UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-K


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

For the fiscal year ended      June 27, 1998
 

                                       OR


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


  For the transition period from         to


  Commission file number         33-96680


                                HERFF JONES, INC.
             (Exact name of registrant as specified in its charter)


              INDIANA                                        35-1637714
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                           Identification No.)


  4501 West 62nd Street, Indianapolis, Indiana                 46268
  (Address of principal executive offices)                   (Zip Code)



               Registrant's telephone number, including area code
                                 (317) 297-3740


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

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

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

YES        NO   X *


* Effective  January 30, 1998,  registrant  is no longer  subject to such filing
requirements.


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


     The aggregate  market value of the voting stock held by  non-affiliates  of
the  registrant  is  $96,000**.  
** Value based on management's most recent estimated share value.

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes  of common  stock as of the latest  practicable  date:  9,530,156  as of
September 1, 1998.

  There are no documents incorporated by reference herein.

<PAGE>



Voluntary Filing - effective  January 30, 1998, Herff Jones, Inc. is not subject
to filing requirements of the Securities Exchange Act of 1934.


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

Overview

          Herff Jones is one of the leading manufacturers of recognition awards,
educational products and  graduation-related  products for the scholastic market
in the United States. Its product lines include class rings,  medals and awards,
diplomas  and  graduation  announcements  (also  referred  to as "fine  paper"),
yearbooks,  caps and gowns, school photography services and multimedia education
products. The Company historically has sold approximately 80% of its products to
the high school and elementary  market and  approximately 20% of its products to
the  college  and  commercial  or  non-scholastic  market  through a network  of
approximately  700  primarily  independent  sales  representatives.  The Company
believes  that  the  Herff  Jones  name is  widely  recognized  in  schools  and
universities nationwide.

          Sales  to the  scholastic  market  tend  to be  highly  seasonal.  For
example,  orders for the Company's  class rings are high in the fall with a view
to delivery to students before the year-end  holiday season.  On the other hand,
sales of the  Company's  fine paper  products,  yearbooks and caps and gowns are
predominantly  made in the spring months for delivery by graduation  (i.e.,  May
and June).  Although the Company receives advance deposits for many products, it
recognizes revenue only upon delivery of its products.  Therefore, the Company's
revenues  tend to be higher  toward the end of the calendar  year and toward the
end of the school year in late spring (the  Company's  second and fourth  fiscal
quarters).  Selling  expenses tend to represent a relatively  high percentage of
the  Company's  net sales  because most of the  Company's  products are marketed
locally through the efforts of independent sales  representatives  at individual
schools and  because of the highly  customized  nature of many of the  Company's
products.

          Demand  for a  majority  of the  Company's  product  lines is  greatly
affected by the  population of high school and college  students.  The number of
high school graduates, which declined significantly from 1980 to 1992, increased
in 1993 for the first  time  since the 1970s  (with the  exception  of two small
increases  in  1987  and  1988).  According  to  U.S.  Department  of  Education
estimates,  there were  approximately  2.49 and 2.55  million  U.S.  high school
graduates  in 1995  and 1996  respectively.  The U.S.  Department  of  Education
forecasts the number of high school graduates will reach 3.02 million by 2007.


ESOP

          General

         In November 1989, the Herff Jones,  Inc.  Employee Stock Ownership Plan
(the  "ESOP")  purchased  just over 30% of the common  stock of the Company from
shareholders.  Pursuant to a plan of  recapitalization  adopted by the Company's
Board of  Directors  in May 1995,  effective  as of  August  22,  1995,  (a) the
Company's  outstanding shares in three classes of common stock were converted to
a  single  class  of  Common  Stock  on a  share-for-share  basis,  (b) the ESOP
purchased  substantially  all of the shares of Common Stock so converted held by
shareholders  other than the ESOP, (c) to fund its purchase of Common Stock, the
ESOP borrowed  approximately  $188.3  million from the Company (the "ESOP Loan")
and  (d) the  Company  used  the  proceeds  of the  offering  of the 11%  Senior
Subordinated Notes  ("Subordinated  Notes"),  along with borrowings under a bank
credit facility and internally generated cash from operations,  to fund the ESOP
Loan and to prepay its 8.05% Senior ESOP Notes.  The foregoing  transactions are
sometimes  referred  to  herein as the  "ESOP  Transactions".  Prior to the ESOP
Transactions,  the ESOP  held  approximately  30% of the  Company's  outstanding
shares of Common  Stock,  which it acquired with the proceeds of an initial loan
in the amount of $89 million (the "Initial Loan"). In the ESOP Transactions, the
Company loaned an additional  $188.3 million to the ESOP to enable it to acquire
substantially  all of the  remaining  outstanding  shares of Common  Stock  from
existing shareholders (other than the ESOP) of the Company. Company shareholders
tendered  substantially  all of their  shares of Common Stock to the ESOP in the
ESOP  Transactions  and  thus,  the  ESOP  now  owns  substantially  all  of the
outstanding  shares of Common Stock. This loan,  combined with the Initial Loan,
which was refinanced, resulted in a total new ESOP loan balance of approximately
$258.1  million  (the "ESOP  Loan"),  due over a period of 15 years and  bearing
interest at 9% per annum.


