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                       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 December 31, 1998.

[  ]    Transition Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934  for the transition period from ___ to ___

                             Commission File Number
                                    333-23519

                           VESTCOM INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)


                 New Jersey                               22-3477425
        (State or other jurisdiction of          (I.R.S. Employer Identification
        incorporation or organization)                      Number)

                 1100 Valley Brook Avenue, Lyndhurst, New Jersey
               07071; (201) 935-7666 (Address, including zip code,
                  and telephone number, including area code, of
                    registrant's principal executive office)

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

           Securities registered pursuant to Section 12(g) of the Act:

                               Title of each class
                               -------------------

                           Common Stock, no par value

         Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                  Yes X  No 
                                     ---    ---

         Indicate by checkmark 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 ]

         Aggregate market value of voting stock held by non-affiliates as of
March 1, 1999 was approximately $38.6 million.

         Number of shares of Common Stock outstanding as of March 1, 1999: 
8,788,590

         Documents incorporated by reference: Definitive Proxy Statement for the
registrant's 1999 Annual Meeting of Shareholders (Part III).

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                           VESTCOM INTERNATIONAL, INC.

                                TABLE OF CONTENTS

                                     Part I
                                                                            PAGE
Item 1     Business.......................................................    3
Item 2     Properties.....................................................   14
Item 3     Legal Proceedings..............................................   15
Item 4     Submission of Matters to a Vote of Security Holders............   15
Item 4A    Executive Officers of the Registrant...........................   15

                                     Part II

Item 5     Market for the Registrant's Common Equity and Related
               Stockholder Matters........................................   16
Item 6     Selected Financial Data........................................   17
Item 7     Management's Discussion and Analysis of Results of
               Operations and Financial Condition.........................   17
Item 7A    Quantitative and Qualitative Disclosures About Market Risk.....   22
Item 8     Financial Statements and Supplementary Data....................   23
Item 9     Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure........................   24

                                    Part III

Item 10    Directors of the Registrant....................................   24
Item 11    Executive Compensation.........................................   24
Item 12    Security Ownership of Certain Beneficial Owners and
               Management.................................................   24
Item 13    Certain Relationships and Related Transactions.................   24

                                     Part IV

Item 14    Exhibits, Financial Statement Schedules and Reports
               on Form 8-K................................................   24


Signatures................................................................   26

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                                     PART I

Item 1.  Business

         This Annual Report on Form 10-K contains forward-looking statements
based on current expectations, estimates and projections about Vestcom's
industry, management's beliefs and certain assumptions made by management. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Disclosures Regarding Forward-Looking Statements."

General

         Vestcom International, Inc. ("Vestcom") is a consolidator and operator
of companies that create, manage and distribute business critical documents
including (i) statements, invoices and confirms, (ii) product pricing and usage
information, and (iii) sales generation and product fulfillment materials.
Vestcom was founded in September 1996. Concurrently with the consummation of
Vestcom's initial public offering (the "IPO") on August 4, 1997, Vestcom
acquired seven companies in the document services industry (the "Founding
Companies"). Since the IPO, Vestcom has expanded its operations through internal
growth and by acquiring eight additional operating companies, and now has 36
facilities in 19 states and in the Provinces of Quebec and Ontario, Canada. The
companies acquired by Vestcom since the IPO, along with the Founding Companies,
are referred to herein as the "Operating Companies." Prior to the IPO, Vestcom
did not conduct any operations. Unless otherwise indicated, all references to
Vestcom's business prior to the IPO refer to the businesses of the Founding
Companies as they were conducted on an independent basis. Vestcom maintains a
website at vestcomintl.com.

         Vestcom's knowledge of the industry, technological expertise, resources
and operating efficiencies enable it to provide a broad range of services from
multiple locations at a competitive cost. The Operating Companies provide a
number of value-added services to customers. For example, in the financial
services industry, Vestcom works with its customers to create, manage and
distribute statements, invoices and confirms. Vestcom provides added value by
producing these business critical documents in a cost-effective, timely manner,
with enhanced graphics, and by also providing customers with database services
where requested. As an additional example, in the retail industry, Vestcom works
with its customers to create, manage and distribute product pricing and
merchandising support materials. Vestcom not only produces pricing labels and
point-of purchase displays, but also provides its customers with value-added
services such as the production and distribution of frequent shopper and
personalized ID cards, price books, database services, equipment and supplies
for onsite production of product pricing materials and other merchandising 
support needs.

         Vestcom provides services to customers in a broad range of industries.
In addition to the financial services and retail industries, Vestcom provides
services to customers in the pharmaceutical, telecommunications, utilities,
health care, travel and leisure and manufacturing industries. Vestcom provides
its customers with solutions to meet their business critical document
requirements. Vestcom's services enable customers to:

                o Obtain customized  business critical documents to meet their
                  specific needs

                  Vestcom believes that one of its key competitive advantages is
         its significant data processing and programming capabilities. Vestcom's
         technical staff designs and implements the software and systems to
         produce customized business critical documents for customers. These
         documents not only communicate business critical data, but may also
         provide personalized and focused marketing messages and may be
         supplemented through selective insertion of marketing materials.
         Vestcom's capabilities provide customers with the flexibility to
         produce small or large volumes of business critical documents with the
         same high quality, while permitting each document to contain customized
         or individualized information. Vestcom produces documents for most of
         its customers on a regular basis, either daily, weekly, monthly,
         quarterly or as otherwise required by the customer.

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                o Fulfill multiple business critical document needs from one 
                  source, at a competitive cost

                  Vestcom's advanced data processing and distribution
         capabilities permit customers to fulfill many of their business
         critical document needs from a single source, at a competitive cost. By
         using Vestcom's services, customers can reduce their production,
         distribution and mailing costs. They can also reduce their overhead and
         fixed costs by decreasing or eliminating their investments in
         technology and the need for expensive equipment, floor space,
         personnel, utilities and other related expenses.

                o Reduce production turnaround time and equipment downtime

                  Vestcom's advanced computer network shifts production to
         various locations, thereby increasing efficiency, productivity, cost
         effectiveness and timely delivery. Vestcom reduces turnaround time and
         downtime through its:

                           o direct customer data links, which speed processing 
                             time;

                           o distributed processing, by which Vestcom maximizes
                             equipment utilization and distributes data received
                             from customers to geographically dispersed
                             production and distribution centers, enabling
                             customers to improve delivery time; and

                           o internal equipment redundancy and multi-site
                             production capabilities, which provide backup
                             protection for equipment failure.

                o Gain access to the newest technologies and key business
                  services

                  Vestcom keeps abreast of frequent changes in technology and 
         continually upgrades its production capabilities and services, 
         enabling its customers to:

                  o   receive the benefits of technological advances without 
                      making significant investments in hardware and software;

                  o   retain the flexibility to change the equipment and 
                      technologies that Vestcom utilizes to produce their work;
                      and

                  o   select from among a variety of medium, such as paper,
                      compact disc, microfiche and electronic formatting via the
                      Internet for the production of their documents.

                  In 1998, primarily through an acquisition, Vestcom expanded
         its capabilities in various aspects of creative marketing design and
         direct response marketing. As an internal development activity, Vestcom
         formed Vestcom's Internet Solutions Group and developed an Internet
         suite of products which includes web-based fulfillment services,
         electronic document delivery and electronic bill presentment and
         payment.

Industry Overview

         The business of creating, managing and distributing business critical
documents is highly fragmented and is characterized by many small companies,
which typically serve local markets and provide a narrow range of services, and
by numerous in-house operations and several national service providers, some of
whom serve specialized market niches. As a result of the increased complexity
and volume of business critical documents and the increased costs of producing
these documents in-house, a growing number of companies have looked to
outsourcing as an alternative to creating, managing and distributing business
critical documents in-house. Vestcom believes that many companies offering
outsourcing services comparable to Vestcom's services:

              o   have insufficient capital for expansion;

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              o   do not invest sufficiently in rapidly changing technologies;
                  and

              o   are unable to meet the needs of large and/or geographically
                  dispersed clients.

         Vestcom believes that the growth of its market is being driven by
         several factors, including:

              o   the increasing trend of businesses to outsource their non-core
                  functions;

              o   the growth of the companies and industries in Vestcom's
                  customer base, which has resulted in an increase in the volume
                  and variety of business critical documents which these
                  companies need to generate;

              o   the increased demand of managers, employees and customers for
                  business critical documents as a result of recent advances in
                  information technology; and

              o   government regulations that require the reporting and
                  retention of, and access to, a broad range of information.

Strategy

         Vestcom has implemented the following business strategy:

         Strategy for Internal Growth:

Provide Technological Leadership and Value-Added Solutions

         Vestcom's technological expertise combined with its size and scope of
service offerings enables it to provide customers with "one stop" shopping at a
competitive cost for many of their business critical document requirements.
Using a focused sales approach, driven by a customer intimate strategy, Vestcom
provides a broad range of high quality services at a competitive cost from
multiple locations.

Achieve Cost Savings and Promote Name Recognition Through Integration

         Vestcom believes that by integrating its business units it can improve
both its national and local marketing opportunities and increase resource
utilization. During 1998, while maintaining individual operating unit
performance responsibilities, Vestcom continued integrating its acquired
companies and resources. As part of the integration process and to enhance its
market recognition or branding, Vestcom formed regional operating units: Vestcom
New England, Vestcom Canada and Vestcom Mid-Atlantic. Vestcom also formed a
market focused operating unit: Vestcom Retail Solutions Group. The companies
comprising the regional units serve multiple markets and may serve customers
outside of their respective regions. Additionally, such units may share
production resources and technical capabilities. The companies comprising the
Retail Solutions Group have a coordinated sales force and provide vinyl and
laminated paper pricing labels, laser printed price books, customer
communications material and database and other services for the retail industry.
During 1998, Vestcom took the initial steps to consolidate certain executive,
administrative, sales and financial functions within these units. By the end of
1998, each unit had an integrated sales function. During 1999, Vestcom intends
to continue its program to consolidate production facilities and functions.

         Vestcom believes that this integration will improve cost-effectiveness
and brand recognition by:

         o   consolidating a number of executive and administrative functions;

         o   reducing or eliminating redundant functions and facilities;

         o   increasing equipment utilization; and

         o   creating common sales and marketing materials and approaches.

Leverage technical know-how and production resources

         Vestcom's operating units share a common technical expertise, which
includes data management skills, programming know-how, and expertise related to
image/document transmission, formatting, presentation, production and
distribution. The units also operate similar laser printing and related
production equipment. To leverage its technical know-how and production
resources, Vestcom is continuing its program to transfer industry specific
application expertise among its various operating units. For example,
applications marketed to customers in the retail industry are produced at
operating units not comprising Vestcom's Retail Solutions Group, and production
locations comprising Vestcom's Retail Solutions Group may produce work for
customers in markets other than retail.

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Capitalize on Cross-Selling Opportunities

         Vestcom has initiated cross-selling efforts and intends to further
capitalize on the expertise of the various Operating Companies to expand the
range of services provided to existing customers as well as to broaden Vestcom's
customer base. As examples, Vestcom believes that its direct marketing and
database services could be marketed to certain customers for whom Vestcom
presently produces business critical documents, and its fulfillment services
could be marketed to certain customers for whom Vestcom presently provides laser
printing and document distribution services. Vestcom further believes that new
technologies shared among the Operating Companies, such as the ability to
electronically distribute data received from customers to geographically
dispersed locations, will increase Vestcom's cross-selling opportunities. In
addition, certain of the Operating Companies have expertise in particular
industries and with specific types of customers, such as financial institutions,
retail chains and telecommunications companies. Vestcom believes that this
expertise will enhance its ability to obtain and service customers.

New Products and Services

         Vestcom intends to supplement the selling efforts of its operational
units by corporate-sponsored internal product development, acquisition of new
products and services and sales and marketing efforts.

Provide Outsourcing Solutions for Clients

         Vestcom's Management Solutions Group targets customers desiring to
outsource a significant portion of their laser printing and document
distribution processes. Vestcom provides a turnkey service for the creation,
management and distribution of business critical documents in which it assumes
most of the responsibilities previously performed by the customer's in-house
operations on either a facilities management basis or on an outsourced basis.
Vestcom believes that, in most cases, it can perform these services more
cost-effectively than the customer can perform them internally. Vestcom believes
that its knowledge of the industry, technological expertise, resources and
operating efficiencies will enhance its ability to successfully market this
service.

         For a discussion of certain risks associated with Vestcom's internal
growth strategy, see "Risk Factors - There Are Various Risks Related to
Integrating Vestcoms Operating Companies", " - Vestcom May Not Be Able to
Successfully Manage Its Growth" and "- Vestcom May Not Be Able to Sustain
Internal Growth".

         Acquisition Strategy:

         Concurrently with the consummation of its IPO, Vestcom acquired the
Founding Companies. Since the IPO, Vestcom has expanded its operations through
internal growth and by acquiring eight additional Operating Companies, and now
has 36 facilities in 19 states and in the Provinces of Quebec and Ontario,
Canada. Vestcom plans to acquire additional companies that create, manage and
distribute business critical documents in the highly-fragmented business
services industry.

         As Vestcom grows, it will seek to expand into targeted geographic areas
in the United States, Canada and abroad by acquiring companies that have
specified characteristics. Targeted geographical areas include those areas which
have a high concentration of potential customers with high-volume, business
critical document requirements. In identifying potential acquisition candidates,
Vestcom will look for companies:

         o that are expected to be accretive to Vestcom's earnings per share;

         o with services that are similar or complementary to those provided by
           Vestcom;

         o serving geographic markets targeted by Vestcom; and

         o with strong management and customer relationships.

         In addition, as opportunities arise, Vestcom will seek to augment the
operations of the Operating Companies and to capitalize on economies of scale

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with "tuck-in" acquisitions in the same or contiguous areas that can be
assimilated into existing operations. Vestcom believes that it can increase
market share through tuck-ins by adding additional customers and leveraging
operational efficiencies through the sharing of capacities and capabilities and
the elimination of duplicate overhead.

         For a discussion of certain risks associated with Vestcom's acquisition
strategy, see "Risk Factors--Vestcom Faces Risks Related to its Acquisition
Strategy" and "--Vestcom May Not Be Able to Obtain Adequate Financing to Fund
its Acquisition Program".

         Vestcom is regularly engaged in discussions with additional acquisition
candidates and may from time to time enter into letters of intent with respect
to the acquisition of such businesses. No assurance can be given, however, that
Vestcom will acquire any additional businesses.

