<PAGE>

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

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

                                    FORM 10-K

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

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
         FOR THE FISCAL YEAR ENDED AUGUST 28, 1999

                                       OR

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


                           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 Number)

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

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

   TITLE OF EACH CLASS               NAME OF EACH EXCHANGE ON WHICH REGISTERED
         None                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

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

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

The aggregate market value of the voting stock held by non-affiliates at
August 28, 1999: $0.00

                         375,985 shares of common stock
             (Number of shares outstanding as of November 23, 1999)

<PAGE>

                           COMMEMORATIVE BRANDS, INC.
                                    FORM 10-K
                    FOR THE FISCAL YEAR ENDED AUGUST 28, 1999
                                      INDEX

<TABLE>
<CAPTION>
                                                                                                              Page
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<S>                                                                                                           <C>
      PART I

      Item 1.  Business..........................................................................................1

      Item 2.  Properties........................................................................................6

      Item 3.  Legal Proceedings.................................................................................6

      Item 4.  Submission of Matters to a Vote of Security Holders...............................................6

      PART II

      Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.............................7

      Item 6.  Selected Financial Data...........................................................................7

      Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations............12

      Item 7A. Quantitative and Qualitative Disclosures About Market Risks......................................19

      Item 8.  Financial Statements and Supplementary Data......................................................20

      Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............20

      PART III

      Item 10. Directors and Executive Officers of the Registrant...............................................21

      Item 11. Executive Compensation...........................................................................23

      Item 12. Security Ownership of Certain Beneficial Owners and Management...................................27

      Item 13. Certain Relationships and Related Transactions...................................................28

      Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................29

               Signatures.......................................................................................31

               Financial Statements.............................................................................33

               Exhibit Index....................................................................................78
</TABLE>

<PAGE>

                                     PART I

ITEM 1.        BUSINESS

GENERAL

      Commemorative Brands, Inc. (the "Company") is a leading manufacturer of
class rings in the United States. The Company also supplies 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
("Acquisitions") of substantially all of the scholastic and recognition and
affinity products, assets and business of the ArtCarved ("ArtCarved")
operations of CJC Holdings, Inc. ("CJC") and the Balfour operations
("Balfour") of the L. G. Balfour Company, Inc., a wholly-owned subsidiary of
Town & Country Corporation ("Town & Country").

      The Company was formed as a Delaware corporation in March 1996, by
Castle Harlan Partners II, L.P., 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 or activities other than
in connection with the Acquisitions and the financing thereof.

PRODUCTS

      Most of the Company's sales (approximately 88% of net sales during
fiscal 1999 and 1998) were derived from the sale of scholastic products,
consisting of high school and college class rings, graduation-related fine
paper products and other graduation accessories. The balance of the Company's
sales (approximately 12% of net sales during fiscal 1999 and 1998) were
derived from the sale of recognition and affinity products, consisting of
jewelry and other products which are designed to enable purchasers to show
affinity or support for their favorite teams, to show pride in their
affiliations and to help companies and other organizations promote and
recognize achievement.

      The Company's largest product offerings are its high school and college
class rings. The Company offers over 200 styles of high school class rings
ranging from traditional to highly stylish and fashion oriented. Most of the
Company's high school class rings are available in either gold or nonprecious
metal, and most are available with a choice of more than 50 different types
of stones in each of several different cuts. More than 400 designs can be
placed on or under the stone, and emblems of over 100 activities or sports
can appear on the sides. As a result, students have the ability to customize
their rings by designing highly personal and meaningful rings to commemorate
their high school education. During fiscal 1999 and 1998, the Company's high
school class rings generally ranged in price to the student from
approximately $50 for a nonprecious metal ring up to approximately $500 for a
gold ring with precious stones.

      The Company's college class rings are similar to the Company's high
school class rings in terms of the variety of customization and
personalization options available. However, college rings tend to be larger
than high school rings, and many more college rings are ordered in 14- and
18-karat gold or with precious or semiprecious stones. During fiscal 1999 and
1998, the average selling price of the college class ring was higher than
that of the Company's high school class ring, with prices generally ranging
from approximately $100 for a nonprecious metal ring to as much as $2,000 for
a gold ring with precious stones.

      The Company produces and markets a wide array of fine paper products,
including customized graduation announcements, name cards, thank-you
stationery, business cards, diplomas, mini-diplomas, certificates,
appreciation covers, diploma covers, and fine paper accessory items. Through
its independent sales representatives, the Company also markets certain
graduation accessories that it does not produce, such as T-shirts and
pendants denoting class year, caps and gowns, yearbooks, memory books and
other scholastic products.

                                       1
<PAGE>

      The Company manufactures and markets a variety of recognition and
affinity jewelry for specialty niche markets. The Company's "recognition"
products are designed to commemorate accomplishments and achievements in
business, sporting or other endeavors, and "affinity" products are designed
to express pride in one's affiliations with a particular organization or
support for one's favorite teams and organizations. The Company's recognition
and affinity jewelry products are grouped into four primary categories. The
personalized family jewelry products consist of rings custom-made to include
children's names, birth dates and birthstones, and personalized jewelry such
as necklaces and bracelets designed to commemorate family celebrations and
holidays such as Mother's Day and Valentine's Day. The Company distinguishes
its personalized family jewelry from that of its competitors through
extensive personalization with family names, dates, crests and events. The
Company's licensed consumer sports jewelry includes rings, pins and pendants
containing team logos, mascots and colors, that are manufactured for fans to
express their support for their favorite professional or amateur sports team.
The Company's professional sports championship jewelry consists of similar
products but is designed for the championship individual or team to
commemorate its championship, accomplishments or achievements. The Company
offers sports championship jewelry for professional sports organizations
(including Super Bowl rings to the San Francisco 49ers in 1995 and World
Series rings to the New York Yankees in 1996 and 1998) as well as jewelry for
individuals to commemorate American Bowling Congress-sanctioned perfect
games. Corporate recognition and reward jewelry includes jewelry awards for
employees of various corporations.

SALES AND MARKETING

      The Company has a national presence in all three primary sales channels
for class rings and scholastic products: (i) the high school in-store sales
channel of independent retail jewelers, retail jewelry chains and mass
merchants; (ii) the high school in-school sales channel of independent sales
representatives; and (iii) the college on-campus sales organization
(primarily on-campus and local bookstores). No single customer of the Company
represented more than 5% of net sales in fiscal 1999.

      The Company markets its class rings: (i) in-store to independent and
chain jewelers under the names ARTCARVED-Registered Trademark- and R.
JOHNS-Registered Trademark- and to mass merchants under the names
KEYSTONE-Registered Trademark-, MASTER CLASS RINGS-Registered Trademark- and
CLASS RINGS, LTD.-Registered Trademark-; (ii) in high schools under the
BALFOUR-Registered Trademark- name; and (iii) on college campuses under the
ARTCARVED-Registered Trademark-, BALFOUR-Registered Trademark- and
KEEPSAKE-Registered Trademark- names. The Company markets its
graduation-related fine paper and accessories under the BALFOUR-Registered
Trademark- and ARTCARVED-Registered Trademark- names directly to students
in-school and on college campuses through approximately 100 college
bookstores. The Company markets its licensed consumer sports jewelry and its
corporate recognition and reward jewelry under the BALFOUR-Registered
Trademark- name, its sports championship jewelry under the BALFOUR-Registered
Trademark- and KEEPSAKE-Registered Trademark- names and its personalized
family jewelry under the Celebrations of LIFE-Registered Trademark-,
GENERATIONS OF LOVE-Registered Trademark- and NAME SAKE-Registered
Trademark- names.

      The Company is one of the leading suppliers of high school class rings
in the in-store channel based on net sales for fiscal 1999. A predecessor of
the Company introduced the concept of in-store sales for high school class
rings in 1963 as an alternative to traditional in-school sales. The Company
sells its high school class rings in-store to independent jewelry retailers,
large jewelry chains and to mass merchants. The Company was also the first
class ring manufacturer to sell class rings to mass merchants such as
Wal-Mart and Kmart, an area of strong sales growth within the class ring
industry over the last ten years. The Company utilizes distinct product
brands, product line characteristics and pricing for each of the in-store
sales channels. Advertising is particularly important in the in-store market
to inform students and parents that the retailer offers alternatives to the
products sold at school. The Company utilizes a combination of national,
regional, local and co-op print and local direct mail advertising for its
products depending on the type of retailer involved.

      The Company also markets its products in high schools using the
BALFOUR-Registered Trademark-brand name through its independent sales
representatives, who offer both class rings and a variety of fine paper
products and graduation accessories directly to high school students. The
Company's in-school sales channel is supported through a sales organization
that consists of approximately 135 regional independent representatives who
work exclusively for the Company with respect to the types of products
represented by the Company's product lines.

                                       2
<PAGE>

      The Company compensates its independent sales representatives on a
commission basis, and most independent sales representatives receive a
monthly draw against commissions earned, although all expenses, including
promotional materials made available by the Company, are the responsibility
of the representative. The Company's independent sales representatives
operate under contract with exclusive non-compete arrangements that prohibit
representatives from selling competing products during the term of their
arrangement with the Company and for a period of time, generally two years,
thereafter. Depending on geographical size and volume, independent sales
representatives may employ one or more additional sales representatives in
addition to part-time or full-time personnel.

      The Company's college class rings are sold under the
ARTCARVED-Registered Trademark- and BALFOUR-Registered Trademark- brand names
primarily through on-campus bookstores and, to a lesser extent, through local
bookstores, both of which typically also offer class rings distributed by one
or more of the Company's competitors. The college bookstores display the
Company's products, although approximately 85% of all orders are taken by the
Company's sales representatives at special events periodically set up at the
bookstore or campus student center. College class ring sales are principally
supported by sales promotions with school newspaper advertising and direct
mailings to students and parents. The Company uses promotions to stimulate
sales in the critical back-to-school, pre-Christmas and pre-graduation
periods. The Company differentiates itself from its competitors through its
high quality rings, innovative styles, quick delivery times and promotional
services that attract students to tables containing product information.
Beginning during the fourth quarter of fiscal 1997, the Company began to
offer BALFOUR-Registered Trademark- fine paper products through the more
extensive ArtCarved college on-campus sales channels. At August 28, 1999,
BALFOUR-Registered Trademark- fine paper products, primarily personalized
college announcements and name cards, were being sold in approximately 100
college bookstores.

      Recognition and affinity products are sold either (i) to retail outlets
or directly to the group or organization, or (ii) by a combination of field
sales personnel and corporate sales personnel. The Company's
BALFOUR-Registered Trademark- licensed consumer sports jewelry and
CELEBRATIONS OF LIFE-Registered Trademark-, GENERATIONS OF LOVE-Registered
Trademark- and NAME-SAKE-Registered Trademark- personalized family jewelry
are primarily distributed to retail outlets and through merchandise
catalogues. The Company markets its BALFOUR-Registered Trademark-sports
championship jewelry directly to the championship team or organization or its
members and its KEEPSAKE-Registered Trademark- bowling rings directly to
individuals. Corporate recognition and reward programs are developed in
conjunction with corporate clients, who order and purchase products directly
from the Company.

      The market for the Company's recognition and affinity products is a
broad collection of market niches. It includes championship jewelry for
winners of professional sports championships as well as individual events.
The market for retail affinity products is well developed in the apparel
category but not with respect to non-apparel products (such as the Company's
licensed consumer sports jewelry). Management believes that the demand for
licensed consumer sports jewelry is influenced by trends in the popularity of
professional and amateur sports. An important success factor in the licensed
consumer jewelry business is obtaining the right to use and market a team
name and mascot.

INDUSTRY

      Management believes there are three national competitors in the sale of
class rings and fine paper products (the Company, Jostens, Inc. and Herff
Jones, Inc.) and numerous regional producers. The class rings and fine paper
markets are highly competitive and numerous alternative suppliers for the
Company's products exist.

      Consumers differentiate scholastic products on the basis of price,
quality, marketing and customer service. Customer service is particularly
important in the sale of class rings because of the high degree of
customization and the emphasis on timely delivery. Class rings with different
quality and price points are marketed through different channels and, within
the in-store sales channel, through different retailers.

      Scholastic products are sold in retail stores and directly to students
in schools and on college campuses. Management estimates that, historically,
approximately 65% of high school class rings have been sold through the
in-school sales channel. In schools, administrators or student
representatives select the authorized supplier for their school. Suppliers
contact these administrators or student representatives through their sales
forces, which are generally comprised of independent sales representatives
who market products directly to high school students.

                                       3
<PAGE>

      In addition to the in-school sales channel, the scholastic product
market is also characterized by a strong in-store distribution channel. In
1963, a predecessor of ArtCarved initiated the use of the in-store sales
channel, and management estimates that this segment represents, historically,
approximately 35% of high school class rings sold. The in-store channel
consists primarily of independent jewelry retailers, large jewelry chains and
mass merchants.

      College class rings are sold primarily through on-campus bookstores
and, to a lesser extent, through local bookstores, both of which typically
also offer class rings distributed by one or more of the Company's major
national competitors.

      Historically, on-campus bookstores have been owned and operated by the
colleges and universities; however, during the last several years an
increasing number of campus bookstores have been leased to companies engaged
in retail bookstore operations, primarily Barnes & Noble Bookstores, Inc. and
Follett Corporation.

PRODUCTION AND TECHNOLOGY

      The Company produces high school and college class rings only upon the
receipt of a customer order and deposit, and each ring is custom
manufactured. The entire production process takes approximately two to eight
weeks from receipt of the customer's order to product shipment, depending on
tooling requirements. Consequently, only a limited amount of finished
products inventory is necessary, reducing the Company's exposure to
fluctuations in the price of the gold material content of its rings and the
Company's investment in working capital.

      The Company employs advanced design and manufacturing techniques at its
jewelry manufacturing plants. The use of computer-aided design and
manufacturing equipment, computer integrated manufacturing, cell
manufacturing and the craftsmanship of the Company's highly-skilled jewelers
enable the Company to produce increasingly personalized and high quality
jewelry while maintaining critical delivery schedules.

      The Company's fine paper manufacturing and distribution activities are
housed at a 100,000 square-foot facility in Louisville, Kentucky. Each fine
paper product requires a high level of customization and is characterized by
having short production runs. For a typical graduation product order, the
Company's salespeople meet with the next class of graduating seniors to chose
their graduation announcements and related designs in the spring of their
junior year or early fall of their senior year. Designs are chosen and
artwork is produced on the Company's computerized design systems.

RAW MATERIALS

      The principal raw materials that the Company purchases are gold and
precious, semiprecious and synthetic stones. The cost (and, with respect to
precious, semiprecious and synthetic stones, the availability) of these
materials are affected by market conditions. Operating results during fiscal
1999 were not materially affected by market volatility. Any significant
increase in the price of these raw materials could adversely impact the
Company's cost of sales.

      The Company requires significant amounts of gold for the manufacture of
its jewelry. The Company finances the majority of its gold inventory
requirements through borrowings by the Company under its Revolving Credit and
Gold Facilities, described below. Management believes that it has sufficient
availability under its Revolving Credit and Gold Facilities to finance all of
its gold inventory requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital
Resources" below.

      The Company reduces its exposure to fluctuations in the price of gold
in several ways. In the Company's in-school sales channel for the sale of
high school class rings, the Company resets its ring prices from time to time
on new ring sales to reflect the then current price of gold. However, the
Company does not have the same flexibility to reset its ring prices in the
in-store and on-campus sales channels for high school and college rings,
respectively, where rings are sold on the basis of seasonal prices. In either
of these two cases, the Company must bear the risk of a change in the price
of gold either from the time the order is placed or from the time the price
is set until the product is shipped. As a result, since there may be a change
in the price of gold, the Company may from time to time engage in certain
hedging transactions to reduce the effects of fluctuations in the price of
gold. As of August 28, 1999, the Company held options for 58,300 ounces of
gold.

      The Company also uses precious, semiprecious and synthetic stones in
its products. The precious stones are

                                       4
<PAGE>

purchased from multiple vendors at market prices. The Company purchases
substantially all synthetic and semiprecious stones from a single German
supplier, which the Company believes supplies semiprecious and synthetic
stones to almost all of the class ring manufacturers in the United States.
The Company believes that the loss of this source of synthetic and
semiprecious stones would adversely affect its business during the time
period in which alternate sources adapted production capabilities to meet
increased demand.

ENVIRONMENTAL MATTERS

      The Company is subject to federal, state and local laws, ordinances and
regulations that establish various health and environmental quality standards
and provide penalties for violations of those standards. Past and present
manufacturing operations of the Company subject to environmental laws include
the use, handling, and contracting for disposal or recycling of hazardous or
toxic substances, the discharge of particles into the air, and the discharge
of process wastewaters into sewers. Management believes that the Company's
current operations are in substantial compliance with all material
environmental laws and that the Company does not currently face environmental
liabilities that would have a material adverse effect on the Company's
financial position or results of operations.

INTELLECTUAL PROPERTY

      The Company markets its products under many trademarked brand names,
some of which rank among the most recognized and respected names in the
jewelry industry, including ARTCARVED-Registered Trademark-,
BALFOUR-Registered Trademark-, CELEBRATIONS OF LIFE-Registered Trademark-,
CLASS RINGS, LTD.-Registered Trademark-, GENERATIONS OF LOVE-Registered
Trademark-, KEEPSAKE-Registered Trademark-, KEYSTONE-Registered Trademark-,
MASTER CLASS RINGS-Registered Trademark-, NAME-SAKE-Registered Trademark-
and R. JOHNS-Registered Trademark-. Generally, a trademark registration will
remain in effect so long as the trademark remains in use by the registered
holder and any required renewals are obtained. The Company also holds several
patented ring designs. The Company's patents expire at varying dates, but
management does not believe that the loss of any one of these patents would
have a material adverse effect on the Company's financial position or results
of operations.

      The Company has non-exclusive licensing arrangements with numerous
colleges and universities under which the Company has the right to use the
name and other trademarks and logos of these schools on the Company's
products. In addition, the Company has non-exclusive licensing agreements
with certain major professional sports organizations for the right to use the
name and other trademarks and logos of the professional sports organizations
on the Company's products. Management does not believe that there are any
licenses the loss of which, individually, would have a material adverse
effect on the Company's financial position or results of operations.

      Effective March 30, 1999, the Company had granted to Lenox, Inc., a
license expiring May 1, 2002 to use the KEEPSAKE-Registered Trademark- name
for the sale of non-jewelry goods on a royalty-free, worldwide and
non-exclusive basis for non-jewelry products.

      The Company has non-exclusive licensing arrangements with two
manufacturers in Canada for the ARTCARVED-Registered Trademark- trademark and
exclusive licensing arrangements for the ARTCARVED-Registered Trademark-
trademark to a retailer in Central America.

      During October 1997, the Company entered into a Trademark License
Agreement with Aurafin, Inc. pursuant to which the Company granted to Aurafin
the right to use the ARTCARVED-Registered Trademark- trademark in connection
with wedding rings, engagement rings and anniversary bands for an initial
term of ten years, which is automatically renewable for additional successive
five-year periods unless terminated prior thereto. Under the terms of the
agreement, Aurafin pays the Company royalties based on decreasing marginal
percentages of annual net sales of various licensed products.

      During December 1997, the Company entered into a Trademark License
Agreement with Frederick Goldman, Inc. pursuant to which the Company granted
Goldman the right to use the KEEPSAKE-Registered Trademark- trademark in
connection with rings, bracelets, pendants, necklaces, earrings, earring
jackets, brooches, pins, neck chains, watches, and related services,
excluding any products manufactured or developed by the Company. The
agreement, which has an initial term of ten years which automatically renews
for successive five-year periods assuming it is not otherwise terminated
pursuant to its terms, provides for royalty payments based on percentages of
sales of various licensed products, subject to an annual minimum royalty.

                                       5
<PAGE>

EMPLOYEES

      At August 28, 1999, the Company employed 1,575 individuals, of whom
approximately 1,195 were involved in manufacturing, operations and production
support, 270 were involved in customer service, marketing and sales and 110
were employed in various administrative, accounting and data processing
functions. Many employees engaged in manufacturing operations are highly
skilled technicians and craftspersons.

      Other than 607 hourly production and maintenance employees (at August
28, 1999) at the Austin, Texas manufacturing facility, no employees of the
Company are represented by a labor union. The production and maintenance
workers are represented by the United Brotherhood of Carpenters and Joiners
Union (the "Union"). After the Company and its predecessor had operated
without an agreement for nearly three years, the Company and the Union signed
a collective bargaining agreement on April 24, 1997, which provided for wage
rate increases of $0.30 an hour on April 21, 1997, and $0.25 an hour on June
1, 1998, and $0.20 an hour on June 1, 1999. The contract expires on May 31,
2000. Management anticipates negotiations with the union for a new collective
bargaining agreement will begin in March 2000 or April 2000. Neither the
Company nor its predecessors have experienced any work stoppages or
significant employee-related problems at its Austin, Texas manufacturing
facility in the recent past. Management considers the relationship between
the Company and all of its employees to be satisfactory.

      The Company employs two separate sales forces to support its in-store
retail products and its on-campus products, with approximately 30 salespeople
concentrating on in-store and approximately 35 full-time territory managers
(supplemented by approximately 80 to 90 part-time representatives during peak
buying seasons) concentrating on college campuses.

ITEM 2.        PROPERTIES

      The Company's headquarters and principal executive offices are located
at 7211 Circle S Road, Austin, Texas 78745. The Company's other principal
properties as of August 28, 1999, are as set forth below. Management believes
the Company's properties are in good condition.

<TABLE>
<CAPTION>
Primary Use                         Location                  Approximate Size              Owned/Leased
-----------                         --------                  ----------------              ------------
<S>                                 <C>                       <C>                           <C>
Administrative Offices              Austin, Texas             20,000 Square Feet                Owned
Jewelry Manufacturing               Austin, Texas             99,830 Square Feet                Owned
Jewelry Manufacturing               Juarez, Mexico            20,000 Square Feet                Leased
Jewelry Manufacturing               North Attleboro, MA       35,000 Square Feet                Leased
Fine Paper Manufacturing            Louisville, KY           100,000 Square Feet                Leased
Warehouse Facility                  Austin, Texas             50,060 Square Feet                Leased
</TABLE>

      Subsequent to August 28, 1999, the Company entered into two new lease
agreements for an additional facility in El Paso, Texas and a replacement for
the warehouse facility listed above in Austin, Texas effective December 31,
1999.

<TABLE>
<S>                                 <C>                       <C>                           <C>
Warehouse Facility                  Austin, Texas             30,600 Square Feet                Leased
Manufacturing Facility              El Paso, Texas            20,000 Square Feet                Leased
</TABLE>

ITEM 3.        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 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

                                       6
<PAGE>

                                     PART II

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

      There is no established public trading market for the Company's common
stock, par value $0.01 per share ("Common Stock"). At August 28, 1999 and at
November 23, 1999, there were four (4) holders of record of the Common Stock.

      The Company has never declared dividends on its Common Stock. The
Company is restricted from paying dividends by certain of its bank debt
covenants and the indenture pursuant to which its senior subordinated notes
were issued (see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources") and by
provisions of the Company's outstanding classes of preferred stock. The
Company intends to retain any earnings for internal investment and debt
reduction, and does not intend to declare dividends on its Common Stock in
the foreseeable future.