          Management  believes that the increased  ownership of the Common Stock
by the ESOP will  improve  the  Company's  cash flow by reducing  the  Company's
federal tax  liability.  As with the Initial Loan,  the ESOP will repay the ESOP
Loan using funds received from the Company in the form of ESOP contributions and
dividends.  Such  ESOP  contributions  and  dividends  are  expected  to be  tax
deductible  to  the  Company  as  compensation  expense  within  the  applicable
limitations  of  the  Code.  The  Code  limitations  on  deductibility  of  such
contributions and dividends are effectively tied to the extent such payments are
used to pay principal of the ESOP Loan. The ESOP is expected to repay the $258.1
million ESOP Loan to the Company over 15 years with level  payments of principal
and interest of approximately  $32.0 million per year. The principal  portion of
these  payments in the first full calendar year was  approximately  $9.0 million
with approximately $23.0 million in interest.  In the last full calendar year of
the  loan,  the  principal   portion  of  ESOP  Loan  payments  will  amount  to
approximately $28.4 million with $3.3 million in interest.  Thus, the proportion
of the annual payments allocated to principal (and deductible by the Company for
federal income tax purposes)  will  gradually  increase over the 15-year term of
the ESOP Loan. The tax  deductibility  of the $258.1 million in principal amount
of the ESOP Loan over its  15-year  term is  expected  by  management  to have a
significant  positive  effect  on the  Company's  cash  flow.  If  current  Code
provisions allowing such deductibility were curtailed or repealed, the Company's
cash flow and its ability to make scheduled  payments on its indebtedness  could
be materially adversely affected.


Fiscal Year 1998 Compared to Fiscal Year 1997

General.  Net sales  rose  8.7% to $336.5  million  in fiscal  1998 from  $309.5
million in fiscal 1997.  Operating  profit  increased  7.0% to $39.7  million in
fiscal 1998 from $37.1 million in fiscal 1997.  Net income before  extraordinary
item  increased  29.9% to $14.0  million in fiscal  1998 from  $10.8  million in
fiscal 1997.  Net income  increased  14.0% to $12.3  million in fiscal 1998 from
$10.8  million in fiscal 1997.  Earnings  per common share before  extraordinary
item increased 3.9% to $5.39 in fiscal 1998 from $5.19 in fiscal 1997.  Earnings
per share of common stock  decreased  8.9% to $4.73 in fiscal 1998 from $5.19 in
fiscal 1997.

Net Sales.  Net sales  increased  $27.1  million or 8.7%,  to $336.5  million in
fiscal 1998 from $309.5  million in fiscal  1997,  due to  increased  volume and
modest price increases across all product lines.  Volume increases  approximated
two thirds of the increase.

Cost of Sales. Cost of sales increased $6.0 million,  or 4.0%, to $156.4 million
in fiscal 1998 from $150.4  million in fiscal  1997,  primarily as a function of
increased  sales.  Cost of sales as a percentage of net sales decreased to 46.5%
in fiscal 1998 from 48.6% in fiscal 1997.  This decrease was due  principally to
reductions  in material  costs in all product  lines,  coupled  with  efficiency
improvements in the Cap & Gown and Fine Paper product lines.

Selling and Administrative Expense. Selling and administrative expense increased
$14.7 million, or 13.8%, to $121.4 million in fiscal 1998 from $106.7 million in
fiscal  1997.  This  increase  was  predominantly  due  to the  increase  in the
Company's commission expense resulting from increased net sales and increases in
certain commission rates, increased costs for the long-term management incentive
plan, increased  depreciation,  higher information  technology consulting costs,
and normal cost increases.  Selling and  administrative  expense  increased as a
percentage  of net sales to 36.1% in  fiscal  1998  from  34.5% in fiscal  1997,
primarily as a result of the increased  commission rates in the Jewelry and Fine
Paper product lines and the cost of the long-term management incentive plan.

ESOP Compensation. ESOP compensation increased $3.6 million, to $19.0 million in
fiscal  1998  from  $15.4  million  in  fiscal  1997 due to an  increase  in the
estimated per share valuation.