Services

         Vestcom provides a variety of services for its customers based on their
specific needs for business critical documents. These services include the
following:

Production and Distribution Services

         Production and Distribution of Time-Sensitive Business Critical 
         Documents

         Vestcom converts electronic data received from its customers into
informative, accurate and customized business critical documents such as
brokerage statements, transaction confirms, bank statements, invoices, pension
reports, credit union statements, product pricing labels and management reports
(including sales reports, financial and accounting reports and inventory
reports). Upon receipt of computer data from its customers, the data is
processed through specialized systems and software generally developed by or
licensed to Vestcom to provide, among other things, customized formatting of
data, document production and printing, cost-effective and expedited postal
delivery, intelligent insertion of supplementary marketing material into
envelopes, selective distribution and quality control. Vestcom's processing of
its customers' data enables Vestcom to create personalized and focused business
critical documents, which may include selective marketing messages, specialized
graphics and highlight color. Vestcom's capabilities enable it to image small or
large volumes of documents with the same high quality, while permitting each
document to contain customized or individualized information. Vestcom's
capabilities also include receipt of data from customers in a central location
and the electronic distribution of this data to geographically dispersed
production and distribution centers, enabling customers to improve delivery
time. Vestcom produces documents for most of its customers on a regular basis,
either daily, weekly, monthly, quarterly or as otherwise required by the
customer.

         Vestcom offers its customers a variety of medium for the production and
distribution of business critical documents, including paper, compact disc,
microfiche, microfilm, and electronic formatting via the Internet. Compact disc
is primarily used for rapid access to information and in situations where the
user needs to manipulate the data easily. Microfiche and microfilm are used
primarily for archiving and for other purposes which are not highly
time-sensitive. Vestcom also offers Internet delivery of documents for
customers.

         Production and Distribution of Computer-Generated Labels

         Vestcom's Retail Solutions Group provides vinyl and laminated paper
pricing labels, laser printed price books, customer communications material and
database services for the retail industry. Vestcom produces and distributes
point-of-purchase displays, frequent shopper and personalized ID cards,
equipment and supplies for onsite production of product pricing materials and
other merchandising support materials. For example, major grocery and drug-store
chains rely on Vestcom to manage product pricing information. Promotions and
price changes are transmitted weekly to Vestcom for the creation of
point-of-purchase shelf labels, which are laser printed and ready for
distribution to retail stores throughout North

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America generally within 24 hours of receipt of data. These labels typically
display the product's price (including unit price), a bar-code for scanning and
information about the product such as its size and weight. Vestcom utilizes
high-speed laser printers and specialized finishing equipment to produce these
labels. Vestcom provides rapid turnaround of labels to its customers' stores and
distribution centers daily, weekly or as otherwise required to reflect changes
in the information contained on the labels.

         Demand Publishing and Marketing Materials Fulfillment

         Vestcom prints, packages and distributes business critical documents
that are subject to frequent revision or unpredictable demand, such as product
instruction manuals, training manuals and technical materials. For example, a
software company that provides instruction manuals to its customers may need to
update the manuals frequently to reflect changes in its product. Vestcom's print
on demand system permits the customer to revise the instruction manual,
cost-effectively producing the number of copies required at the time the
information is needed. The flexibility of Vestcom's system enables the customer
to make product enhancements (such as corrections or improvements to product
manuals) without maintaining costly inventories of documents which might quickly
become outdated. Vestcom provides complete assembly of software packages,
including coordination of software duplication and production of the applicable
documentation.

         In addition to the electronic storage of data for print on demand
requirements, Vestcom also receives printed marketing and related materials from
customers, retains the material in inventory and then ships the materials to
various locations upon the receipt of a customer order. Vestcom receives orders
to ship materials by telephone, phone mail, fax, mail and electronic mail via
the Internet. Vestcom's inbound telemarketing service includes customer service
representatives who take orders and provide information concerning inventory
availability, anticipated delivery and the status of previously placed orders.
Vestcom also produces customized computer reports which track the volume and
frequency of shipments of materials to various locations.

Direct Response Marketing

         In October 1998, Vestcom acquired Manus Services Corporation, with its
principal place of business in Seattle, Washington. This acquisition expanded
Vestcom's capabilities in various aspects of creative marketing design and
direct response marketing. Through this acquisition and Vestcom's other
capabilities, Vestcom is able to assist its customers by:

              o   identifying and targeting potential new customers;

              o   developing and creating promotional marketing materials and 
                  direct mail marketing programs aimed at these customers;

              o   distributing the marketing materials; and

              o   determining the effectiveness of direct marketing programs by 
                  performing database response analyses.

Vestcom also fulfills requests for marketing materials from customer inquiries.
Vestcom believes that direct response marketing is an important addition to its
product and service offerings.

Commingling, Intelligent Inserting and Mailing Services

         Vestcom provides cost-effective and rapid distribution of completed
documents and is able to obtain postal discounts off the current U.S. first
class single piece postage rate. By maximizing equipment utilization and
electronically distributing data received from customers to geographically
dispersed production and distribution centers, Vestcom enables customers to
reduce distribution costs while improving delivery time.

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         Commingling

         By combining volumes of mail from a number of customers and adding
postal bar-codes, Vestcom is able to generate postal discounts for customers
that do not produce sufficient volume to obtain these benefits on their own.

         Insertion

         Vestcom provides both selective (intelligent) and non-selective
insertion services. Vestcom's insertion equipment folds and inserts reports,
bills, invoices and other marketing materials into envelopes.

         Presorting

         Vestcom sorts mail to United States and Canadian Postal Service
specifications and adds postal bar-codes in order to obtain the greatest
available discount and speed delivery.

Computer Center Business Critical Document Outsourcing Services

         As contrasted with Vestcom's individualized applications for customers,
Vestcom's Management Solutions Group targets customers desiring to outsource a
significant portion of their laser printing and document distribution processes.
Vestcom provides a turnkey service that encompasses document creation,
management and distribution services to meet the customer's needs for business
critical documents, which may also include mailing services. Vestcom will
typically assume most of the responsibilities previously performed by the
customer's in-house operations either on a facilities management basis or on an
outsourced basis. Vestcom believes that outsourcing will often enable the
customer to close its in-house computer output printing center. The customer
transmits its computer-generated data to one of Vestcom's production and
distribution centers, which then processes, produces and distributes the
reports, invoices, statements and other business critical documents needed by
the customer.

Forms Management

         Vestcom's services include the purchase, storage and inventory
management of printed forms, envelopes, letterhead and marketing materials for
customers. Vestcom also offers limited offset printing services to print forms,
stationery and other marketing materials.

Development of New Services

         Vestcom believes that its future success depends on its ability to
enhance its current services and develop new services that address the
increasingly sophisticated needs of its customers. For example, during 1998,
Vestcom's Internet Solutions Group began to offer a suite of Internet-enabled
products that include web-based fulfillment services, electronic document
delivery and electronic bill presentment and payment. As an additional example,
Vestcom has expanded its direct response marketing services since its
acquisition of Manus Services Corporation in October 1998.

Sales and Marketing

         Vestcom's sales efforts are handled principally through its in-house
direct sales staff of approximately 68 people. Vestcom's sales representatives
generally have expertise in specific industries, such as the financial services,
retail, pharmaceutical and telecommunications industries, and in specific
services, such as statements, computer-generated point-of-purchase pricing
labels, direct response marketing and demand publishing. Vestcom employs
customer service representatives to provide on-going support to existing
customers and to oversee the implementation of new customer projects.

         Local sales efforts are augmented by corporate supported participation
in industry trade shows and conferences, articles and advertisements in trade
journals and seminars sponsored by Vestcom for customers and prospective

                                      -9-
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customers. Vestcom provides marketing support to its sales staff through the
production and distribution of marketing materials, telemarketing and seminars.
Vestcom's sales and customer service personnel interact extensively with the
customer and Vestcom's operations staff to address specific customer needs.

Customers

         Vestcom provides services to customers in a broad range of industries,
including the financial services, retail, pharmaceutical, telecommunications,
utilities, health care, travel and leisure and manufacturing industries. No one
customer presently accounts for over 5% of Vestcom's revenues.

Competition

         Vestcom operates in a highly competitive industry. There can be no
assurance that Vestcom's targeted customer base will outsource more of their
needs for business critical documents or that such businesses will not bring
in-house services that they currently outsource. In addition, with respect to
those services that are outsourced, Vestcom competes with a variety of
companies, many of which have greater financial resources than Vestcom. A number
of Vestcom's current suppliers of equipment and services are also a source of
competition. Vestcom's major competitors include Xerox Business Services, Pitney
Bowes Management Services, Anacomp, Output Technologies (a division of DST
Systems), IKON Office Solutions, Moore Corporation Ltd., F.Y.I. Incorporated and
Lason, Inc., as well as smaller local, regional and national providers.

         Certain of Vestcom's competitors operate in broader geographic areas
than Vestcom, and others may choose to compete in Vestcom's areas of operation
in the future. In addition, Vestcom intends to enter new geographic areas
through internal growth and by acquiring existing companies, and expects to
encounter significant competition from established competitors in each of these
new areas. As a result of this highly competitive environment, Vestcom may lose
customers or have difficulty in acquiring new customers and new companies and
its results of operations may be adversely affected.

         Vestcom believes that the principal competitive factors in providing
one-stop solutions to meet customers' business critical document requirements
include technological expertise, quality and accuracy, turnaround time, price,
reliability and security of service, reputation, client industry expertise,
capacity back-up and redundancy capabilities and customer support and service.
Vestcom believes that it competes favorably with respect to these factors,
although there can be no assurance that it will continue to do so.

Employees

         At December 31, 1998, Vestcom had approximately 950 full-time and 120
part-time employees. No employees of Vestcom are represented by a labor union.
Vestcom considers its relations with its employees to be good.

                                  RISK FACTORS

Vestcom Has Limited Combined Operating History

         Prior to the consummation of the IPO and the acquisitions of the
Founding Companies on August 4, 1997, Vestcom conducted no operations and
generated no revenues. Vestcom has acquired eight additional operating companies
since the IPO. These companies, together with the Founding Companies, are
referred to as the "Operating Companies." Prior to their acquisition by Vestcom,
the Operating Companies operated as separate, independent businesses. Vestcom
cannot be certain that the Operating Companies or the companies it may acquire
in the future will achieve sales and profitability justifying Vestcom's
investment in them.

                                      -10-
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There are Various Risks Related to Integrating Vestcom's Operating Companies

         The process of integrating the operations of the businesses Vestcom
acquires into Vestcom's business may involve unforeseen difficulties and may
require a significant amount of Vestcom's financial and other resources,
including management time. In connection with the integration process, Vestcom
may experience:

         o    the loss of customers;

         o    the loss of personnel;

         o    increased costs related to recruitment and termination payments;

         o    operating interruptions;

         o    moving and relocation costs;

         o    abandonment costs related to the termination of leases; and

         o    increased expenditures for leasehold improvements and fit up costs
              for new facilities.

Vestcom cannot be certain that it will be able to integrate the operations of
these businesses successfully into its operations. In addition, to improve
operating efficiencies, Vestcom must conform all acquired companies into certain
necessary common systems and procedures, including certain production and
accounting systems. Vestcom cannot be certain that it will successfully
institute these common systems and procedures for all acquired companies or
accomplish this without substantial costs, delays or other operational or
financial difficulties. Vestcom's inability to integrate or successfully manage
the companies it has acquired or may acquire in the future could have a material
adverse effect on Vestcom's business, financial condition and results of
operations.

Vestcom May Not Be Able to Successfully Manage Its Growth

         Vestcom expects to expend significant time and effort in expanding its
business and acquiring other businesses. This growth may place a significant
strain on Vestcom's resources. Vestcom cannot be certain that its systems,
procedures and controls will be adequate to support its operations as they
expand. Any future growth also will impose significant additional
responsibilities on members of Vestcom's senior management, including the need
to identify, recruit and integrate new senior level managers and executives.
Vestcom cannot be certain that it will be able to identify and retain such
additional managers and executives. As a result, Vestcom cannot be certain that
it will be able to expand its business or manage any future growth effectively
and profitably.

Vestcom Faces Risks Related to its Acquisition Strategy

         Vestcom intends to expand its operations through the acquisition of
additional businesses which create, manage and distribute business critical
documents. There can be no assurance that Vestcom will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses, if any, into Vestcom without substantial costs, delays or
other operational or financial difficulties. Further, acquisitions may involve a
number of special risks, including:

         o adverse effects on Vestcom's operating results;

         o diversion of management's attention;

         o failure to retain key personnel or customers of an acquired company;

         o risks associated with unanticipated events; and

                                      -11-
<PAGE>
         o amortization of acquired intangible assets.

         Some or all of these risks could have a material adverse effect on
Vestcom's business, financial condition or results of operations. In addition,
if competition for acquisition candidates increases, the cost of acquiring
businesses could increase materially. Changes in accounting requirements
relating to acquisitions could make it more difficult for Vestcom to structure
accretive acquisitions. Unfavorable developments at a single acquired company
could have a material adverse impact on the reputation and business of Vestcom
as a whole. In addition, there can be no assurance that acquired businesses, if
any, will achieve anticipated revenues and earnings. The inability of Vestcom to
implement and manage its acquisition strategy successfully may have an adverse
effect on the business or future prospects of Vestcom.

Vestcom May Not Be Able to Obtain Adequate Financing to Fund its Acquisition
Program

         Vestcom cannot readily predict the timing, size and success of its
acquisition efforts or the capital it will need for these efforts. Vestcom
currently intends to finance future acquisitions by using a combination of its
Common Stock, notes and cash. As a result of the decrease in the market value of
Vestcom's Common Stock since the IPO, it currently is more difficult and
dilutive for Vestcom to use stock in structuring acquisitions. If the Common
Stock does not maintain a sufficient market value, or if the owners of the
businesses Vestcom wishes to acquire are unwilling to accept Common Stock as
part of the purchase price, Vestcom will be required to use more of its cash
resources, if available, to maintain its acquisition program. Using cash for
acquisitions limits Vestcom's financial flexibility and makes Vestcom more
likely to seek additional capital through borrowing money or selling stock.
Vestcom may not be able to obtain cash if and when it is needed on acceptable
terms, or at all. This could have a material adverse effect on Vestcom's
business, financial condition and results of operations.

Vestcom May Not Be Able to Sustain Internal Growth

         A key element of Vestcom's strategy is to generate internal growth by
capitalizing on cross-selling opportunities, generating new clients through
aggressive marketing and expanding its service offerings. Internal growth will
depend upon factors including:

         o the effective initiation, development and maintenance of client
           relationships;

         o the expansion and coordination of sales functions;

         o the development and success of new products and services;


         o Vestcom's ability to maintain the high quality of the services it 
           offers; and

         o the recruitment, motivation and retention of qualified management 
           and other personnel.

         Sustaining growth will also require continued access by Vestcom to
capital, the successful cross-selling of products and services among the
Operating Companies and realization by Vestcom of economies of scale. Vestcom
cannot be certain that its strategies will continue to generate internal growth
or that it will be able to generate cash flow adequate for its operations and to
support growth.

Vestcom Depends on Certain Technology

         Vestcom's success is dependent on its ability to acquire and utilize
competitive production technologies on a more cost-effective basis than
Vestcom's existing and potential customers can utilize them in-house. Vestcom's
services could be rendered noncompetitive or obsolete by technological advances
made by its current or potential production technology suppliers, some of whom
may be competitors. In addition, Vestcom could make a significant investment in

                                      -12-
<PAGE>

equipment or technology which quickly becomes obsolete. Vestcom cannot be
certain that it will be able to obtain the rights to use any of these
technologies, that it will be able to implement effectively these technologies
on a cost-effective basis or that these technologies will not render
noncompetitive or obsolete Vestcom's role as a consolidator and operator of
companies that create, manage and distribute business critical documents.

