily indicative of
the results of operations of the Company following the Acquisitions.

Commemorative Brands, Inc.

Three months ended May 31, 1997 to three months ended May 25, 1996 (ArtCarved)
and three months ended May 26, 1996 (Balfour)

Net Sales - Net sales decreased $6.1 million, or 14.3%, to $36.9 million for the
three months ended May 31, 1997 from $18.9 million for the three months ended
May 25, 1996 for ArtCarved and $24.1 million for the three months ended May 26,
1996 for Balfour. The decrease in sales resulted from a decline in the sales of
recognition and affinity products and a delay of shipments of products due to
the transition of the Balfour operations from Massachusetts to Texas.

<PAGE>

Gross Profit - Gross Profit decreased $3.9 million, or 17.6%, to $18.4 million
for the three months ended May 31, 1997. As a percentage of net sales, gross
profit was 49.9% for the three months ended May 31, 1997. Cost of goods sold for
the three months ended May 31, 1997 includes an incremental charge of $2.0
million related to an increase in inventory valuation at the time of the
Acquisitions in accordance with purchase price accounting, which was expensed to
cost of goods sold as the related inventory was sold. Gross profit, excluding
this $2.0 million charge, would have been $20.4 million, or 55.2%, of sales for
the three months ended May 31, 1997 compared to $10.2 million, or 53.9%, for the
three months ended May 25, 1996 for ArtCarved and $12.2 million, or 50.4%, for
the three months ended May 26, 1996 for Balfour. In 1997 gross profit as a
percentage of net sales benefited from higher margins in the recognition and
affinity business and in the fine paper business which primarily resulted from
the consolidation of the fine paper manufacturing plants during 1996.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses decreased $1.1 million, or 6.5%, to $15.9 million for
the three months ended May 31, 1997 from $6.6 million for the three months ended
May 25, 1996 for ArtCarved and $10.4 million for the three months ended May 26,
1996 for Balfour. As a percentage of net sales, selling, general and
administrative expenses increased to 43.0% for the three months ended May 31,
1997 from 39.5% for the combined three months ended May 25, 1996 for ArtCarved
and for the three months ended May 26, 1996 for Balfour. The increase was
primarily a result of the decreased sales for the three months ended May 31,
1997.

Operating Income - As a result of the foregoing, operating income was $2.5
million for the three months ended May 31, 1997. As a percentage of net sales,
operating income decreased to 6.8% for the three months ended May 31, 1997 from
12.4% for the combined three months ended May 25, 1996 for ArtCarved and three
months ended May 26, 1996 for Balfour. Operating income excluding the $2.0
million charge resulting from the increased inventory valuation at the time of
the Acquisitions in accordance with purchase price accounting, would have been
$4.5 million, or 12.2%, of net sales.

Interest Expense - Interest expense, net was $3.4 million for the three months
ended May 31, 1997. The majority of the interest expense was due to the bank
term debt of $24.9 million at rates ranging from 9% - 10% and interest on the
$90 million of Senior Subordinated Notes issued on December 16, 1996 at a rate
of 11%.

Provision for Income Taxes - Since the Company does not have a history of
generating income from operations, no tax benefit on operating losses has been
accrued. The $30,000 provision for income taxes represents state income taxes.

Net Income (Loss) - As a result of the foregoing, the Company had a net loss of
$(1.2) million, or (3.2)% of net sales, for the three months ended May 31, 1997
as compared to net income of $1.8 million for the combined three months ended
May 25, 1996 for ArtCarved and three months ended May 26, 1996 for Balfour.

Commemorative Brands, Inc.

Nine months ended May 31, 1997

Net Sales - Net sales for the nine months ended May 31, 1997 were $61.7 million.
Approximately 70% of December 1996 revenues for the businesses acquired by the
Company were attributable to operations prior to December 16, 1996 (the date of
the Acquisitions) and were therefore recognized by predecessor companies.

<PAGE>

Gross Profit - Gross profit for the nine months ended May 31, 1997 was $28.9
million, or 46.9% of net sales. Cost of goods sold for the nine months ended May
31, 1997, includes an incremental charge of $4.5 million related to an increase
in inventory valuation at the time of the Acquisitions in accordance with
purchase price accounting which was expensed to cost of goods sold as the
related inventory was sold. Gross profit, excluding this $4.5 million charge,
would have been $33.4 million or 54.2% of sales. Gross profit for the nine
months ended May 31, 1997, was adversely affected by the higher overhead costs
per unit for the month of December 1996 following the Acquisitions as a result
of the fact that approximately 70% of the net sales for December 1996 were
attributable to the pre-December 16, 1996 period and were therefore recognized
by the Company's predecessors.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses for the nine months ended May 31, 1997, were $27.6
million, or 44.8% of net sales.