Operating  Profit.  Operating profit  increased $2.6 million,  or 7.0%, to $39.7
million in fiscal 1998 from $37.1  million in fiscal  1997.  This  increase  was
predominantly due to strong operating performance in the Jewelry, Cap & Gown and
Education  product  lines,  partially  offset  by  increased  ESOP  compensation
expense.

Interest Expense.  Interest expense  decreased $2.4 million,  or 11.9%, to $17.6
million in fiscal 1998 from $20.0 million in fiscal 1997, due primarily to lower
levels of borrowing in fiscal 1998.

Income Taxes.  Income taxes increased $1.8 million, or 28.6%, to $8.1 million in
fiscal  1998 from $6.3  million  in fiscal  1997 due to the  increase  in income
before taxes.

Extraordinary  Loss on Early  Extinguishment  of Debt, Net of Taxes. The Company
reported an  extraordinary  item in fiscal 1998 due to the repurchase of $20,815
of Senior  Subordinated  Notes ("Notes").  The extraordinary item is the premium
paid on the Notes,  plus the write-off of previously  deferred  financing  costs
associated with the Notes, net of the applicable tax benefit.

Net Income.  Net income  increased $1.5 million,  or 14.0%,  to $12.3 million in
fiscal  1998 from  $10.8  million in fiscal  1997.  Net  income  increased  as a
percentage  of net sales to 3.7% in fiscal 1998 from 3.5% in fiscal  1997.  Such
increases  were  primarily  the result of  improved  operating  profit and lower
interest expense.

Dividends.  Two $.28 per share dividends were paid during fiscal 1998,  totaling
$5.3 million,  a $.5 million  increase from the $4.8 million ($.50 per share) of
dividends  paid in fiscal  1997.  Essentially  all of the $5.3 million of fiscal
1998  dividends were paid to the ESOP,  which used such dividend  income to make
payments on the loan from the Company.

Fiscal Year 1997 Compared to Fiscal Year 1996

General.  Net sales  rose  9.4% to $309.5  million  in fiscal  1997 from  $282.9
million in fiscal 1996.  Operating  profit rose 20.5% to $37.1 million in fiscal
1997 from $30.8  million in fiscal 1996.  Net income  increased  $8.8 million to
$10.8  million in fiscal 1997 from $2.0  million in fiscal  1996.  Earnings  per
share of common  stock  increased  to $5.19 in  fiscal  1997 from $.58 in fiscal
1996.

Net Sales.  Net sales  increased  $26.6  million,  or 9.4%, to $309.5 million in
fiscal 1997 from $282.9 million in fiscal 1996, due primarily to increased sales
at Delmar of $13.1  million  reflecting  a full years  activity  in fiscal  1997
compared to only two months  activity  in fiscal  1996.  All  product  lines had
increases  which  were due  largely to modest  price  increases  as unit  volume
remained  fairly  constant  across most product  lines,  except for increases in
Jewelry and Education.

Cost of Sales.  Cost of sales  increased  $14.8  million,  or  10.9%,  to $150.4
million in fiscal  1997 from  $135.6  million  in fiscal  1996,  primarily  as a
function of  increased  sales,  coupled  with a one-time  charge to increase the
reserve  for  returned  product.  Cost of sales  as a  percentage  of net  sales
increased  slightly  to 48.6% in fiscal  1997 from 47.9 % in fiscal  1996.  This
increase was due  principally to higher costs related to Delmar activity and the
one-time charge to increase the reserve for returned  product,  partially offset
by  improved  operating  performance  in the  Jewelry,  Cap & Gown and  Yearbook
product lines.

Selling and Administrative Expense. Selling and administrative expense increased
$9.0 million,  or 9.2%,  to $106.7  million in fiscal 1997 from $97.7 million in
fiscal  1996.  This  increase  was  predominantly  due  to the  increase  in the
Company's  commission expense resulting from increased net sales in fiscal 1997,
coupled  with a full year of  expenses  for Delmar and  normal  cost  increases.
However,  despite  the dollar  increase in selling  and  administrative  expense
during fiscal 1997, selling and administrative  expense remained at 34.5% of net
sales.

ESOP Compensation.  ESOP compensation  decreased $1.3 million, or 7.8%, to $15.4
million in fiscal 1997 from $16.7 million in fiscal 1996 due to the  elimination
of a $4.0 million charge in fiscal 1996 for employee  service in the prior year,
partially offset by the effect of an increase in the per share valuation.

Restructuring  Charge.  The  Company  incurred  a  restructuring  charge of $2.1
million in the third quarter of fiscal 1996  resulting from a one time voluntary
early retirement program completed in one Scholastic plant location. The program
was  offered to  management  and  supervisory  employees,  of whom 17 elected to
participate in the program. All of the restructuring charges were paid in fiscal
1996.