Vestcom May Be Affected by Consolidation in the Industries of Certain Customers

         A significant portion of Vestcom's customers are in the financial
services and retail industries. These industries have experienced consolidation
in recent years and may experience additional consolidation in the future.
Vestcom cannot predict the effects that such consolidation, or the possible
consolidation in other industries which Vestcom serves, such as the healthcare
industry, may have on its business or future prospects. For example, in
connection with such consolidation, Vestcom may either lose or gain additional
customers or experience variations in the volume of work received from its
customers.

The Price of Vestcom's Common Stock May Be Volatile

         In recent years the stock market has experienced significant price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of particular companies. These fluctuations, as well as a
shortfall in sales or earnings compared to public market analysts' expectations,
changes in analysts' recommendations or projections, and general economic,
industry specific and market conditions, may adversely affect the market price
of Vestcom's Common Stock. Vestcom's quarterly results of operations may vary
materially as a result of factors which include: timing and structure of
Vestcom's acquisitions, the gain or loss of material customers, the costs of
integrating acquired companies, changes in Vestcom's operating cost structure
and variations in the prices charged for Vestcom's services. Fluctuations in
Vestcom's stock price may adversely affect Vestcom's business and acquisition
opportunities.

Shares of Common Stock Eligible for Future Sale May Affect Market Price

         By August 1999, 3,430,327 shares of Common Stock issued to the former
holders of the Founding Companies at the time of the IPO and in connection with
certain earnouts and to certain other investors will be freely tradable, unless
held by affiliates of Vestcom. Also in August 1999, the holders of 278,334
shares of Common Stock will have the right to exercise registration rights with
respect to these shares. Shares issued upon the exercise of stock options also
will be eligible for resale in the public market. Sales of a substantial number
of shares of Common Stock in the public market could adversely affect the market
price of the Common Stock.

Vestcom May Be Adversely Affected by the Impact of the Year 2000 Issue

         The Year 2000 Issue is primarily the result of computer programs being
written using two digits rather than four to define the applicable year. Certain
computer programs may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activity.

         Based on a recent internal assessment, Vestcom believes that the
cost to modify its existing software and/or to convert to new software will not
be significant. However, if customers, suppliers or others with whom Vestcom
does business experience problems relating to the Year 2000 Issue, Vestcom's
business, financial condition or results of operations could be materially
adversely affected. In addition, Vestcom could be affected by a systematic
failure beyond its control, such as a prolonged telecommunications or electrical
failure, the failure of other utility companies or a failure of governmental
systems including the U.S. postal service. Such failures could interrupt
Vestcom's operations, including its ability to receive and process data from its
customers, and could have a material adverse effect on Vestcom's business,
results of operations or financial condition.

                                      -13-
<PAGE>

Vestcom May Face Potential Liability for Breach of Confidentiality

         A substantial portion of Vestcom's business involves the handling of
documents containing confidential and other sensitive information. There can be
no assurance that unauthorized disclosure will not result in liability to
Vestcom or damage Vestcom's reputation. In addition, in connection with
providing its Internet suite of products, Vestcom transmits information about
third parties over the Internet. Vestcom may be exposed to liability with
respect to the transmission of such third party information.

Vestcom May Have Business Interruptions

         Vestcom believes that its future results of operations are dependent in
large part upon its ability to provide prompt and efficient services to its
customers. Certain of Vestcom's operations are performed at a single location
and are dependent on continuous computer, electrical and telephone service. As a
result, any disruption of Vestcom's day-to-day operations could have a material
adverse effect upon Vestcom. There can be no assurance that a fire, flood,
earthquake, power loss, phone service loss or other event affecting one or more
of Vestcom's facilities would not disable these services. Any significant damage
to any such facility or other failure that causes significant interruptions in
Vestcom's operations may not be covered by insurance. Any uninsured or
underinsured loss could have a material adverse effect on Vestcom's business,
financial condition or results of operations.

Vestcom's Business May Be Affected By Fluctuations in the Price of Supplies and
other Costs or Alternative Technologies

         Prices for paper, equipment maintenance, delivery services and labor
costs may increase from time to time in the future. Any significant increases in
the prices of these materials and services that cannot be passed on to customers
could have a material adverse effect on Vestcom's business, financial condition
or results of operations. In addition, increases in the prices of supplies and
other materials and services might cause some of Vestcom's customers to utilize
alternative technologies in their respective businesses that do not involve the
use of paper or the mail, such as the Internet. While Vestcom presently offers
electronic distribution services via the Internet, there can be no assurance
that these services will be accepted by Vestcom's customers, or that other
technologies (whether now existing or developed in the future) may not in the
future reduce or supplant the demand for Vestcom's services, which could in turn
adversely affect Vestcom's business.

Effect of Certain Charter Provisions and New Jersey Law

         The Board of Directors of Vestcom is empowered to issue common stock
and preferred stock without stockholder action. The existence of this
"blank-check" common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of Vestcom by means of a tender offer,
merger, proxy contest or otherwise and may adversely affect the prevailing
market price of Vestcom's Common Stock. In addition, the New Jersey Shareholders
Protection Act prohibits certain persons from engaging in business combinations
with Vestcom.

Item 2.  Properties

         Vestcom currently has 36 facilities, aggregating approximately
1,102,000 square feet. These facilities are located in 19 states and in the
Provinces of Quebec and Ontario, Canada. All of these facilities are leased and
are used for operations, administrative and storage functions. Leases vary in
term remaining from month-to-month to 15 years and in some cases, include
options to extend the lease term. Vestcom has entered into a 15 year lease
commencing June 1, 1999, for executive office, production and warehouse space,
aggregating approximately 210,000 square feet (which is included in the
aggregate square footage amount referred to above).

                                      -14-
<PAGE>

Item 3.  Legal Proceedings

         Vestcom is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on
Vestcom's business, financial position or results of operations.

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

         During the fourth quarter of the year ended December 31, 1998, no
matters were submitted to a vote of Vestcom's security holders.

Item 4A.  Executive Officers of the Registrant

         Vestcom's executive officers are as follows:
<TABLE>
<CAPTION>
Name                                Age*                     Positions with Vestcom
----                                ---                      ----------------------
<S>                                 <C>      <C>                                                      
Joel Cartun                         59      Chairman of the Board and Chief Executive Officer

Brendan Keating                     44      President and Chief Operating Officer

Harvey Goldman                      52      Executive Vice President, Chief Financial Officer and
                                              Treasurer

Peter J. McLaughlin                 60      Executive Vice President

Sheryl Bernstein Cilenti            30      Vice President, General Counsel and Secretary
</TABLE>

--------------------
*  Ages are as of March 1, 1999.

         Joel Cartun has been the Chief Executive Officer and a director of
Vestcom since its incorporation in September 1996 and Chairman of the Board
since August 1997. He served as President of Vestcom from its incorporation
until March 1999. Mr. Cartun founded Comvestrix Corp. (now known as Vestcom
Mid-Atlantic, Inc. ("VMA")), one of the Founding Companies, in 1969, and has
served as Chief Executive Officer and a director of that corporation since its
incorporation and as President until October 1998. Mr. Cartun was a founder of
Xplor International, a trade association for the electronic printing industry.

         Brendan Keating has served as President of Vestcom since March 1999, as
a director since May 1998, and as Chief Operating Officer of Vestcom since
October 1997. He served as Executive Vice President of Vestcom from October 1997
until March 1999. He has served as President of VMA since October 1998, and as
Chief Operating Officer of VMA from October 1997 until April 1998. He served as
Vice President of Bowne & Co., Inc. (a financial printing company) from 1991
until October 1997. He also served as Vice President of Operations of Bowne of
New York City, Inc. from 1985 to 1991, and as President of Bowne Business
Communications from 1993 to 1995.

         Harvey Goldman has served as Executive Vice President, Chief Financial
Officer and Treasurer of Vestcom since May 1997. He served as President, Chief
Executive Officer and Chairman of the Board of Conversion Technologies
International, Inc. (a publicly traded specialty materials company) from 1994 to
May 1997. From June 1991 to March 1994, Mr. Goldman served as Executive Vice
President and as a director of Air & Water Technologies Corporation, a publicly
held environmental technologies company (and successor to Research-Cottrell,
Inc.), and as its Chief Financial Officer from June 1987 through June 1991.
Prior to joining Research Cottrell, Inc. in 1985, Mr. Goldman was a partner at
Arthur Young & Co. (now Ernst & Young LLP).

         Peter J. McLaughlin has served as Executive Vice President of Vestcom
since March 1997 and as a consultant to Vestcom from July 1996 to March 1997. He

                                      -15-


<PAGE>

served as Chief Financial Officer and Treasurer of Vestcom from March 1997 to
May 1997. Mr. McLaughlin also served as a director of Vestcom from its inception
through the consummation of the IPO. He was a partner from 1994 to 1996 in the
merger and acquisition firm of McLaughlin & Tonra. Prior thereto, he was Senior
Vice President of the Eastern Region, with Zytron (a Dun & Bradstreet subsidiary
specializing in computer output services) and its successor company, First Image
Management.

         Sheryl Bernstein Cilenti has served as Vice President and General
Counsel of Vestcom since October 1997 and as Secretary of Vestcom since November
1997. From September 1993 until joining Vestcom, Ms. Cilenti was an associate at
Lowenstein Sandler PC in Roseland, New Jersey, where she practiced law primarily
in the areas of mergers and acquisitions and securities.

                                     PART II

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

         Vestcom's Common Stock has traded on the Nasdaq National Market since
July 30, 1997, under the symbol "VESC". Vestcom's initial public offering price
to the public was $13.00 per share. The following table sets forth the range of
high and low sales prices for the Common Stock on the Nasdaq National Market for
the periods indicated:
                                                     High              Low
                                                     ----              ---
Year ended December 31, 1997:
         Third quarter (from July 30)               $21.125          $13.00*
         Fourth quarter                              22.625           17.00

Year ended December 31, 1998:
         First quarter                               21.50            6.50
         Second quarter                              11.75            8.625
         Third quarter                               11.00            6.063
         Fourth quarter                               9.00            5.813

-----------------
         *Represents the initial public offering price.

         As of March 24, 1999, there were 89 holders of record of the Common
Stock.

         Vestcom has not declared or paid any dividends on its Common Stock.
Vestcom currently intends to retain earnings to support its growth strategy and
does not anticipate paying dividends in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of Vestcom's Board of
Directors after taking into account various factors, including Vestcom's
financial condition, results of operations, current and anticipated cash needs
and plans for expansion and any restrictions that may be imposed by Vestcom's
future credit facilities. Vestcom's credit facility with Summit Bank restricts
Vestcom's ability to pay cash dividends on its Common Stock. The credit facility
provides that Vestcom may declare and pay quarterly cash dividends on its Common
Stock only if after giving effect to any such payment Vestcom would not be in
default under any of the provisions of such credit facility.

         During the year ended December 31, 1998, Vestcom issued an aggregate of
304,779 shares of Common Stock which were not registered under the Securities
Act of 1933 (the "Securities Act"). All of the shares were issued on April 29,
1998, as earnout payments in connection with Vestcom's acquisitions of two of
the Founding Companies. All of the unregistered shares issued by Vestcom during
1998 were issued in reliance upon the exemption provided by Section 4(2) of the
Securities Act. None of the unregistered issuances of Common Stock described
above involved an underwriter.


                                      -16-

<PAGE>

Item 6        SELECTED FINANCIAL DATA

         Vestcom acquired the Founding Companies on August 4, 1997 concurrently
with the consummation of the Company's IPO. Prior to the consummation of the
IPO, Vestcom conducted no activities, other than those related to the IPO and
the acquisition of the Founding Companies. For financial statement presentation
purposes, Vestcom has been identified as the accounting acquirer. The following
selected historical financial data of Vestcom as of December 31, 1998 and 1997
and for the years ended December 31, 1998 and 1997 and for the period from
inception (September 19, 1996) to December 31, 1996 have been derived from the
audited financial statements of Vestcom included elsewhere in this Annual Report
on Form 10-K. The Statements of Operations Data included below reflect the
operations of the acquired companies from the respective dates of their
acquisition.

                             SELECTED FINANCIAL DATA
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                                                         For the Period from
                                                   For the Year Ended        For the Year Ended     Inception (September 19, 1996)
                                                    December 31, 1998        December 31, 1997           to December 31, 1996
                                                   ------------------        ------------------      ------------------------------
Statement of Operations Data:
<S>                                                       <C>                      <C>                        <C>          
Revenues.........................................     $   108,676              $     29,777             $        --
                                                                            
Income (loss) from Operations....................           8,927                     2,671                  (1,633)
                                                                            
Net Income (loss) - Basic........................     $     4,627              $      1,308             $    (5,078)
Net Income (loss) - Diluted......................     $     4,623              $      1,249             $    (5,078)
Net Income per share - Basic.....................     $       .52              $        .31        
Net Income per share - Diluted...................     $       .52              $        .29        

Additional Information:

EBITDA                                                $    15,228              $      4,681

Balance Sheet Data:                                December 31, 1998      December 31, 1997
                                                   -----------------      -----------------

Working capital                                       $     3,745           $     17,147
Total assets                                          $   142,544           $    114,346
Long term obligations                                 $    21,386           $     10,802
Stockholders' equity                                  $    89,911           $     83,028
</TABLE>

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

Overview

         The following discussion of the financial condition and results of
operations of Vestcom should be read in conjunction with Vestcom's Consolidated
Financial Statements and the related notes thereto appearing elsewhere herein.

Disclosures Regarding Forward Looking Statements

         This Annual Report on Form 10-K contains 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 that are based on
the beliefs of Vestcom's management as well as assumptions made by and
information currently available to Vestcom's management. Such statements reflect
the current views of Vestcom with respect to future events based on currently
available information and are subject to risks and uncertainties that could
cause actual

                                      -17-

<PAGE>


results to differ materially from those contemplated in such forward-looking 
statements. Factors that could cause actual results to differ materially from
Vestcom's expectations include, but are not limited to, the following:
acceptance of Vestcom's new products in the marketplace, the entry of new
competitors, changes in the business document outsourcing industry, the
availability of suitable acquisition candidates, the assimilation of new
acquisitions with existing business, the ability to execute and manage its
growth strategy, the ability to successfully consolidate production facilities
and functions as part of the Company's integration program, and the results of
its investment spending. Other factors are described from time to time in
Vestcom's public filings with the Securities and Exchange Commission, news
releases and other communications. Also, when Vestcom uses the words "believes",
"expects", "anticipates," "estimates," "plans," "intends," "objectives,"
"goals," "aims," "projects" or similar words or expressions, Vestcom is making
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
Vestcom does not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

Introduction

         Vestcom International, Inc. was incorporated in September 1996.
Concurrently with the consummation of Vestcom's initial public offering (the
"Offering") on August 4, 1997, Vestcom acquired seven companies that create,
manage and distribute business critical documents (the "Founding Companies")
each of which had been operating as a separate independent entity. For
accounting purposes, the acquisitions of the Founding Companies were deemed to
be made August 1, 1997, using purchase accounting, with Vestcom as the acquirer.
Since the Offering, Vestcom has acquired additional companies that create,
manage and distribute business critical documents, as detailed below
(collectively with the Founding Companies referred to herein as "Acquired
Companies").