Operating Income - As a result of the foregoing, operating income was $1.3
million, or 2.1% of net sales for the nine months ended May 31, 1997. Operating
income, excluding the $4.5 million charge resulting from the increased inventory
valuation at the time of the Acquisitions in accordance with purchase price
accounting, would have been $5.8 million.

Interest Expense, Net - Interest expense, net, was $6.0 million for the nine
months ended May 31, 1997. The majority of the interest expense was due to bank
term debt of $24.9 million at rates ranging from 9% - 10% and interest on the
$90.0 million of Senior Subordinated Notes issued on December 16, 1996 at a rate
of 11%.

Provision for Income Taxes - Since the Company does not have a history of
generating income from operations, no tax benefit on operating losses has been
accrued. The $50,000 provision for income taxes represents state income taxes.

Net Income (Loss) - As a result of the foregoing, the Company had a net loss of
$(5.3) million, or (8.6)% of net sales, for the nine months ended May 31, 1997.

ArtCarved

Nine months ended May 25, 1996

Net Sales - Net sales for the nine months ended May 25, 1996 were $58.3 million.

Gross Profit - Gross profit for the nine months ended May 25, 1996 was $32.3
million, or 55.4% of net sales.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses, for the nine months ended May 25, 1996 were $21.6
million, or 37.1% of net sales.

Operating Income - As a result of the foregoing, for the nine months ended May
25, 1996 operating income was $10.6 million, or 18.3% of net sales.

Interest Expense, Net - Interest expense, net for the nine months ended May 25,
1996 was $9.2 million. Average interest rates on the debt during the nine months
ended May 25, 1996, were approximately 10% for ArtCarved long-term debt and
10.3% for the ArtCarved gold loan.

<PAGE>

Provision for Income Taxes - There was no income tax provision for the nine
months ended May 25, 1996 due to available federal net operating tax losses and
other credit carry forwards of CJC that eliminated the need for a federal tax
provision.

Net Income (Loss) - As a result of the foregoing, net income for the nine months
ended May 25, 1996 was $1.4 million or 2.5% of net sales.

Balfour

Nine months ended May 26, 1996

Net Sales - Net sales for the nine months ended May 26, 1996 was $59.5 million.

Gross Profit - Gross profit for the nine months ended May 26, 1996 was $31.3
million, or 52.5% of net sales.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses for the nine months ended May 26, 1996 was $27.0
million, or 45.4% of net sales.

Operating Income - As a result of the foregoing, operating income for the nine
months ended May 26, 1996 was $4.3 million, or 7.2% of net sales.

Interest Expense, Net - Interest expense, net for the nine months ended May 26,
1996 was $2.1 million, substantially on account of intercompany debt at a rate
of 11.5%.

Provision for Income Taxes - There was no income tax provision due to available
federal net operating tax losses and other credit carry forwards at Town &
Country that eliminated the need for a federal tax provision. The $120,000
provision for income taxes represents the state income taxes for the nine months
ended May 26, 1996, respectively.

Net Income - As a result of the foregoing, for the nine months ended May 26,
1996 net income was $2.5 million, or 4.1% of net sales.

Seasonality

The Company's sales are highly seasonal. Management anticipates that the Company
will achieve its highest sales and income levels in its first fiscal quarter
(September through November), followed in descending order by the third, second
and fourth fiscal quarters. This is primarily due to the fall "back-to-school"
selling season for class rings. The third fiscal quarter includes the spring
semester school activities including graduation events, while the fourth fiscal
quarter (and the second fiscal quarter to a lesser extent) includes the periods
when school is not in session.

Liquidity and Cash Flows

The Company's cash flows from operating activities for the period of December
16, 1996 to May 31, 1997 were primarily the net result of decreased accounts
receivable, decreased inventories, increased other assets, decreased accounts
payable and accrued expenses. The decrease in accounts receivable, inventories,
accounts payable and accrued expenses were due to the seasonality of the
business. As of December 16, 1996, the date of the consummation of the
Acquisitions, inventory and receivables were at a high point of the year. The
majority of the increase in other assets related to transaction fees and
expenses. At May 31, 1997 the Company had a $35.0 million revolving credit
facility with up to $24.1 million available in borrowings

<PAGE>

and $17.3 million for future borrowings. Borrowings under the bank credit
facility are subject to certain borrowing base requirements relating to the
Company's eligible receivables and eligible inventory. Management believes that
cash flows generated by existing operations and its available bank credit
facilities will be sufficient to fund its ongoing operations.

<PAGE>

                                   Signatures:

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       Commemorative Brands, Inc.
                                    --------------------------------
                                       (Registrant)


Date:                               By:
     ----------------------            -----------------------------
                                          Richard H. Fritsche
                                          Chief Financial Officer