Operating  Profit.  Operating profit increased $6.3 million,  or 20.5%, to $37.1
million in fiscal 1997 from $30.8  million in fiscal  1996.  This  increase  was
predominantly  due to strong sales and  operational  performance by the Jewelry,
Cap & Gown and Yearbook product lines,  coupled with the  non-recurrence  of the
restructuring charge taken in fiscal 1996.

Interest Income and Expense.  Interest income decreased $.6 million,  or 100.0%,
to $0.0  million  in fiscal  1997  from $.6  million  in fiscal  1996 due to the
elimination  of the  Company's  investments  in marketable  securities  and cash
equivalents.  Interest expense increased $.5 million,  or 2.8%, to $20.0 million
in fiscal 1997 from $19.5  million in fiscal 1996.  This increase was the result
of a full year of borrowings associated with the recapitalization in fiscal 1997
compared to about 10 months of borrowings in fiscal 1996.

Income Taxes.  Income taxes increased $2.2 million, or 53.7%, to $6.3 million in
fiscal  1997 from $4.1  million  in fiscal  1996 due to the  increase  in income
before taxes.

Net Income.  Net income increased $8.8 million,  to $10.8 million in fiscal 1997
from $2.0 million in fiscal 1996.  Net income  increased as a percentage  of net
sales to 3.5% in fiscal  1997  from .7% in  fiscal  1996.  Such  increases  were
primarily the result of improved  operating profit and the non-recurrence of the
extraordinary item in 1996.

Dividends.  Two $.25 per share dividends were paid during fiscal 1997,  totaling
$4.8 million,  a $2.0 million decrease from the $6.8 million ($.70 per share) in
dividends  paid in fiscal  1996.  Essentially  all of the $4.8 million of fiscal
1997  dividends  were paid to the ESOP which used such  dividend  income to make
payments on the loan from the Company.

Earnings Per Share.  Earnings  per share  increased to $5.19 per share in fiscal
1997 from $.58 per share in fiscal 1996.  Beginning in fiscal 1996, the weighted
average number of common shares  outstanding was calculated using only allocated
shares and shares committed to be released.

Impact of Inflation

          Although  increases in demand for, or costs of, certain  materials can
adversely  affect the Company's  operations,  the Company  historically has been
able  to  increase  its  selling  prices  to  offset  increased   costs.   Price
competition,  however,  can affect the ability of the  Company to  increase  its
selling prices to reflect such  increased  costs.  Significant  increases in the
price of gold have historically resulted, to some degree, in customers switching
their  preference  from precious  metal rings to  non-precious  metal rings.  In
general,  the Company  believes that the  relatively  moderate rate of inflation
over the past  several  years has not had a  significant  impact on its sales or
profitability.

          The Company requires  significant  amounts of gold for the manufacture
of jewelry and  minimizes its exposure to  fluctuations  in the price of gold in
two ways.  First,  the Company resets its ring prices every two weeks to reflect
the current price of gold.  Second, it finances its gold inventory  requirements
through  an  arrangement  with two  suppliers  whereby  it leases  certain  gold
inventories not yet committed to manufacture at an effective annual rate of 3.0%
to 5.0% of the market  value of the gold.  The Company  purchases  the gold only
after it is committed to the manufacture of a ring. As part of the  arrangement,
the suppliers hold a security  interest in, and lien upon,  gold inventory owned
by the  Company.  The Company  believes  its gold  financing  arrangement  is on
favorable   terms  and  enables  the  Company  to   effectively   hedge  against
fluctuations in the spot price of gold.

Seasonality, Liquidity and Capital Resources

          The Company is engaged in a highly seasonal business. For fiscal 1998,
approximately  22% of the Company's sales occurred  between October and December
(the Company's second fiscal quarter), due primarily to sales of class rings and
school photographs, while approximately 44% of sales occurred in the spring (the
Company's fourth fiscal quarter),  due primarily to yearbook sales, cap and gown
sales and rentals, and sales of graduation  announcements and diplomas. As such,
the Company's fourth quarter revenues are its largest due to graduation  related
sales,  specifically  yearbooks,  fine paper and caps and gowns.  Second quarter
revenues are the  Company's  second  largest due  primarily to fall  delivery of
school photographs and class rings prior to the holidays.