ITEM 6.        SELECTED FINANCIAL DATA

      This item is presented in three tables for the historical reporting
requirements. The Company began operations on December 16, 1996, by acquiring
and merging two predecessor companies with different fiscal year ends.
Selected historical data for the Company, ArtCarved, and Balfour are
presented in tables (A), (B) and (C), respectively.

Table (A)      Summary Historical Financial and Other Data - the Company

      The Company completed the Acquisitions of ArtCarved and Balfour on
December 16, 1996 and prior to such date engaged in no business activities
other than those in connection with the Acquisitions and financing thereof.
The following table presents summary historical financial and other data for
the Company and should be read in conjunction with the financial statements
of the Company and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7
herein. The following information with respect to the Company as of August
28, 1999 and August 29, 1998, and for the fiscal years ended August 28, 1999,
August 29, 1998 and August 30, 1997 has been derived from the audited
financial statements of the Company, which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
dated November 5, 1999 included herein. The following information with
respect to the Company as of August 30, 1997, has been derived from the
audited financial statements of the Company, which have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report dated November 27, 1998, which is not included herein. See "Financial
Statements." The results of operations for the Company for the fiscal year
ended August 28, 1999, and August 29, 1998 are not comparable to the results
of operations for the fiscal year ended August 30, 1997 because the
information presented for the fiscal year ended August 28, 1999 and August
29, 1998 includes business operations for a full twelve-month period in
contrast to the fiscal year ended August 30, 1997 in which the Company had
not been engaged in significant business operations prior to the completion
of the Acquisitions on December 16, 1996. Due to the highly seasonal nature
of the class ring business, a significant amount of revenue and income were
earned by the Company's predecessors in the three and one-half month period
ended December 16, 1996, due to the back to school and pre-holiday season.
See "Seasonality" below.

                                       7
<PAGE>

TABLE (A)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended
                                                                -----------------------------------------------
                                                                    August 30,    August 29,      August 28,
                                                                     1997(1)         1998            1999
                                                                ---------------- --------------  --------------
                                                                   (Dollars in thousands, except share data)
<S>                                                             <C>              <C>             <C>
 STATEMENT OF INCOME DATA:
 Net sales                                                       $    87,600     $   151,101     $    160,308
 Cost of sales                                                   $    45,189     $    72,615     $     70,824
                                                                ---------------- --------------  --------------
 Gross profit                                                    $    42,411     $    78,486     $     89,484
 Selling, general and administrative expenses                    $    41,481     $    68,294     $     78,962
                                                                ---------------- --------------  --------------
 Operating income                                                $       930     $    10,192     $     10,522
 Loss from continuing operations                                 $    (8,867)    $    (4,637)    $     (4,192)
 Net loss to common stockholders                                 $    (9,717)    $    (5,837)    $     (5,392)
 Basic and diluted loss per share                                $    (25.91)    $    (15.55)    $     (14.31)
 OTHER DATA:
 EBITDA (2)                                                      $     5,025     $    17,093     $     17,698
 Depreciation and amortization                                   $     4,095     $     6,901     $      7,176
 Capital expenditures                                            $     3,493     $     6,610     $      9,785
 Cash flows provided by (used in):
      Operating activities                                       $      (677)    $    (3,749)    $      1,097
      Investing activities                                       $  (173,693)    $    (6,552)    $     (9,785)
      Financing activities                                       $   175,450     $     9,102     $      8,464
 BALANCE SHEET DATA (AT END OF PERIOD):
 Total assets                                                    $   200,869     $   203,805     $    209,845
 Total long-term debt                                            $   125,450     $   134,322     $    134,410
 Total stockholders' equity                                      $    40,453     $    34,846     $     37,830
</TABLE>

(1)  The Company completed the Acquisitions of ArtCarved and Balfour on December
     16, 1996, and prior to such date, engaged in no business activities other
     than those in connection with the Acquisitions and financing thereof. Due
     to the highly seasonal nature of the class ring business, a significant
     amount of revenues and income were earned by the Company's predecessors in
     the three and one-half month period ended December 16, 1996, due to the
     back to school and pre-holiday season.

(2)  EBITDA represents operating income (loss) before depreciation and
     amortization. EBITDA is not intended to, and does not, represent cash flows
     as defined by generally accepted accounting principles and does not
     necessarily indicate that cash flows are sufficient to fund all of the
     Company's cash needs. EBITDA should not be considered in isolation or as a
     substitute for or more meaningful than net income (loss), cash flows from
     operating activities or other measures of liquidity determined in
     accordance with generally accepted accounting principles. The Company has
     presented EBITDA data because the Company understands that such information
     is commonly used by investors to analyze and compare companies on the basis
     of operating performance and to determine a company's ability to service
     debt. The EBITDA measure presented herein is not necessarily comparable to
     similarly titled measures reported by other companies.

                                       8
<PAGE>

Table (B) Summary Historical Financial and Other Data - ArtCarved

      The following table presents summary historical financial and other
data for ArtCarved and should be read in conjunction with the financial
statements of ArtCarved and the notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in
Item 7 herein. The following information with respect to ArtCarved for the
period from September 1, 1996 to December 16, 1996, has been derived from the
audited financial statements of ArtCarved, which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
dated October 24, 1997, included in the Financial Statements included herein.
See "Financial Statements." The following information with respect to
ArtCarved as of December 16, 1996, August 31, 1996, and August 26, 1995 and
for the fiscal years ended August 31, 1996 and August 26, 1995, has been
derived from the audited financial statements of ArtCarved, which have been
audited by Arthur Andersen LLP as stated in their report dated October 24,
1997, which is not included herein. The results for the period September 1,
1996, to December 16, 1996, are not necessarily indicative of the results to
be expected for the full fiscal year. The information presented below does
not include adjustments related to the ArtCarved acquisition.

TABLE (B)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended (1)
                                               ---------------------------------------------------------------
                                                                                                The Period
                                                                                              from September
                                                                                                1, 1996 to
                                                                 August 26,                    December 16,
                                                                    1995     August 31, 1996       1996
                                               ---------------------------------------------------------------
                                                                      (Dollars in thousands)
<S>                                            <C>                            <C>             <C>

STATEMENT OF INCOME DATA:

Net sales                                                       $     71,994  $     70,671    $      27,897

Cost of sales                                                   $     32,879  $     32,655    $      11,988
                                                                ------------  ------------    -------------

Gross profit                                                    $     39,115  $     38,016    $      15,909

Selling, general and administrative expenses                    $     28,224  $     27,940    $       9,862

Restructuring charges (2)                                       $      3,244  $          -    $           -
                                                                ------------  ------------    -------------

Operating income(3)                                             $      7,647  $     10,076    $       6,047

OTHER DATA:

EBITDA (4)                                                      $     16,505  $     15,091    $       8,039

Depreciation and amortization                                   $      5,614  $      5,015    $       1,992

Capital expenditures (5)                                        $      1,120  $        844    $         195

Cash flows provided by (used in):

     Operating activities                                       $     (3,164) $      1,663    $       1,498

     Investing activities                                       $     (1,120) $       (844)   $        (195)

     Financing activities                                       $      4,284  $       (819)   $       4,261

BALANCE SHEET DATA (AT END OF PERIOD):

Total assets                                                    $     75,955  $     74,542    $      86,065

Total long-term debt (6)                                        $     99,900  $     91,221    $      80,144

Advances in equity (deficit) (6)                                $    (53,186) $    (28,524)   $      (6,464)
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                       9
<PAGE>

(1)  During the periods presented, ArtCarved was not operated or accounted for
     as a separate entity. As a result, allocations for certain accounts of CJC
     were reflected in the financial statements of ArtCarved. Selling, general
     and administrative expenses for ArtCarved represent all the expenses
     incurred by CJC excluding only the expenses directly related to the
     non-ArtCarved operations of CJC. Since CJC used the proceeds from the sale
     of ArtCarved to repay its outstanding debt obligations, the statement of
     income data, other data and the balance sheet data include all of CJC's
     debt and related interest expense.

(2)  For the fiscal year ended August 26, 1995, the restructuring charges of
     $3.2 million consisted of the write-off of $2.9 million of capitalized
     financing costs incurred in 1990 by CJC and $0.3 million of related
     professional advisory fees incurred by CJC. The balance sheet data includes
     all of CJC's debt and related interest expense, and therefore all of the
     restructuring charges are allocated to ArtCarved assets.

(3)  The results of operations for the period from September 1, 1996, through
     December 16, 1996, are not comparable to the results of operations for the
     fiscal years presented and are not necessarily indicative of the results
     that could be expected for a full fiscal year. Due to the highly seasonal
     nature of the class ring business, a significant amount of revenues and
     income occurred in the three and one-half month period ended December 16,
     1996, due to the back-to-school and pre-holiday season.

(4)  EBITDA represents operating income (loss) before depreciation, amortization
     and restructuring charges. EBITDA is not intended to, and does not,
     represent cash flows as defined by generally accepted accounting principles
     and does not necessarily indicate that cash flows are sufficient to fund
     all of ArtCarved's cash needs. EBITDA should not be considered in isolation
     or as a substitute for or more meaningful than net income (loss), cash
     flows from operating activities or other measures of liquidity determined
     in accordance with generally accepted accounting principles. The Company
     has presented EBITDA data because the Company understands that such
     information is commonly used by investors to analyze and compare companies
     on the basis of operating performance and to determine a company's ability
     to service debt. The EBITDA measure presented herein is not necessarily
     comparable to similarly titled measures reported by other companies.

(5)  Historical capital expenditure levels are not necessarily indicative of the
     future capital expenditure level for ArtCarved's ongoing operations when
     merged with Balfour.

(6)  The changes in total long-term debt and advances in equity (deficit) from
     August 31, 1996, to December 16, 1996, are due to the sale of CJC's
     non-ArtCarved operations.

Table (C) Summary Historical Financial and Other Data - Balfour

      The following table presents summary historical financial and other
data for Balfour and should be read in conjunction with the financial
statements of Balfour and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7
herein. The following information with respect to Balfour for the period from
February 26, 1996 to December 16, 1996 has been derived from the audited
financial statements of Balfour, which have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report dated
November 19, 1997, included herein. See "Financial Statements". The following
information with respect to Balfour as of December 16, 1996, February 25,
1996, and February 26, 1995, and for the years ended February 25, 1996 and
February 26, 1995, has been derived from the audited financial statements of
Balfour, which have been audited by Arthur Andersen LLP as stated in their
report dated November 19, 1997, which is not included herein. The results for
the period from February 26, 1996 to December 16, 1996 are not necessarily
indicative of the results that could be expected for the full fiscal year.
The information presented below does not include adjustments related to the
Balfour acquisition.

                                       10
<PAGE>

TABLE (C)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended (1)
                                                    ---------------------------------------------------------------
                                                                                                 The Period from
                                                                                                February 26, 1996
                                                                                                       to
                                                         February 26,         February 25,        December 16,
                                                             1995                 1996                1996
                                                    ---------------------------------------------------------------
                                                                        (Dollars in thousands)
<S>                                                 <C>                  <C>                 <C>
STATEMENT OF INCOME DATA:

Net sales                                            $         77,491       $       71,300      $        60,233

Cost of sales                                        $         35,406       $       35,598      $        29,350
                                                     ----------------       --------------      ---------------

Gross profit                                         $         42,085       $       35,702      $        30,883

Selling, general and administrative expenses         $         51,743       $       33,496      $        31,020
                                                     ----------------       --------------      ---------------

Operating income (loss)                              $         (9,658)      $        2,206      $          (137)

OTHER DATA:

EBITDA (2)                                           $         (7,680)      $        4,232      $         1,396

Depreciation and amortization                        $          1,978       $        2,026      $         1,533

Capital expenditures (3)                             $          1,274       $          530      $           345

Adjusted net sales (4)                               $         64,891       $       70,111      $        59,384

Cash flows provided by (used in):

    Operating activities                             $         (7,077)      $        1,604      $        (7,264)

    Investing activities                             $         (1,209)      $          421      $           226

    Financing activities                             $          8,286       $       (1,970)     $         6,977

BALANCE SHEET DATA (AT END OF PERIOD):

Total assets                                         $         45,236       $       42,563      $        45,127

Total long-term debt                                 $         15,136       $       13,166      $        20,201

Total stockholders' equity                           $         14,024       $       13,888      $        11,735
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  During the periods presented, Balfour was operated as a wholly owned
     subsidiary of Town & Country and Town & Country administered certain
     programs (such as health insurance, workmen's compensation and gold
     consignment) and charged all directly identifiable costs to Balfour.
     Indirect costs were not allocated to Balfour; however, management believes
     these amounts are not significant for the periods presented.

(2)  EBITDA represents operating income (loss) before depreciation, amortization
     and restructuring charges. EBITDA is not intended to, and does not,
     represent cash flows as defined by generally accepted accounting principles
     and does not necessarily indicate that cash flows are sufficient to fund
     all of Balfour's cash needs. EBITDA should not be considered in isolation
     or as a substitute for or more meaningful than net income (loss), cash
     flows from operating activities or other measures of liquidity determined
     in accordance with generally accepted accounting principles. The Company
     has presented EBITDA data because the Company understands that such
     information is commonly used by investors to analyze and compare companies
     on the basis of operating performance and to determine a company's ability
     to service debt. The EBITDA measure presented herein is not necessarily
     comparable to similarly titled measures reported by other companies.

(3)  Historical capital expenditure levels are not necessarily indicative of the
     future capital expenditure level for Balfour's ongoing operations when
     merged with ArtCarved.

                                       11
<PAGE>

(4)  Adjusted net sales represents, for all periods presented, net sales
     excluding results from: (i) the direct distribution of licensed consumer
     sports jewelry, which was discontinued in February 1995; and (ii) the
     fraternity jewelry product line, which was sold in March 1994; and (iii)
     the service award recognition product line, which was sold in April 1993.
     Although Balfour sold substantially all of the service award recognition
     product line, Balfour continues to have sales of service award recognition
     products, which management believes will not be a significant percentage of
     net sales in future periods.

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

      For purposes of the discussion contained in this Item 7, 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.

GENERAL

      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 financial statements of the Company for the fiscal year ended
August 28, 1999 reflect operations of the Company for the 52-week period from
August 30, 1998 to August 28, 1999. The financial statements of the Company
for the fiscal year ended August 29, 1998 reflect operations of the Company
for the 52-week period from August 31, 1997 to August 29, 1998. The financial
statements of the Company for the fiscal year ended August 30, 1997 reflect
operations for the period from December 16, 1996 (the date of consummation of
the Acquisitions) to August 30, 1997. The financial statements are presented
for the predecessors: ArtCarved for the period from September 1, 1996 through
December 16, 1996, and Balfour for the period from February 26, 1996 through
December 16, 1996. See "Financial Statements". The results of operations for
the Company for the fiscal years ended August 28, 1999 and August 29, 1998
are not comparable to the results of operations for the fiscal year ended
August 30, 1997 because the information presented for the fiscal years ended
August 28, 1999 and August 29, 1998 include business operations for a full
twelve-month period in contrast to the fiscal year ended August 30, 1997
which includes no significant business operations prior to December 16, 1996.
Due to the highly seasonal nature of the class ring business, a significant
amount of revenue and income were earned by the Company's predecessors in the
three and one-half month period ended December 16, 1996 due to the back to
school and pre-holiday season.

      The results of operations of the Company for the fiscal years ended
August 28, 1999, August 29, 1998 and August 30, 1997 were negatively impacted
as a result of the consolidation of the Attleboro and North Attleboro,
Massachusetts operations into the Austin, Texas facilities. 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. The consolidation of these Massachusetts-based
operations into the Texas facilities was expected to yield cost savings to
the combined Balfour and ArtCarved operations as compared to their
predecessor's historical cost from, among other things, reduced occupancy,
overhead and labor expenses. To date, the Company has realized savings
approximately $1.5 million per year in reduced occupancy and overhead costs.
The full anticipated cost savings from the consolidation of facilities has
not been realized, however, mainly due to the following ongoing
circumstances:

-    People - The specific Balfour product knowledge that was "lost" due to
     Massachusetts employees electing not to relocate to Texas resulted in
     production inefficiencies, higher than normal training expenses and
     additional costs to temporarily place former Balfour employees (manager and
     supervisors) in the Texas plant. In addition, labor costs in the Austin,
     Texas area have increased faster than anticipated as a result of the
     tightening of the labor market in the Austin area.

                                       12
<PAGE>

-    Tooling - Because Balfour ring tooling is older and more complicated to use
     than the ArtCarved ring tooling, the Company continues to experience higher
     than normal training costs and lower levels of efficiency than that
     achieved at the ArtCarved ring plant.

-    Systems - The Balfour computer system is heavily dependent on manual
     processing and human interaction. The Company experienced difficulties in
     the transfer of user knowledge and system documentation. As a result,
     the Company has incurred labor costs in excess of those anticipated by
     management to enter, schedule, produce, track and ship the Balfour rings.

      During January 1998, the Company began a major computer project which
began implementation in July 1999. The project will convert the more inefficient
Balfour computer systems to the more efficient ArtCarved systems, unifying
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 substantially reducing the risk of any material
"Year 2000" problems that were inherent in the existing Balfour computer
systems. Management believes that the system is now Year 2000 compliant and will
be operating more efficiently by January 2000.

      As certain of the labor and tooling costs are imbedded in the Balfour
manufacturing process, management does not anticipate that significant cost
reductions can be accomplished in the near term without significant changes
in the tooling and manufacturing processes of Balfour products.  Management
continues to assess more efficient manufacturing and tooling techniques which
may in the future yield additional cost savings but may require additional
capital investment.

THE COMPANY

      TWELVE MONTHS ENDED AUGUST 28, 1999 ("FISCAL 1999") AS COMPARED TO THE
TWELVE MONTHS ENDED AUGUST 29, 1998 ("FISCAL 1998").

NET SALES - Net sales increased $9.2 million, or 6.1%, to $160.3 million for
fiscal 1999, from $151.1 million in fiscal 1998. The increase in net sales
was the result of a 4.3% increase in net sales of high school class rings, a
2.3% increase in net sales of fine paper products and a 1.1% increase in net
sales of recognition and affinity jewelry, offset by a 1.6% decrease in net
sales of college class rings. Net sales in the high school in-school sales
channel increased 4.9%, as a result of increased unit sales of 2.6% which
resulted primarily from an increase in the number of sales representatives.
The remaining 2.3% increase resulted from price increases and changes in
product mix. These high school in-school volume increases were offset by a
0.6% decrease in net sales of rings in the high school in-store sales
channel. The increase in net sales of fine paper products resulted primarily
from an increase in the number of sales representatives, and a majority of
the increase in the net sales of recognition and affinity jewelry was
primarily attributable to increased sales of mothers' rings. The decline in
the net sales of college class rings was primarily the result of the loss of
competitive bid contracts to be the exclusive supplier of college class rings
to students of the United States Air Force Academy and the United States
Military Academy.

GROSS PROFIT - Gross Profit increased $11.0 million, or 14.0%, to $89.5
million for fiscal 1999 as compared to $78.5 million for fiscal 1998. As a
percentage of net sales, gross profit increased to 55.8% for fiscal 1999 from
51.9% for fiscal 1998. Of the 3.9% increase in gross profit as a percentage
of net sales, 2.2% of the increase was due to labor and overhead efficiencies
in both the ring and the fine paper manufacturing plants and 2.0% resulted
from favorable gold prices in fiscal 1999 as compared to fiscal 1998. These
improvements were partially offset by increases in stone prices and stone
breakage in fiscal 1999 as compared to fiscal 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $10.7 million, or 15.6%, to $79.0 million
for fiscal 1999, compared to $68.3 million for fiscal 1998. As a percentage
of net sales, selling, general and administrative expenses increased to 49.3%
for fiscal 1999, compared to 45.2% for fiscal 1998. Of the 4.1% increase in
selling, general and administrative expenses, 2.5% of the increase resulted
from increased commissions to sales representatives as a result of a change in
sales mix in the high school class rings and fine paper products, with the
remaining increase resulting from increases in general and administrative
expenses. General and administrative expenses increased approximately 1.5% as
a percentage of net sales due to various factors including additional employee
costs and professional advisory fees.

                                       13
<PAGE>

OPERATING INCOME - As a result of the foregoing, operating income increased
$0.3 million to $10.5 million for fiscal 1999 compared to $10.2 million for
fiscal 1998. As a percentage of net sales, operating income decreased to 6.6%
for fiscal 1999 compared to 6.7% for fiscal 1998.

INTEREST EXPENSE, NET - Net interest expense was $14.6 million for fiscal
1999 and $14.8 million for fiscal 1998. Interest expense remained
approximately the same as the prior year as a result of the combination of
lower interest rates on the average outstanding balance under the Bank
Agreement and an increase of the outstanding balance to $52.6 million
in fiscal 1999 as compared to $46.6 million in 1998. Interest rates ranged
from 7.8% to 10.3% for fiscal 1999 and 1998. Interest on the $90.0 million of
senior subordinated notes is fixed at a rate of 11%.

PROVISION FOR INCOME TAXES - For fiscal 1999 and 1998, the Company expensed
$120,000 and $0 respectively, related to state income taxes. There is no
federal income tax benefit as a valuation allowance exists due to the net
operating losses incurred by the Company.

NET LOSS - As a result of the foregoing, net loss decreased $0.4 million to
$4.2 million for fiscal 1999 compared to net loss of $4.6 million for fiscal
1998.

PREFERRED DIVIDENDS - Preferred dividends of $1.2 million were accrued for
each of fiscal 1999 and fiscal 1998. No cash dividends were paid in fiscal
1999 or fiscal 1998.

NET LOSS TO COMMON STOCKHOLDERS - As a result of the foregoing, net loss to
common stockholders decreased an aggregate of $0.4 million to $5.4 million
for fiscal 1999 compared to $5.8 million for fiscal 1998.

      TWELVE MONTHS ENDED AUGUST 29, 1998 ("FISCAL 1998") AS COMPARED TO THE
TWELVE MONTHS ENDED AUGUST 30, 1997 ("FISCAL 1997")

      The results of operations for the Company for fiscal 1998 are not
comparable to the results of operations for fisca1 1997 because the
information presented for fiscal 1998 includes business operations for a full
twelve-month period in contrast to fiscal 1997 which includes no significant
business operations prior to December 16, 1996.

NET SALES - Net sales increased $63.5 million, or 72.5%, to $151.1 million
for fiscal 1998, as compared to $87.6 million in fiscal 1997. This increase
in net sales is primarily a result of the fact that fiscal 1998 includes a
full twelve months of business operations in contrast to fiscal 1997 which
includes only approximately eight and one-half months of business operations.
Due to the highly seasonal nature of the class ring business, approximately
35% of the Company's fiscal 1997 sales were recognized by the Company's
predecessors in the three and one-half month period ended December 16, 1996.
This period included the back-to-school period and the pre-holiday season.
Approximately 18% of the Company's increase in net sales was a result of
increases in sales volume of high school and college rings and an increase in
the sales volume of the personalized family jewelry product segment of
recognition and affinity products.