         Vestcom acquired substantially all of the assets of New England Laser
Printing, Inc. (now known as Vestcom Rhode Island, Inc.) in November, 1997, and
the stock of Moreau Promotional Services, Inc. (now known as Vestcom Canada) in
December 1997. As of January 20, 1998 Vestcom acquired substantially all of the
assets of Creative Data Services, Inc. ("CDS") and D.B. Acquisition Inc. (doing
business as Business Mail Express) ("BME"), a wholly owned subsidiary of CDS,
and on April 14, 1998 Vestcom acquired substantially all of the assets of Dee
Cee Graphics Inc. ("Dee Cee"). The operations of Dee Cee were consolidated into
Vestcom Massachusetts' operations. On August 4, 1998, Vestcom, acquired
substantially all of the assets of Graphic Technology Systems, Inc. ("GTS"). The
operations of GTS were consolidated into Vestcom's Retail Solutions' operations.
On October 30, 1998, Vestcom acquired substantially all of the assets of Manus
Services Corporation ("Manus"), a company based in Seattle, Washington. The
Acquired Companies were managed prior to their acquisition as independent
private companies, and their results of operations reflect different tax
structures (S corporations and C corporations for the U.S. Acquired Companies),
which have influenced, among other things, the Acquired Companies historical
levels of owners' compensation. In connection with the acquisition of the
Acquired Companies, these owners and certain key employees agreed to certain
reductions in their compensation which commenced as of the date of acquisition.

         Vestcom's Consolidated Balance Sheet as of December 31, 1998 includes
the Founding Companies and Vestcom Rhode Island, Inc., Vestcom Canada, CDS, BME,
Dee Cee, GTS and Manus. The results of operations and statement of cash flows
for the year ended December 31, 1998, include the results of Vestcom and all of
the companies acquired in 1997 for the entire period, and the companies acquired
in 1998 from their respective dates of acquisition.

         In connection with Vestcom's acquisitions, Vestcom has made certain
earnout payments and may be required to pay an additional earnout if specified
revenue thresholds, margins or earnings are attained during the period ending
July 31, 1999. In connection with a determination of earnouts for two of the
Founding Companies, in April 1998, Vestcom paid $1,278,000 in cash, incurred an
obligation to pay $1,160,000 in cash and issued an aggregate of 304,779 shares
of Common Stock. The Company paid $580,000 of the $1,160,000 obligation in
September 1998 and the remaining $580,000 in March 1999.


                                      -18-


<PAGE>

         In February 1999, Vestcom paid $375,984 and in March 1999, issued an
aggregate of 228,216 shares of Common Stock in connection with the determination
of an earnout for another Founding Company. In March 1999, Vestcom paid
$325,000, issued a note payable for $612,500 at 5% interest due in January, 2000
and issued an aggregate of 40,000 shares of Common Stock in connection with the
determination of an earnout of an acquired company. After the April 1998,
September 1998, February 1999 and March 1999 payments, the aggregate maximum
earnout payments which Vestcom may be required to make going forward are
$650,000 in cash. Any payments of earnouts will increase the goodwill recorded
for the acquisition of the applicable company. The amortization of any
additional goodwill and the increased number of shares issued in connection with
earnouts will negatively affect Vestcom's future earnings per share.

         Vestcom, which conducted no operations prior to the consummation of the
Offering other than in connection with the acquisitions of the Founding
Companies and the financing activities related thereto, including the Offering,
had no revenues and limited corporate expenses in the first seven months of
1997. Therefore, Management's Discussion and Analysis based on actual results
would compare twelve months of operating activity in 1998 to five months of
operating activity in 1997 to no operating activity in 1996. Accordingly,
management believes that Management's Discussion and Analysis would only be
meaningful based on a comparison of the audited Results of Operations of Vestcom
for the year ended December 31, 1998, to the unaudited Pro Forma Results of
Operations of Vestcom for the years ended December 31, 1997 and December 31,
1996. The unaudited pro forma data give effect to: (i) the acquisitions of the
Founding Companies and Vestcom Rhode Island and Vestcom Canada; and (ii)
compensation and other adjustments for all transactions as if the transactions
had occurred on January 1, 1997 and January 1, 1996, respectively.

         The following discussion of Pro Forma Results of Operations is not
necessarily indicative of the results Vestcom would have obtained had all of
these acquisitions actually then occurred or of Vestcom's actual or future
results.
<TABLE>
<CAPTION>
                                                           Actual            Unaudited Pro Forma
                                                          (Audited)         Results of Operations
                                                       (in thousands)           (in thousands)
                                                       --------------       ---------------------
                                                              1998             1997           1996
                                                              ----             ----           ----
<S>                                                      <C>               <C>                <C>    
Revenues                                                 $     108,676       $  79,273     $ 71,201
Gross profit                                             $      39,882       $  29,531     $ 24,511
Selling, general & administrative expenses               $      30,955       $  18,984     $ 17,008
Income from operations                                   $       8,927       $   8,418     $  5,524
</TABLE>

Results of Operations

Year Ended December 31, 1998 Compared to Unaudited Pro Forma
Year Ended December 31, 1997 ($ in 000's)

         Revenues increased $29,403, or 37.1%, from pro forma $79,273 for the
year ended December 31, 1997 to $108,676 for the year ended December 31, 1998.
This increase was primarily attributable to acquisitions which accounted for
$22,173 or 28% of 1998 revenues and $7,230 or 9% internal growth over 1997
revenues. This internal growth was due to increased sales to new and existing
customers primarily in the financial services and retail markets.

         Vestcom's gross profit increased $10,351, or 35.1%, from pro forma
$29,531 for the year ended December 31, 1997 to $39,882 for the year ended
December 31, 1998. This increase was primarily attributed to acquisitions which
accounted for approximately $8,242 with the remaining increase relating to the
increased volume of business. The gross profit margin decreased from 37.3% in
1997 to 36.7% in 1998 primarily due to the renegotiation of certain capital
lease obligations with one of Vestcom's vendors which reclassified certain of
the obligations from capital leases to operating leases. This transaction
resulted in expense being moved from Interest Expense to Cost of Revenue thereby
reducing the gross profit in 1998.


                                      -19-


<PAGE>

         Selling, general and administrative expenses increased $11,971, or
63.1%, from pro forma $18,984 for the year ended December 31, 1997 to $30,955
for the year ended December 31, 1998. As a percentage of revenues, selling
general and administrative expenses increased from 23.9% in 1997 to 28.5% in
1998. The increase was attributable in part to acquisitions which accounted for
approximately $4,900, or 41% of the total increase. The remaining increase in
selling, general and administrative expenses was primarily due to increased
compensation expense including increased commissions on higher sales, increased
staffing for new technical and administrative personnel to support the greater
volume of business, increased spending in sales and marketing programs and the
costs associated with the increased Vestcom corporate management staff. The
majority of the expenses of the Vestcom corporate staff operations did not come
into existence until after the consummation of the initial public offering in
August of 1997. In addition, the Company incurred costs in connection with its
efforts to integrate its acquired companies. These costs included redundant
overhead and facility costs. The Company expects that it will continue to incur
such costs in future periods in connection with its integration process.

Pro Forma Year Ended December 31, 1997 Compared to
the Pro Forma Year Ended December 31, 1996 ($ in 000's)

         Pro forma revenues increased $8,072 or 11.3% from $71,201 for the year
ended December 31, 1996 to $79,273 for the year ended December 31, 1997. This
increase was primarily attributable to increased volume of production of
statements, point of purchase labels and other imaging services, although
revenues also increased in other areas.

         Pro forma gross profit increased $5,020 or 20.5% from $24,511 for the
year ended December 31, 1996 to $29,531 for the year ended December 31, 1997.
The pro forma gross profit margin increased from 34.4% in 1996 to 37.3% in 1997
primarily due to improved capacity utilization resulting from the increased
volume of business and the refinancing through capital leases of certain
existing production equipment which resulted in reduced lease and maintenance
costs.

         Pro forma selling, general and administrative expenses increased $1,976
or 11.6% from $17,008 for the year ended December 31, 1996 to $18,984 for the
year ended December 31, 1997. As a percentage of revenues, selling, general and
administrative expenses remained constant at approximately 23.9% in 1996 and
1997.

         Pro forma income from operations increased $2,894 or 52.4% from $5,524
for the year ended December 31, 1996 to $8,418 for the year ended December 31,
1997 for the reasons discussed above.

Liquidity and Capital Resources

         The following discussion of liquidity and capital resources reflects
Vestcom's actual results of operations and financial position for the periods
discussed.

         On August 4, 1997 Vestcom consummated its initial public offering of
3,850,000 shares of its Common Stock at a price of $13.00 per share. Vestcom's
underwriters exercised in full an option to purchase an additional 577,500
shares of Vestcom's Common Stock at $13.00 per share to cover over allotments of
the initial public offering. The capital raised by this offering was
approximately $54,000,000 net of underwriting discounts, of which approximately
$35,000,000 was used for the cash portion of Vestcom's acquisitions and
approximately $12,000,000 was used for the repayment of debt and capital leases.

         At December 31, 1998, Vestcom had working capital of approximately
$3,745,000 as compared to $17,147,000 at December 31, 1997. The decrease is
primarily attributed to acquisitions. Net cash provided by operating activities
for the year ended December 31, 1998, was approximately $15,264,000 and was
generated primarily from net income and depreciation and amortization charges.
Net cash used in investing activities for the year ended December 31, 1998, was
approximately $28,731,000 which consisted of approximately $13,134,000 generated
from the sale of marketable securities, approximately $30,422,000 of cash used
for acquisitions, and approximately $11,605,000 used for the purchase of 
property and equipment. Net cash provided by financing activities for the year 
ended December 31, 1998, was approximately $13,559,000 which included 
approximately


                                      -20-

<PAGE>

$11,006,000 from net borrowings and $2,552,000 from the issuance of Common Stock
to former stockholders of certain of the Founding Companies in connection with
earnout provisions.

         On August 13, 1997, Vestcom and Summit Bank entered into an Equipment
Loan and Revolving Credit Agreement ("the Credit Facility") in the amount of
$30,000,000. On December 31, 1998, approximately $12,300,000 was outstanding and
$17,700,000 remained available under the Credit Facility.

         Vestcom incurs postage costs on behalf of customers of approximately
$4,000,000 to $6,000,000 each month. Vestcom seeks to collect such postage costs
from its customers in advance. At December 31, 1998, Vestcom had postage
advances from customers in the amount of approximately $5,200,000 and had
prepaid postage and postage receivables of approximately $3,200,000. To the
extent Vestcom is unsuccessful in obtaining postage costs in advance, cash flow
is negatively affected and Vestcom may be required to utilize its working
capital or credit facility to cover the cash outlay.

         Capital expenditures of approximately $11,605,000 for property and
equipment and leasehold improvements were made in 1998. These investments, which
were financed primarily by working capital and vendor financing, relate to the
facility consolidations of certain of the Acquired Companies and the purchase of
supplemental production equipment to meet customer demands for business critical
documents. There are anticipated requirements for future capital expenditures in
1999 for leasehold improvements, furniture and fixtures, and equipment due to
the opening of new facilities to support the consolidation and integration of
production sites and the anticipated production equipment needs of the business.
At this time, these expenditures are estimated to be approximately $5,000,000.
While no assurance can be given, management believes that its cash flow from
operations combined with existing cash and the availability of funds under the
Credit Facility, and potential additional credit capacity, will be sufficient to
meet its working capital, capital expenditure and debt service requirements and
its current plans to acquire additional related businesses for the foreseeable
future. The preceding sentence constitutes a forward looking statement.

Impact of the Year 2000 Issue

         Vestcom utilizes computer technologies in the form of both software and
hardware (including electronic digital printers) to effectively carry out its
day-to-day operations. In addition to information technology, there is embedded
computer technology in Vestcom's facilities and equipment. Vestcom is utilizing
a multi-phased concurrent approach to determine whether its systems are capable
of recognizing and processing date sensitive information properly as the year
2000 approaches. The phases included in Vestcom's approach are awareness,
assessment, remediation, validation, implementation and contingency planning.

         Vestcom has separate plans to complete the year 2000 project for each
operating unit, with central review and audit being performed by the
headquarters organization. All units have completed the awareness and assessment
phases. Remediation, validation and implementation were near completion in all
units at the end of 1998. Full validation and implementation is scheduled to be
complete by July 1999. Since each Vestcom unit uses many different kinds of
computers, procedures to implement year 2000 corrections vary greatly. Each unit
has a plan to test all year 2000 changes during the first half of 1999. This
includes upgrades to mainframe hardware and software operating systems, laser
printer software upgrades, microfiche and CD software replacements, PC
replacements and financial software upgrades. Since Vestcom processes data
prepared by its customers, and does not have extensive date dependent
proprietary software to repair or replace, management believes that the required
changes to Vestcom's systems will not be extensive.

         Vestcom has contacted its major software and hardware suppliers to
verify that the systems Vestcom uses are Year 2000 compliant. All major vendors
have replied, and all vendors have either repaired, replaced or are in the
process of upgrading hardware and software installed at Vestcom. Most of the
changes are complete, with some work to be completed during the first quarter of
1999. There can be no assurances that other companies' systems on which
Vestcom's systems rely will be timely converted or that any such failure to
convert by another company would not have a materially adverse effect on
Vestcom's systems. Certain of Vestcom's customers may need to make appropriate
changes to modify the data that they send to Vestcom to make the information
Year 2000 compliant. Vestcom has assessed the extent to which its customers may
experience Year 2000 issues and has 


                                      -21-

<PAGE>


completed testing with certain major customers. If customers or others with whom
Vestcom does business experience problems relating to the Year 2000 issue,
Vestcom's business, financial condition or results of operations could be
adversely affected. A loss of business could result from Vestcom's customers'
inability to implement new work projects while focusing their information
technology resources on Year 2000 issues within their existing systems.

         Vestcom estimates that the aggregate cost of its Year 2000 project will
be approximately $1,000,000, including costs already incurred. Significant
portions of these costs are not likely to be incremental costs, but rather will
represent the redeployment of existing resources. This reallocation of resources
is not expected to have a significant impact on the day-to-day operations of
Vestcom. Vestcom incurred total costs of approximately $300,000 for this project
during 1998, of which about $100,000 was incremental expense. Major planned
costs in 1999 are to cover the replacement of billing software and PC hardware.
The anticipated costs of the project, as well as the date on which Vestcom
expects to complete the project are based on management's best estimate using
information currently available and numerous assumptions about future events.
However there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those plans. Based on its current
estimates and information currently available Vestcom does not anticipate that
the costs associated with this project will have a material adverse effect on
Vestcom's consolidated financial position, results of operations or cash flows
in the future. The preceding sentence constitutes a forward looking statement.