The following table sets forth the Company's net sales and operating  profit for
the periods indicated (unaudited):

<TABLE>
<CAPTION>
                        First Quarter       Second Quarter       Third Quarter      Fourth Quarter
                        -------------       --------------       -------------      --------------
Net Sales
---------
<S>                         <C>                 <C>                  <C>                 <C>     
     Fiscal 1998            $50,064             $74,574              $64,114             $147,790
     Fiscal 1997             46,656              68,288               58,264              136,281
     Fiscal 1996             43,543              56,275               50,239              132,884

Operating Profit
----------------
     Fiscal 1998            $(6,795)             $6,502              $(1,269)             $41,252
     Fiscal 1997             (7,965)              7,080               (1,203)              39,181
     Fiscal 1996             (8,767)              4,665               (1,295)              36,188
</TABLE>

          The Company's primary source of cash is operating profit from the sale
of its products and its primary uses of cash are capital  expenditures,  payment
of debt and  dividends  for fiscal  years  prior to the ESOP  Transactions.  The
Company has  historically  experienced an operating loss during its first fiscal
quarter  (ending in  September)  and its working  capital  requirements  tend to
exceed its operating  cash flows in the months of August  through  October.  The
Company  reduces  its  working  capital  needs  throughout  the fiscal year with
customer deposits and progress payments. These steps notwithstanding,  since the
ESOP  Transactions,  the Company  has been  required  to incur  working  capital
borrowings.  These working capital borrowings  fluctuate and are generally lower
in the summer  months and higher  throughout  the  remainder of the year.  These
amounts  have been and are  expected to continue to be financed  through a $60.0
million revolving credit facility under the Credit  Agreement,  described below.
Ongoing seasonal  borrowings  during fiscal 1998 peaked at  approximately  $39.0
million and averaged  approximately  $20.2 million.  For both tax and accounting
purposes,  ESOP contributions are non-cash expenses of the Company because funds
paid to the ESOP are then repaid to the Company pursuant to the ESOP Loan.


<PAGE>
          The Company will be required to repurchase  shares:  (a) from the ESOP
to  provide  for  cash  distributions  to  participants,  or (b)  from  retiring
participants  who  receive  distributions  of shares  from the  ESOP,  or (c) to
accommodate investment diversification requirements of the ESOP for participants
nearing retirement.  Such repurchase obligations  approximated 39,000 shares for
the plan  year  ending  December  31,  1998 and are  projected  to vary  between
approximately  39,000 shares and 100,000  shares per year,  and are estimated to
amount to 491,000 shares in the aggregate,  through the plan year ended December
31, 2004.  These  forward-looking  projections  could vary  materially  based on
important  factors,  including  the number and account  values of employees  who
become eligible for investment diversification or distributions from the ESOP or
who exercise put options following distributions of their allocated shares.

          In  connection  with the ESOP  Transactions,  the Company  issued $120
million of 11% Senior Subordinated  Notes, due 2005 (the "Subordinated  Notes").
The Company  also  entered  into a credit  agreement  (the  "Credit  Agreement")
pursuant  to which  BankBoston,  N.A.  and other  financial  institutions  named
therein have provided the Company with a $120.0 million credit  facility,  which
includes a $60.0 million  senior secured term loan (the "Term Loan") and a $60.0
million  senior  secured   revolving  credit  facility  (the  "Revolving  Credit
Facility"),  which  includes a letter of credit  facility  with a $12.0  million
sublimit.  The Term Loan and the Revolving Credit Facility have a final maturity
of September 30, 2000. As a result of the issuance of the Subordinated Notes and
the incurrence of additional  indebtedness  under the Credit Agreement to effect
the ESOP Transactions,  as well as working capital  borrowings,  the Company has
significant  interest  expense  and  interest  expense  is  expected  to  remain
significant for a number of years.

          Covenants under the indenture governing the Subordinated Notes and the
Credit   Agreement   restrict  the   Company's   ability  to  incur   additional
indebtedness, pay dividends or make other distributions, redeem equity interests
or  subordinated  indebtedness,  create  dividend or other payment  restrictions
affecting  subsidiaries,  make certain investments,  engage in transactions with
affiliates,  create  liens,  sell  assets,  or merge,  consolidate  or  transfer
substantially all of its assets, among other things. See Note 6 to the Company's
financial statements set forth herein under Item 8.

          The  Company  has   historically   generated  strong  cash  flow  from
operations and has had modest capital  requirements.  These  characteristics are
expected to continue.  The Company  currently  believes that its operating  cash
flow, together with seasonal working capital  borrowings,  will be sufficient to
meet the ongoing  capital  requirements of its business,  including  payments of
interest and principal on the Subordinated Notes, repayments of borrowings under
the Credit Agreement and share repurchase obligations, although no assurances to
that effect can be given.