GROSS PROFIT - Gross profit increased $36.1 million, or 85.1%, to $78.5
million for fiscal 1998, as compared to $42.4 million for fiscal 1997 which
was primarily a result of the fact that fiscal 1998 includes a full twelve
months of business operations in contrast to fiscal 1997 which includes only
approximately eight and one-half months of business operations. As a
percentage of net sales, gross profit was 51.9% for fiscal 1998, compared to
48.4% for fiscal 1997. Cost of sales for fiscal 1997 includes an incremental
charge of $4.7 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 sales as the related inventory was sold. Gross profit
for fiscal 1997, excluding this $4.7 million charge, would have been 53.8% of
sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $26.8 million, or 64.6%, to $68.3 million
for fiscal 1998, compared to $41.5 million for fiscal 1997. The increase was
primarily a result of the fact that fiscal 1998 includes a full twelve months
of business operations in contrast to fiscal 1997 which

                                       14
<PAGE>

includes only approximately eight and one-half months of business operations.
As a percentage of net sales, selling, general and administrative expenses
decreased to 45.2% for fiscal 1998, compared to 47.4% for fiscal 1997. The
decrease was a result of decreased marketing expenditures offset by an
increase in general and administrative expenses as a percentage of net sales
as a result of the increased expense incurred in the consolidation of the
Massachusetts operations with the Texas operations.

OPERATING INCOME - As a result of the foregoing, operating income increased
$9.3 million to $10.2 million for fiscal 1998 compared to $0.9 million for
fiscal 1997 which was primarily a result of the fact that fiscal 1998
includes a full twelve months of business operations in contrast to fiscal
1997 which includes only approximately eight and one-half months of business
operations. As a percentage of net sales, operating income increased to 6.7%
for fiscal 1998 compared to 1.1% for fiscal 1997.

INTEREST EXPENSE, NET - Interest expense, net was $14.8 million for fiscal
1998 and $9.8 million for fiscal 1997 primarily consisting of interest on the
outstanding debt under the Bank Agreement which had an average outstanding
balance of $46.6 million and $32.7 million for fiscal 1998 and 1997,
respectively, at rates ranging from 8.5% to 10.5% and interest on the $90.0
million of notes, at a rate of 11%.

PROVISION FOR INCOME TAXES - For fiscal 1998 and fiscal 1997, no provisions
or benefits were recorded as management believes the net operating losses and
carry-forwards incurred by the Company in prior periods will be sufficient to
cover any tax liability.

NET LOSS - As a result of the foregoing, net loss decreased $4.2 million to a
net loss of $4.6 million for fiscal 1998 compared to a net loss of $8.9
million for fiscal 1997 which was primarily a result of the fact that fiscal
1998 includes a full twelve months of business operations in contrast to
fiscal 1997 which includes only approximately eight and one-half months of
business operations.

PREFERRED DIVIDENDS - Preferred dividends were $1.2 million for fiscal 1998
and $0.9 million for fiscal 1997. No cash dividends were paid in fiscal 1998
or fiscal 1997.

NET LOSS TO COMMON STOCKHOLDERS - As a result of the foregoing, net loss to
common stockholders decreased an aggregate of $3.9 million to a net loss to
common stockholders of $5.8 million for fiscal 1998 compared to a net loss to
common stockholders of $9.7 million for fiscal 1997 which was primarily a
result of the fact that fiscal 1998 includes a full twelve months of business
operations in contrast to fiscal 1997 which includes only approximately eight
and one-half months of business operations.

ARTCARVED

      THE PERIOD FROM SEPTEMBER 1, 1996 THROUGH DECEMBER 16, 1996 ("THE
ARTCARVED PERIOD THROUGH DECEMBER 16, 1996")

      The results of operations for the ArtCarved period through December 16,
1996, are not comparable to the results of operations for the fiscal year
ended August 31, 1996, and are not necessarily indicative of the results that
could be expected for a full fiscal year. Due to the highly seasonal nature
of the class ring business, a significant amount of revenues and income were
earned in the three and one-half month period ended December 16, 1996, due to
the back-to-school and pre-holiday season.

NET SALES - Net sales for the ArtCarved period through December 16, 1996,
were $27.9 million.

GROSS PROFIT - Gross profit for the ArtCarved period through December 16,
1996, was $15.9 million, or 57.0% of net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses for the ArtCarved period through December 16, 1996,
were $9.9 million, or 35.4% of net sales.

OPERATING INCOME - As a result of the foregoing, operating income was $6.0
million or 21.7% of net sales for the ArtCarved period through December 16,
1996.

                                       15
<PAGE>

INTEREST EXPENSE, NET - Interest expense, net, for the ArtCarved period
through December 16, 1996, was $2.9 million. Average interest rates on debt
during the ArtCarved period through December 16, 1996, were approximately
11.9% for ArtCarved long-term debt and 9.75% for the ArtCarved gold loan.

INCOME TAX PROVISION - There was no income tax provision for the ArtCarved
period through December 16, 1996, due to available federal net operating tax
losses and other credit carry forwards of CJC that eliminated the need for a
tax provision.

NET INCOME (LOSS) - As a result of the foregoing, net income for the
ArtCarved period through December 16, 1996, was $3.2 million, or 11.4% of net
sales.

BALFOUR

      THE PERIOD FROM FEBRUARY 26, 1996 THROUGH DECEMBER 16, 1996 ("THE BALFOUR
PERIOD THROUGH DECEMBER 16, 1996")

NET SALES - Net sales for the Balfour period through December 16, 1996, were
$60.2 million.

GROSS PROFIT - Gross profit for the Balfour period through December 16, 1996,
was $30.9 million, or 51.3% of net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses for the Balfour period through December 16, 1996,
were $31.0 million, or 51.5% of net sales.

OPERATING INCOME (LOSS) - As a result of the foregoing, operating loss for
the Balfour period through December 16, 1996, was $0.1 million, or 0.2% of
net sales.

INTEREST EXPENSE, NET - Interest expense, net, for the Balfour period through
December 16, 1996 was $2.0 million, substantially on account of intercompany
debt at a rate of 11.5%.

INCOME TAX EXPENSE - 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 $63,000
provision for income taxes represents the state income taxes for the Balfour
period through December 16, 1996.

NET INCOME (LOSS) - As a result of the foregoing, net loss for the Balfour
period through December 16, 1996, was $2.2 million, or 3.6% of net sales.
















                                       16
<PAGE>

SEASONALITY

      The Company's scholastic product sales tend to be seasonal. The Company
generally recognizes sales on shipment of product. 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 class rings for delivery 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.
The Company has 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 the seasonality of the class ring business on the
Company are somewhat 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.

LIQUIDITY AND CAPITAL RESOURCES

      As of August 28, 1999, the Company had a $35.0 million line of credit
under the Revolving Credit and Gold Facilities (each as defined in Note 8 to
the Consolidated Financial Statements). The Company had $21,660,000
outstanding under the Revolving Credit Facility and $4,800,000 outstanding
under the Gold Facility at August 28, 1999. At August 28, 1999, the Company
had $4,161,000 available under its Revolving Credit Facility, including a $4.0
million overadvance loan extended in August, and $4,379,000 available under
its Gold Facility. The Company's ability to borrow under the overadvance loan
expires on November 30, 1999 and any amounts on that date in excess of the
then current Borrowing Base (as defined and more fully discussed in Note 8 to
the Consolidated Financial Statements) are due and payable in full.

The Company's liquidity needs arise primarily from debt service on the Bank
Agreement and the Notes (each as defined in Note 8 to the Consolidated
Financial Statements) working capital and capital expenditure requirements,
and payments required under a management agreement with Castle Harlan, Inc.
("the CHP Management Fee") which has been accrued but not paid in each of
fiscal year 1998 and fiscal year 1999 in accordance with the terms of the
Bank Agreement (see Item 13 "Certain Relationships and Related
Transactions"). Because of the difficulties in the consolidation of the
Balfour operations and the seasonality of the Company's business, the Company
will continue to have limited capital resources and limited flexibility in
meeting the Company's cash requirements at certain times during the year.

      As of June 28, 1999 (a) the $8.0 million Short-Term Revolving Credit
Loan that the Company had secured from the Banks was terminated and (b) the
banks under the Company's Bank Agreement agreed to further amend the Bank
Agreement to, among other things, (i) delete the Consolidated Net Worth
covenant, (ii) amend certain other financial covenants and (iii) provide for
overadvance loans to the Company of up to $4 million in excess of the
availability under the Borrowing Base for a period of up to 120 days expiring
on November 30, 1999; provided that the funds held in a cash collateral
account that had been pledged by CHPII to secure a CHPII guaranty of the
Company's obligations under the Short-Term Revolving Credit be converted into
$8.5 million face amount of Series B Preferred or other capital stock of the
Company having terms acceptable to the banks. Upon the termination of the
Short-Term Revolving Credit and the conversion of the funds in the cash
collateral account into shares of Series B Preferred, the guarantee
obligations of CHPII and the indemnification obligations of the Company were
satisfied and released. See Note 8 to the Consolidated Financial Statements.

      Operating activities provided cash of $1.1 million for fiscal 1999 as a
result of a net loss of $4.2 million, adjusted by $8.6 million to eliminate
expenses for non-cash items, and partially offset by net cash used by changes
in assets and liabilities of $3.3 million. The $3.3 million of cash used by
changes in assets and liabilities resulted from increases in accounts
receivable of $5.4 million and other assets of $0.8 million, which were offset
by decreases in inventories of $0.5 million, prepaid expenses and other
current assets of $0.6 million and increases in bank overdraft, accounts
payable, accrued expenses and other long-term liabilities of $1.8 million.
Accounts receivable increased $5.4 million as a result of increased sales of
$7.2 million during the third and fourth quarters of fiscal 1999 as compared
to fiscal 1998. In addition, prepaid expenses and other current assets, (which
are primarily comprised of advances to sales representatives, deferred taxes
and prepaid advertising expenses) decreased $0.6 million and inventories
decreased $0.5 million as order volume remained relatively constant with
fiscal 1998. Other assets increased $0.8 million as a result of an increase in
the manufacture of samples for new sales representatives. The increase of $1.8
million in bank overdraft, accounts payable, accrued expenses and other
long-term liabilities resulted from an increase of $3.2 million in commissions
owed to sales representatives and royalties, an increase of $1.4 million in
accrued expenses for the CHP Management Fee, offset by a decrease of $0.9
million in accounts payable, a decrease of $1.5 million in the accumulated
post-retirement benefit obligation, deferred

                                       17
<PAGE>

compensation, and compensation and related costs, and a decrease of $0.4
million in other accrued expenses and other long-term liabilities.

The Company's cash flows from operating activities for the fiscal year ended
August 29, 1998, were primarily the net result of decreased receivables,
increased inventories, increased prepaid expenses and other current assets,
increased other assets and decreased overdraft, accounts payable and accrued
expenses. The decreased receivables were primarily the result of the
acceleration of the cash collections from the Balfour sales representatives,
the increased inventories were primarily the result of increased units in the
factory in fiscal 1998, the increase in prepaid expenses and other assets
resulted primarily from an increase in prepaid marketing expenses and draws
paid in advance to the Balfour representatives.

      The Company used $9.8 million, a $3.2 million increase over fiscal 1998,
for investing activities. The increase reflects the capital expenditures made
by the Company for the conversion of the Balfour computer systems to the
ArtCarved system. The Company's projected capital expenditures for fiscal 2000
are expected to decline to approximately $5.1 million for manufacturing
equipment, tools and dies and software development.

      Also affecting cash usage in fiscal 1998 were the one-time costs
associated with the closing of the Attleboro facilities, moving expenses and
set-up expenses in Austin. As of August 28, 1999 and August 29, 1998, $11.5
million and $11.3 million, respectively, of the costs had been incurred with
the balance of $0.6 million in reserves for remaining expenses associated
with the metal stamping and tooling operations currently operating in
Attleboro.

YEAR 2000 COMPLIANCE

      YEAR 2000 ISSUE. 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 to 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, throughout and beyond the Year 2000.

      COMPANY STATE OF READINESS. The awareness phase of the Year 2000
project began with a corporate-wide awareness program. The assessment phase
of the project involved, 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. However, the Company does
not consider responses from such third parties to be conclusive. As a result,
management cannot predict the potential consequences if these or other third
parties are not Year 2000 compliant. The Company continues to assess and
evaluate the exposure associated with its interaction with and reliance on
third parties.

      The Company expects its Year 2000 conversion project to be completed in
December 1999. All major applications have been implemented and testing is
continuing. Management expects all testing to be completed as scheduled by
the end of December 1999.

      COSTS TO ADDRESS YEAR 2000 COMPLIANCE ISSUES. The total cost to the
Company of the Year 2000 project will be approximately $0.6 million. The
materiality of the costs of the project and the date when the Company
believes it will complete the Year 2000 projects 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. Through August 28, 1999, the Company has expended $0.3 million
related to its Year 2000 compliance assessment.

                                       18
<PAGE>

      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 have been
developed to respond to any failures as they may occur. Such contingency and
business plans were completed in early November 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 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.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      INTEREST RATE RISK. The Company has market risk exposure from changes
in interest rates as its Revolving Credit Agreement provides for varying
interest rates based upon prime interest rates. The Company's policy is to
manage interest rate exposure through the use of a combination of fixed and
floating rate debt instruments. The Company uses a variable and fixed rate
line of credit including Euro Rate obligations to provide working capital for
operations and inventory build-up. The Company does not hedge its interest
rate obligations with any type of derivative investments.

      SEMI-PRECIOUS STONES. The Company purchases the majority of its
semi-precious stones from a single source supplier in Germany. Management
believes that all major competitors purchase their semi-precious stones from
the same supplier. The purchases are payable in German Marks or Euros. In the
past and from time-to-time the Company has purchased forward German Mark
contracts in order to hedge its market risk. No contracts were purchased in
the fiscal year ended August 28, 1999 and the Company's exposure did not
result in an adverse impact on the Company due to the strength of the U. S.
Dollar in relation to the Mark.

      GOLD. The Company purchases all of its gold requirements from
BankBoston's Gold Department through its Revolving Credit and Gold
Facilities. The Company consigns the majority of its gold from BankBoston and
pays for it as the product is shipped to its customers. The Company, as of
August 28, 1999, had hedged its gold requirements for the fiscal year ending
August 26, 2000 by covering the majority of its estimated gold requirements
through the purchase of gold options. At August 28, 1999 the Company held
58,300 ounces of gold options at a price of $285 per ounce which expire on a
monthly basis from September 1999 through June 2000.

                                       19
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The financial statements of the Company and the predecessor financial
statements of ArtCarved and Balfour are included as part of this report. (See
page 33.)

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

      None.




























                                       20
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The following table sets forth each person who was an executive officer
or director of the Company as of August 28, 1999:

<TABLE>
<CAPTION>
NAME                                      POSITION
<S>                                       <C>
EXECUTIVE OFFICERS AND DIRECTORS:

      David G. Fiore                      President, Chief Executive Officer
                                          and Director

      John K. Castle                      Director

      David B. Pittaway                   Director

      Zane Tankel                         Director

      Edward O. Vetter                    Director

      Sherice P. Bench                    Vice President Finance

</TABLE>

      For a description of the Company's employment arrangements with Mr.
Fiore and Ms. Bench see "Executive Compensation --Employment Agreements". No
family relationship exists between any of the executive officers or between
any of them and any director of the Company.

      DAVID G. FIORE (52) has been President, Chief Executive Officer and a
director of the Company since August 11, 1999, and prior thereto was
president and CEO of Reliant Building Products, Inc., of Dallas from October
1992 to January 1999. Prior to that Mr. Fiore was president and CEO of CalTex
Industries, Inc. from September 1988 to October 1992. Mr. Fiore has also held
the positions of Division General Manager, VP of Manufacturing and Director
of Marketing, all with Atlas Powder Company, a subsidiary of Tyler
Corporation from April 1977 to September 1988. Prior to his service at Atlas,
Mr. Fiore served as Assistant to the President of the Gunlocke Company from
January 1974 to April 1977. Mr. Fiore received his MBA from Syracuse
University and BA degree from the State University of New York at Buffalo.

      JOHN K. CASTLE (58) has been a director of the Company since December
16, 1996, and has been Chairman of Castle Harlan, Inc., a private merchant
bank, since 1987. Mr. Castle is Chairman of Castle Harlan Partners II GP,
Inc., which is the general partner of Castle Harlan Partners II, L.P., the
Company's controlling stockholder. Mr. Castle is also Chairman and Chief
Executive Officer of Branford Castle Holdings, Inc. and Chairman of Castle
Harlan Partners III GP, Inc., the general partner of the general partner of
Castle Harlan Partners III, L.P. Immediately prior to forming Castle Harlan,
Inc., Mr. Castle was President and Chief Executive Officer and a director of
Donaldson, Lufkin and Jenrette, Inc., one of the nation's leading investment
banking firms. Mr. Castle is a director of Sealed Air Corporation, Morton's
Restaurant Group, Inc. and Universal Compression, Inc.; a Managing Director
of Statia Terminals Group, N.V.; and a member of the corporation of the
Massachusetts Institute of Technology. Mr. Castle is also a Trustee of the
New York Presbyterian Hospital, Inc., the Whitehead Institute of Biomedical
Research and New York Medical College (for 11 years serving as Chairman of
the Board). Formerly, Mr. Castle was a Director of the Equitable Life
Assurance Society of the United States.


                                       21
<PAGE>

      DAVID B. PITTAWAY (48) has been a director of the Company since
December 16, 1996, and was President, Treasurer and the sole director of the
Company from April 1996 through December 1996. Mr. Pittaway has been Vice
President and Secretary of Castle Harlan, Inc., a private merchant bank,
since February 1987 and Senior Managing Director since May 1999. Mr. Pittaway
is Secretary of Castle Harlan Partners II GP, Inc., which is the general
partner of the general partner of Castle Harlan Partners II, L.P., the
Company's controlling stockholder. Mr. Pittaway is also Secretary of Castle
Harlan Partners III GP, Inc., the general partner of the general partner of
Castle Harlan Partners III, L.P. Mr. Pittaway has been Vice President and
Secretary of Branford Castle, Inc., an investment company, since October
1986; Vice President, Chief Financial Officer and a director of Branford
Chain, Inc., a marine wholesale company, since June 1987; a director of
Morton's Restaurant Group, Inc., a public restaurant company, and of Charlie
Browns Acquisition Corp; and Managing Director of Statia Terminals Group,
N.V., a holder of marine terminals. Prior to 1987, Mr. Pittaway was Vice
President of Strategic Planning and Assistant to the President of Donaldson
Lufkin & Jenrette, Inc. from 1985.

      ZANE TANKEL (59) has been a director of the Company since December 16,
1996, and has been Chairman and Chief Executive Officer of Zane Tankel
Consultants, Inc., a sales company, since 1990. In 1994, Mr. Tankel formed
Apple Metro, Inc., a restaurant franchisee for the New York metropolitan
area, for the franchiser Applebee's Neighborhood Grill & Bar. He is presently
Chairman and Chief Executive Officer of Apple Metro, Inc. In 1995, Mr. Tankel
was elected chairman of the Federal Law Enforcement Foundation, which aids
the federal law enforcement community in times of crisis, and was elected to
the Board of Directors of the Metropolitan Presidents Organization, the New
York chapter of the World Presidents Organization, with which Mr. Tankel has
been associated since 1977. Mr. Tankel has also served on the Board of
Directors of Beverly Hills Securities Corporation, a wholesale mortgage
brokerage company, from 1987 until its sale in January 1994. In addition, Mr.
Tankel founded Saga Communications, Inc. in 1988.

      EDWARD O. VETTER (79) has been a director of the Company since January
28, 1998 and has served as President of Edward O. Vetter & Associates, a
private management consulting firm, since 1978 and has also served as a
Trustee for the Massachusetts Institute of Technology since 1979. Mr. Vetter
also served from 1987 to 1991 as Chairman of the Texas Department of
Commerce, from 1979 to 1983 as Energy Advisor to the Governor of Texas and
from 1976 to 1977 as U.S. Undersecretary of Commerce, serving as Director of
Overseas Private Investment Corporation and as Director of Pension Benefit
Guaranty Corporation. From 1952 through 1975, Mr. Vetter was employed by
Texas Instruments, Inc. in various capacities and was the Executive
Vice-President and Chief Financial Officer at the time of his retirement in
1975. Formerly, Mr. Vetter has served as a director of AMR Corporation,
Champion International, Cabot Corporation, Dual Drilling Company, and Bell
Packaging Company.

      SHERICE P. BENCH (40) has been Vice President Finance of the Company
since December 16, 1996, and prior thereto was Vice President Finance and
Controller of CJC from March 1989 through December 1996. Before joining CJC
in March 1989, Ms. Bench was employed as an audit manager with Arthur
Andersen LLP. Mrs. Bench received her BA degree from Texas Tech University
and is a Certified Public Accountant.

      The Board of Directors has established two committees, a Compensation
Committee and an Audit Committee. The Compensation Committee reviews general
policy matters relating to compensation and benefits of employees and
officers of the Company. The Audit Committee recommends the firm to be
appointed as independent accountants to audit the Company's financial
statements, discusses the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants the
Company's interim and year-end operating results, considers the adequacy of
the internal controls and audit procedures of the Company and reviews the
non-audit services to be performed by the independent accountants. The
Compensation Committee consists of Messrs. Castle, Pittaway and Tankel and
the Audit Committee consists of Messrs. Pittaway and Vetter.

                                       22
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

      The table below summarizes the total value of compensation received by
the Named Executive Officers who received compensation which exceeded
$100,000 during fiscal 1999.

<TABLE>
<CAPTION>
                                               SUMMARY COMPENSATION TABLE

                                                                   Long-Term
                                        Annual Compensation      Compensation
                                      ------------------------------------------
                                                                    Awards
                                                                  Securities
         Name and                                                 Underlying        All Other
    Principal Position        Year     Salary($)     Bonus($)    Options(#)(1)    Compensation($)
---------------------------- -------- ------------- ----------- ---------------- ------------------
<S>                          <C>      <C>           <C>         <C>              <C>
David G. Fiore(2)             1999       23,077        -0-          12,524             -0-
President, Chief Executive    1998        -0-          -0-            -0-              -0-
Officer and Director          1997        -0-          -0-            -0-              -0-

Robert F. Amter(3)            1999      440,000        -0-             -(4)            -0-
(Former President and         1998        -0-          -0-            -0-              -0-
Chief Executive Officer)      1997        -0-          -0-            -0-              -0-

Jeffrey H. Brennan(4)         1999      110,427        -0-            -0-           97,243(4)
(Former President and         1998      195,292        -0-            -0-              -0-
Chief Executive Officer)      1997      131,538        -0-           8,617             -0-

Richard H. Fritsche(5)        1999        -0-          -0-            -0-          119,366(5)
(Former Vice President and    1998      118,309       50,000          -0-           27,894(6)
Chief Financial Officer)      1997       79,618        -0-           1,723          46,940(6)

Sherice P. Bench              1999      119,572       6,000           -0-              -0-
Vice President Finance        1998       88,269       5,000           -0-              -0-
                              1997       83,158       7,500          1,034             -0-
</TABLE>

-----------------
  (1)  The right to exercise the underlying options granted pursuant to the
       Company's Amended and Restated 1997 Stock Option Plan (the "Option Plan")
       vest at the rate of 25% per year at the end of the second through fifth
       year following the grant. As of August 28, 1999, there were 5,020 options
       exercisable under the Option Plan. Unless otherwise terminated earlier in
       accordance with the terms of the Option Plan, the options expire ten
       years from the date of grant.
  (2)  Mr. Fiore was employed as President and Chief Executive Officer of the
       Company on August 11, 1999. Mr. Fiore was granted options to purchase
       12,524 shares under the Option Plan concurrent with his employment. In
       accordance with the terms of his employment contract, Mr. Fiore's options
       vest and become exercisable one-half at the end of the first year and
       the remainder at the end of the second year.
  (3)  Mr. Amter was employed from February 19, 1999 through August 19, 1999. No
       stock options were granted to Mr. Amter. Mr. Amter's employment agreement
       provides for certain additional equity compensation (discussed further
       under Employment Contracts below) and a tax-offset loan which was
       deferred at August 28, 1999.
  (4)  Mr. Brennan's employment with the Company terminated as of February 19,
       1999. Payments to Mr. Brennan after such date have continued in
       accordance with the terms of his employment agreement. Mr. Brennan's
       options under the Option Plan terminated effective February 19, 1999,
       upon the termination of his employment.
  (5)  Mr. Fritsche's employment with the Company was terminated as of August
       29, 1998. Payments to Mr. Fritsche after such date have continued to be
       made in accordance with the terms of his employment agreement. Mr.
       Fritsche's options under the Option Plan terminated effective August 29,
       1998 upon the termination of his employment.
  (6)  Consists of reimbursement for relocation expenses.