         In the event that the efforts of Vestcom's Year 2000 project do not
address all relevant problems, Vestcom has developed contingency plans. Vestcom
uses multiple suppliers for most critical processes. Reliance on multiple
suppliers lessens risk to any single critical business process. In the limited
cases where there is a single supplier, Vestcom is performing extensive testing
and planning for onsite support at year-end to minimize the length and impact of
an outage. In addition, Vestcom's decentralized operational structure allows for
a single operating unit to have a software or hardware failure, while another
unit can provide backup support. This provides reduced risk if a single unit
does not successfully complete the required changes to become Year 2000
compliant as planned.

         Vestcom uses the services of many public utilities such as
telecommunications common carriers, both local and long distance, water, gas,
electrical power, and municipal services such as fire and security. The Company
cannot effectively test these services for year 2000 readiness. These
organizations have made public statements regarding readiness for year 2000 and
the Company is unable to assess the accuracy of these statements. Since Vestcom
is located in many different geographic areas, and relies on many different
public utility suppliers, the failure of one of these entities could affect the
Company.

         Vestcom is continuing its efforts to timely address the Year 2000
issues. Actual results could differ materially from the forward-looking
statements contained herein as a result of a variety of factors, including
potential unavailability of technological resources, increased expenses
associated with obtaining such resources and unanticipated technological
difficulties.

         Vestcom is currently evaluating the Year 2000 readiness of the business
and assets acquired from Conversion Printing Systems, Inc. ("CPS") as of
February 12, 1999. As such the above discussion does not reflect the impact of
CPS.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

         Vestcom's major "market risk" exposure is the effect of changing
interest rates. Vestcom manages its interest expenses by using a combination of
fixed and variable rate debt. At December 31, 1998, Vestcom's debt consisted of
approximately $8,924,000 of fixed-rate debt with a weighted average interest
rate of 7.55% and $10,000,000 of variable-rate debt with a weighted average
interest rate of 6.79%. The amount of variable-rate debt fluctuates during the
year based on Vestcom's cash requirements; maximum borrowings at any quarter end
during 1998 were $10,000,000. If interest rates on such variable debt were to
increase by 200 basis points (two-tenths of the rate at December 31, 1998), the
net impact of Vestcom's results of operations and cash flows would be
immaterial.


                                      -22-

<PAGE>



Item 8        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements:                                             Page

Report of Independent Public Accountants                                    F-1
Vestcom International, Inc. and Subsidiaries
       Consolidated Balance Sheets at December 31, 1998 and 1997            F-2
Vestcom International, Inc. and Subsidiaries
       Consolidated Statements of Operations for the years ended
       December 31, 1998 and 1997, and for the period
       from inception (September 19, 1996) to December 31, 1996             F-3
Vestcom International, Inc. and Subsidiaries
       Consolidated Statements of Stockholders' Equity
       for the years ended December 31, 1998 and 1997, and for the
       period from inception (September 19, 1996) to December 31, 1996      F-4
Vestcom International, Inc. and Subsidiaries
       Consolidated Statements of Cash Flows for the
       years ended December 31, 1998 and 1997
       and for the period from inception (September 19, 1996)
       to December 31, 1996                                                 F-5
Vestcom International, Inc. and Subsidiaries
       Notes to Consolidated Financial Statements                           F-6


                                      -23-


<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Vestcom International, Inc.

         We have audited the accompanying consolidated balance sheets of Vestcom
International, Inc. (a New Jersey corporation) and Subsidiaries, as of December
31, 1998 and 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1998 and
1997, and for the period from inception (September 19, 1996) through December
31, 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 audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vestcom
International, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the
results of their operations and their cash flows for the years ended December
31, 1998 and 1997, and for the period from inception (September 19, 1996)
through December 31, 1996 in conformity with generally accepted accounting
principles.


                                                ARTHUR ANDERSEN LLP

Roseland, New Jersey
March 1, 1999


                                      F-1




<PAGE>



               VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997

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

CURRENT ASSETS
<S>                                                                            <C>                    <C>       
Cash                                                                           $3,887,971             $4,092,000
Marketable securities                                                             360,480             13,494,886
Accounts receivable, net of allowance for
    doubtful accounts of $1,123,581 and $354,952 in 1998 and 1997,
    respectively                                                               21,190,379             13,999,511
Supplies inventory                                                              4,476,122              2,221,725
Prepaid expenses and other current assets                                       5,076,807              3,855,122
                                                                        -----------------       ----------------
                           Total current assets                                34,991,759             37,663,244

PROPERTY AND EQUIPMENT, at cost, net of
    accumulated depreciation and amortization                                  27,576,892             21,684,918

GOODWILL, net                                                                  79,192,856             54,336,937

OTHER ASSETS                                                                      782,729                660,660
                                                                        -----------------       ----------------
                           Total assets                                 $     142,544,236       $    114,345,759
                                                                        =================       ================

</TABLE>

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



                                      F-2

<PAGE>

                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                         1998              1997
                                                                                     -------------    -------------
LIABILITIES & STOCKHOLDERS'
EQUITY

CURRENT LIABILITIES
<S>                                                                                  <C>              <C>          
Current portion of long term debt                                                    $     642,307    $     191,184
Current portion of capital lease obligations                                             1,689,238        2,435,994
Accounts payable                                                                        10,761,607        4,780,082
Accrued expenses                                                                        17,272,370       11,698,803
Income taxes payable                                                                       493,394        1,210,235
Other current liabilities                                                                  387,635          199,653
                                                                                     -------------    -------------
                  Total current liabilities                                             31,246,551       20,515,951

LONG-TERM DEBT                                                                          12,847,319           38,835
CAPITAL LEASE OBLIGATIONS                                                                3,745,435        7,894,737
DEFERRED CHARGES & OTHER LIABILITIES                                                       457,693        1,427,037
DEFERRED INCOME TAXES                                                                    4,335,898        1,441,373
                                                                                     -------------    -------------
                  Total liabilities                                                     52,632,896       31,317,933

STOCKHOLDERS' EQUITY:
Preferred Stock
Class A convertible,  no shares issued and outstanding at December 31, 1998; 200
 shares authorized, issued and outstanding at December 31, 1997                              --               --
Class B 1 share authorized, issued and outstanding at December 31, 1998 and                   
 December 31, 1997                                                                       2,651,867        2,651,867
Class C convertible, 100 shares authorized, issued and outstanding at December 31,       
 1998 and December 31, 1997                                                                  --               --
Common stock, no par value; 20,000,000 shares authorized: 8,788,590 shares issued
 and outstanding at December 31, 1998; 8,483,811 shares issued and outstanding at
 December 31, 1997                                                                      86,782,015       84,229,597
Retained earnings (accumulated deficit)                                                    857,367       (3,770,054)
Accumulated Other Comprehensive Income                                                    (379,909)         (83,584)
                                                                                     -------------    -------------
                  Total stockholders' equity                                            89,911,340       83,027,826
                                                                                     -------------    -------------
                  Total liabilities & stockholders' equity                           $ 142,544,236    $ 114,345,759
                                                                                     =============    =============

</TABLE>

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

<PAGE>


 
                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND FOR
       THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                          1998                   1997                  1996
                                                                          ----                   ----                  ----
<S>                                                                 <C>                    <C>                    <C>           
REVENUES                                                            $    108,675,572       $     29,777,283       $            -
COST OF REVENUES                                                          68,793,382             18,317,401                    -
                                                                    ----------------       ----------------       -------------- 
          Gross Profit                                                    39,882,190             11,459,882                    -
SELLING, GENERAL & ADMINISTRATIVE EXPENSES                                30,955,177              8,789,000            1,633,042
                                                                    ----------------       ----------------       -------------- 
          Income (loss) from operations                                    8,927,013              2,670,882           (1,633,042)
OTHER INCOME (EXPENSE)
          Interest Expense                                                  (796,251)              (660,607)          (3,444,917)
          Interest income and other, net                                     243,432                603,685                    -
                                                                    ----------------       ----------------       -------------- 
                                                                            (552,819)               (56,922)          (3,444,917)
         Income (loss) before provision for income
         taxes                                                             8,374,194              2,613,960           (5,077,959)

PROVISION FOR INCOME TAXES                                                 3,746,773              1,306,055                    -
                                                                    ----------------       ----------------       -------------- 
          Net income (loss)                                         $      4,627,421       $      1,307,905       $   (5,077,959)
                                                                    ================       ================       ===============
Net income per share-basic                                          $           0.52       $           0.31
                                                                    ================       ================
Net income per share - diluted                                      $           0.52       $           0.29
                                                                    ================       ================
</TABLE>
          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-3


<PAGE>
                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND FOR THE PERIOD FROM
               INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
                                                         COMMON STOCK                   PREFERRED STOCK           SUBSCRIPTIONS  
                                                    SHARES           AMOUNT          SHARES        AMOUNT           RECEIVABLE   
                                                  ---------------------------     -------------------------      --------------
<S>                                                 <C>           <C>             <C>          <C>               <C>
ISSUANCE OF COMMON STOCK                            791,346       $    39,965                   $                $               
ISSUANCE OF COMMON STOCK                            503,846         5,441,536                                       (279,082)    
NET LOSS
   TOTAL COMPREHENSIVE INCOME                                                                                 
                                                  ---------       -----------     --------      -----------      ------------    
BALANCE AT DECEMBER 31, 1996                      1,295,192         5,481,501                                       (279,082)    
                                                  =========       ===========     ========      ===========      ============    
SHARES RETURNED                                    (170,856)       (1,363,745)                                                   
SHARES RETURNED                                     (54,656)         (436,255)                                                   
INITIAL PUBLIC OFFERING NET OF
 UNDERWRITING DISCOUNTS                           4,427,500        53,528,475                                                    
ISSUANCE OF STOCK TO FOUNDING
 COMPANIES, NET OF DISCOUNT                       2,852,111        24,555,061          301        2,651,867                      
PAYMENT OF SUBSCRIPTIONS RECEIVABLE                                                                                  279,082     
ISSUANCE OF COMMON STOCK IN
 CONNECTION WITH ACQUISITIONS, NET OF
 DISCOUNT                                           134,520         2,464,560                                                    
TRANSLATION ADJUSTMENT                                                                                                           
NET INCOME
   TOTAL COMPREHENSIVE INCOME                                                                                  
                                                  ---------       -----------     --------      -----------      ------------    
BALANCE AT DECEMBER 31, 1997                      8,483,811        84,229,597          301        2,651,867                -     
                                                  =========       ===========     ========      ===========      ============
ISSUANCE OF COMMON STOCK IN
 CONNECTION WITH EARNOUTS                           304,779         2,552,418         (200)                                      
TRANSLATION ADJUSTMENT                                                                                                           
NET INCOME                   
   TOTAL COMPREHENSIVE INCOME                                                                                                       
                                                  ---------       -----------     --------      -----------      ------------    
BALANCE AT DECEMBER 31, 1998                      8,788,590       $86,782,015          101      $ 2,651,867      $         -     
                                                  =========       ===========     ========      ===========      ============    
</TABLE>

<TABLE>                                                   
<CAPTION>                                                 
                                                   RETAINED          ACCUMULATED                                   
                                                   EARNINGS/            OTHER               TOTAL       
                                                   ACCUMULATED      COMPREHENSIVE       STOCKHOLDERS'          COMPREHENSIVE
                                                    DEFICIT            INCOME              EQUITY                  INCOME    
                                                   -----------       -----------         -------------          -------------      
<S>                                              <C>                <C>                  <C>                         <C>
ISSUANCE OF COMMON STOCK                         $                  $                    $    39,965    
ISSUANCE OF COMMON STOCK                                                                   5,162,454    
NET LOSS                                          (5,077,959)                             (5,077,959)             (5,077,959)
                                                                                                                  ----------
   TOTAL COMPREHENSIVE INCOME                                                                                     (5,077,959)
                                                  ----------        ------------         -----------              ==========
BALANCE AT DECEMBER 31, 1996                      (5,077,959)                                124,460              
                                                  ==========        ============         ===========         
SHARES RETURNED                                                                           (1,363,745)   
SHARES RETURNED                                                                             (436,255)   
INITIAL PUBLIC OFFERING NET OF                                                                          
 UNDERWRITING DISCOUNTS                                                                   53,528,475    
ISSUANCE OF STOCK TO FOUNDING                                                                           
 COMPANIES, NET OF DISCOUNT                                                               27,206,928    
PAYMENT OF SUBSCRIPTIONS RECEIVABLE                                                          279,082         
ISSUANCE OF COMMON STOCK IN                                                                             
 CONNECTION WITH ACQUISITIONS, NET OF                                                                    
 DISCOUNT                                                                                  2,464,560    
TRANSLATION ADJUSTMENT                                                  (83,584)             (83,584)                (83,584)
NET INCOME                                         1,307,905                               1,307,905               1,307,905
                                                                                                                  ----------
   TOTAL COMPREHENSIVE INCOME                                                                                      1,224,321
                                                  ----------        ------------         -----------              ==========
BALANCE AT DECEMBER 31, 1997                      (3,770,054)           (83,584)          83,027,826              
                                                  ==========        ============         ===========         
ISSUANCE OF COMMON STOCK IN                                                                             
 CONNECTION WITH EARNOUTS                                                                  2,552,418    
TRANSLATION ADJUSTMENT                                                 (296,325)            (296,325)                (296,325) 
NET INCOME                                         4,627,421                               4,627,421                4,627,421
                                                                                                                  ----------
   TOTAL COMPREHENSIVE INCOME                                                                                       4,331,096
                                                  ----------        ------------         -----------              ==========
BALANCE AT DECEMBER 31, 1998                      $  857,367        $  (379,909)         $89,911,340              
                                                  ==========        ============         ===========         
</TABLE>                                                    
          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.
                                      F-4
<PAGE>
 
                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1997,
  AND FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
                                                                           1998         1997              1996
                                                                         ---------    ------------    ------------ 
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                      <C>          <C>             <C>          
Net income (loss)                                                     $  4,627,421    $  1,307,905    $ (5,077,959)
Adjustments to reconcile net income (loss) to net cash provided by
 operating activities-
         Depreciation and amortization                                   6,058,897       1,926,638            --
         Provision for losses on accounts receivable                       276,984          16,000            --
         Discount on issuance of stock                                        --              --         5,074,233
         Loss on disposal of equipment                                     176,796            --              --
Changes in operating assets (increase) decrease in-
         Accounts receivable                                            (2,685,871)     (1,287,591)           --
         Supplies inventory                                               (630,508)       (257,568)           --
         Prepaid expenses and other current assets                        (798,498)        942,222        (392,664)
         Other assets                                                      (93,408)       (277,160)           --
Changes in operating liabilities increase (decrease) in-
         Accounts payable                                                4,065,253        (382,210)           --
         Accrued expenses                                                3,530,742       3,848,609         320,230
         Income taxes payable and other current liabilities             (1,188,715)        753,590            --
         Deferred charges & other liabilities                            1,925,181       1,681,842            --
                                                                       -----------     -----------      ----------     
Net cash provided by (used in) operating activities                     15,264,274       8,272,277         (76,160)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment                                  (11,604,831)     (2,130,356)           --
Proceeds from sale of assets                                               161,225            --              --
Acquisition of businesses, net of cash acquired                        (30,421,549)    (60,602,754)           --
Sale (purchase) of marketable securities                                13,134,406     (13,494,886)           --
                                                                       -----------     -----------      ----------     
Net cash provided by (used in) investing activities                    (28,730,749)    (76,227,996)           --

CASH FLOWS FROM FINANCING ACTIVITIES
Collection of subscriptions receivable                                        --           279,082            --
Proceeds on borrowings                                                  30,963,889            --         1,292,732
Repayment of debt                                                      (19,957,536)    (10,892,500)
Issuances of common stock                                                2,552,418      78,748,096         128,186
Issuances of preferred stock                                                  --         2,651,867            --
                                                                       -----------     -----------      ----------     
Net cash provided by (used in) financing activities                     13,558,771      70,786,545       1,420,918
EFFECTS OF EXCHANGE RATES ON CASH BALANCES                                (296,325)        (83,584)           --
                                                                       -----------     -----------      ----------     
NET (DECREASE) INCREASE IN CASH                                           (204,029)      2,747,242       1,344,758

CASH, beginning of period                                                4,092,000       1,344,758            --
                                                                      ------------    ------------    ------------     
CASH, end of period                                                   $  3,887,971    $  4,092,000    $  1,344,758
                                                                      ============    ============    ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligation incurred (renegotiated)                      $ (4,054,104)      1,155,456            --

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest                                                     775,028         638,179            --
Cash paid for income taxes                                               3,324,054         729,224            --
</TABLE>
          The accompanying notes to consolidated financial statements
                    are an integral part of these statements.