          Net cash provided by operating  activities was $37.2 million in fiscal
1998 down from $37.4  million in fiscal 1997 and up from $26.8 million in fiscal
1996.  The decrease from fiscal 1997 was primarily the result of the decrease in
cash  resulting  from an increase in accounts  receivable,  mostly  offset by an
increase in net income and depreciation. The increase in fiscal 1997 from fiscal
1996 was primarily the result of the increase in net income.

          Cash  flows  from  investing  activities  represented  a usage of $8.8
million in fiscal 1998  compared to a usage in fiscal 1997 of $7.5 million and a
usage of $13.3 million in fiscal 1996. The increase in funds used in fiscal 1998
compared  to fiscal  1997 was  primarily  the result of an  increase  in capital
expenditures.  The decrease in funds used by investing activities in fiscal 1997
compared  to fiscal  1996 was due to the Delmar  acquisition  in 1996  partially
offset  by  the  1996  sale  of  marketable  securities  and  increased  capital
expenditures  in 1997. The capital  expenditures  in fiscal 1998 of $8.8 million
were generally for  maintenance of property and  equipment,  and  investments in
technology.  The higher capital  expenditures in fiscal 1997 as compared to 1996
were the result of higher  spending  for  technology.  The Company  expects cash
generated  from  operations  plus the working  capital  facility  portion of the
Credit  Agreement  to be adequate to meet  anticipated  capital  needs in future
years.

          As mentioned  above,  the Company  acquired certain assets and assumed
certain  liabilities  of Delmar  for a net  purchase  price of $15,332 in fiscal
1996. The Delmar  acquisition was financed with funds from the Credit  Agreement
and on-going  working  capital  requirements  for the  acquisition  will also be
financed from the Credit  Agreement.  The  acquisition is expected to contribute
significantly  to sales in the Yearbook and  Photography  product lines over the
long-term.

          Cash  flows  from  financing  activities  represent  a usage  of $25.3
million in fiscal 1998 compared to a usage of $32.7 million in fiscal 1997.  The
primary  reason for the  decrease in fiscal  1998  compared to fiscal 1997 was a
reduction in the payment of debt.  Cash flows used by financing  activities were
$32.7  million in fiscal 1997  compared  to $79.4  million in fiscal  1996.  The
primary  reason for the  decrease in fiscal 1997 from fiscal 1996 was the result
of the purchase of shares by the ESOP Trust and the  prepayment  of the previous
ESOP debt partially offset by new borrowings and related  financing costs by the
Company.  Pursuant  to the  Credit  Agreement,  a  required  advance  payment in
addition to the scheduled amortization payments on the Term Loan of $6.0 million
was made in the first quarter of 1997. Subsequently, a 1997 amendment eliminated
the requirement for advance payments.

NEW ACCOUNTING PRONOUNCEMENTS

          The  Financial   Accounting  Standards  Board  issued  FASB  No.  130,
"Reporting Comprehensive Income," FASB No. 131, "Disclosure about Segments of an
Enterprise and Related Information," FASB No. 132, "Employers' Disclosures about
Pensions and Other  Postretirement  Benefits" and FASB No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities."  FASB  No.  130  establishes
standards for reporting and presenting  comprehensive income and its components.
FASB No. 131 establishes standards for defining operating segments and reporting
certain information regarding operating segments.  FASB No. 132 refines standard
disclosure requirements for pension and other postretirement benefits. FASB Nos.
130, 131 and 132 are effective in fiscal 1999. The Company does not believe that
FASB  Nos.  130,  131 and 132  will  have a  material  impact  on its  financial
statements.  If the Company determines that it has a reporting  obligation under
the new standards,  the necessary  information  will be disclosed as part of the
Company's financial reporting when effective.  FASB No. 133, effective in fiscal
2000, establishes accounting and reporting standards for derivative instruments,
including certain derivatives  embedded in contracts and for hedging activities.
The Company  does not believe  that FASB No. 133 will have a material  impact on
its financial statements.

COMMITMENTS AND CONTINGENCIES

          Herff Jones has an agreement  with a national  bank  association  (the
"Bank") and a precious metal broker (the "Broker") under which gold inventory is
shipped on consignment to Herff Jones. Title to such gold inventory remains with
the Bank and the Broker until Herff Jones has paid for amounts used.  The amount
of  consigned  gold  inventory  with the Bank is limited to the lesser of 21,500
troy ounces,  a fair market  value of $9,000 or 95% of Herff Jones'  entire troy
ounce gold inventory.  The amount of consigned gold inventory with the Broker is
limited to the lesser of 10,000 troy ounces or a fair market value of $4,500. In
the event that gold held on consignment  exceeds any  consignment  limit,  Herff
Jones  must  transfer  the  excess  gold to the Bank or the Broker or any of its
authorized  agents or pay for such excess.  In addition,  Herff Jones must pay a
monthly consignment fee for the use of such gold inventory on consignment. Herff
Jones  bears  the  risk of loss,  theft,  damage  or  destruction  of such  gold
inventory  ($6,064  at June 27,  1998 and  $6,876  at June 28,  1997)  for which
appropriate insurance coverage has been obtained.