                                       23
<PAGE>

      No stock options under the Option Plan were exercised by any of the
named executives or officers during fiscal 1999. Options to purchase an
aggregate of 8,617 shares and 1,723 shares terminated by reason of the
terminations of employment by Mr. Brennan and Mr. Fritsche, respectively.
Options to purchase an aggregate of 12,524 shares were granted to Mr. Fiore
pursuant to the Option Plan during fiscal 1999.

      Directors who are neither managers of the Company nor affiliates of
CHPII each receive a fee of $25,000 per year for their services as a
director. In addition, all directors are reimbursed for expenses incurred by
them in attending meetings of the Board of Directors or any committee thereof.

      The Company has entered into indemnification agreements with each of
its directors that, among other things, require the Company to indemnify such
directors to the fullest extent permitted by law and to advance to the
directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. The Company
has also agreed to indemnify and advance all expenses incurred by directors
seeking to enforce their rights under the indemnification agreements, and to
cover directors under the Company's directors' and officers' liability
insurance.

EMPLOYMENT CONTRACTS

      The Company entered into an employment agreement with Mr. David G.
Fiore, effective August 11, 1999, pursuant to which Mr. Fiore serves as Chief
Executive Officer of the Company at an annual base salary of $300,000 per
year for an initial term of two (2) years. The Agreement will automatically
renew so that the employment term will always have two years remaining unless
either party provides written notice to the other party of its or his intent
to terminate. The employment agreement provides that Mr. Fiore will be paid a
bonus each fiscal year in an amount of up to $200,000 based upon targets or
standards as shall be determined by the Board of Directors, in each case,
within three months of the commencement of the following fiscal year. In
addition, a discretionary bonus of up to $100,000 as determined by the
Compensation Committee of the Board of Directors may be granted. All such
bonuses shall be paid within 120 days following the close of each fiscal
year. In addition, if the Company achieves certain EBITDA objectives (as
defined) within three years of the effective date of his Agreement, Mr. Fiore
will earn a long-term incentive bonus of $1,000,000 in the form of Series B
Preferred Stock of the Company having a face value of $1,000,000 on the date
of issuance. In addition, Mr. Fiore received an initial grant of stock
options to purchase 12,524 shares of Common Stock, pursuant to his agreement
and the terms of the Company's qualified incentive stock option plan,
equivalent to 3% of the issued and outstanding shares of the common stock of
the Company on a fully diluted basis. One-half of these options fully vest at
the end of the first year and the remainder at the end of the second year.
Mr. Fiore is eligible to participate in all employee benefit plans and
programs (including any incentive bonus plan and incentive stock option
plans) maintained by the Company from time to time for the benefit of its
employees. In the event of the termination of his employment without
substantial cause (as defined), Mr. Fiore would be entitled to receive
bi-weekly severance payments for the balance of his employment term, plus the
aggregate of any bonus actually earned by him through the date of
termination, plus the long-term bonus and any stock options actually earned
through the date of termination. In addition the Company will provide health
benefits to Mr. Fiore and his family members for an additional 24 months
beginning on the date his health coverage would otherwise cease due to his
termination.

      The Company entered into an employment agreement with Sherice P. Bench,
effective as of December 16, 1996, pursuant to which Mrs. Bench serves as an
executive officer of the Company at an annual base salary of not less than
$85,000 per year for an initial term of two years, which can be automatically
extended for additional one year terms on December 15th of each succeeding
year thereafter unless earlier terminated by the Company by not less than 60
days' prior notice. The current term expires December 15, 2000. Mrs. Bench is
entitled to participate in such employee benefit programs, plans and policies
(including incentive bonus plans and incentive stock option plans) as are
maintained by the Company and as may be established for the employees of the
Company from time-to-time on the same basis as other executive employees are
entitled thereto. In the event of termination without "substantial cause" (as
defined), Mrs. Bench will be entitled to receive 39 bi-weekly severance
payments equal to the average of her bi-weekly compensation in effect within
the two years preceding the termination, accrued but unused vacation, and any
accrued bonus plus Mrs. Bench will be entitled to elect the continuation of
health benefits under COBRA and the Company will pay the COBRA premiums for
an 18-month period, beginning on the date that her health coverage ceases due
to her termination.

      The Company entered into an employment agreement with Mr. Robert F.
Amter, effective as of February 19, 1999, pursuant to which Mr. Amter was to
serve as an executive of the Company for a term of six months at a salary of
$70,000 per month. Mr. Amter's contract expired on August 19, 1999. Mr.
Amter's employment agreement provided

                                       24
<PAGE>

for additional equity or cash compensation following the expiration of its
term based on whether certain financial performance criteria were met during
the term of the agreement, which were not met. The agreement provides that
Mr. Amter receive as additional compensation 6,600 shares of Series B
Preferred Stock of the Company valued at $100 per share and also provides for
a tax offset payment in the form of a loan to Mr. Amter sufficient to pay Mr.
Amter's federal and state income taxes and employment tax with respect to
such additional compensation. The balance of any such loan is due and payable
upon an initial public offering of the company or upon the disposition of the
Series B Preferred Stock issued as additional compensation. Any issuance of
any stock as additional compensation or any extension of tax offset loans was
deferred as of August 28, 1999.

      The Company entered into an employment agreement with Jeffrey H.
Brennan, effective as of December 16, 1996, pursuant to which Mr. Brennan was
to serve as Chief Executive Officer of the Company at an annual base salary
of $190,000 per year for an initial term of four years. Mr. Brennan's
employment pursuant to his employment agreement was terminated on February
19, 1999. In accordance with Mr. Brennan's employment agreement, Mr. Brennan
is entitled to receive bi-weekly severance payments during the two-year
period following his termination in an amount equal to the average of his
bi-weekly base compensation in effect within the two years preceding his
termination. Mr. Brennan agreed not to compete with the Company in the United
States for a period of one year after the termination of his employment under
his employment agreement. In conjunction with the termination of Mr.
Brennan's employment, the Company repurchased from Mr. Brennan all shares of
stock of the Company then beneficially owed by him at the original purchase
price paid by Mr. Brennan therefore in cash plus the cancellation of the note
issued to the Company by Mr. Brennan in conjunction with the purchase.

      The Company entered into an employment agreement with Richard H.
Fritsche, effective as of December 16, 1996, pursuant to which Mr. Fritsche
was to serve as an executive of the Company at an annual base salary of
$115,000 per year for an initial term of three years. Mr. Fritsche's
employment pursuant to his employment agreement was terminated on August 29,
1998. In accordance with Mr. Fritsche's employment agreement, Mr. Fritsche is
entitled to receive bi-weekly severance payments during the 18-month period
following his termination in an amount equal to the average of his bi-weekly
base compensation in effect within the two years preceding his termination.
Mr. Fritsche agreed not to compete with the Company in the United States for
a period of one year after the termination of his employment under his
employment agreement. In conjunction with the termination of Mr. Fritsche's
employment, the Company repurchased from Mr. Fritsche all shares of stock of
the Company then beneficially owed by him at the original purchase price paid
by Mr. Fritsche therefore.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      No member of the Compensation Committee is an employee of the Company.
There are no compensation committee interlocks (i.e., no executive officer of
the Company serves as a member of the board of directors or the compensation
committee of another entity which has an executive officer serving on the
Company's Board or the Compensation Committee.)

MANAGEMENT OPTIONS

      The Board of Directors of the Company approved the Commemorative
Brands, Inc. Amended and Restated 1997 Stock Option Plan (the "Option Plan")
effective July 29, 1997, as amended December 9, 1997. Pursuant to the Option
Plan approximately 15% of the Common Stock of the Company on a fully diluted
basis (after giving effect to the issuance of the shares of Common Stock
underlying such options) or 69,954 shares of Common Stock have been reserved
for issuance upon exercise of future stock options under the Option Plan. The
Option Plan provides for the granting of both incentive and nonqualified
stock options. On July 29, 1997, the Board approved the grant of 34,470
options to management employees at an exercise price of $6.67 per share. No
options were granted to management in fiscal 1998. On January 28, 1998 the
Board approved the grant of 937 nonqualified options to each of Messrs.
Tankel and Vetter, at an exercise price of $6.67 per share. On August 11,
1999, the Board approved the grant of 12,524 nonqualified options to Mr.
Fiore, in accordance with the terms of Mr. Fiore's employment agreement and
the Option Plan, at an exercise price of $6.67 per share. The Compensation
Committee is responsible for monitoring the Option Plan. All Common Stock
issued upon exercise of options granted pursuant to the Option Plan will be
subject to a voting trust agreement.

                                       25
<PAGE>

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
"Stock Purchase Plan"). Pursuant to the terms of the Stock Purchase Plan, the
Company may from time to time offer shares of the Company's Class 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 Stock Purchase Plan by the Plan Administrator (as defined in the Stock
Purchase Plan) upon such terms and at such prices as are set forth in the
Stock Purchase Plan and as are determined by the Plan Administrator.

      On July 20, 1998, the Company commenced an offering pursuant to the
Stock Purchase Plan 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, and no shares were sold.

























                                       26
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information known by the Company
regarding the beneficial ownership of the Company's voting securities as of
August 28, 1999, with respect to (i) each person or entity who is the
beneficial owner of more than 5% of any class of the Company's voting
securities, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, and (iv) all directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                    NUMBER OF        PERCENTAGE         NUMBER OF     PERCENTAGE
                                                    SHARES OF         OF TOTAL          SHARES OF      OF TOTAL
                                                     COMMON            COMMON           SERIES B       SERIES B
NAME AND ADDRESS OF BENEFICIAL OWNER (1)              STOCK             STOCK           PREFERRED      PREFERRED
----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>               <C>            <C>
Castle Harlan Partners II, L.P.(2)                    330,840           87.7%            406,240          88.1%
Castle Harlan Offshore Partners, L.P.(2) (3)           20,804            5.5              25,546           5.5
John K. Castle (2) (3) (4)                            375,985          100.0             460,985         100.0
David B. Pittaway (2)                                     469            *                   469           *
Zane Tankel (2)                                           938            *                   938           *
Edward O. Vetter(2)                                       400            *                   400           *
Robert F. Amter (6)                                       -0-            *                   -0-           *
Jeffrey H. Brennan (7)                                    -0-            *                   -0-           *
David G. Fiore (5)                                        -0-            *                   -0-           *
Sherice P. Bench(5)                                       -0-            *                   -0-           *
Directors and executive officers as a group
  (9 persons, including those listed above)(5)        375,985          100.0             460,985         100.0
</TABLE>
----------------------
* Denotes beneficial ownership of less than one percent of the class of capital
stock.

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission. Except as indicated in the footnotes to
     this table, each stockholder named in the table has sole voting and
     investment power with respect to the shares set forth opposite such
     stockholder's name except for John K. Castle who, in his capacity as voting
     trustee, has sole voting power on such shares, but disclaims any economic
     interest in any shares so held.
(2)  The address for each stockholder or director identified above is c/o Castle
     Harlan, Inc., 150 East 58th Street, New York, New York 10155.
(3)  Affiliates of CHPII include among others, Castle Harlan Offshore Partners,
     L.P. ("Offshore"), Dresdner Bank AG, Grand Cayman Branch Managed Account
     (the "Managed Account") and the limited partners of the sole general
     partner of CHPII. Castle Harlan, Inc. acts as the investment manager for
     CHPII, Offshore and the Managed Account, pursuant to separate investment
     management agreements. Castle Harlan Associates, L.P. ("CHALP") is the sole
     general partner of each of CHPII and Offshore, and therefore, may be deemed
     to be a beneficial owner of the shares owned by each of those two
     partnerships. Castle Harlan Partners II GP, Inc. is the sole general
     partner of CHALP and, therefore, may be deemed to be a beneficial owner of
     the shares owned by CHALP. Castle Harlan, Inc., as the investment manager
     for each of CHPII, Offshore and the Managed Account (the owner of 18,483
     shares of common stock and 22,696 shares of Series B Preferred Stock
     representing 4.9% of the total outstanding common stock and 4.9% of the
     total Series B Preferred Stock,), may be deemed to be beneficial owner of
     the shares owned by such entities.
(4)  John K. Castle is a director of the Company and is the controlling
     stockholder of Castle Harlan Partners II GP, Inc., the general partner of
     the general partner of CHPII, and as such may be deemed to be a beneficial
     owner of the shares owned by CHPII and its affiliates. Mr. Castle disclaims
     beneficial ownership of such shares in excess of his proportionate
     partnership share. In addition, Mr. Castle serves as voting trustee under a
     voting trust agreement (the "Voting Trust Agreement") with certain officers
     and directors of the Company, and limited partners of CHALP and a corporate
     entity of which Mr. Castle is Chairman, Chief Executive Officer and
     principal stockholder. As the voting trustee, Mr. Castle may be deemed the
     beneficial owner of 7,029 shares of Common Stock and 7,674 shares of Series
     B Preferred Stock beneficially held by such persons and entities (which
     amounts are included in the numbers set forth above) through the voting
     trust. Mr. Castle disclaims any economic interest in such shares.
(5)  The address for each director or executive officer identified above is c/o
     Commemorative Brands, Inc., 7211 Circle S Road, Austin, Texas 78745.
(6)  The address for Mr. Robert F. Amter is 44 Ridgeview Drive, Belle Mead, NJ
     08502.
(7)  The address for Mr. Jeffrey H. Brennan is 5400 S. Park Terrace Avenue,
     #10-105, Greenwood Village, CO 80111.

                                       27
<PAGE>

      In accordance with a subscription agreement entered into by the Company
and certain of CHPII's affiliates (together, the "Castle Harlan Group") in
conjunction with the Acquisitions, the Company granted to the Castle Harlan
Group and their permitted transferees, certain registration rights with
respect to the shares of its 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 at any time at the request of the Castle
Harlan Group and granted to the Castle Harlan Group and Messrs. Vetter and
Tankel unlimited piggyback registration rights on certain registrations of
shares by the Company.

      As of June 28, 1999 (a) the Short-Term Revolving Credit was terminated
and (b) the banks under the Company's Bank Agreement agreed to further amend
the Bank Agreement to, among other things, (i) delete the Consolidated Net
Worth Covenant, (ii) amend certain other financial covenants and (iii)
provide for additional loans to the Company of up to $4 million in excess of
the availability under the Borrowing Base for a period of up to 120 days
expiring on November 30, 1999; provided that the funds held in a cash
collateral account that had been pledged by CHPII to secure the CHPII
guaranty of the Company's obligations under the Short-Term Revolving Credit
be converted into $8.5 million face amount of Series B Preferred or other
capital stock of the Company having terms acceptable to the banks. Upon the
conversion of the funds in the cash collateral account into shares of Series
B Preferred, the guarantee obligations of CHPII and the indemnification
obligations of the Company were satisfied and released.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      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 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, 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. 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 Bank Agreement
prohibits payment of the CHP Management Fee (as defined in the Bank
Agreement) 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 CHP Management Fee; (ii) the Short-Term Revolving
Credit shall have been repaid in full; and (iii) the Company meets the
requisite Modified Funded Debt Ratio (as defined in the Bank Agreement). The
Indenture also prohibits payment of the CHP Management Fee (as defined in the
Indenture) in the Event of a Default by the Company in the payment of
principal, Redemption Price, Purchase Price (as defined in the Indenture),
interest, or Liquidated Damages (if any) on the Notes. The Management Fee for
the fiscal years ended August 28, 1999 and August 29, 1998 has been accrued
but not paid, and is included in accounts payable and accrued expenses.

      During June 1998, the Company sold 937 newly issued shares of Series B
Preferred Stock and 937 newly issued shares of Common Stock to Jeffrey H.
Brennan, former Chief Executive Officer and President and Director of the
Company. The Company also sold an aggregate of 985 newly issued shares of
Series B Preferred Stock and 985 shares of Common Stock to three other
officers of the Company. All such sales were effected at a purchase price of
$100 per share of Series B Preferred Stock and $6.67 per share of Common
Stock. Each of the foregoing purchases of shares by officers of the Company
are subject to stock purchase agreements that give the Company the right to
repurchase such shares or the officer the right to require the Company to
repurchase such shares upon termination of employment under certain
circumstances. Concurrently with such purchases, the officers placed all of
the shares acquired by them into the voting trust created by the Voting Trust
Agreement, of which John K. Castle is voting trustee. In conjunction with the
termination of employment of Messrs. Fritsche and Brennan, the Company, in
July 1999, repurchased all shares of stock purchased by Messrs. Fritsche and
Brennan at their original purchase price and cancelled the note issued by Mr.
Brennan in conjunction with his purchase.

                                       28
<PAGE>

      The Company 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. The indemnification agreement was terminated as
of June 28, 1999 upon the termination of the Short-Term Revolving Credit. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -Liquidity and Capital Resources" and Note 8 to the Consolidated
Financial Statements.

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

     The following documents have been filed as a part of this report or
where noted incorporated by reference:

     (a)  The financial statements of the Company are set forth at page 33 of
          this report.

     (b)  The Company has not filed any reports on Form 8-K during the last
          quarter of the period covered by this report.

     (c)  The following exhibits are filed as a part of the report (or have been
          filed and are incorporated by reference herein):

<TABLE>
<CAPTION>
    Exhibit No.     Designation
    -----------     -----------
<S>                 <C>
          2.1(a)    Asset Purchase Agreement dated as of May 20, 1996
                    ("ArtCarved Purchase Agreement"), among the Company, CJC and
                    CJC North America, Inc. ("CJCNA").

          2.2(a)    First Amendment to the ArtCarved Purchase Agreement dated as
                    of November 21, 1996, among the Company, CJC and CJCNA.

          2.3(a)    Letter Agreement amending the ArtCarved Purchase Agreement
                    dated December 16, 1996, among the Company, CJC and CJCNA.

          2.4(a)    Amended and Restated Asset Purchase Agreement dated as of
                    November 21, 1996 ("Balfour Purchase Agreement"), among the
                    Company, Town & Country, L. G. Balfour Company, Inc., and
                    Gold Lance, Inc.

          2.5(a)    Letter Agreement amending the Balfour Purchase Agreement
                    dated December 16, 1996, by and among the Company, Town &
                    Country, L. G. Balfour Company, Inc. and Gold Lance.

          3.1(a)    Certificate of Incorporation of the Company, as amended.

          3.2(a)    Certificate of Designations, Preferences and Rights of
                    Series A Preferred Stock of the Company, effective December
                    13, 1996, together with a Certificate of Correction thereof.

          3.3(a)    Certificate of Designations, Preferences and Rights of
                    Series B Preferred Stock of the Company effective December
                    13, 1996.

          3.4(a)    Restated by-laws of the Company, as amended.

          3.5(c)    Certificate of Increase of Series B Preferred Stock dated
                    June 10, 1998.

          3.6(d)    Certificate of Increase of Series B Preferred Stock dated
                    June 25, 1999.

          4.1(a)    Indenture dated as of December 16, 1996, between the Company
                    and Marine Midland Bank, as trustee (including the form of
                    Note).

          4.2(a)    Form of Note (Included as part of Indenture).

          4.3(a)    Registration Rights Agreement dated as of December 16, 1996,
                    among the Company, Lehman Brothers Inc. and BT Securities
                    Corporation.

          4.4(c)    Amended and Restated Stockholders' and Subscription
                    Agreement, dated as of April 29, 1998, by and among the
                    Company, CHPII, Dresdner Bank AG, Grand Cayman Branch,
                    Offshore, John K. Castle, as Voting Trustee, and the
                    individuals party thereto.

          4.5(b)(f) Amended and restated 1997 Stock Option Plan of the Company.

          9.1(c)    Voting Trust Agreement, as amended and restated as of April
                    29, 1998, among the Company, certain stockholders of the
                    Company party thereto and John K. Castle, as Voting Trustee.

          10.1(a)   Revolving Credit, Term Loan and Gold Consignment Agreement
                    dated as of December 16, 1996, among the Company, the
                    lending institutions listed therein and The First National
                    Bank of Boston and Rhode Island Hospital Trust National
                    Bank, as Agents for the Banks.

          10.2(a)   Purchase Agreement dated December 10, 1996, among the
                    Company and the Initial Purchasers.

          10.3(a)(b) Employment Agreement dated as of December 16, 1996, between
                    the Company and Jeffrey H. Brennan.

          10.4(a)(b) Employment Agreement dated as of December 16, 1996, between
                    the Company and Richard H. Fritsche.

                                       29
<PAGE>

          10.5(a)(b) Employment Agreement between the Company and Balfour with
                    respect to George Agle.

          10.6(a)(b) Form of Indemnification Agreement between the Company and
                    (i) each director and (ii) certain officers.

          10.7(f)   Management Agreement dated as of December 17, 1996, between
                    the Company and Castle Harlan, Inc. .

          10.8(g)   First Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated March 16, 1998.

          10.9(h)   Second Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated July 10, 1998.

          10.10(c)  Incentive Stock Purchase Plan, effective as of July 7, 1998.

          10.11(c)  Third Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated August 26, 1998.

          10.12(c)  Revolving Credit Note, dated as of August 26, 1998, issued
                    by the Company and payable to the order of BankBoston, N.A..

          10.13     (c) Indemnity Agreement, dated August 26, 1998, by and
                    between the Company and CHPII.

          10.14(c)  Fourth Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated November 27, 1998.

          10.15(b)(e) Employment Agreement dated as of February 19, 1999 among
                    the Company, Castle Harlan Partners II, LP and Robert F.
                    Amter.

          10.16(c)  Waiver and Fifth Amendment to Revolving Credit, Term Loan
                    and Gold Consignment Agreement, dated March 30, 1999.

          10.17(c)  Amended and Restated Revolving Credit Note.

          10.18(d)  Waiver and Sixth Amendment to Revolving Credit Term Loan and
                    Gold Consignment Agreement.

          10.19(d)  Seventh Amendment to Revolving Credit, Term Loan, and Gold
                    Consignment Agreement.

          10.20(b)  Employment Agreement dated as of July 13, 1999 between
                    Commemorative Brands, Inc. and David G. Fiore. Filed
                    herewith.

          10.21(b)  Employment Agreement dated as of December 16, 1996 between
                    Commemorative Brands, Inc. and Sherice P. Bench. Filed
                    herewith.