                                      F-5

<PAGE>
                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION:

         Vestcom International, Inc. (a New Jersey corporation) ("Vestcom" or
the "Company"), was formed in September 1996 to create an international document
management service provider focusing on the creation, management and
distribution of business critical documents. The Company's primary strategy is
to acquire, integrate and facilitate the growth of similar and complementary
companies in the highly fragmented document management services industry.

         On August 4, 1997, Vestcom consummated its initial public offering of
3,850,000 shares of its Common Stock at a price of $13.00 per share. The
Company's underwriters exercised in full an option to purchase an additional
577,500 shares of the Company's Common Stock at $13.00 per share to cover over
allotments of the initial public offering. The capital raised by this offering
was $53,528,475 net of underwriting discounts.

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
transactions have been eliminated. The results of operations for the twelve
months ended December 31, 1997 are not indicative of the results for a full year
because the results of operations of the acquired Founding Companies (as defined
below) included herein are for the period from August 1, 1997 (the effective
date of acquisition for financial statement purposes) to December 31, 1997.

2. ACQUISITIONS:

         Concurrently with the consummation of the Company's initial public
offering, it acquired seven companies in the document management services
industry (collectively the "Founding Companies"). The aggregate consideration
paid by the Company to acquire the Founding Companies was, subject to working
capital adjustments and certain additional earnouts, approximately $19.1 million
in cash and 3,156,890 shares of Vestcom Common Stock. The Acquisitions were
accounted for using the purchase method of accounting and accordingly, the
purchase price has been allocated to the assets acquired and the liabilities
assumed based upon the fair values at the date of acquisition. For purposes of
computing the estimated purchase price for accounting purposes, the value of the
shares issued simultaneously with the initial public offering was determined
using an estimated fair value of $11.05 per share, which represents a discount
of fifteen percent from the initial public offering price of $13.00 due to
restrictions on the sale and transferability of the shares issued. For purposes
of computing the estimated purchase price for accounting purposes, the value of
the shares issued in connection with earnout payments made during 1998 was
determined using a discount factor of 15% from the then current market price at
the date of the earnout determination due to restrictions on the sale and
transferability of the shares issued. The acquisitions resulted in goodwill of
approximately $56.3 million which is being amortized over 30 years, and is based
on allocations of the purchase price to the net assets acquired.

         On November 14, 1997, the Company acquired substantially all of the
assets of Rhode Island based New England Laser Printing, Inc. (now known as
Vestcom Rhode Island, Inc.). On December 15, 1997, the Company acquired the
stock of Moreau Promotional Services, Inc., (now doing business as Vestcom
Canada), an Ontario corporation located in Toronto, Canada. The aggregate price
paid for these acquisitions was approximately $7,000,000 in cash and 134,520
unregistered shares of Vestcom Common Stock, the fair market value of which was
based on a fifteen percent discount from the fair market value due to length and
type of restrictions in the purchase agreements. The estimated goodwill
associated with these acquisitions aggregated approximately $9,600,000.

         The above acquisitions were accounted for using the purchase method of
accounting and accordingly, the purchase price has been allocated to the assets
acquired and the liabilities assumed based upon the fair values at the date of
acquisition.

         In January 1998, the Company acquired substantially all the assets of
Creative Data Services ("CDS") and D.B. Acquisition, Inc. (doing business as
Business Mail Express, "BME"). In April 1998, the Company acquired 


                                      F-6

<PAGE>

substantially all the assets of Dee Cee Graphics, Inc. and in August 1998, the 
Company acquired substantially all the assets of Graphic Technology Systems, 
Inc. ("GTS"). In October 1998, the Company acquired substantially all the assets
of Manus Services Corporation.

         The aggregate price paid for these acquisitions, including certain 
earn-out payments made in 1999, was approximately $17,100,000 in cash plus the
Company issued a note payable for $612,500 payable in January, 2000 bearing
interest at 5%, a note payable for $1,150,000 payable in March, 2001 bearing
interest at 5%, and an aggregate of 40,000 shares of Common Stock, plus incurred
a potential future obligation to pay an additional $650,000 in cash due to an
earnout. The estimated goodwill associated with these acquisitions, including
provisions for earnouts, aggregated approximately $16,400,000. All the above
acquisitions have been accounted for as purchases.

         Set forth below is unaudited pro forma financial information for the
twelve months ended December 31, 1998 and December 31, 1997. The unaudited pro
forma data give effect to: (i) the acquisitions of the Founding Companies and
all subsequent acquisitions in 1997 and 1998; and (ii) compensation and other
adjustments for all transactions as if the transactions had occurred on January
1, 1998 and January 1, 1997 respectively. This information is not necessarily
indicative of the results the Company would have obtained had these events
actually then occurred or of the Company's future results:
<TABLE>
<CAPTION>
                                                          Pro Forma                  Pro Forma
                                                         Year Ended                 Year Ended
                                                      December 31, 1998          December 31, 1997
                                                      -----------------          -----------------
                                                 (Unaudited, in thousands,    except per share data)
<S>                                                    <C>                             <C>         
Revenues.....................................          $    118,453                $    111,405
Income from operations.......................          $      9,569                $      8,967
Net income...................................          $      5,030                $      4,734
Earnings per share: basic....................          $        .56                $        .53
                    diluted..................          $        .56                $        .53
</TABLE>
                                                                                
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                         

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 amount 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.

Supplies Inventory

         Supplies inventory consists of paper, vinyl, laminating materials,
toner, developer and other items including, film, compact discs and micrographic
materials, and packaging materials. Supplies are valued at cost, which
approximates market with cost determined using the first-in-first-out method.

Property and Equipment

         Property and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are capitalized and amortized over the
shorter of the estimated useful lives of the assets or the terms of the related
leases.

         Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.

<PAGE>

Revenue Recognition

         Revenues are recognized when the services are rendered.

Income Taxes

         The Company follows the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are received or settled.

Earnings per Share

         In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" ("SFAS 128"). This statement supersedes
APB Opinion No. 15, "Earnings per Share" and simplifies the computation of
earnings per share ("EPS"). Primary EPS is replaced with a presentation of basic
EPS. Basic EPS includes no dilution and is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Fully diluted EPS is replaced with diluted EPS.
Diluted EPS reflects the potential dilution if certain securities are converted
and also includes certain shares that are contingently issuable. SFAS No. 128
requires dual presentation of basic and diluted EPS by entities that issue any
securities other than ordinary common stock. SFAS No. 128 which is effective for
financial statements for both interim and annual periods ending after December
15, 1997 requires retroactive restatement of all EPS data presented. The Company
adopted the statement on December 31, 1997. The following is the computation of
earnings per share:
<TABLE>
<CAPTION>
                                                     For the year ended                     For the year ended
                                                     December 31, 1998                      December 31, 1997
                                                     -----------------                      -----------------
                                                                         Per-Share                                  Per-Share
                                           Income         Shares          Amount        Income         Shares         Amount
                                        -----------    -----------    -------------   -----------   -----------   -------------
<S>                                    <C>              <C>            <C>             <C>            <C>           <C>
Basic Earnings Per Share:
Net income/weighted average
     shares outstanding                 $ 4,627,421      8,904,371    $        .52    $ 1,307,905     4,157,891   $         .31
                                        -----------    -----------    -------------   -----------   -----------   -------------
Diluted Earnings Per Share:
Net income/weighted average
     shares outstanding                   4,627,421      8,904,371                      1,307,905     4,157,891
Goodwill adjustment on earnouts              (4,385)                                      (59,284)
Assumed earned shares
     by Acquired Companies                                  66,245                                      149,383
Options                                                      3,887                                       34,092
                                        -----------    -----------    -------------   -----------   -----------   -------------
Net income/average weighted shares
     outstanding adjusted for assumed
     conversions to common stock        $ 4,623,036    $ 8,974,503    $         .52   $ 1,248,621     4,341,366   $         .29
                                        ===========    ===========    =============   ===========   ===========   =============
</TABLE>

         Options on approximately 126,164 and 18,294 shares of Common Stock were
not included in computing diluted earnings per share in 1998 and 1997,
respectively, because their effects were antidilutive.

Foreign Currency

         In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation", income statement accounts are translated at the
average exchange rates in effect during the period, while assets and liabilities
are translated at the rates of exchange at the balance sheet date. The resulting
balance sheet translation adjustment was $296,325 and $83,584 for the years
ended December 31, 1998 and 1997, respectively.

<PAGE>



Comprehensive Income

         Statement of Financial Accounting Standards Number 130, "Reporting
Comprehensive Income" ("SFAS 130"), establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The objective of SFAS 130 is to report a measure
of all changes in equity of an enterprise that result from transactions and
other economic events of the period other than transactions with owners
("comprehensive income"). Comprehensive income is the total of net income and
all other non-owner changes in equity. SFAS 130 is effective for fiscal years
beginning after December 15, 1997, with earlier application allowed but not
required. Upon adoption, reclassification of comparative financial statements
provided for prior periods is required. The Company has adopted this standard as
of January 1, 1998.

The following represents comprehensive income:
<TABLE>
<CAPTION>

                                                        For the Year Ended December 31,
                                                        -------------------------------
                                               1998                  1997                 1996
                                               ----                  ----                 ----
<S>                                        <C>                   <C>                  <C>         
Net income                                 $   4,627,421         $ 1,307,905           $(5,077,959)
Foreign Currency Translation Adjustment         (296,325)            (83,584)                    -
                                           -------------         ------------         ------------
Comprehensive Income                       $   4,331,096         $ 1,224,321           $(5,077,959)
                                           =============         ============         ============
</TABLE>

Intangible Assets

         Intangible assets consist primarily of excess purchase price over net
assets acquired (goodwill), which is being amortized over its estimated useful
life of 30 years. In conformance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company's management continually evaluates whether events and circumstances
indicate that the remaining estimated useful life of intangible assets may
warrant revisions or that the remaining balance of intangibles or other
long-lived assets may not be recoverable. To make this evaluation, management
uses an estimate of undiscounted net income over the remaining life of the
intangibles or other long-lived assets. Accumulated amortization at December 31,
1998 and 1997 was $3,122,588 and $688,641 respectively.

Concentration of Credit Risk

         Financial instruments that potentially expose the Company to
concentration of credit risk, as defined by SFAS No. 105, "Disclosure of
Information about Financial Instruments with Off-Balance Sheet Risk and
Financial Instruments with Concentration of Credit Risk," consist primarily of
trade accounts receivable. The Company's customers are concentrated in North
America, primarily in the financial, retail, telecommunications, pharmaceutical,
health care, travel and leisure, publishing and manufacturing industries. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.

New Accounting Pronouncements

         The Accounting Standards Executive Committee (AcSec) issued SOP 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," in March, 1998. The objective of the SOP is to provide guidance
that specifically addresses the accounting for the costs related to developing,
obtaining, modifying and/or implementing internal use software. SOP 98-1 is
intended to eliminate the diversity in practice that exists in the accounting
for internal use software and improve financial reporting for what has become a
significant unrecorded asset for many companies. AcSec believes that the costs
of computer software developed or obtained for internal use are specifically
identifiable, have determinate lives, relate to probable future economic
benefits, and meet the criteria for recognition as an asset in the financial
statements. SOP 98-1 is effective for financial statements for fiscal years
beginning after December 15, 1998 and should be applied prospectively to all
costs incurred in connection with internal use software development projects in
those fiscal years including costs incurred subsequent to adopting the SOP on
projects that commenced in earlier years.


<PAGE>

         Management believes that upon initial adoption of SOP 98-1 there will
be the effect of increasing gross profit, income from operations, net income and
earnings per share due to the capitalization of certain costs previously charged
to expense. Generally, however, management believes the effect will not be
material due to the increased amortization expense on capitalized costs
consistent with SOP 98-1.

         In April 1998, AcSec issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." This SOP provides guidance on the financial reporting of
start-up costs and organization costs. It requires the costs of start-up
activities and organization costs to be expensed as incurred. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. Management believes that the adoption of SOP No. 98-5 will not have a
material impact on its financial statements.

4. MARKETABLE SECURITIES

         Marketable securities classified as available-for sale securities are
carried at fair market value with unrealized gains and losses excluded from
income and recorded, net of income tax, as a separate component of stockholders'
equity. The Company has no securities classified as trading or held-to maturity.

         Gains and losses on investment transactions are recognized when
realized based on trade dates. Dividends are recorded in income based on payment
dates. Interest is recognized when earned.