Year 2000 Conversion Costs

          In fiscal  1994,  the Company  embarked on a program to change all its
business systems to a client server platform. One of those systems was completed
in fiscal 1998, and four others are scheduled for completion in fiscal 1999. The
systems that won't be converted by the end of fiscal 1999 have been  modified to
make them year 2000 compliant. The year 2000 project cost was approximately $1.5
million  which  included $1.0 million to purchase and implement new hardware and
software  that was  capitalized  and $.5 million  that was expensed as incurred.
There  are  no  material  additional  expenditures  required  to  be  year  2000
compliant.  The year 2000 is not  expected  to have a  material  affect on Herff
Jones' operations.

          The foregoing discussion contains forward-looking statements regarding
the adequacy of the Company's anticipated cash flows and capital resources. Such
statements  are  subject to  important  factors  that could  cause  management's
projections and compliance by its information systems with year 2000 programming
issues  to be  materially  inaccurate.  Such  factors  include  (i) the rates of
retiring and terminating ESOP participants and participants becoming entitled to
investment  diversification rights whose accounts must be liquidated in whole or
in part by means of  repurchase  of shares by the Company from the ESOP, or (ii)
the Company's potential  requirements for extraordinary  capital expenditures to
fund  acquisitions  (should  favorable  opportunities  arise) or improvements of
management information systems and to maintain or improve the competitiveness of
Company products.


<PAGE>

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

Index to Financial Statements

Financial Statements:

          Report of Independent Accountants
          Consolidated Balance Sheet as of June 27, 1998
              and June 28, 1997
          Consolidated Statement of Income for the
              years ended June 27, 1998, June 28, 1997
              and June 29, 1996
          Consolidated  Statement  of  Shareholders'  Equity for the years ended
              June 27, 1998, June 28, 1997 and June 29, 1996
          Consolidated  Statement  of Cash  Flows for the years  ended  June 27,
              1998, June 28, 1997 and June 29, 1996
          Notes to Consolidated Financial Statements
          Financial Statement Schedules for the three years
              ended June 27, 1998

          VIII.   Valuation and Qualifying Accounts and Reserves

           X.     Supplemental Statement of Income Information.

          All other schedules are omitted because they are not applicable or the
          required  information  is shown in the  financial  statements or notes
          thereto.

<PAGE>

                   (Letterhead of PricewaterhouseCoopers LLP)








July 31, 1998


                        Report of Independent Accountants
                        ---------------------------------


To the Board of Directors and
     Shareholders of Herff Jones, Inc.


In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects,  the financial position of Herff
Jones,  Inc. and its  subsidiaries  at June 27, 1998 and June 28, 1997,  and the
results of their  operations and their cash flows for each of the three years in
the period ended June 27, 1998, in conformity with generally accepted accounting
principles.  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 of these statements in
accordance with generally accepted auditing standards which 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,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.





                                                  /s/PricewaterhouseCoopers LLP
                                                  -----------------------------
                                                     Indianapolis, Indiana

<PAGE>



                                HERFF JONES, INC.
                                -----------------
                           CONSOLIDATED BALANCE SHEET
                           --------------------------

                         JUNE 27, 1998 AND JUNE 28, 1997
                         -------------------------------
                        (Amounts in thousands of dollars,
                             except for share data)
<TABLE>
<CAPTION>

Assets                                                                  1998           1997
------                                                               ---------      ---------
     Current Assets:
<S>                                                                  <C>            <C>      
         Cash and cash equivalents                                   $   8,964      $   5,843
         Accounts receivable, less allowances of
              $5,744 (1998) and $5,754 (1997) for
              returns and doubtful accounts                             64,689         55,709
         Inventories                                                    39,526         37,963
         Prepaid expenses                                                2,321          1,816
         Deferred income taxes                                          10,887          9,106
                                                                     ---------      ---------
              Total Current Assets                                     126,387        110,437

     Deferred income taxes                                               1,668            ---
     Deferred financing cost, net and other assets                       3,454          4,590
     Property, plant and equipment, net                                 48,868         49,014
                                                                     ---------      ---------

              Total Assets                                           $ 180,377      $ 164,041
                                                                     =========      =========