          11.1      Statement re: Computation of per share earnings. Filed
                    herewith.

          27.1      Financial Data Schedule. Filed herewith.

</TABLE>

-----------------
(a)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Registration Statement on Form S-4, dated April 11, 1997.
(b)      Management contract or compensatory plan or arrangement.
(c)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Annual Report on Form 10-K, dated August 29, 1998.
(d)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Quarterly Report on Form 10-Q, dated May 29, 1999.
(e)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Quarterly Report on Form 10-Q, dated February 27, 1999.
(f)      Incorporated by reference to the corresponding Exhibit of the Company's
         Annual Report on Form 10-K, dated August 30, 1997.
(g)      Incorporated by reference to Exhibit 10.1 of the Company's Quarterly
         Report on Form 10-Q, dated February 28, 1998.
(h)      Incorporated by reference to Exhibit 10.1 of the Company's Quarterly
         Report on Form 10-Q, dated May 30, 1998.


                                       30
<PAGE>

                                   SIGNATURES

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

                                         COMMEMORATIVE BRANDS, INC.




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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the indicated capacities on November 23, 1999.


/s/ David G. Fiore               President, Chief Executive Officer and Director
----------------------------
David G. Fiore


/s/ John K. Castle               Director
----------------------------
John K. Castle


/s/ David B. Pittaway            Director
----------------------------
David B. Pittaway


/s/ Zane Tankel                  Director
----------------------------
Zane Tankel


/s/ Edward O. Vetter             Director
----------------------------
Edward O. Vetter



                                       31
<PAGE>

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

The Company has not sent to any of the Company's security holders either (i)
an annual report covering the Company's last fiscal year or (ii) any proxy
statement, form of proxy or other proxy material with respect to any annual
or other meeting of security holders.




























                                       32
<PAGE>

                              FINANCIAL STATEMENTS

                          Index to Financial Statements

<TABLE>
<CAPTION>
                                                                                                              Page
<S>                                                                                                           <C>
Consolidated Financial Statements of Commemorative Brands, Inc. and Subsidiaries

         Report of Independent Public Accountants.........................................................      34

         Consolidated Balance Sheets as of August 28, 1999 and August 29, 1998............................      35

         Consolidated Statements of Operations for the Fiscal Years Ended August 28, 1999, August 29,
                  1998 and August 30, 1997................................................................      36

         Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended August 28, 1999,
                  August 29, 1998 and August 30, 1997.....................................................      37

         Consolidated Statements of Cash Flows for the Fiscal Years Ended August 28, 1999, August 29,
                  1998 and August 30, 1997................................................................      38

         Notes to Consolidated Financial Statements.......................................................      39

Financial Statements of CJC Holdings, Inc., Class Rings Business (ArtCarved)

         Report of Independent Public Accountants.........................................................      56

         Statements of Income (Loss) for the Period from September 1, 1996, through December 16,
                  1996....................................................................................      57

         Statements of Changes in Advances and Equity (Deficit) for the Period from September 1,
                  1996, through December 16, 1996.........................................................      58

         Statements of Cash Flows for the Period from September 1, 1996, through December 16, 1996........      59

         Notes to Financial Statements....................................................................      60

Financial Statements of L. G. Balfour Company, Inc.

         Report of Independent Public Accountants.........................................................      68

         Statements of Operations for the Period Ended December 16, 1996..................................      69

         Statements of Stockholder's Equity for the Period Ended December 16, 1996........................      70

         Statements of Cash Flows for the Period Ended December 16, 1996..................................      71

         Notes to Financial Statements....................................................................      72
</TABLE>

                                       33
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
Commemorative Brands, Inc.:

We have audited the accompanying consolidated balance sheets of Commemorative
Brands, Inc. (a Delaware corporation), and subsidiaries as of August 28, 1999
and August 29, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the fiscal years ended August 28,
1999, August 29, 1998 and August 30, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Commemorative Brands, Inc., and subsidiaries, as of August 28, 1999 and
August 29, 1998, and the results of their operations and their cash flows for
the fiscal years ended August 28, 1999, August 29, 1998 and August 30, 1997,
in conformity with generally accepted accounting principles.



Houston, Texas
November 5, 1999

                                       34
<PAGE>

                             COMMEMORATIVE BRANDS, INC.

                            CONSOLIDATED BALANCE SHEETS

                         (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                 August 28, 1999     August 29, 1998
                                                                                ------------------  -----------------
<S>                                                                             <C>                 <C>
 ASSETS
 Current assets:
       Cash and cash equivalents                                                $        751         $      975
       Accounts receivable,  net of allowance for doubtful accounts of $2,366
         and $2,356, respectively                                                     28,707             24,705
       Inventories                                                                    13,804             14,299
       Prepaid expenses and other current assets                                       9,900             10,517
                                                                                ------------------  -----------------
            Total current assets                                                      53,162             50,496
 Property, plant and equipment, net                                                   41,780             36,294
 Trademarks, net of accumulated amortization of $2,081
            and $1,313, respectively                                                  28,659             29,427
 Goodwill, net of accumulated amortization of $5,953
            and $3,844, respectively                                                  78,408             80,517
 Other assets, net                                                                     7,836              7,071
                                                                                ------------------  -----------------
            Total assets                                                            $209,845         $  203,805
                                                                                ==================  =================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
       Bank overdraft                                                           $      3,186         $      3,138
       Accounts payable and accrued expenses                                          26,142               22,116
       Current portion of long-term debt                                               1,750                1,983
                                                                                ------------------  -----------------
            Total current liabilities                                                 31,078               27,237

 Long-term debt, net of current portion                                              132,660              132,339
 Other long-term liabilities                                                           8,277                9,383
                                                                                ------------------  -----------------
            Total liabilities                                                        172,015              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, 460,985 and 377,156 shares issued and outstanding                    5                    4
       Common Stock, $.01 par value, 750,000 shares authorized, 375,985 and
             377,156 shares issued and outstanding                                         4                    4
       Additional paid-in capital                                                     58,766               50,391
       Retained deficit                                                              (20,946)             (15,554)
                                                                                ------------------  -----------------
            Total stockholders' equity                                                37,830               34,846
                                                                                ------------------  -----------------
            Total liabilities and stockholders' equity                              $209,845         $    203,805
                                                                                ==================  =================
</TABLE>

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

                                       35
<PAGE>

                            COMMEMORATIVE BRANDS, INC.

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                          (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                        August 28,           August 29,          August 30,
                                                                           1999                1998                 1997
                                                                    -----------------    ----------------     ----------------
<S>                                                                 <C>                  <C>                  <C>
Net sales                                                            $   160,308         $    151,101         $    87,600
Cost of sales                                                             70,824               72,615              45,189
                                                                    -----------------    ----------------     ----------------
Gross profit                                                              89,484               78,486              42,411

Selling, general and administrative expenses                              78,962               68,294              41,481
                                                                    -----------------    ----------------     ----------------
Operating income                                                          10,522               10,192                 930
Interest expense, net                                                     14,594               14,829               9,797
                                                                    -----------------    ----------------     ----------------
     Loss before provision for income taxes                               (4,072)              (4,637)             (8,867)
Provision for income taxes                                                   120                    -                   -
                                                                    -----------------    ----------------     ----------------
     Net loss                                                        $    (4,192)        $     (4,637)        $    (8,867)
Preferred dividends                                                       (1,200)              (1,200)               (850)
                                                                    -----------------    ----------------     ----------------
     Net loss to common stockholders                                 $    (5,392)        $     (5,837)        $    (9,717)
                                                                    =================    ================     ================
     Basic and diluted loss per share                                $    (14.31)        $     (15.55)        $    (25.91)
                                                                    =================    ================     ================

Weighted average common shares outstanding and common and
     common equivalent shares outstanding                                376,811              375,323             375,000
                                                                    =================    ================     ================
</TABLE>


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


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


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

                                       36
<PAGE>

                             COMMEMORATIVE BRANDS, INC.
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          (In thousands, except share data)

<TABLE>
<CAPTION>


                                                          Preferred Stock                              Common Stock
                                       -----------------------------------------------------     --------------------------
                                                  Series A                    Series B
                                       --------------------------   ------------------------
                                          Shares       Amount           Shares      Amount         Shares       Amount
                                       ------------- ------------   ------------- -----------    ------------ ------------
<S>                                    <C>           <C>            <C>           <C>            <C>          <C>
Balance, March 28, 1996                           -  $        -                -  $      -                 -  $       -
     (date of formation)
Issuance of Common Stock                          -           -                -         -           375,000          4
Issuance of Preferred Stock                 100,000           1          375,000         4                 -          -
Accrued Preferred Stock Dividends                 -           -                -         -                 -          -
Net loss                                          -           -                -         -                 -          -
                                       ------------- ------------   ------------- -----------    ------------ ------------
Balance, August 30, 1997                    100,000  $        1          375,000  $      4           375,000  $       4
Issuance of Common Stock                          -           -                -         -             2,156          -
Issuance of Preferred Stock                       -           -            2,156         -                 -          -
Accrued Preferred Stock Dividends                 -           -                -         -                 -          -
Net loss                                          -           -                -         -                 -          -
                                       ------------- ------------   ------------- -----------    ------------ ------------
Balance, August 29, 1998                    100,000  $        1          377,156  $      4           377,156  $       4
Repurchase of Common Stock                        -           -                -         -           (1,171)          -
Issuance of Preferred Stock                       -           -           83,829         1                 -          -
Accrued Preferred Stock Dividends                 -           -                -         -                 -          -
Net loss                                          -           -                -         -                 -          -
                                       ------------- ------------   ------------- -----------    ------------ ------------
Balance, August 28, 1999                    100,000  $        1          460,985  $      5           375,985  $       4
                                       ============= ============   ============= ===========    ============ ============


<CAPTION>
                                           Additional
                                             paid-in         Retained
                                             capital         deficit          Total
                                           ------------    -------------    ------------
<S>                                        <C>             <C>             <C>
Balance, March 28, 1996                    $       -       $        -      $        -
     (date of formation)
Issuance of Common Stock                       2,666                -           2,670
Issuance of Preferred Stock                   47,495                -          47,500
Accrued Preferred Stock Dividends                  -             (850)           (850)
Net loss                                           -           (8,867)         (8,867)
                                           ------------   -------------    ------------
Balance, August 30, 1997                   $  50,161       $   (9,717)     $   40,453
Issuance of Common Stock                          14                -              14
Issuance of Preferred Stock                      216                -             216
Accrued Preferred Stock Dividends                  -           (1,200)         (1,200)
Net loss                                           -           (4,637)         (4,637)
                                           ------------   -------------    ------------
Balance, August 29, 1998                   $  50,391       $  (15,554)     $   34,846
Repurchase of Common Stock                        (7)               -              (7)
Issuance of Preferred Stock                    8,382                -           8,383
Accrued Preferred Stock Dividends                  -           (1,200)         (1,200)
Net loss                                           -           (4,192)         (4,192)
                                           ------------   -------------    ------------
Balance, August 28, 1999                   $  58,766       $  (20,946)     $   37,830
                                           ============   =============    ============
</TABLE>

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

                                       37
<PAGE>

                            COMMEMORATIVE BRANDS, INC.
                             STATEMENTS OF CASH FLOWS
                                  (In thousands)

<TABLE>
<CAPTION>
                                                                                        For the Fiscal Years Ended
                                                                           -----------------------------------------------------
                                                                              August 28,        August 29,       August 30,
CASH FLOWS FROM OPERATING ACTIVITIES:                                            1999              1998             1997
                                                                           -----------------  --------------- ------------------
<S>                                                                        <C>                <C>             <C>
     Net loss                                                               $    (4,192)       $ (4,637)      $     (8,867)
     Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities-
         Depreciation and amortization                                            7,176            6,901             4,095
         Provision for doubtful accounts                                          1,389              706               632
         Changes in assets and liabilities-
           (Increase) decrease in receivables                                    (5,391)           1,033             8,187
           (Increase) decrease in inventories                                       495          (2,532)             4,557
           (Increase) decrease in prepaid expenses and other current assets         617          (1,995)            (3,237)
           Increase in other assets                                                (765)         (1,696)            (1,567)
           Increase (decrease) in bank overdraft, accounts payable and
           accrued expenses and other long-term liabilities                       1,768          (1,529)            (4,477)
                                                                           -----------------  --------------- ------------------

           Net cash provided by (used in) in operating activities                 1,097          (3,749)              (677)
                                                                           -----------------  --------------- ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property, plant and equipment                                  (9,785)         (6,552)            (3,493)
     Cash paid for the acquisitions of ArtCarved and Balfour, including               -                -          (170,200)
     transaction costs
                                                                           -----------------  --------------- ------------------

           Net cash used in investing activities                                 (9,785)         (6,552)          (173,693)
                                                                           -----------------  --------------- ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from debt issuance                                                      -                -           120,200
     Payments for repurchase of common stock                                         (7)               -                 -
     Proceeds from issuance of common and preferred stock                         8,383              230            50,000
     Payments on term loan facility, net                                         (1,250)           (750)                 -
     Revolver borrowings, net                                                     1,338            9,622             5,250
                                                                           -----------------  --------------- ------------------

           Net cash provided by financing activities                              8,464            9,102           175,450
                                                                           -----------------  --------------- ------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               (224)         (1,199)             1,080

CASH AND CASH EQUIVALENTS,  beginning of period                                     975            2,174             1,094
                                                                           -----------------  --------------- ------------------

CASH AND CASH EQUIVALENTS, end of period                                    $       751        $     975      $      2,174
                                                                           =================  =============== ==================

SUPPLEMENTAL DISCLOSURE
     Cash paid during the period for -
       Interest                                                             $    14,358        $  14,039      $      7,568
                                                                           =================  =============== ==================
       Taxes                                                                $        94        $     186                43
                                                                           =================  =============== ==================

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
     Accrued preferred stock dividends                                      $     1,200        $   1,200      $        850
                                                                           =================  =============== ==================
</TABLE>

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


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

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

                                       38
<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. The Company's corporate office and primary manufacturing
facilities are located in Austin, Texas.

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 (the Acquisitions) 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 certain assets and liabilities of L.G. Balfour Company, Inc.
(Balfour) from Town and Country Corporation and, until December 16, 1996,
engaged in no business activities other than in connection with the
Acquisitions and the financing thereof. The results of operations for the
Company for the fiscal year ended August 28, 1999, and August 29, 1998 are
not comparable to the results of operations for the fiscal year ended August
30, 1997 because the information presented for the fiscal year ended August
28, 1999 and August 29, 1998 includes business operations for a full
twelve-month period in contrast to the fiscal year ended August 30, 1997 in
which the Company had not be engaged in significant business operations prior
to the completion of the Acquisitions on December 16, 1996. The Company's
scholastic product line consists of high school and college class rings (the
Company's predominate product offering) and graduation-related fine paper
products such as announcements, name cards and diplomas.

(2)      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 years ended
August 28, 1999, August 29, 1998 and August 30, 1997 were negatively impacted
as a result of the consolidation of the Attleboro and North Attleboro,
Massachusetts operations into the Austin, Texas facilities. 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. The consolidation of these Massachusetts-based
operations into the Texas facilities were expected to yield cost savings to
the combined Balfour and ArtCarved operations compared to their predecessors
historical costs from, among other things, reduced occupancy, overhead and
labor expenses. To date, the Company has realized savings of approximately
$1.5 million per year in reduced occupancy and overhead costs. The full
anticipated cost savings from the consolidation of facilities has not been
realized, however, mainly due to the following ongoing circumstances:

-               People - The specific Balfour product knowledge that was "lost"
                due to Massachusetts employees electing not to relocate to
                Texas resulted in production inefficiencies, higher than normal
                training expenses and additional costs to temporarily place
                former Balfour employees (manager and supervisors) in the Texas
                plant. In addition, labor costs in the Austin, Texas area have
                increased faster than anticipated as a result of the tightening
                of the labor market in the Austin area.

-               Tooling - Because Balfour ring tooling is older and more
                complicated to use than the ArtCarved ring tooling, the
                Company continues to experience higher than normal training
                costs and lower levels of efficiency than that achieved at
                the ArtCarved ring plant.

                                       39
<PAGE>

-               Systems - The Balfour computer system is heavily dependent on
                manual processing and human interaction. The Company
                experienced difficulties in the transfer of user knowledge
                and system documentation. As a result, the Company has
                incurred labor costs in excess of those anticipated by
                management to enter, schedule, produce, track and ship the
                Balfour rings.

         During January 1998, the Company began a major computer project
which began implementation in July 1999. The project will convert the more
inefficient Balfour computer systems to the more efficient ArtCarved systems,
unifying the Company's computer systems thereby reducing computer operations
and maintenance costs, streamlining and making the Company's order entry
system and process more accurate, and substantially reducing the risk of any
material "Year 2000" problems that were inherent in the existing Balfour
computer systems. Management believes that the system is now Year 2000
compliant and will be operating more efficiently by January 2000.

         As certain of the labor and tooling costs are imbedded in the
Balfour manufacturing process, management does not anticipate that
significant cost reductions can be accomplished in the near term without
significant changes in the tooling and manufacturing processes of Balfour
products. Management continues to assess more efficient manufacturing and
tooling techniques which may in the future yield additional cost savings but
may require additional capital investment.

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:

<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.

                                       40
<PAGE>

IMPAIRMENT OF LONG-LIVED ASSETS

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," 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 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 supplied to national chain stores
and sales representatives by the Company which are amortized on a
straight-line basis over six 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.

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.

                                       41
<PAGE>

ADVERTISING EXPENSE

Selling, general and administrative expenses for the Company include
advertising expenses of $3,694,000, $3,506,000 and $2,752,000 for the fiscal
years ended August 28, 1999, August 29, 1998 and August 30, 1997 (See Note 1).

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. The Company 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 somewhat 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 8 and 12.

SFAS No. 130, "Reporting Comprehensive Income," was adopted by the Company
for the fiscal year ending August 28, 1999, and 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 did not 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," was 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 did not impact
the Company's disclosures.

SFAS No. 132, "Employers Disclosure about Pensions and Other Postretirement
Benefits," was adopted by the

                                       42
<PAGE>

Company for fiscal year ending August 28, 1999. It revised employers'
disclosures about pension and other postretirement benefit plans, but it did
not change the measurement or recognition of those plans.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which was amended by SFAS No. 137, is required to be adopted by the Company
in the first quarter of fiscal year 2001 (November 2000). 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.

(3)      INVENTORIES

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

<TABLE>
<CAPTION>
                                             August 28, 1999     August 29, 1998
                                             ---------------     ---------------
<S>                                          <C>                 <C>
Raw materials                                $      8,079         $      8,754
Work in process                                     1,987                3,139
Finished goods                                      3,738                2,406
                                             ---------------     ---------------
                                             $     13,804         $     14,299
                                             ===============     ===============
</TABLE>

Cost of sales includes depreciation and amortization of $2,425,000,
$2,188,000 and $1,439,000, for the fiscal years ended August 28, 1999, August
29, 1998 and August 30, 1997, respectively (see Note 1).

In accordance with purchase price accounting, at the purchase date (December
16, 1996), the inventory balance was increased by $4.7 million to record
inventory at fair market value. During the fiscal year ended August 30, 1997,
this amount was expensed to cost of sales.

(4)      PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                      August 28,           August 29,
                                                         1999                 1998
                                                    ----------------     ---------------
<S>                                                 <C>                  <C>
Sales representatives advances                      $       5,874         $      4,771
Reserve on sales representatives advances                  (1,245)              (1,041)
Current deferred tax asset                                  2,799                3,178
Prepaid advertising and promotion materials                 1,669                2,694
Other                                                         803                  915
                                                    ----------------     ---------------
                                                    $       9,900         $     10,517
                                                    ================     ===============
</TABLE>

Included in other current assets as of August 28, 1999, is approximately
$233,000 of options to purchase 58,300 ounces of gold which expire in various
amounts through June 2000. All options have a strike price of $285 per ounce
of gold. The Company carries these gold options at the lower of cost or
market.

                                       43
<PAGE>

(5)               PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                       August 28,          August 29,
                                                          1999                1998
                                                    ----------------    ----------------
<S>                                                 <C>                 <C>
Land                                                $      2,000         $     2,000
Buildings and improvements                                 5,366               5,123
Tools and dies                                            22,691              20,377
Machinery and equipment                                   20,741              14,320
Construction in progress                                   1,113                 307
                                                    ----------------    ----------------
                  Total                             $     51,911         $    42,127
Accumulated depreciation                                 (10,131)             (5,833)
                                                    ----------------    ----------------
         Property, plant and equipment, net         $     41,780         $    36,294
                                                    ================    ================
</TABLE>

Depreciation expense (included in cost of sales and selling, general and
administrative expenses) recorded in the accompanying statements of
operations is $4,299,000, $3,776,000 and $2,115,000 for the fiscal years
ended August 28, 1999, August 29, 1998 and August 30, 1997, respectively.

(6)      OTHER ASSETS

Other assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                        August 28,          August 29,
                                                           1999                1998
                                                    ------------------    ----------------
<S>                                                 <C>                   <C>
Deferred financing costs                            $      5,103           $    4,646
Ring samples                                               4,308                3,155
Other                                                         45                  215
                                                    ------------------    ----------------
                                                    $      9,456           $    8,016
Accumulated amortization                                  (1,620)                (945)
                                                    ------------------    ----------------
         Other assets, net                          $      7,836           $    7,071
                                                    ==================    ================
</TABLE>

(7)      ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The principle components of accounts payable and accrued expenses are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                           August 28,          August 29,
                                                              1999                1998
                                                        ----------------     ----------------
<S>                                                     <C>                  <C>
Accounts payable                                        $      7,714          $     8,682
Commissions and royalties                                      6,543                3,362
Compensation and related costs                                 2,002                2,283
Accrued interest payable                                       1,849                1,872
Accrued management fees                                        1,750                  313
Customer deposits                                              1,085                1,179
Accrued sales and property taxes                                 878                  870
Severance costs                                                  832                  847
Accumulated post retirement medical benefit cost                 454                  413
Other                                                          3,035                2,295
                                                        ----------------     ----------------
                                                        $     26,142          $    22,116
                                                        ================     ================
</TABLE>

                                       44
<PAGE>

(8)  LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                            August 28,          August 29,
                                                               1999                1998
                                                        -----------------    -----------------
<S>                                                     <C>                   <C>
11% senior subordinated notes due 2007                  $     90,000          $    90,000
Term loan facility                                            22,750               24,000
Bank revolver                                                 21,660               19,589
Short-term revolving credit                                      -                    733
                                                        -----------------    -----------------
         Total debt                                     $    134,410          $   134,322
Less: current portion                                          1,750                1,983
                                                        -----------------    -----------------
         Total long-term debt                           $    132,660          $   132,339
                                                        =================    =================
</TABLE>

11% SENIOR SUBORDINATED NOTES

The Company's 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, at specified redemption
prices ranging from 105.5% of the principal amount thereof if redeemed during
2002 and declining to 100% of the principle amount thereof if redeemed during
the year 2005 or thereafter, 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% 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,
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 in the Indenture), 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 Agreement (as defined below) 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 in the Indenture), the Company is
required to apply any Net Proceeds (as defined in the Indenture) 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 11% 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 is in compliance with the Indenture covenants as of
August 28, 1999 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, including a $4.0 million overadvance line extended
in August, 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.

                                       45
<PAGE>

TERM LOAN FACILITY

The term loan facility (Term Loan) matures on December 16, 2003. The Company
may prepay the Term Loan at any time without penalty. The Company must repay
specified amounts of the Term Loan in 28 consecutive quarterly installments
which commenced March 31, 1997. Amounts of principal prepaid on the Term Loan
may not be reborrowed.