Marketable securities consist of the following at December 31:

                                            1998                 1997
                                            ----                 ----
Commercial paper..................       $        -        $ 1,540,439
Money market funds................          360,480          4,454,447
Taxable auction rate securities          
 with maturities at 1-28 days.....                -          7,500,000
                                         ----------        -----------
                                         $  360,480        $13,494,886
                                         ==========        ===========
                                                     
5. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE:

The activity in the allowance for doubtful  accounts and notes  receivable is as
follows:
<TABLE>
<CAPTION>
                                              Balance at                      Charged to
                                             Beginning of       Balance        Costs and                        Balance at End of
                                                Period         Acquired        Expenses         Write-offs           Period
                                                ------         --------        --------         ----------           ------
<S>                                          <C>             <C>              <C>             <C>                <C> 
Twelve Months Ended December 31, 1998
 Allowance for doubtful accounts             $   354,952      $  625,413     $   276,984       $  133,768        $   1,123,581
Twelve Months Ended December 31, 1997
 Allowance for doubtful accounts             $         -      $  342,900     $    16,000       $    3,948        $     354,952
Period From Inception (September 19,
 1996) to December 31, 1996
     Allowance for doubtful accounts         $         -      $        -     $         -       $        -        $           -
</TABLE>
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid  expenses and other current  assets consist of the following at 
December 31:
                                               1998                1997
                                               ----                ----
Prepaid postage......................     $   2,613,644         $  2,340,522
Postage receivable...................           582,353              345,088
Other    ............................         1,880,810            1,169,512
                                          -------------         ------------
                                          $   5,076,807         $  3,855,122
                                          =============         ============


<PAGE>


7. PROPERTY AND EQUIPMENT
                         
                                                                    
Property and equipment consists of the following at December 31:      Estimated 
                                                                    Useful Lives
                                         1998             1997        (Years)
                                         ----             ----        -------
Machinery, equipment and software.    27,389,658       20,550,474      5-10
Furniture and fixtures............       919,506          745,875        10
Leasehold improvements............     3,770,685        1,626,566       2-7
                                     -----------      -----------
                                      32,079,849       22,922,915
Less - Accumulated depreciation                      
& amortization....................    (4,502,957)      (1,237,997)
                                     -----------      -----------
Property and equipment, net.......   $27,576,892      $21,684,918
                                     ===========      ===========
                                                           
Leased equipment under capital leases (included above) consists of the following
at December 31:
                                                1998                 1997
                                                ----                 ----
Equipment...........................       $   6,941,155         $  13,028,202
Less - Accumulated amortization.....          (1,383,697)             (961,952)
                                           -------------         -------------
                                           $   5,557,458         $  12,066,250
                                           =============         =============

         Depreciation and amortization expense on property and equipment charged
to operations for the years ended December 31, 1998 and 1997 was $3,624,950 and
$1,237,997, respectively. Equipment decreased due to the renegotiation of
certain capital lease obligations with one of Vestcom's vendors which
reclassified the leases from capital lease to operating lease status. This had
the effect of removing assets previously capitalized and recording the
obligation payments as rent expense.

At December 31, 1998 minimum annual payments under capital leases are as 
follows:

1999..................................................    $  1,689,238
2000..................................................       1,583,540
2001..................................................       1,455,427
2002..................................................         688,349
2003 and thereafter...................................          18,119
                                                          ------------
Total minimum payments excluding interest.............       5,434,673
Less - Current portion of capital lease obligations...       1,689,238
                                                          ------------
Long-term portion of capital lease obligations........       3,745,435
                                                          ============
Interest payments for term of capital leases..........    $    885,688
                                                          ============
                                                      
         The interest rates on the capitalized leases range from 3.7% to 12.8%
and are imputed based on the fair market value of the equipment at the inception
of the lease.

8. ACCRUED EXPENSES:

Accrued expenses consist of the following at December 31:

                                                    1998             1997
                                                    ----             ----
Accrued payroll and payroll related expenses....$   2,217,630   $   1,476,526
Accrued professional fees.......................      387,501         815,670
Acquisition related liabilities.................    5,593,047       2,890,764
Advanced postage................................    5,201,833       4,877,691
Other...........................................    3,872,359       1,638,152
                                                -------------   -------------
                                                $  17,272,370   $  11,698,803
                                                =============   =============

<PAGE>

9. DEBT:

Long-term obligations
<TABLE>
<CAPTION>
Long-term obligations consist of the following:
                                                            December 31, 1998     December 31, 1997
                                                            -----------------     -----------------
<S>                                                         <C>                      <C>                           
Revolving credit line (a)..............................         10,000,000                   -

Equipment notes payable to a bank and equipment
     manufacturer  at interest rates
     ranging from 7% - 14% with monthly payments 
     of $10,979 through
     December 1998.....................................     $           -           $  117,183
Notes payable to an equipment manufacturer
     at interest rates ranging from 1%-4.8% with a
     final payment due in June 1999....................            38,835              112,836

Equipment loans payable to a bank at interest
     rate of 6.53% with monthly payments of
     $29,953 through September 2002(a).................         1,347,877                    -

Equipment loans payable to a bank at interest
     rate of 6.70% with monthly payments of
     $20,337 through November 2002(a)..................           952,914                    -

Notes payable to seller of an acquired company at
     interest rate of 5% due on March 31, 2001.........         1,150,000                    -
                                                            -------------           ----------
                                                               13,489,626              230,019
     Less current maturities...........................           642,307              191,184
                                                            -------------           ----------
                                                            $  12,847,319           $   38,835
                                                            =============           ==========
</TABLE>
Maturities of Long-Term Obligations

         As of December 31, 1998, maturities of long-term obligations are as
follows:
<TABLE>
<CAPTION>
<S>                                                        <C>                         
Years Ending December 31:
1999...................................................     $     642,307
2000...................................................     $  10,603,472
2001...................................................     $   1,753,472
2002...................................................     $     490,375
2003 and thereafter....................................                 -
                                                            -------------
Total..................................................     $  13,489,626
                                                            =============
</TABLE>
                                              
         (a) On August 13, 1997, the Company and Summit Bank entered into a
three year Equipment Loan and Revolving Credit Agreement in the amount of
$30,000,000. The interest rate is based on certain financial performance ratios
plus a rate equal to LIBOR or a Summit Bank alternate base rate (6.25% at
December 31, 1998). The Agreement is subject to various covenant restrictions,
the most restrictive of which requires tangible net worth to be a minimum of 10%
of stated net worth. At December 31, 1998 there was approximately $2,300,000
outstanding related to equipment loans, $10,000,000 outstanding on the revolving
credit line and approximately $17,700,000 remained available under this credit
facility.



<PAGE>


10. STOCKHOLDERS' EQUITY:

         The Company initially issued 791,346 shares of its Common Stock in
September 1996 for $39,965. In December 1996, an additional 503,846 shares of
its Common Stock were issued for $367,303. In connection therewith the Company
recorded a non-recurring non-cash charge to compensation and interest expense of
approximately $5.1 million, representing the difference between the amount paid
for the shares and the estimated fair value of the shares at the date of sale,
as estimated for accounting purposes.

         In March 1997, the Company filed a Restated Certificate of
Incorporation which modified the capital stock structure of the Company to
provide for 30 million shares, divided into 20 million shares of Common Stock
and 10 million shares of undesignated stock.

         In May and July, 1997, CIBC Oppenheimer Corp. (formerly named
Oppenheimer & Co., Inc. and referred to herein as "Oppenheimer") returned to
Vestcom an aggregate of 225,512 shares of Common Stock which was previously
issued.

         In July 1997, the Company filed an amendment to its Restated
Certificate of Incorporation which created 200 shares of Class A Convertible
Preferred Stock, one share of Class B Preferred Stock and 100 shares of Class C
Convertible Preferred Stock, with each share having a liquidation value of $.10
per share. The Class A shares were issued to certain former shareholders of
Electronic Imaging Services, Inc. and the Class C shares were issued to certain
former shareholders of Image Printing Systems, Inc (now known as Vestcom
Wisconsin, Inc.). The shares of Class A and Class C Convertible Preferred Stock
were issued pursuant to the earnout provisions of the applicable acquisition
agreements. The one share of Class B Preferred Stock was issued to selling
shareholders of a Canadian Founding Company and is equal to 239,988 shares of
Common Stock valued at $11.05 per share and has equal voting rights. In April
1998, in connection with a determination of the earnout for Electronic Imaging
Services, all of the outstanding shares of Class A Convertible Preferred Stock
were converted into shares of Common Stock.

         On August 4, 1997, Vestcom consummated its initial public offering of
3,850,000 shares of its Common Stock at a price of $13.00 per share. The
Company's underwriters exercised in full an option to purchase an additional
577,500 shares of the Company's Common Stock at $13.00 per share to cover over
allotments of the initial public offering.

         In April 1998, the Company issued 304,779 shares of common stock in
connection with a determination of earnouts for two of the Founding Companies.


11. STOCK OPTION PLAN:

         In March 1997, the Company approved the 1997 Equity Compensation
Program (the "Stock Option Plan") which provides for the granting or awarding of
stock options and stock appreciation rights to non-employee directors, officers
and other key employees and consultants (including officers of the Founding
Companies). The number of shares authorized and reserved for issuance under the
Plan is limited to the greater of 700,000 shares or 10 percent of the number of
shares of Common Stock outstanding. In general, the terms of the option awards
(including vesting schedules) will be established by the Compensation Committee
of the Board of Directors.

         The Stock Option Plan also provides for automatic option grants to
directors who are not employed by Vestcom or its subsidiaries. Upon commencement
of service, a non-employee director will receive a nonqualified option to
purchase 10,000 shares of Common Stock, and continuing non-employee directors
will receive annual options to purchase 5,000 shares of Common Stock, all at
fair market value on the date of the grant. Options granted to non-employee
directors become fully exercisable one year after the date of grant.
Non-employee directors' options have a term of ten years from the date of grant.

         Upon consummation of the acquisitions and the Offering, options
covering an aggregate of 286,150 shares of Common Stock were outstanding under
the Stock Option Plan including (i) options to purchase 10,000 shares of common
stock which were granted to each non-employee director, (ii) options to purchase
15,000 shares of common stock which were granted to a former director and
employee of the Company, and (iii) options to purchase 


<PAGE>


an additional 231,150 shares of Common Stock which were granted to employees of
the Company and its subsidiaries. All of these options expire ten years after
the date of grant (except for one grant of an option to purchase 15,000 shares
of Common Stock, which will expire on January 2, 2001) and have an exercise
price, subject to adjustment, equal to the initial public offering price of the
Common Stock in the Offering. Such options will be exercisable annually in 25%
increments beginning with the first anniversary of the date of grant, except for
the options granted to non-employee directors which become fully exercisable one
year after the date of grant. In October 1997 an additional 115,000 options were
granted to officers of the Company. In November 1997, an additional 2,900
options were granted to employees.

         During 1998, options to purchase 252,800 shares of Common Stock, each
with an exercise price equal to the fair market value of the Common Stock on the
date of grant were granted. All of these options expire ten years after the date
of grant and are exercisable annually in 25% increments beginning with the first
anniversary of the date of grant, except for (i) options to purchase 30,000
shares of Common Stock granted to non-employee directors which become fully
exercisable one year after the date of grant, and (ii) an aggregate of options
to purchase 10,000 shares of Common Stock which were granted in October and
November, 1998, which are exercisable annually in 20% increments beginning with
the first anniversary of the date of grant.

                                               Options Outstanding
                                               -------------------
                                     Shares          Weighted Average Exercise 
                                                          Price Per Share

Balance at Inception                       -                  $    -
Granted                                    -                       -
                                   ---------                  ------
Balance at December 31, 1996               -                  $    -
Granted                              404,050                   14.61
Exercised                                  -                       -
                                   ---------                  ------
Balance at December 31, 1997         404,050                  $14.61
Granted                              252,800                    9.49
Cancelled                          (100,000)                   21.63
Forfeited                           (45,400)                   11.60
Exercised                                  -                       -
                                   ---------                  ------
Balance, December 31, 1998           511,450                  $12.09
                                   =========                  ======
Exercisable, December 31, 1998        69,188                  $13.21
                                   =========                  ======
                                              
         As of September 19, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation," was effective for the Company. SFAS No. 123 permits, but does not
require, a fair value-based method of accounting for employee stock option plans
which results in compensation expense recognition when stock options are
granted. As permitted by SFAS No. 123, the Company has provided pro forma
disclosure of net income and earnings per share, as applicable, in these notes
to consolidated financial statements.

         The weighted average fair value of options granted in 1998 at market
value was $5.24. The weighted average exercise price of options granted in 1998
at market value was $9.49.

         The fair value of each stock option grant is estimated as of the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:

                                                 1998                1997
                                                 ----                ----
Risk-Free Interest Rate                          5.7%                6.5%
Expected Lives                                7-10 years           10 years
Expected Volatility                             32.8%               23.0%


<PAGE>



         The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
                                                  Number of              Weighted
                                                   Options               Average
                                                  Outstanding            Remaining             Weighted
                                                at December 31,        Contractual             Average
Range of Exercise Price                              1998              Life (years)        Exercise Price
-----------------------                        -----------------      --------------     ----------------
<S>                                            <C>                    <C>                <C>    
$7.38-$8.88                                          100,000                9.59             $    8.35
$9.38-$10.13                                         135,100                9.30                  9.90
$13.00-$18.88                                        276,350                8.60                 13.37
                                                    --------               -----             ---------
                                                     511,450                8.85             $   12.09
</TABLE>

         Had compensation expense for all stock options granted in 1998 and 1997
been determined consistent with SFAS No. 123, the Company's net income and
income per share would have been as follows:
<TABLE>
<CAPTION>
                                                                   1998                 1997
                                                                   ----                 ----
<S>                           <C>                             <C>                   <C>    
Net Income:                   As Reported                     $  4,627,421          $  1,307,905
                              Pro Forma                       $  3,928,865          $  1,116,821
Net Income Per Share:         As Reported - basic             $        .52          $        .31
                              Pro Forma - basic               $        .44          $        .27
                              As Reported - diluted           $        .52          $        .29
                              Pro Forma - diluted             $        .44          $        .24
</TABLE>

         The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts and additional awards in future years are
anticipated.

12. EMPLOYEE BENEFIT PLANS:

         Certain of the acquired U.S. companies had qualified defined
contribution employee benefit plans (the "Plans"), the majority of which allowed
for voluntary pretax contributions by employees. The operating companies paid
all general and administrative expenses of the Plans and in some cases, the
operating companies made matching and discretionary contributions to the Plans.

         Effective on January 1, 1998, the Company established a new defined
contribution 401K plan and merged all of the U.S. companies' plans into the
newly adopted plan. Substantially all employees are eligible to participate in
the plan and are permitted to contribute between 1% and 15% of their annual
salary. The Company makes matching contributions on behalf of the employees. The
company offers no post-employment or post-retirement benefits. The expense
incurred related to the 401K plan for the year ended December 31, 1998 was
$419,047.

13. INCOME TAXES:

The provision for federal and state income taxes consists of the following:

             Twelve Months Ended           Twelve Months Ended
              December 31, 1998             December 31, 1997
             -------------------           -------------------
Federal         $ 3,060,007                     $ 1,012,191
State               686,766                         293,864
                -----------                     -----------
                $ 3,746,773                     $ 1,306,055
                ===========                     ===========


<PAGE>

The differences in income taxes provided and the amounts determined by applying
the federal statutory tax rate (34%) to income before income taxes result from
the following:
<TABLE>
<CAPTION>
                                      Twelve Months Ended                  Twelve Months Ended
                                       December 31, 1998                    December 31, 1997
                                       -----------------                    -----------------
<S>                                    <C>                                  <C>    
Tax at statutory rate                    $  2,847,226                        $     888,746
Add (deduct)--
      State Income taxes                      453,266                              193,950
      Non deductible expenses
(primarily goodwill)                          446,281                              223,359
                                         ------------                        -------------
                                         $  3,746,773                        $   1,306,055
                                         ============                        =============
</TABLE>
         Deferred taxes result primarily from cash to accrual differences and
differences in the reporting of depreciation, the allowance for doubtful
accounts, goodwill and other non-deductible accruals.