REVOLVING CREDIT AND GOLD FACILITIES

The revolving credit and gold facilities (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 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.

The Bank Agreement 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 American, Inc., has guaranteed the Company's obligations and granted a
similar security interest.

The Bank Agreement contains certain financial covenants that require the
Company to maintain certain minimum or maximum, as applicable, levels of (a)
senior funded debt to earnings before interest, taxes, depreciation and
amortization (EBITDA, as defined), (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. unless at the time of payment
(A) no Event of Default (as defined in 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. As of March 30, 1999, the foregoing Consolidated Net Worth
covenant was further amended by agreement among the Company and the banks to
extend the date for compliance with the covenant from March 30, 1999 to May
27, 1999, and subsequently extended to June 28, 1999, and to increase the
amount of required Consolidated Net Worth to be at least $44.0 million. The
Company met this requirement as of June 28, 1999. See Note 10 for discussion
of the additional equity contributed by CHP II in June 1999.

As of June 28, 1999, (a) the Short-Term Revolving Credit was terminated and
(b) the banks under the Company's Bank Agreement agreed to further amend the
Bank Agreement to, among other things, (i) delete the Consolidated Net Worth
covenant, (ii) amend and retain certain other financial covenants (as defined
above) and (iii) provide for overadvance loans to the Company of up to $4
million in excess of the availability under the Borrowing Base (as defined
below) for a period of up to 120 days expiring on November 30, 1999; provided
that the funds held in a cash collateral account that had been pledged by
CHPII to secure the CHPII guaranty of the Company's obligations under the
Short-Term Revolving Credit be converted into $8.5 million face amount of
Series B Preferred or other capital stock of the Company having terms
acceptable to the banks. Upon the conversion of the funds in the cash
collateral account into shares of Series B Preferred on June 28, 1999, the
guarantee obligations of CHPII and the indemnification obligations of the
Company were satisfied and released.

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 certain investments. The Company was in
compliance with all debt covenants under the Bank Agreement as of August 28,
1999 and August 29, 1998.

                                       46
<PAGE>

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 and Gold Facilities to the extent of
such excess. At August 28, 1999, the Company had $4,161,000 available under
the Revolving Credit Facility including the $4.0 million overadvance loan,
and $4,379,000 available under the Gold Facility.

The Bank Agreement 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
Agreement 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.

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 fiscal years ended August
28, 1999 and August 29, 1998, the Company expensed approximately $265,000 and
$243,000, 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 August 28,
1999, and August 29, 1998, the Company held approximately 18,911 ounces and
13,846 ounces, respectively, valued at $4.8 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 (as
amended, the Short-Term Revolving Credit), pursuant to which the Company
could borrow up to $8 million from BankBoston, N.A. (BankBoston), from time
to time. The Short-Term Revolving Credit was initially set to expire on March
31, 1999, but on March 30, 1999 was extended through May 27, 1999 and as of
May 27, 1999 was further extended through June 28, 1999. Amounts outstanding
under the Short-Term Revolving Credit bore interest at either fixed or
floating rates based upon the interest rate option selected by the Company.
The Short-Term Revolving Credit expired on June 28, 1999.

The long-term debt outstanding as of August 28, 1999, matures as follows (in
thousands):

<TABLE>
<CAPTION>
Fiscal Year Ending                                  Amount Maturing
                                                    ----------------
<S>                                                 <C>
2000                                                        1,750
2001                                                        2,500
2002                                                       27,160
2003                                                        8,500
2004                                                        4,500
Thereafter                                                 90,000
                                                    -------------
                                                    $     134,410
                                                    =============
</TABLE>

The weighted average interest rate of debt outstanding as of August 28, 1999
and August 29, 1998 was 10.2% and 10.3%, respectively. The weighted average
interest rate under the Short-Term Revolving Credit as of August 29, 1998 was
8.5%.

The Company's management believes the carrying amount of long-term debt,
including the current maturities, approximates fair value as of August 28,
1999 and August 29, 1998, based upon current rates offered for debt with the
same or similar debt terms.

                                       47
<PAGE>

(9)      COMMITMENTS AND CONTINGENCIES

Certain Company facilities and equipment are leased under agreements expiring
at various dates through 2005. The Company's commitments under the
noncancelable portion of all operating leases for the next five years and
thereafter as of August 28, 1999, are approximately as follows (in thousands):

<TABLE>
<CAPTION>
Fiscal Year Ending                                    Commitment
                                                    ----------------
<S>                                                 <C>
2000                                                $       1,158
2001                                                          834
2002                                                          682
2003                                                          542
2004                                                          501
Thereafter                                                    489
                                                    -------------
                                                    $       4,206
                                                    =============
</TABLE>

Subsequent to August 28, 1999, the Company entered into two new lease
agreements for additional facilities in Austin, Texas and El Paso, Texas.
Monthly lease payments for the facilities are $13,218 and $6,780,
respectively, and expire in October 2004 and September 2001, respectively.

Lease and rental expense included in selling, general and administrative
expenses in the accompanying statements of operations amounts to
approximately $825,000, $773,000 and $1,056,000 for the fiscal years ended
August 28, 1999, August 29, 1998 and August 30, 1997, respectively (see Note
1).

The Company is a party to certain contracts with some of its sales
representatives whereby the representatives have purchased from their
predecessors 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.

(10)     EMPLOYEE COMPENSATION AND BENEFITS

POSTRETIREMENT MEDICAL BENEFITS

In December 1990, the Financial Accounting Standards Board issued SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which requires that the accrual method of accounting for certain
postretirement benefits be adopted. The Company provides certain health care
and life insurance benefits for employees who retired prior to December 31,
1990. L. G. Balfour Company, Inc., adopted this statement in fiscal 1994 and
recognized the actuarial present value of the accumulated postretirement
benefit obligation (APBO) of approximately $6.2 million at February 29, 1993,
using the delayed recognition method over a period of 20 years. Prior to
adopting SFAS No. 106, the cost of providing these benefits was expensed as
incurred.

At the purchase date (December 16, 1996), CBI assumed this pre-existing
liability and recorded the APBO of $5.5 million at the time of acquisition.

                                       48
<PAGE>

The following table sets forth the plan status (in thousands):

<TABLE>
<CAPTION>
                                                                                August 28,            August 29,
                                                                                   1999                  1998
                                                                             -----------------     ----------------
<S>                                                                          <C>                   <C>
Accumulated postretirement benefit obligation
         Retired employees                                                    $    (1,216)         $     (1,456)
         Active employees                                                               -                     -
                                                                             -----------------     ----------------
         Total                                                                     (1,216)         $     (1,456)
Plan assets at fair value                                                               -                     -
                                                                             -----------------     ----------------
         Unfunded accumulated benefit obligation in excess of plan assets          (1,216)         $     (1,456)
         Unrecognized net gain                                                       (109)                 (187)
         Unrecognized prior service costs                                          (1,160)               (1,739)
                                                                             -----------------     ----------------
Accumulated postretirement benefit cost, current and long-term                $    (2,485)         $     (3,382)
                                                                             =================     ================
</TABLE>

The net periodic postretirement benefit cost for the fiscal years ended
August 28, 1999, August 29, 1998, and August 30, 1997, includes the following
components (in thousands):

<TABLE>
<CAPTION>
                                                                 August 28,        August 29,         August 30,
                                                                   1999              1998                1997
                                                            ------------------ -----------------  ------------------
<S>                                                         <C>                <C>                <C>
Service costs, benefits attributed to service
         during the period                                  $          -       $          -       $          -
Interest cost                                                         96                100                302
Actual return on assets                                                -                  -                  -
Recognition of transition obligation                                   -                  -                  -
Amortization of unrecognized net gain                                  -                (39)                 -
Amortization of unrecognized net prior service costs               (580)               (580)                 -
                                                            ------------------ -----------------  ------------------
         Net periodic postretirement benefit cost (income)  $      (484)       $       (519)       $       302
                                                            ================== =================  ==================
</TABLE>

For measurement purposes, a 5.0% annual rate of increase in the per-capital
cost of covered health care benefits was assumed for fiscal 1999 and 1998.
The health care cost trend rate assumption has a significant effect on the
amounts reported. Increasing (or decreasing) the assumed health care cost
trend rate one percentage point in each year would increase (or decrease) the
accumulated postretirement benefit obligation by $33,000, or 3%, and by
$38,000, or 3% as of August 28, 1999 and August 29, 1998, respectively, and
the aggregate of the service and interest cost components of the net periodic
postretirement benefit cost by $2,100, or 2%, and by $2,200, or 2%, for
fiscal 1999 and 1998, respectively.

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% compounded annually for fiscal
1999 and 1998. As the plan is unfunded, no assumption was needed as to the
long-term rate of return on assets.

DEFERRED COMPENSATION

The Company has deferred compensation agreements with certain sales
representatives and executives, which provide for payments upon retirement or
death based on the value of life insurance policies or mutual fund shares at
the retirement date. As of August 28, 1999 and August 29, 1998, the Company
had accrued a total of $486,000 and $773,000, respectively, related to these
agreements. Such amounts, net of the current portion of approximately
$288,000 as of August 28, 1999 and August 29, 1998, are included in other
long-term liabilities in the accompanying consolidated balance sheets.

(11)     INCOME TAXES

For the fiscal years ended August 28, 1999, August 29, 1998, and August 30,
1997, the net current and deferred provision and/or benefit is $0, as a
valuation allowance exists due to the net operating losses incurred by the
Company.

                                       49
<PAGE>

The Company's effective tax rate differs from the federal statutory rate of
34% for the fiscal years ended August 28, 1998 and August 30, 1997, due to
the following (in percentages):


<TABLE>
<CAPTION>
                                                 August 28,          August 29,          August 30,
                                                    1999                1999                1997
                                              ----------------    ----------------     --------------
<S>                                           <C>                 <C>                  <C>
Computed tax benefit at statutory rate               (34.0)%             (34.0)%            (34.0)%
State taxes                                           (5.0)               (5.0)              (5.0)
Change in assets and liabilities, net                 18.5                 4.6               14.4
Increase in valuation allowance                       20.5                34.4               24.6
                                              ----------------    ----------------     --------------
Total effective tax rate                               0.0%                 0.0%              0.0%
                                              ================    ================     ==============
</TABLE>

Deferred tax assets and liabilities as of August 28, 1999 and August 29, 1998
consist of the following (in thousands):

<TABLE>
<CAPTION>
         Deferred tax assets -
                                              August 28, 1999       August 29,1998
                                              ----------------     ----------------
<S>                                           <C>                  <C>
Allowances and reserves                       $       1,644         $      1,947
Net operating loss carryforwards                     16,389               10,995
Other                                                 1,181                1,248
                                              ----------------     ----------------
Total gross deferred tax assets                      19,214         $     14,190
Less - Valuation allowance                           (6,628)              (3,776)
                                              ----------------     ----------------
Net deferred tax assets                       $      12,586         $     10,414
                                              ================     ================

         Deferred tax liabilities -

Property,  plant and equipment,  principally
due to differences in depreciation            $       4,841         $      3,536
                                              -----------------    -----------------
Goodwill basis difference                             7,745                6,878
                                              -----------------    -----------------
Total deferred tax liabilities                $      12,586         $     10,414
                                              ----------------     ----------------
Net deferred tax assets (liabilities)         $           -         $          -
                                              =================    =================
</TABLE>

The valuation allowance has been established due to uncertainty surrounding
the realizability of the deferred tax assets, principally the net operating
loss carryforwards.

For tax reporting purposes, the Company has U.S. net operating loss
carryforwards of approximately $42.0 million and $28.2 million as of August
28, 1999 and August 29, 1998, respectively. Utilization of the net operating
loss carryforwards is contingent on the Company's ability to generate income
in the future. The net operating loss carryforwards will expire beginning in
years 2017 and 2018 if not utilized.

(12)     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. As of August 28, 1999, the Company had issued and outstanding 100,000
shares of Series A Preferred, 460,985 shares of Series B Preferred and
375,985 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) or the last date to
which dividends have been paid 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.

                                       50
<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% 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. 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.

On June 28, 1999, the Company issued 85,000 shares of Series B Preferred
Stock to CHP II for $8.5 million in cash, representing funds previously held
in a cash collateral account that had been pledged to secure the CHPII
guaranty of the Company's obligations under the Short-Term Revolving Credit.

According to the terms of an employment agreement, the Company was to have
issued 6,600 shares of Series B Preferred Stock valued at $100 per share to a
former executive of the Company upon the termination of his agreement in
August 1999. The Company and the former executive have agreed to defer the
issuance of such shares until at least January 2000.

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. So long as shares of the Series A Preferred and Series B
Preferred remain outstanding, the Company may not declare, pay or set aside
for payment any dividends on the Common Stock.

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 4.96% 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 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.

                                       51
<PAGE>

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 35,476 of those shares were available for
grant to directors and employees of the Company as of August 28, 1999. 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 fair market value of the Common Stock at the
date of grant. Payment of the exercise 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.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the 1997 Stock
Option Plan. Accordingly, no compensation cost has been recognized for its
1997 Stock Option Plan. Had compensation cost for the Company's stock-based
compensation plan been determined based on the fair value at the grant date
for awards under the plan consistent with the method of SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net loss to holders
of Common Stock and basic and diluted loss per share for the fiscal years
ended August 28, 1999, August 29, 1998, and August 30, 1997, would have been
increased to the pro forma amounts indicated below (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                         August 28,        August 29,        August 30,
                                                            1999              1998              1997
                                                        --------------   --------------    --------------
<S>                                    <C>              <C>              <C>               <C>
Net loss to common stockholders        As reported       $(5,392)         $(5,837)          $(9,717)
                                       Pro forma          (5,410)          (5,862)           (9,719)
Basic and diluted loss per share       As reported        (14.31)          (15.55)           (25.91)
                                       Pro forma          (14.36)          (15.62)           (25.92)
</TABLE>

Compensation expense for options is reflected over the vesting period;
therefore, future compensation expense may be greater as additional options
are granted.

Incentive stock options for 32,604 shares and 31,971 shares and nonqualified
stock options for 1,874 shares and 1,874 shares of the Company's Common Stock
were outstanding as of August 28, 1999 and August 29, 1998, respectively. A
summary of the status of the Company's 1997 Stock Option Plan as of August
28, 1999 and August 29, 1998, and changes during the fiscal years then ended
are presented below:

<TABLE>
<CAPTION>
                                         August 28,                  August 29,                 August 30,
                                            1999                        1998                       1997
                                  -------------------------- -------------------------- ---------------------------
                                                 Weighted                   Weighted                    Weighted
                                                  Average                    Average                    Average
                                                 Exercise                   Exercise                    Exercise
Fixed Options                       Shares         Price       Shares         Price        Shares        Price
--------------------------------  ------------  ------------  ------------ ------------ ------------- -------------
<S>                               <C>           <C>           <C>          <C>          <C>           <C>
Outstanding at beginning of           33,845    $     6.67        34,470    $    6.67            -    $       -
  fiscal year
Granted                               12,524          6.67         1,874         6.67       34,470         6.67
Exercised                                  -             -             -            -            -            -
Canceled                             (11,891)         6.67        (2,499)        6.67            -            -
                                  ------------  ------------  ------------ ------------ ------------- -------------
Outstanding at end of fiscal          34,478    $     6.67        33,845    $    6.67       34,470    $    6.67
year
                                  ============  ============  ============ ============ ============= =============

Options exercisable at year-end       5,020                           -                           -
Weighted average fair value of
options granted during the                      $     3.72                  $    3.60                 $    3.71
fiscal year ended
</TABLE>

The fair value of each grant was estimated on the date of the grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1999, 1998, and 1997, respectively: dividend
yield of nil in all three fiscal years; expected volatility of 27.99%,
27.36%, and 29.30%, respectively; risk-free interest rate of 6.42%, 6.01%,
and 6.14% respectively; and expected life of 10 years in all three fiscal
years. The Black-Scholes option

                                       52
<PAGE>

pricing model was developed for use in estimating the fair value of traded
options, which have no vesting restrictions and are fully transferable. In
addition, option pricing models require the input of highly subjective
assumptions, including expected stock price volatility. Because the Company's
stock options have characteristics significantly different from those of
traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its stock options.

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 (Stock
Purchase Plan). Pursuant to the terms of Stock Purchase Plan, the Company may
from time to time offer shares of the Company's Class B Preferred Stock and
Common Stock to employees, consultants and independent sales representatives
who are determined to be eligible to purchase shares pursuant to Stock
Purchase Plan by the Plan Administrator (as defined in Stock Purchase Plan)
upon such terms and at such prices as are set forth in Stock Purchase Plan
and as are determined by the Plan Administrator.

On July 20, 1998, the Company commenced an offering pursuant to the Stock
Purchase Plan 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, and no shares were sold.

(13)     RELATED - PARTY TRANSACTIONS

The Company agreed to indemnify CHPII pursuant to an indemnification
agreement, dated August 26, 1998 for any amount that may be incurred by CHPII
under CHPII's guaranty of the Company's obligations under the Short-Term
Revolving Credit (see Note 8). The indemnification agreement was terminated
as of June 28, 1999 (see Note 8).

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, former 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 was due and payable in full on
June 16, 2003, and which bore interest at the rate of 5.77% per annum,
payable annually on the 15th of June. Mr. Brennan granted to the Company a
security interest in the shares acquired by him and his interest in the
voting trust into which the shares were deposited as collateral security for
the repayment in full of the promissory note. As of May 11, 1999, in
connection with the termination of Mr. Brennan's employment, the Company
repurchased for $25,000 in cash plus the return and cancellation of Mr.
Brennan's $75,000 promissory note, all of the shares purchased by Mr. Brennan
at the purchase price paid by him therefor. In connection with the purchase
by another officer of the Company of shares on June 30, 1998, the Company
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 $25,000 loan was repaid in full to the Company on
February 15, 1999. The balance of $100,000 was included in prepaid expenses
and other current assets on the accompanying balance sheet as of 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 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% 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 Bank Agreement
prohibits payment of the CHP 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 CHP Management Fee;
(ii) the Short-Term Revolving Credit shall have been repaid in full; and
(iii) the Company meets the requisite Modified Funded Debt Ratio (as defined
in the Bank Agreement). The Indenture also prohibits payment of the CHP
Management Fee in the Event of a Default by the Company in the payment of
principal, Redemption Price or

                                       53
<PAGE>

Purchase Price (both as defined in the Indenture), interest or Liquidated
Damages (if any) on the Notes. The CHP Management Fee (as defined in the
Indenture) for the fiscal years ended August 28, 1999 and August 29, 1998,
has been accrued but not paid, and is included in accounts payable and
accrued expenses.

(14)     QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data for the Company for the fiscal year ended
August 28, 1999, is as follows:

<TABLE>
<CAPTION>
                                             First Quarter        Second Quarter      Third Quarter       Fourth Quarter
                                                Ended                 Ended               Ended                Ended
                                              November 28,         February 27,          May 29,             August 28,
                                                 1998                 1999                1999                 1999
                                            ----------------    -----------------    ----------------     ----------------
                                                                  (In thousands, except share data)
<S>                                         <C>                 <C>                  <C>                  <C>
     Net sales                              $     41,178         $     43,323        $     50,685         $     25,122
                                            ================    =================    ================     ================
     Gross profit                           $     23,971         $     24,393        $     28,532         $     12,588
                                            ================    =================    ================     ================
     Net income (loss)                      $       (13)         $      1,099        $      2,670         $    (7,948)
                                            ================    =================    ================     ================
     Net income (loss) to common
     stockholders                           $      (313)         $        799        $      2,370         $    (8,248)
                                            ================    =================    ================     ================
     Basic and diluted earnings (loss)
     per share                              $     (0.83)         $       2.12        $       6.29         $    (21.94)
                                            ================    =================    ================     ================
     Weighted average common shares
     outstanding and common and common
     equivalent shares outstanding
                                                 377,156              377,156             376,937              375,985
                                            ================    =================    ================     ================
</TABLE>

Summarized quarterly financial data for the Company for the fiscal year ended
August 29, 1998, is as follows:

<TABLE>
<CAPTION>
                                             First Quarter        Second Quarter      Third Quarter       Fourth Quarter
                                                Ended                 Ended               Ended                Ended
                                              November 30,         February 28,          May 30,             August 29,
                                                 1997                 1998                1998                 1998
                                            ----------------    -----------------    ----------------     ----------------
                                                                  (In thousands, except share data)
<S>                                         <C>                 <C>                  <C>                  <C>
     Net sales                              $     38,364         $     44,168        $     43,085         $     25,484
                                            ================    =================    ================     ================
     Gross profit                           $     21,138         $     24,401        $     22,954         $      9,993
                                            ================    =================    ================     ================
     Net income (loss)                      $        978         $      2,067        $        308         $    (7,990)
                                            ================    =================    ================     ================
     Net income (loss) to common
     stockholders                           $        678         $      1,767        $          8         $    (8,290)
                                            ================    =================    ================     ================
     Basic and diluted earnings (loss)
     per share                              $       1.81         $       4.71        $       0.02         $    (22.03)
                                            ================    =================    ================     ================
     Weighted average common shares
     outstanding and common and common
     equivalent shares outstanding
                                                 375,000              375,000             375,000              376,294
                                            ================    =================    ================     ================
</TABLE>

                                       54
<PAGE>

Summarized quarterly financial data for the Company for the fiscal year ended
August 30, 1997, is as follows:

<TABLE>
<CAPTION>
                                                            Second Quarter       Third Quarter       Fourth Quarter
                                                                Ended                Ended                Ended
                                                               March 1,             May 31,             August 30,
                                                                 1997                1997                  1997
                                                           -----------------    ----------------     ----------------
                                                                        (In thousands, except share data)
<S>                                                        <C>                  <C>                  <C>
Net sales                                                  $     24,751         $     36,927         $      25,922
                                                           =================    ================     ================
Gross profit                                               $     10,509         $     18,423         $      13,479
                                                           =================    ================     ================
Net income (loss)                                          $    (3,861)         $      (874)         $     (4,132)
                                                           =================    ================     ================
Net income (loss) to common stockholders                   $    (4,111)         $    (1,174)         $     (4,432)
                                                           =================    ================     ================
Basic and diluted earnings (loss) per share                $    (10.96)         $     (3.13)         $     (11.82)
                                                           =================    ================     ================
Weighted average common shares outstanding and
common and common equivalent shares outstanding                 375,000              375,000               375,000
                                                           =================    ================     ================
</TABLE>

Commemorative Brands, Inc., completed the Acquisitions of ArtCarved and
Balfour on December 16, 1996, and prior to such date, engaged in no business
activities other than those in connection with the Acquisitions and financing
thereof.

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. The Company has 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 somewhat 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.

                                       55
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To the Stockholders of
Commemorative Brands, Inc.:

We have audited the accompanying statements of income, changes in advances
and equity (deficit) and cash flows of the class rings business (ArtCarved)
of CJC Holdings, Inc. (a Texas corporation), for the period from September 1,
1996, through December 16, 1996. These financial statements are the
responsibility of Artcarved's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of ArtCarved's (as defined above)
operations and its cash flows for the period from September 1, 1996, through
December 16, 1996, in conformity with generally accepted accounting
principles.



Houston, Texas
October 24, 1997



                                       56
<PAGE>

              CJC HOLDINGS, INC., CLASS RINGS BUSINESS (ARTCARVED)

                           STATEMENT OF INCOME (LOSS)

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                   For the Period
                                                                                          From
                                                                                      September 1,
                                                                                         1996,
                                                                                        Through
                                                                                      December 16,
                                                                                          1996
                                                                                  ----------------
<S>                                                                               <C>

NET SALES                                                                           $      27,897

COST OF SALES                                                                              11,988
                                                                                    -------------

               Gross profit                                                                15,909

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                               (9,862)
                                                                                    -------------

               Operating income                                                             6,047

INTEREST INCOME                                                                                94

INTEREST EXPENSE                                                                           (2,970)
                                                                                    -------------

               Income before income tax provision                                           3,171

INCOME TAX PROVISION                                                                            -
                                                                                    -------------

               Net income                                                           $       3,171
                                                                                    =============
</TABLE>

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

                                       57
<PAGE>

              CJC HOLDINGS, INC., CLASS RINGS BUSINESS (ARTCARVED)

              STATEMENT OF CHANGES IN ADVANCES AND EQUITY (DEFICIT)

                                 (In thousands)

<TABLE>
<S>                                                                                                <C>
BALANCE AT AUGUST 31, 1996                                                                          (28,524)
     Net increase in advances from parent                                                            18,889
     Net income for the period from September 1, 1996, through December 16, 1996                      3,171
                                                                                                   --------

BALANCE AT DECEMBER 16, 1996                                                                       $ (6,464)
                                                                                                   ========
</TABLE>


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


                                       58
<PAGE>

              CJC HOLDINGS, INC., CLASS RINGS BUSINESS (ARTCARVED)

                             STATEMENT OF CASH FLOWS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                 For the Period
                                                                                 from September
                                                                                 1, 1996 through
                                                                                December 16, 1996
                                                                                -----------------
<S>                                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                                 $          3,171
     Adjustments to reconcile net income to net cash provided by operating
         activities-
             Depreciation                                                                    649
             Amortization                                                                  1,343
             Provisions for doubtful accounts                                                144
             Change in assets and liabilities-
                    Increase in receivables                                               (6,951)
                    Decrease in inventories                                                  124
                    Decrease in prepaid expenses and other current assets                  1,378
                    Increase in other assets                                              (3,270)
                    Increase in accounts payable                                           1,424
                    Increase in accrued expenses                                           3,486
                                                                                ----------------

     Net cash provided by operating activities                                             1,498
                                                                                ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property, plant and equipment                                             (195)
                                                                                ----------------

     Net cash used in investing activities                                                  (195)
                                                                                ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net change in advances from parent                                                   18,889
                                                                                         (14,628)
     Note payments
                                                                                ----------------

     Net cash provided by financing activities                                             4,261
                                                                                ----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                  5,564

CASH AND CASH EQUIVALENTS, beginning of period                                               -0-
                                                                                ----------------

CASH AND CASH EQUIVALENTS, end of period                                        $          5,564
                                                                                ================
</TABLE>

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

                                       59
<PAGE>

              CJC HOLDINGS, INC., CLASS RINGS BUSINESS (ARTCARVED)

                          NOTES TO FINANCIAL STATEMENTS

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

The accompanying financial statements represent the class rings business
(ArtCarved or the Company) of CJC Holdings, Inc. (CJC). Since ArtCarved is
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 ArtCarved. Management considers the allocations to be
reasonable and believes the accompanying financial statements materially
represent the operations of ArtCarved on a stand-alone basis. Selling,
general and administrative expenses from the operations of ArtCarved as shown
in the accompanying statements of income (loss) represent all the expenses
incurred by CJC excluding only the expenses directly related to the
non-ArtCarved operations of CJC. CJC sold the assets of ArtCarved and CJC
used the sale proceeds to repay its outstanding debt obligations.
Accordingly, the debt obligations of CJC repaid with the sale proceeds have
been recorded on the accompanying balance sheet with the offsetting charge
included in the advances and equity (deficit) account, and the accompanying
statements of income (loss) of ArtCarved presented herein include all of
CJC's debt-related interest expense on such debt obligations. Interest income
of CJC is included in the statements of income (loss) since all excess cash
balances are used to pay principal and interest on debt obligations.

All cash balances remained with CJC after sale of the assets. No cash
balances have been included in cash and cash equivalents in the accompanying
statements of cash flows. All amounts due to/from CJC for ArtCarved's
operations have been included in advances and equity (deficit). Also,
included in advances and equity (deficit) are all intercompany accounts.

Although management considers the above allocation (carve-out) methods to be
reasonable, due to the relationship between ArtCarved and other operations
and activities of CJC, the terms of some or all of the transactions and
allocations discussed above may not necessarily be indicative of that which
would have resulted had ArtCarved been a stand-alone entity.

On December 16, 1996, Commemorative Brands, Inc. (CBI), completed the
acquisitions (the Acquisitions) of substantially all of the scholastic and
recognition and affinity product assets and businesses of ArtCarved of CJC
from CJC and certain assets and liabilities 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.

RESULTS OF OPERATIONS

The results of operations for the period from September 1, 1996, through
December 16, 1996, are not necessarily indicative of the results that could
be expected for a full fiscal year. Due to the highly seasonal nature of the
class ring business, a significant amount of revenues and income occurred in
the three and one-half month period ended December 16, 1996, related to the
back-to-school and pre-holiday season.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR-END

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

                                       60
<PAGE>

INVENTORIES

ArtCarved's inventories, which include raw materials, labor and overhead and
other manufacturing and production costs, are stated at the lower of cost or
market using the dollar-value last-in, first-out (LIFO) link-chain method.

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:

<TABLE>
<S>                                         <C>
DESCRIPTION                                     USEFUL LIFE

Land improvements                                      15 years
Buildings and improvements                       10 to 25 years
Tools and dies                                    5 to 10 years
Machinery and equipment                           3 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.

GOODWILL AND 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 costs, software and software development costs, and
engineering and design costs. Debt costs are amortized over the lives of the
specific debt instruments of one to six years. Software and software
development costs have a useful life of three to five years, and engineering
and design costs are amortized over six years.

FAIR VALUE OF FINANCIAL INSTRUMENTS

ArtCarved'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 ArtCarved's cash and
cash equivalents, accounts receivable and accounts payable approximate fair
value due to their short-term nature. The fair value of ArtCarved's long-term
debt is estimated based on current rates offered to ArtCarved for debt with
the same or similar terms.

CASH FLOWS

Total cash interest paid for the period from September 1, 1996, to December
16, 1996, was approximately $4,405,000. Total cash paid for income taxes for
the period from September 1, 1996, to December 16, 1996, was approximately $
- .

ACCOUNTING FOR INCOME TAXES

Effective September 1, 1992, CJC (and ArtCarved) adopted Statement of
Financial Accounting Standards (SFAS)

                                       61
<PAGE>

No. 109, "Accounting for Income Taxes," which requires the asset and
liability method of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recorded for the tax consequences
of applying currently enacted statutory tax rates applicable to differences
between the financial reporting and income tax bases of assets and
liabilities.

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

ArtCarved's sales are highly seasonal. Historically, ArtCarved has achieved
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 most schools are not in session.

REVENUE RECOGNITION

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

ADVERTISING EXPENSE

Selling, general and administrative expenses for ArtCarved include
advertising expense in the following amounts for the statement of income
presented (in thousands):

Period from September 1, 1996, to December 16, 1996                1,222

(3)      RECEIVABLES

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

(4)      INVENTORIES

Cost of sales includes depreciation and amortization of the following amounts in
the accompanying statement of income (in thousands):

Period from September 1, 1996, to December 16, 1996               $  691

Inventories are priced using the dollar-value LIFO link-chain method.

(5)      PROPERTY, PLANT AND EQUIPMENT

Depreciation expense (included in cost of sales and selling, general and
administrative expenses) recorded in the accompanying statement of income is
as follows (in thousands):

Period from September 1, 1996 to December 16, 1996                $  770

                                       62
<PAGE>

(6)      GOLD LOAN

As a means of hedging against gold market price fluctuations and financing
its needs for gold in the manufacturing process, CJC had historically entered
into a fee-bearing gold consignment agreement with a bank (the Consignor).
During the term of the consignment agreement, title to the gold covered by
the consignment agreement remained with the Consignor. CJC had a credit
facility with a bank which provided for a $25,000,000 letter-of-credit
facility which could be utilized to request letters of credit pursuant to the
gold consignment agreement. The consignment agreement expired in June 1994
and was not renewed. In connection with the expiration of the gold
consignment agreement, the Consignor presented to the bank a draft for
payment under the letter of credit in the amount of $14,614,255, and such
draft was honored by the bank in that amount. The amount invoiced CJC was for
38,053 ounces of gold at a price of $384.05 per ounce. Although a substantial
amount of gold is held by other operations of CJC and serves as collateral
for the loan, the entire gold loan was paid with the proceeds from the asset
sale and, therefore, the full amount of the loan is included in ArtCarved's
balance sheet.

(7)       LONG-TERM DEBT

In November 1995, CJC's board of directors, shareholders and principal
creditors approved its restructuring plan and the plan and agreement of
merger (as defined) whereby CJC's common and preferred shareholders agreed to
a recapitalization and holders of senior secured, senior subordinated notes
and the gold loan agreed to restructure their debt obligations. On March 12,
1996, the restructuring agreement was consummated. The debt obligations
discussed below were paid with the proceeds of the asset sale of ArtCarved
and, therefore, are included in ArtCarved's financial statements.

The significant components of the restructuring and recapitalization are as
follows:

a.       New capital stock consisting of 30,000,000 authorized shares of common
         stock designated as either Series 1, Series 2 or Series 3, as defined,
         of CJC Newco, Inc. (Newco), was authorized and issued in the following
         order:

          (i)       The holder of CJC's Series A preferred stock received an
                    aggregate of 100% or 8,750,000 shares of the Series 1 common
                    stock, such number to be reduced by that number of shares of
                    Series 1 common stock to be issued to the subordinated
                    noteholders.

          (ii)      A holder of CJC's senior subordinated notes due 1999 and
                    1998 (the Original Subordinated Notes), pursuant to the
                    restructuring, received 4,410,000 shares of the Series 1
                    common stock in lieu of debt of CJC. Holders of CJC's
                    Original Subordinated Notes also received 94,000 shares of
                    the Series 1 common stock as compensation for a
                    payment-in-kind (PIK), nondefault rate interest option, as
                    defined, contained in CJC's new senior subordinated notes
                    due 2002 (the New Subordinated Notes). In addition, 974,000
                    shares of the Series 1 common stock authorized to be issued
                    to the holders of CJC's New Subordinated Notes were not
                    issued as of the restructuring date but were reserved for
                    issuance in accordance with the terms of the New
                    Subordinated Note agreement and the new shareholders'
                    agreement.

          (iii)     The holders of CJC's Series B preferred stock received an
                    aggregate of 1,249,020 shares of Series 2 common stock. Each
                    such holder received 11.67 shares of Series 2 common stock
                    for each previously held share of Series B preferred stock.

          (iv)      Previous holders of CJC's common stock received an aggregate
                    of 9,992,317 shares of Series 3 common stock. Each such
                    holder received 4.20 shares of Series 3 common stock for
                    each previously held share of common stock. Effective June
                    30, 1996, the Series 3 shares were redeemed at $0.001 per
                    share.

                                       63
<PAGE>

          (v)       Holders of CJC's warrants issued in 1990 received new
                    warrants to purchase 3,023,623 shares of Series 3 common
                    stock. These warrants expired on June 30, 1996. All other
                    existing warrants, rights or options outstanding immediately
                    prior to the merger were canceled and extinguished.

b.       Holders of CJC's floating rate senior secured notes, Series A due 1996
         (the Series A Notes), and holders of CJC's 12.12% senior secured notes,
         Series B-2 due 1998 (the Series B Notes) (collectively, the Original
         Senior Notes), received all accrued interest on the unpaid principal
         amount of such notes. Pursuant to the terms of a senior note purchase
         agreement, the holders of the Series A Notes received New Series A
         Notes and the holders of Series B Notes received New Series B Notes.

         The New Series A Notes were issued in the aggregate principal amount of
         $14,677,000, the outstanding principal balance on the restructuring
         date. The New Series A Notes are mandatorily redeemable under certain
         circumstances. The maturity date of the New Series A Notes shall be
         July 15, 1999, and such notes bear interest at the Eurodollar Rate, as
         defined, plus 2.25%. In addition, the principal of the New Series A
         Notes will be repaid in installments of $2.0 million on each semiannual
         period currently anticipated to commence no later than July 15, 1997.
         Interest on the New Series A Notes is due on the fifteenth day of each
         quarter, beginning April 15, 1996.

         The New Series B Notes were issued in the aggregate principal amount of
         $42,023,000, the outstanding principal balance on the restructuring
         date. The New Series B Notes are mandatorily redeemable under certain
         circumstances. The maturity date of the New Series B Notes shall be
         July 15, 2000, and such notes bear interest at the rate of 12.12%. The
         New Series B Notes shall be payable in full at maturity. After the New
         Series A Notes have been repaid in full, the $2.0 million semiannual
         principal repayments shall be applied to the New Series B Notes.
         Interest on the New Series B Notes shall be due on the fifteenth day of
         each quarter beginning April 15, 1996. Finally, the holders of the New
         Series B Notes may be entitled to certain "make-whole" payments on the
         original amount issued once the New Series A Notes have been repaid in
         full or replaced. The New Series A Notes and New Series B Notes shall
         be secured by substantially all of CJC's assets.

         Under the terms of the New Series A Notes and New Series B Notes, CJC,
         among other restrictions, will be required to maintain a current ratio,
         as defined (excluding current maturities of funded debt), of 3.2 to 1.0
         for the period March 12, 1996, to February 28, 1998, and 2.5 to 1.0 for
         the period March 1, 1998, to maturity, minimum shareholders' equity
         (deficit), as defined, of $(8,000,000) for the period March 12, 1996,
         to June 30, 1996, $(9,000,000) for the period July 1, 1996, to May 31,
         1997, $(10,000,000) for the period June 1, 1997, to November 30, 1997,
         and beginning to increase to $(5,000,000) until maturity, and an
         interest coverage ratio, as defined, of 1.25 to 1.0 for the period
         March 12, 1996, to February 28, 1998, 1.50 to 1.0 for the period March
         1, 1998, to August 31, 1999, and 1.75 to 1.0 for the period September
         1, 1999, to maturity. CJC will also have certain limitations relating
         to additional debt, liens, mergers, asset sales transactions,
         restricted investments and payments of dividends and is obligated to
         make certain reports periodically to the lenders. As of August 31,
         1996, CJC was in compliance with these covenants.

c.       Holders of CJC's Original Subordinated Notes in the amount of
         $35,000,000 were issued either (i) New Subordinated Notes having an
         aggregate principal amount equal to the unpaid principal under the
         Original Subordinated Notes plus accrued interest through June 30,
         1995, as well as shares of Series 1 common stock as described in a.
         (ii) above, or (ii) New Subordinated Notes having an aggregate
         principal amount equal to 50% of the unpaid principal under the
         Original Subordinated Notes plus accrued interest through June 30,
         1995, as well as shares of Series 1 common stock as described in
         a.(ii) above. One holder elected to convert 50% of its Original
         Subordinated Notes (principal amount of $7,500,000 plus accrued
         interest through June 30, 1995, of approximately $1,873,000) into
         Series 1 common stock.

                                       64
<PAGE>

         The New Subordinated Notes have a maturity of July 15, 2002, with
         certain mandatory prepayments, as defined, based upon net cash
         proceeds, as defined. The New Subordinated Notes are subordinate to the
         New Senior Notes and the New Gold Notes. The New Subordinated Notes
         have loan covenants that are substantially identical to the New Senior
         Notes. Finally, the holders of the New Subordinated Notes may be
         entitled to certain "make-whole" payments on the original amount issued
         if both the New Senior Notes and New Subordinated Notes are repaid in
         full prior to March 1997.

d.       Each gold loan holder shall receive a new promissory note evidencing
         the existing obligation having a maturity date of February 28, 1997
         (the New Gold Notes). The New Gold Notes shall be issued in an
         aggregate principal amount of $8,641,125, the outstanding principal
         balance on the restructuring date. The New Gold Notes shall bear
         interest at the lesser of (i) the alternate base rate, as defined,
         plus 1.5% or (ii) the highest lawful rate, as defined. Principal
         payments under the New Gold Notes are $2,267,000 and $6,374,125 for
         fiscal years 1996 and 1997, respectively. CJC shall prepay the New
         Gold Notes using available net cash proceeds, as defined. The New Gold
         Notes shall be secured by substantially all of CJC's assets. In
         connection with the New Gold Notes, CJC purchased options for 24,053
         ounces of gold, exercisable at $384.05 per ounce. The total premiums
         for fiscal 1996 relating to these options were approximately $238,000.
         As of August 31, 1996, CJC has options on 17,800 ounces of gold
         outstanding which expire March 28, 1997. CJC is required to purchase
         the options under the New Gold Notes to hedge the collateral against
         changing gold prices. CJC does not engage in gold option speculation.
         CJC has not recorded any significant gains or losses related to such
         options as the price of gold has not fluctuated significantly.

         Under the terms of the New Gold Notes, CJC, among other restrictions,
         will be required to maintain a current ratio, as defined (excluding
         current maturities of funded debt), of 3.2 to 1.0, minimum
         shareholders' equity (deficit), as defined, of $(8,000,000) for the
         period March 12, 1996, to June 30, 1996, and $(9,000,000) for the
         period July 1, 1996, to maturity, and an interest coverage ratio, as
         defined, of 1.25 to 1.0. CJC will also have certain limitations
         relating to additional debt, liens, mergers, asset sales transactions,
         restricted investments and payments of dividends and is obligated to
         make certain reports periodically to the lenders. As of August 31,
         1996, CJC was in compliance with these covenants.

Management believes the carrying amount of long-term debt, including the
current maturities, approximates fair value as of August 31, 1996, based upon
current rates offered for debt with the same or similar debt terms.

Subsequent to year-end, CJC was not in compliance with certain financial
covenants and, accordingly, applied for and has been granted a necessary
waiver through October 31, 1996, and an amendment with respect to such
covenants from its lenders. As discussed in Note 1, all outstanding debt
obligations of CJC were repaid with the sale proceeds from CBI shortly after
the Acquisitions occurred.

(8)      COMMITMENTS AND CONTINGENCIES

ArtCarved leased certain of its manufacturing and office facilities and
equipment under various noncancelable operating leases. Expenses under all
operating leases for the period from September 1, 1996, to December 16, 1996,
are approximately $208,000.

ArtCarved 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 ArtCarved's results of operations or
financial position.

(9)      INCOME TAXES

For the period from September 1, 1996, to December 16, 1996, no current or
deferred provision or benefit exists for ArtCarved due to the available
operating tax losses and other credit carryforwards of CJC.

                                       65
<PAGE>

The following represents a reconciliation between tax computed by applying
the 35% statutory income tax rate to income before income taxes and reported
income tax expense for the period from September 1, 1996, to December 16,
1996:

<TABLE>
<CAPTION>
                                                             Period From
                                                          September 1, 1996,
                                                         to December 16, 1996
                                                         --------------------
<S>                                                      <C>
Pretax book income                                                      35.0%
Permanent differences                                                       -
Utilization of operating loss
      carryforwards                                                     (35.0)
                                                                  -----------
                                                                           -%
                                                                  ===========
</TABLE>

Since ArtCarved's financial results have been included in CJC's consolidated
federal income tax return, ArtCarved federal net operating tax losses and
other credits have been included in CJC's income tax return. As a result, any
carryovers of such losses or credits which might have existed had ArtCarved
reported on a stand-alone basis are not available to ArtCarved as ArtCarved
was purchased in a business combination by CBI.

(10)     EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLAN

CJC adopted an employee benefit plan for substantially all hourly class ring
employees. The benefits were based on the employee's years of service. CJC's
funding policy was to make contributions equal to or greater than the
requirements prescribed by the Employee Retirement Income Security Act of
1974.

The plan was frozen in 1989 and, effective September 5, 1995, the plan was
terminated. Upon receiving a favorable determination on termination, dated
December 1, 1995, all assets of the plan were distributed.

CJC has a defined contribution plan that is available to all employees.
Employees are eligible to make contributions to the plan after one year of
employment. CJC does not make contributions to the plan but pays
substantially all administrative fees related to the plan.

The following components of net periodic pension income are presented for the
hourly class ring employees plan for the period from September 1, 1996, to
December 16, 1996:

<TABLE>
<CAPTION>
                                                                       Period from
                                                                      September 1,
                                                                         1996, to
                                                                     December 16, 1996
                                                                     -----------------
<S>                                                                  <C>
Service cost, benefits earned during the year                         $          -
Interest cost of projected benefit obligation                                    -
Actual return on plan assets                                                     -
Net amortization and deferral
                                                                     ------------------
       Net periodic pension income                                    $          -
                                                                     ------------------
</TABLE>

                                       66
<PAGE>

Assumptions used in accounting for the pension plan for the fiscal year ended
August 31, 1996, are as follows:

<TABLE>
<S>                                                                  <C>
Discount rate                                                        7.30%
Rate of increase in compensation levels                              N/A
Expected long-term rate of return on assets                          7.30%
</TABLE>

DEFINED CONTRIBUTION PLAN

CJC has a defined contribution plan that is available to all employees.
Employees are eligible to make contributions to the plan after one year of
employment. CJC does not make contributions to the plan but pays
substantially all administrative fees related to the plan.





















                                       67
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To L.G. Balfour Company, Inc.:

We have audited the accompanying statements of operations, stockholder's
equity and cash flows of L.G. Balfour Company, Inc. (the Company) (a Delaware
corporation), a wholly owned subsidiary of Town & Country Corporation (the
Parent) (a Massachusetts corporation), for the period from February 26, 1996
to December 16, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of L. G. Balfour Company, Inc.'s
operations and its cash flows for the period from February 26, 1996 to
December 16, 1996, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company relies on funding from
its Parent to support operations. The Parent is in violation under its
various debt agreements and has filed a voluntary petition for relief under
Chapter 11 Title 11 of the United States Bankruptcy Code on November 18,
1997; thus, there is no assurance that the Parent will be able to continue to
provide financial support to the Company. Therefore, there is substantial
doubt about the Company's ability to continue as a going concern. The
Parent's plans with regard to these matters, which primarily relate to the
sale of the Company, are discussed in Notes 1 and 8. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.





Boston, Massachusetts
November 19, 1997


                                       68
<PAGE>

                             L.G. BALFOUR COMPANY, INC.
                              Statement of Operations
                                  (In thousands)

<TABLE>
<CAPTION>
                                                                            For the Period From
                                                                            February 26, 1996 to
                                                                            December 16, 1996(a)
                                                                           ----------------------
<S>                                                                        <C>
    Net Sales                                                                  $       60,233

    Cost of Sales                                                                      29,350
                                                                           ----------------------

                Gross profit                                                           30,883
                                                                           ----------------------

    Expenses:
                Selling                                                                25,203
                General and administrative (Note 3)                                     5,817
                                                                           ----------------------

    Total expenses                                                                     31,020
                                                                           ----------------------

    Other Expense:

                Interest expense (Note 6)                                                 454
                Interest on Due to Parent, net (Note 7)                                 1,499
                                                                           ----------------------

                           Net other expense                                            1,953

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

                           Loss before provision for income taxes                      (2,090)

    Provision for Income Taxes (Notes 1 and 2)                                             63
                                                                           ----------------------

    Net Loss                                                                   $      (2,153)
                                                                           ======================
</TABLE>

(a) EXCLUDES THE FINANCIAL IMPACT OF THE SALE OF CERTAIN ASSETS AND LIABILITIES
OF THE COMPANY DISCUSSED IN NOTE 8.