The components of deferred income tax assets and liabilities, are as follows:

                                                        December 31,
                                                        ------------
                                                  1998               1997
                                                  ----               ----
Deferred tax assets
     Allowance for doubtful accounts         $    270,605      $     141,981
                                             ------------      -------------
Total deferred tax assets                         270,605            141,981
Deferred tax liabilities
     Accumulated depreciation                   3,245,979            477,798
     Cash to accrual differences                  717,542          1,320,500
     Goodwill                                     208,058             14,986
     Other                                        494,444            250,528
                                             ------------      -------------
Total deferred liabilities                      4,666,023          2,063,812
                                             ------------      -------------
Net deferred liability                       $  4,395,418      $   1,921,831
                                             ============      =============

         Included in other current liabilities at December 31, 1998 and 1997 was
$59,520 and $480,458 respectively, which represented the current portion of
deferred income tax liabilities.

14. LEASE COMMITMENTS

         The Company and its subsidiaries lease various office buildings,
machinery, equipment, and vehicles under operating leases expiring at various
dates through 2004. Most of the real property leases have escalation clauses
related to increases in real property taxes. The approximate future minimum
lease payments under operating leases are as follows:

                                                                     Operating
Years Ending December 31                                               Leases  
------------------------                                            ------------
1999................................................................$  5,601,000
2000................................................................   4,442,000
2001................................................................   3,495,000
2002................................................................   2,993,000
2003................................................................   2,403,000
Thereafter..........................................................  16,361,000
                                                                    ------------
Total minimum lease payments........................................$ 35,295,000
                                                                    ============

         Rent expense for all operating leases for the twelve months ended
December 31, 1998 and 1997 and the period from inception (September 19, 1996) to
December 31, 1996 was approximately $5,600,000, $1,436,000, and $5,000
respectively.


<PAGE>


15. RELATED-PARTY TRANSACTIONS:

Leasing Transactions

         Certain of the Operating Companies lease their operating facilities
from selling parties who remained employees or directors of the Company. The
Company's chairman has a 50% interest in the partnership which owns the property
used by the Company and Comvestrix (now know as Vestcom Mid-Atlantic, Inc.)
("VMA") in Lyndhurst, New Jersey. The partnership leases the property to VMA.
The current lease expires in 2001. VMA's related party rent expense for this
property for the year ended December 31, 1998 was $397,000 and from August 1,
1997 to December 31, 1997 was $232,000. Due to contractual obligations and
increased space utilization the current annual rent is $450,000 per year
(exclusive of building operating expenses and real estate tax) which the Company
believes to be the fair market rental value of the property.

         A former director and employee of the Company owns interests ranging
from 75% to 100% in the partnerships which own the properties leased by VMA in
Dover, New Jersey and previously leased in Scranton, Pennsylvania. The current
leases expire at various times from 1998 through 2004. VMA's related party rent
expense for these properties for the year ended December 31, 1998 was $605,000,
and for the period from August 1, 1997 through December 31, 1997 was $286,000.
Pursuant to a written agreement with the owners, the lease obligations will
cease in August of 1999 if certain conditions are met. Based on the foregoing
agreement, the current annual rent for all these properties for 1999 is expected
to be $365,000 (inclusive of real estate taxes), which the Company believes to
be the fair market rental value of the property.

         Two officers of Image Printing Systems, Inc. (now known as Vestcom
Wisconsin, Inc.)("Vestcom Wisconsin"), own the property leased to and used by
Vestcom Wisconsin, in Milwaukee, Wisconsin. The lease will expire in 2002
subject to an option to renew the lease for an additional five years. Vestcom
Wisconsin's related party rent expense for these properties for the year ended
December 31, 1998 was $222,000 and for the period from August 1, 1997 to
December 31, 1997 was $94,000 inclusive of building operating costs. The rent
payable by Vestcom Wisconsin under the lease is $225,000 per year, triple net,
which the Company believes to be the fair market rental value of the property.

         One officer of Manus Services Corporation ("Manus") owns twelve and
one-half percent of the property leased to Manus through December 1998. The
property is leased to Manus on a month to month basis at $32,000 per month.
Manus' related party rent expense for this property for the two months ended
December 31, 1998 was $65,000.

Consulting Agreement

         An executive vice president of the Company received $74,400 from
Vestcom in 1997 for consulting services rendered to Vestcom during 1996, which
was reflected in deferred offering costs. In addition, upon consummation of the
Offering, Vestcom paid a partnership in which that executive vice president held
a 50% interest, the sum of $75,000 in payment of consulting services rendered by
that firm in connection with the acquisitions and the Offering.

16. COMMITMENTS AND CONTINGENCIES:

Litigation

         The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of these actions
will have a material adverse effect on the financial position or results of
operations of the Company.

Contracts

         In May 1997, the Company entered into an agreement with Oppenheimer
pursuant to which the Company agreed to pay Oppenheimer an aggregate amount of
up to $1.8 million for advisory services which has been paid in full. In
addition, Vestcom reimbursed Oppenheimer $75,000 for out-of-pocket expenses
related to such services.

<PAGE>


         Certain executives of the Company have each entered into employment
agreements and/or change-in-control agreements with the Company. In general, the
employment agreements provide that, in the event of a termination of employment
by the Company without cause, such employee will be entitled to receive from the
Company an amount in cash equal to the employee's then current annual base
salary for the remainder of the term. In general, the change-in-control
agreements provide that, in the event of a termination of employment, upon the
occurrence of certain events, such employee will be entitled to receive an
amount in cash equal to twice the employee's then current annual base salary and
bonus.

Earnouts

         Certain of the Founding Companies were eligible to earn additional
amounts, consisting of a combination of cash and securities, as adjustments to
the purchase prices paid for those companies. In April, 1998, in connection with
the earnouts of two Founding Companies, the Company issued 304,779 shares of
common stock, paid $1,278,000 in cash and incurred a future obligation to pay
$1,160,000 in cash of which $580,000 was paid at September 31, 1998 and $580,000
of which was paid in March 1999. The Company also recorded an accrual at
December 31, 1998 for the estimated earnouts of two additional companies for
approximately $1,315,000 of cash and 268,216 shares of common stock.

17. Subsequent Events

Acquisition

         As of February 12, 1999 the Company acquired substantially all of the
assets of Conversion Printing Systems, Inc. ("CPS"). For the twelve months
ending December 31, 1998, CPS' revenues were approximately $8 million, of which
approximately 60% were derived from sales to Vestcom operating units.

Lease

         In January, 1999 Vestcom entered into a 15 year lease commencing June
1, 1999, for executive office, production and warehouse space, aggregating
approximately 210,000 square feet.

Earnouts

         In February 1999, Vestcom paid $375,984 and in March 1999, issued an
aggregate of 228,216 shares of Common Stock in connection with the determination
of an earnout for another Founding Company. In March 1999, Vestcom paid
$325,000, issued a note payable for $612,500 at 5% interest due in January, 2000
and issued an aggregate of 40,000 shares of Common Stock in connection with the
determination of an earnout of an acquired company.







<PAGE>

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

         None.

                                    Part III


Item 10. Directors of the Registrant

         The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1999 annual meeting of shareholders
that is responsive to the information required with respect to this Item.

Item 11. Executive Compensation

         The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1999 annual meeting of shareholders
that is responsive to the information required with respect to this Item.

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1999 annual meeting of shareholders
that is responsive to the information required with respect to this Item.

Item 13. Certain Relationships and Related Transactions

         The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1999 annual meeting of shareholders
that is responsive to the information required with respect to this Item.


                                     PART IV

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

         (a)      (1)      Financial Statements.

                  For the financial statements filed as part of this Annual
Report on Form 10-K refer to "Index to Financial Statements" included in "Item 8
- Financial Statements and Supplementary Data" of this Annual Report on Form
10-K.

                  (2)      Financial Statement Schedules.

                  All financial statement schedules are omitted either because
they are not required or the required information is shown in Vestcom's
consolidated financial statements or the notes thereto.

                  (3)      The following exhibits are incorporated by reference
herein or filed with this Annual Report on Form 10-K.

                                      -24-
<PAGE>

Exhibit
Number                             Description
------

2.1  --     Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Computer Output
            Acquisition Corp., Computer Output Systems, Inc. and the
            Stockholders named therein, is incorporated by reference to Exhibit
            2.1 to Vestcom's Registration Statement on Form S-1 (no. 333-23519).

2.2    --   Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Comvestrix Acquisition
            Corp., Comvestrix Corp. and the Stockholders named therein, is
            incorporated by reference to Exhibit 2.2 to Vestcom's Registration
            Statement on Form S-1 (no. 333-23519).

2.3    --   Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Electronic Imaging
            Acquisition Corp., Electronic Imaging Services, Inc. and the
            Stockholders named therein, is incorporated by reference to Exhibit
            2.3 to Vestcom's Registration Statement on Form S-1 (no. 333-23519).

2.4    --   Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Imaging Printing
            Acquisition Corp., Image Printing Systems, Inc. and the Stockholders
            named therein, is incorporated by reference to Exhibit 2.4 to
            Vestcom's Registration Statement on Form S-1 (no. 333-23519).

2.5    --   Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Direct Mail Services
            Acquisition Corp., Quality Control Printing Acquisition Corp., First
            Class Presort Acquisition Corp., Morris County Direct Mail Services,
            Inc., Quality Control Printing, Inc., First Class Presort, Inc. and
            the Stockholders named therein, is incorporated by reference to
            Exhibit 2.5 to Vestcom's Registration Statement on Form S-1 (no.
            333-23519).

2.6    --   Agreement and Plan of Reorganization, dated as of February 28, 1997,
            by and among Vestcom International, Inc., Mystic Graphic Acquisition
            Corp., Mystic Graphic Systems, Inc. and the Stockholders named
            therein, is incorporated by reference to Exhibit 2.6 to Vestcom's
            Registration Statement on Form S-1 (no. 333-23519).

2.7    --   Share Purchase Agreement dated March 10, 1997 by and among Vestcom
            International, Inc., LIRPACO Acquisition Corp., LIRPACO Inc. and the
            Stockholders named therein, is incorporated by reference to Exhibit
            2.7 to Vestcom's Registration Statement on Form S-1 (no. 333-23519).

2.8    --   Asset Purchase Agreement, dated as of January 20, 1998, by and among
            Vestcom International, Inc., Creative Data Services, Inc., DB
            Acquisition, Inc., d/b/a Business Mail Express and certain other
            parties, is incorporated by reference to Vestcom's Current Report on
            Form 8-K dated February 4, 1998.

3.1    --   Restated Certificate of Incorporation of Vestcom International,
            Inc., as amended, is incorporated by reference to Exhibit 3.1 to
            Vestcom's Quarterly Report on Form 10-Q for the Period Ending June
            30, 1997.

3.2    --   By-laws of Vestcom International, Inc. are incorporated by reference
            to Exhibit 3.2 to Vestcom's Registration Statement on Form S-1 (no.
            333-23519).

4.1    --   Form of certificate evidencing ownership of Common Stock of Vestcom
            International, Inc., is incorporated by reference to Exhibit 4.1 to
            Vestcom's Registration Statement on Form S-1 (no. 333-23519).

10.1   --   Vestcom International, Inc. 1997 Equity Compensation Program, is
            incorporated by reference to Exhibit 10.1 to Vestcom's Registration
            Statement on Form S-1 (no. 333-23519).

                                      -25-
<PAGE>

10.2   --   Employment Agreement, dated as of March 10, 1997, by and between
            Vestcom International, Inc. and Joel Cartun, is incorporated by
            reference to Exhibit 10.2 to Vestcom's Registration Statement on
            Form S-1 (no. 333-23519).

10.3   --   Employment Agreement, dated March 1, 1997, by and between Vestcom
            International, Inc. and Peter J. McLaughlin, is incorporated by
            reference to Exhibit 10.3 to Vestcom's Registration Statement on
            Form S-1 (no. 333-23519).

10.4   --   Note and Stock Purchase Agreement, dated December 31, 1996, between
            Vestcom International, Inc. and certain investors, is incorporated
            by reference to Exhibit 10.7 to Vestcom's Registration Statement on
            Form S-1 (no. 333-23519).

10.5   --   Letter Agreement, between Oppenheimer & Co., Inc. and Vestcom
            International, Inc., is incorporated by reference to Exhibit 10.8 to
            Vestcom's Registration Statement on Form S-1 (no. 333-23519).

10.6   --   Employment Letter Agreement, dated May 21, 1997, between Vestcom
            International, Inc. and Harvey Goldman, is incorporated by reference
            to Exhibit 10.9 to Vestcom's Registration Statement on Form S-1 (no.
            333-23519).

10.7   --   Employment Letter Agreement, dated September 23, 1997, between
            Vestcom International, Inc. and Brendan Keating, is incorporated by
            reference to Exhibit 10.10 to Vestcom's Registration Statement on
            Form S-4 (no. 333-39077).

10.8   --   Change in Control Agreements, dated January 1, 1999, between Vestcom
            International, Inc. and each of Joel Cartun, Brendan Keating and
            Harvey Goldman.

10.9   --   Equipment Facility and Revolving Credit Agreement, dated as of
            August 13, 1997, as amended, between Vestcom International, Inc. and
            Summit Bank.

21.1   --   List of subsidiaries of Vestcom International, Inc.

23.1   --   Consent of Arthur Andersen LLP.

24.1   --   Power of Attorney.

27.1   --   Financial Data Schedule.


       (b)  Reports on Form 8-K

            None.




                                      -26-


<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.

Date:  March 29, 1999                  VESTCOM INTERNATIONAL, INC.

                                          By: /s/ Harvey Goldman
                                              ----------------------------------
                                              Harvey Goldman
                                              Executive Vice President and
                                              Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons in the
capacities indicated on the date indicated.

<TABLE>
<CAPTION>
<S>                                  <C>                                                      <C>
Signatures                          Title                                                          Date

/s/ Joel Cartun*                    Chairman, Chief Executive Officer and Director             March 29, 1999
--------------------
Joel Cartun

/s/ Brendan Keating*                President, Chief Operating Officer and Director            March 29, 1999
--------------------
Brendan Keating

/s/ Stephen Bova*                   Director                                                   March 29, 1999
-------------------
Stephen R. Bova

/s/ Leonard Fassler*                Director                                                   March 29, 1999
-------------------
Leonard J. Fassler

/s/ Fred Lafer*                     Director                                                   March 29, 1999
-------------------
Fred S. Lafer

/s/ Robert Levenson*                Director                                                   March 29, 1999
-------------------
Robert J. Levenson

/s/ Richard White*                  Director                                                   March 29, 1999
-------------------
Richard D. White

/s/ Harvey Goldman                  Executive Vice President, Chief Financial                  March 29, 1999
-------------------                 Officer and Treasurer (Principal Financial and
Harvey Goldman                      Accounting Officer)
                                    
                                 *By: /s/ Harvey Goldman
                                      -------------------------------
                                      Harvey Goldman, Attorney-in-Fact
</TABLE>
                                      -27-