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                             FINANCIAL STATEMENTS.

                                       69
<PAGE>

                           L.G. BALFOUR COMPANY, INC.

                        Statement of Stockholder's Equity

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                         TOTAL
                                                             ADDITIONAL           ACCUMULATED        STOCKHOLDER'S
                                     CAPITAL STOCK         PAID-IN CAPITAL          DEFICIT              EQUITY
                                   ------------------     ------------------    ----------------    -----------------
<S>                                <C>                    <C>                   <C>                 <C>


Balance, February 25, 1996         $            4         $       75,970        $    (62,086)       $       13,888
    Net Loss                                    -                      -              (2,153)              (2,153)
                                   ------------------     ------------------    ----------------    -----------------
Balance, December 16, 1996         $            4         $       75,970        $    (64,239)       $       11,735
                                   ==================     ==================    ================    =================
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.














                                       70
<PAGE>

                           L.G. BALFOUR COMPANY, INC.
                             Statement of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                           FOR THE PERIOD
                                                                          FROM FEBRUARY 26,
                                                                              1996 TO
                                                                           DECEMBER 16,
                                                                               1996
                                                                         ------------------
<S>                                                                      <C>
Cash Flows from Operating Activities:
    Net loss                                                             $       (2,153)
    Adjustments to reconcile net loss to net cash used in
    operating activities-
       Depreciation and amortization                                              1,533
       Changes in assets and liabilities-
       Increase in accounts receivable                                           (6,049)
       Decrease in inventories                                                    1,774
       Decrease in prepaid expenses and other current assets                        189
       Decrease in other assets                                                     160
       Decrease in bank overdraft and accounts payable, net                        (234)
       Decrease in accrued expenses                                              (2,442)
       Decrease in deferred compensation                                            (42)
                                                                         --------------

    Net cash used in operating activities                                        (7,264)
                                                                         --------------

Cash Flows from Investing Activities:
    Proceeds from sale of fixed assets                                              571
    Capital expenditures                                                           (345)
                                                                         --------------
    Net cash provided by investing activities                                       226
                                                                         --------------

Cash Flows from Financing Activities:
       Proceeds from borrowings from Parent, net                                  7,177
       Payments on capital leases                                                  (200)
                                                                         --------------

    Net cash provided by financing activities                                     6,977
                                                                         --------------

Net Decrease in Cash and Cash Equivalents                                           (61)

Cash and Cash Equivalents, beginning of period                                       80
                                                                         --------------

Cash and Cash Equivalents, end of period                                 $           19
                                                                         ==============

Supplemental Cash Flow Data:
    Cash paid during the period for-
    Interest                                                             $           23
                                                                         ==============
    Taxes                                                                $           42
                                                                         ==============

Supplemental Disclosures of Noncash Investing and Financing
Activities (Note 1)

</TABLE>

  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       71
<PAGE>

                             L.G. BALFOUR COMPANY, INC.

                           Notes to Financial Statements

(1)      Summary of Significant Accounting Policies

         GENERAL

         The accompanying financial statements are for L.G. Balfour Company,
         Inc. (the Company), a wholly owned subsidiary of Town & Country
         Corporation (the Parent), for the period from February 26, 1996 to
         December 16, 1996. The accompanying statement of operations for the
         period from February 26, 1996 to December 16, 1996, does not include
         the financial impact of the sale of certain assets and liabilities of
         the Company discussed at Note 8. Subsequent to December 16, 1996,
         substantially all of the normal operations of the Company ceased. This
         subsidiary is engaged in the production and distribution of high school
         and college class rings on a made-to-order basis. The Company markets
         directly to students on campus and at campus book stores and offers a
         variety of graphics products, including graduation announcements,
         diplomas and memory books, and novelty items, such as T-shirts, key
         chains and pendants. In addition, the Company sells licensed sports
         products through retail distribution channels.

         The Company relies on funding from the Parent to support operations.
         The Parent is in violation under its various debt agreements and has
         filed a voluntary petition for relief under Chapter 11 Title 11 of the
         United States Bankruptcy Code on November 18, 1997; thus, there is no
         assurance that the Parent will be able to continue to provide financial
         support to the Company. Therefore, there is substantial doubt about the
         Company's ability to continue as a going concern. The financial
         statements do not include any adjustments that might result from the
         outcome of this uncertainty.

         In addition, substantially all of the Company's assets have been
         pledged as collateral against the Parent's debt obligations.

         CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include highly liquid investments with
         original maturities of three months or less; the carrying amount
         approximates fair market value because of the short-term maturities of
         these investments.

         REVENUE RECOGNITION

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

         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.

         SFAS No. 121 requires that long-lived assets (e.g., property 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.

                                       72
<PAGE>

         On February 26, 1996, the Company adopted SFAS No. 121, which did not
         have a material impact on the Company's financial position or results
         of operations.

         INVENTORIES

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

         The effects of gold price fluctuations are mitigated by the use of a
         consignment program with bullion dealers. As the gold selling price for
         orders is confirmed, the Company's Parent purchases the gold
         requirements at the then current market prices; any additional
         requirements for gold are held as consignee. This technique enables the
         Company to match the price it pays for gold with the price it charges
         its customers. The Company pays a fee, which is subject to periodic
         change, for the value of the gold it holds on consignment during the
         period prior to sale. For the period from February 26, 1996 to December
         16, 1996, these fees totaled $233,000.

         ADVERTISING

         The Company expenses the costs of advertising as incurred. For the
         period from February 26, 1996 to December 16, 1996, advertising expense
         was approximately $2,795,000.

         PROPERTY, PLANT AND EQUIPMENT

         The Company provides for depreciation, principally using the
         straight-line method, at rates adequate to depreciate the applicable
         assets (recorded at cost) over their estimated useful lives, which
         range from 3 to 20 years. Maintenance and repair items are charged to
         expense when incurred; renewals and betterments are capitalized. When
         property, plant and equipment are retired or sold, their costs and
         related accumulated depreciation are removed from the accounts, and any
         resulting gain or loss is included in income.

         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 those estimates.

         INCOME TAXES

         The Company and its Parent have a tax-allocation agreement. The
         Company's results of operations are included in the consolidated
         federal tax return of the Parent. The agreement calls for the
         provisions (benefits) and payments (refunds) to be made as if the
         Company were to file its own separate company tax returns.

         AMORTIZATION OF LONG-TERM INTANGIBLE ASSETS

         The excess $5,612,000 of purchase price over the values assigned to the
         net assets acquired is being amortized using the straight-line method
         over approximately 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 uses an estimate of the related business units' undiscounted
         operating income over the remaining life of the goodwill, as well as
         the sale of the Company (see Note 8), in measuring whether the goodwill
         is recoverable.

                                       73
<PAGE>

         SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

         During the period from February 26, 1996 to December 16, 1996, the
         Company had fixed asset additions of approximately $58,000, funded by
         increases in capital lease obligations.

(2)      Income Taxes

         The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                             FOR THE PERIOD
                                                             FROM FEBRUARY
                                                              26, 1996 TO
                                                              DECEMBER 16,
                                                                  1996
                                                            -----------------
<S>                                                         <C>
Current-
         Federal                                            $          -
         State                                                    63,000
                                                            -----------------
             Total Provision                                $     63,000
                                                            =================
</TABLE>

         The Company's effective tax rate differs from the federal statutory
         rate of 34% for the period from February 26, 1996 to December 16, 1996,
         due to the following (in thousands):

<TABLE>
<CAPTION>
                                                             FOR THE PERIOD
                                                              FROM FEBRUARY
                                                               26, 1996 TO
                                                              DECEMBER 16,
                                                                  1996
                                                            -----------------
<S>                                                          <C>
Computed tax provision (benefit) at statutory rate           $       (711)
Increases resulting from state taxes                                   63
Items not deductible for income tax purposes                           32
Deferral of net operating losses                                      679
                                                            -----------------
                                                             $         63
                                                             ================
</TABLE>

         For tax reporting purposes, the Company has U.S. net operating loss
         carryforwards of approximately $38.3 million as of December 16, 1996,
         subject to Internal Revenue Service (IRS) review and approval and
         certain IRS limitations on net operating loss utilization. Utilization
         of the net operating loss carryforwards is contingent on the Company's
         ability to generate income in the future. The net operating loss
         carryforwards will expire from 2006 to 2012 if not utilized.

(3)      Loss on Assets Held for Sale or Disposal

         In fiscal 1993, the Company's management decided to make changes with
         respect to certain of its operations. As a result of this decision, the
         Company recognized a pretax charge of $14.5 million in the fourth
         quarter of fiscal 1993 to reserve for the losses associated with the
         disposal of certain inventory and fixed assets, including property,
         plant and equipment of approximately $12.9 million and intangible
         assets of approximately $1.6 million no longer considered necessary to
         its future business plans. In fiscal 1996, due to a change in estimates
         for demolishing the facility, the Company reduced the recorded reserve
         by approximately $400,000, which is included as a reduction of general
         and administrative expenses. During the period from February 26, 1996
         to

                                       74
<PAGE>

         December 16, 1996, the Company completed the demolition and sale of
         the manufacturing facility and reduced the recorded reserve by
         approximately $150,000, which is included as a reduction of general
         and administrative expenses in the accompanying statement of
         operations.

(4)      Commitments and Contingencies

         Certain Company facilities and equipment are leased under agreements
         expiring at various dates through 2009 (see Note 8). Lease and rental
         expense included in the accompanying statement of operations amounted
         to approximately $866,000 for the period from February 26, 1996 to
         December 16, 1996.

(5)      Reserve on 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 that it estimates to be uncollectible. The following
         represents the activity associated with the reserve on sales
         representative advances:

         VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                           COLUMN C
                                              COLUMN A          COLUMN B   ADDITIONS    COLUMN D     COLUMN E
                                              --------          --------   ---------    --------     --------
                                                               BALANCE AT  CHARGED TO               BALANCE AT
                                                                BEGINNING  COSTS AND   DEDUCTIONS--   END OF
             FOR THE PERIOD ENDED            DESCRIPTION        OF PERIOD   EXPENSES    DESCRIBE*     PERIOD
             --------------------            -----------        ---------   --------    ---------     ------
<S>                                          <C>               <C>         <C>        <C>           <C>
         Period from February 26,       Reserve on Sales
              1996  to December 16,     Representative
              1996                      Advances               $2,497,000    $502,800  $ 2,255,800  $  744,000
</TABLE>

          *REPRESENTS WRITE-OFF OF TERMINATED SALES REPRESENTATIVES AMOUNT AND
          FORGIVENESS OF AMOUNTS BY THE COMPANY.

(6)      Employee Benefit Plans

         POSTEMPLOYMENT MEDICAL BENEFITS

         In December 1990, the Financial Accounting Standards Board issued SFAS
         No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN
         PENSIONS, which requires that the accrual method of accounting for
         certain postretirement benefits be adopted. The Company provides
         certain health care and life insurance benefits for employees who
         retired prior to December 31, 1990. The Company adopted this statement
         in fiscal 1994 and is recognizing the actuarial present value of the
         accumulated postretirement benefit obligation (APBO) of approximately
         $6.2 million at February 27, 1994 using the delayed recognition method
         over a period of 20 years (see Note 8).


                                       75
<PAGE>

         The net periodic postretirement benefit costs for the period from
         February 26, 1996 to December 16, 1996, included the following
         components (in thousands):

<TABLE>
<CAPTION>
                                                                    FOR THE PERIOD
                                                                     FROM FEBRUARY
                                                                      26, 1996 TO
                                                                     DECEMBER 16,
                                                                         1996
                                                                    --------------
<S>                                                                 <C>
Service costs--benefits attributed to service                         $         -
         during the period
Interest cost                                                                 344
Actuarial assumptions                                                           -
Amortization of unrecognized transition obligation                            255
                                                                    --------------

             Net periodic postretirement benefit cost                 $       599
                                                                    ==============
</TABLE>

         For measurement purposes, a 9% annual rate of increase in the per
         capita cost of covered health care benefits is assumed for fiscal
         1996; the rate was assumed to decrease gradually to 6% for fiscal 2000
         and remain at that level thereafter. The health care cost trend rate
         assumption has a significant effect on the amounts reported. To
         illustrate, increasing the assumed health care cost trend rate one
         percentage point each year would increase the APBO as of February 25,
         1996 by $380,000 or 7%, and the aggregate of the service and interest
         cost components of the net periodic postretirement benefit cost for
         fiscal 1996 by $30,000 or 4%.

         The weighted average discount rate used in determining APBO was 8.0%
         in fiscal 1996.

         Interest cost associated with the accumulated postretirement benefit
         obligation is included as a component of interest expense in the
         statements of operations.

         DEFERRED COMPENSATION

         The Company has deferred compensation agreements with certain sales
         representatives and executives, which provide for payments upon
         retirement or death based on the value of life insurance policies or
         mutual fund shares at the retirement date. The deferred compensation
         expense for the period from February 26, 1996 to December 16, 1996, was
         approximately $79,000.

(7)      Related Party Transactions

         The Parent administers certain programs (health insurance, workmen's
         compensation, gold consignment, etc.) and charges all directly
         identifiable costs to the Company. The Parent does not charge or
         allocate any indirect costs; however, management believes these amounts
         are not significant for the period from February 26, 1996 to December
         16, 1996.

         The Parent charged or credited the Company interest on its advances on
         a monthly basis at a rate of 11.5% for the period from February 26,
         1996 to December 16, 1996. Included in the accompanying statement of
         operations are net interest charges of $1,499,000 for the period from
         February 26, 1996 to December 16, 1996.

(8)      Sale

         The Parent, having reviewed the Company's performance, concluded that
         it would be in the best interest of the Parent's investors and
         creditors to consider opportunities to sell the Company.

                                       76
<PAGE>

         On May 20, 1996 (the Original Agreement), the Parent entered into an
         agreement to sell certain assets and liabilities of the Company (the
         Balfour Acquisition) and Gold Lance, Inc. (the Gold Lance Acquisition),
         another class ring manufacturing subsidiary of the Parent, constituting
         substantially all of the operations of the Company and Gold Lance, Inc.
         to Commemorative Brands, Inc. (CBI and formerly Class Rings, Inc. and
         Scholastic Brands, Inc.), a new company formed by Castle Harlan
         Partners II, L.P. (CHPII). The Original Agreement was amended on
         November 21, 1996 (the Modified Agreement), to exclude the Gold Lance
         Acquisition, among other things. Separately, CBI entered into an
         agreement with CJC Holdings, Inc. (CJC) to acquire its class ring and
         recognition and affinity businesses.

         On September 6, 1996, CBI, CHPII and the Parent entered into an
         Agreement Containing Consent Order (the Consent Agreement) with the
         Federal Trade Commission (the FTC). Pursuant to the Consent Agreement,
         CBI has agreed, among other things, not to acquire any assets of or
         interests in Gold Lance, Inc., which CBI had originally contracted to
         buy together with the Company. Also, pursuant to the Consent Agreement,
         the Parent and Gold Lance, Inc. agreed, among other things, not to sell
         any assets to CBI, other than pursuant to the Balfour Acquisition, or
         acquire any interest in CBI. In October 1996, the FTC, which had been
         reviewing the transaction since May 1996, gave preliminary approval to
         the Modified Agreement.  Final FTC approval was received on December
         26, 1996.

         On December 16, 1996, the Parent completed the sale of certain assets
         and liabilities of the Company (the Closing). At the Closing, the
         Parent received cash equal to the purchase price of $44 million, plus
         $3.0 million in working capital adjustment from January 28, 1996 to the
         date of closing, less $14 million, which was placed in escrow pending
         final FTC approval. CBI also assumed a liability of $4.9 million
         representing the value of gold on hand as of the Closing. All of the
         $4.9 million in gold value acquired by CBI was on consignment at the
         closing date and was neither reflected as an asset or a liability on
         the Company's balance sheet. The Closing also included the assumption
         by CBI of a liability related to unamortized postretirement medical
         benefit obligations, consisting of approximately $5.2 million. This
         liability did not appear on the Company's balance sheet in the past, as
         the Company had been recognizing it on the delayed recognition method
         allowed by SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
         BENEFITS OTHER THAN PENSIONS (see Note 6). Additionally, CBI assumed an
         operating lease obligation for a facility in Louisville, Kentucky which
         runs through August 2, 2005 at an average yearly rental cost of
         approximately $419,000 (see Note 4). On December 31, 1996, the Parent
         received the $14 million in escrowed funds. On April 25, 1997, a
         settlement was reached in which the Parent paid CBI $1.1 million to
         finalize the purchase price and resolve certain other items.

         The Closing did not include the assumption by CBI of a leased facility
         in North Attleboro, Massachusetts. On April 24, 1997 (the Lease
         Amendment Date), the lease was amended, reducing the amount of space
         and the period of time for which the Company is obligated. The
         Company's future lease obligation for this facility from the Lease
         Amendment Date is $16,806 per month from May 17, 1997 through July 31,
         1999. The previous lease required yearly payments ranging from $605,000
         to $699,000 through May 31, 2009 (see Note 4).


                                       77
<PAGE>

                                 EXHIBIT INDEX

The following exhibits are filed as a part of the report:

<TABLE>
<CAPTION>
      EXHIBIT NO.   DESIGNATION
      -----------   -----------
<S>                 <C>
          2.1(a)    Asset Purchase Agreement dated as of May 20, 1996
                    ("ArtCarved Purchase Agreement"), among the Company, CJC and
                    CJC North America, Inc. ("CJCNA").

          2.2(a)    First Amendment to the ArtCarved Purchase Agreement dated as
                    of November 21, 1996, among the Company, CJC and CJCNA.

          2.3(a)    Letter Agreement amending the ArtCarved Purchase Agreement
                    dated December 16, 1996, among the Company, CJC and CJCNA.

          2.4(a)    Amended and Restated Asset Purchase Agreement dated as of
                    November 21, 1996 ("Balfour Purchase Agreement"), among the
                    Company, Town & Country, L. G. Balfour Company, Inc., and
                    Gold Lance, Inc.

          2.5(a)    Letter Agreement amending the Balfour Purchase Agreement
                    dated December 16, 1996, by and among the Company, Town &
                    Country, L. G. Balfour Company, Inc. and Gold Lance.

          3.1(a)    Certificate of Incorporation of the Company, as amended.

          3.2(a)    Certificate of Designations, Preferences and Rights of
                    Series A Preferred Stock of the Company, effective December
                    13, 1996, together with a Certificate of Correction thereof.

          3.3(a)    Certificate of Designations, Preferences and Rights of
                    Series B Preferred Stock of the Company effective December
                    13, 1996.

          3.4(a)    Restated by-laws of the Company, as amended.

          3.5(c)    Certificate of Increase of Series B Preferred Stock dated
                    June 10, 1998.

          3.6(d)    Certificate of Increase of Series B Preferred Stock dated
                    June 25, 1999.

          4.1(a)    Indenture dated as of December 16, 1996, between the Company
                    and Marine Midland Bank, as trustee (including the form of
                    Note).

          4.2(a)    Form of Note (Included as part of Indenture).

          4.3(a)    Registration Rights Agreement dated as of December 16, 1996,
                    among the Company, Lehman Brothers Inc. and BT Securities
                    Corporation.

          4.4(c)    Amended and Restated Stockholders' and Subscription
                    Agreement, dated as of April 29, 1998, by and among the
                    Company, CHPII, Dresdner Bank AG, Grand Cayman Branch,
                    Offshore, John K. Castle, as Voting Trustee, and the
                    individuals party thereto.

          4.5(b)(f) Amended and restated 1997 Stock Option Plan of the Company.

          9.1(c)    Voting Trust Agreement, as amended and restated as of April
                    29, 1998, among the Company, certain stockholders of the
                    Company party thereto and John K. Castle, as Voting Trustee.

          10.1(a)   Revolving Credit, Term Loan and Gold Consignment Agreement
                    dated as of December 16, 1996, among the Company, the
                    lending institutions listed therein and The First National
                    Bank of Boston and Rhode Island Hospital Trust National
                    Bank, as Agents for the Banks.

          10.2(a)   Purchase Agreement dated December 10, 1996, among the
                    Company and the Initial Purchasers.

          10.3(a)(b) Employment Agreement dated as of December 16, 1996, between
                    the Company and Jeffrey H. Brennan.

          10.4(a)(b) Employment Agreement dated as of December 16, 1996, between
                    the Company and Richard H. Fritsche.

          10.5(a)(b) Employment Agreement between the Company and Balfour with
                    respect to George Agle.

          10.6(a)(b) Form of Indemnification Agreement between the Company and
                    (i) each director and (ii) certain officers.

          10.7(f)   Management Agreement dated as of December 17, 1996, between
                    the Company and Castle Harlan, Inc..

          10.8(g)   First Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated March 16, 1998.


                                       78
<PAGE>

          10.9(h)   Second Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated July 10, 1998.

          10.10(c)  Incentive Stock Purchase Plan, effective as of July 7, 1998.

          10.11(c)  Third Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated August 26, 1998.

          10.12(c)  Revolving Credit Note, dated as of August 26, 1998, issued
                    by the Company and payable to the order of BankBoston, N.A..

          10.13(c)  Indemnity Agreement, dated August 26, 1998, by and
                    between the Company and CHPII.

          10.14(c)  Fourth Amendment to Revolving Credit, Term Loan and Gold
                    Consignment Agreement, dated November 27, 1998.

          10.15(b)(e) Employment Agreement dated as of February 19, 1999 among
                    the Company, Castle Harlan Partners II, LP and Robert F.
                    Amter.

          10.16(c)  Waiver and Fifth Amendment to Revolving Credit, Term Loan
                    and Gold Consignment Agreement, dated March 30, 1999.

          10.17(c)  Amended and Restated Revolving Credit Note.

          10.18(d)  Waiver and Sixth Amendment to Revolving Credit Term Loan and
                    Gold Consignment Agreement.

          10.19(d)  Seventh Amendment to Revolving Credit, Term Loan, and Gold
                    Consignment Agreement.

          10.20(b)  Employment Agreement dated as of July 13, 1999 between
                    Commemorative Brands, Inc. and David G. Fiore. Filed
                    herewith.

          10.21(b)  Employment Agreement dated as of December 16, 1996 between
                    Commemorative Brands, Inc. and Sherice P. Bench. Filed
                    herewith.

          11.1      Statement re: Computation of per share earnings. Filed
                    herewith.

          27.1      Financial Data Schedule. Filed herewith.

</TABLE>

-----------------
(a)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Registration Statement on Form S-4, dated April 11, 1997.
(b)      Management contract or compensatory plan or arrangement.
(c)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Annual Report on Form 10-K, dated August 29, 1998.
(d)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Quarterly Report on Form 10-Q, dated May 29, 1999.
(e)      Incorporated by reference to the corresponding Exhibit number of the
         Company's Quarterly Report on Form 10-Q, dated February 27, 1999.
(f)      Incorporated by reference to the corresponding Exhibit of the Company's
         Annual Report on Form 10-K, dated August 30, 1997.
(g)      Incorporated by reference to Exhibit 10.1 of the Company's Quarterly
         Report on Form 10-Q, dated February 28, 1998.
(h)      Incorporated by reference to Exhibit 10.1 of the Company's Quarterly
         Report on Form 10-Q, dated May 30, 1998.




                                       79