Liabilities and Shareholders' Equity
------------------------------------
     Current Liabilities:
         Trade accounts payable                                      $   6,625      $   5,856
         Salaries and wages payable                                      5,430          5,048
         Interest payable                                                4,190          5,082
         Customer deposits                                              18,861         19,508
         Commissions payable                                            22,064         16,864
         Income taxes accrued                                           12,199          9,547
         Other accrued liabilities                                       9,201          9,613
         Current portion of long-term debt                              19,678         10,377
                                                                     ---------      ---------
              Total Current Liabilities                                 98,248         81,895

     Other                                                               6,232          2,239
     Long-term debt                                                    122,903        154,979
     Deferred income taxes                                                 ---            443
                                                                     ---------      ---------

              Total Liabilities                                        227,383        239,556
                                                                     ---------      ---------

     Commitments and Contingencies

     Shareholders' Equity (Deficit):
         Common stock - No par value, shares authorized
              -16,500,000; shares issued and outstanding
              -9,530,156 (1998) and 9,569,304 (1997)                     5,683          5,703
         Retained earnings                                             137,885        128,122
         Deferred compensation                                        (189,927)      (206,440)
         Foreign currency translation                                      (60)             2
         Excess of cost over market (shares committed
         to be released)                                                  (587)        (2,902)
                                                                     ---------      ---------
              Total Shareholders' Equity (Deficit)                     (47,006)       (75,515)
                                                                     ---------      ---------

              Total Liabilities & Shareholders' Equity (Deficit)     $ 180,377      $ 164,041
                                                                     =========      =========
</TABLE>




                (See Notes to Consolidated Financial Statements.)



<PAGE>



                                HERFF JONES, INC.
                                -----------------

                         CONSOLIDATED STATEMENT OF INCOME
                         --------------------------------

       FOR THE YEARS ENDED JUNE 27, 1998, JUNE 28, 1998 AND JUNE 29, 1996
       ------------------------------------------------------------------
                        (Amounts in thousands of dollars
                             except for share data)

<TABLE>
<CAPTION>

                                                                       1998             1997            1996
                                                                    -----------      -----------     -----------
<S>                                                                 <C>              <C>             <C>
Net sales                                                           $   336,542      $   309,489     $   282,941

Cost of sales (excludes ESOP compensation)                              156,441          150,373         135,625

Selling and administrative expenses                                     121,410          106,666          97,719
(excludes ESOP compensation)

ESOP compensation

    Current year service                                                 19,001           15,357          12,632
    Prior year service                                                      ---              ---           4,033

Restructuring charge                                                        ---              ---           2,141
                                                                    -----------      -----------     -----------
Operating profit                                                         39,690           37,093          30,791

Interest income                                                              62               15             627

Interest expense                                                         17,648           20,031          19,482
                                                                    -----------      -----------     -----------
Income before taxes                                                      22,104           17,077          11,936

Income taxes                                                              8,089            6,292           4,094
                                                                    -----------      -----------     -----------

Net income before extraordinary item                                     14,015           10,785           7,842

Extraordinary item:  Loss on early extinguishment of debt, less
applicable tax benefit of $989 (1998) and $3,621 (1996)                  (1,715)             ---          (5,884)
                                                                    -----------      -----------     -----------

Net income                                                          $    12,300      $    10,785     $     1,958
                                                                    ===========      ===========     ===========

Per common share:
Net income before extraordinary item                                $      5.39      $      5.19     $      2.32
Extraordinary item                                                         (.66)             ---           (1.74)
                                                                    -----------      -----------     -----------
Net income                                                          $      4.73      $      5.19     $       .58
                                                                    ===========      ===========     ===========
Weighted average number of
common shares outstanding                                             2,599,635        2,076,431       3,383,379
                                                                    ===========      ===========     ===========

</TABLE>









                (See Notes to Consolidated Financial Statements.)


<PAGE>




                                HERFF JONES, INC.
                                -----------------

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                 ----------------------------------------------

       FOR THE YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
       ------------------------------------------------------------------
                        (Amounts in thousands of dollars
                             except for share data)


<TABLE>
<CAPTION>

                                                                      Foreign                        Excess            Total
                                Common Stock            Retained     Currency       Deferred        Cost Over        Shareholders'
                            Shares        Amount        Earnings   Translation   Compensation        Market        Equity (Deficit)
                            ------        ------        --------   -----------   ------------      ----------      -----------------
<S>                      <C>              <C>          <C>           <C>          <C>              <C>               <C>      
Balance June 24, 1995     9,640,468        $5,745       $121,234       $     6     $ (56,367)         $   ---         $  70,618
                          =========        ======       ========       =======     =========          =======         =========
Dividends declared                                                                                                 
($.70/share)                    ---           ---         (3,221)          ---          ---               ---            (3,221)
Stock purchases             (21,472)         (17)           (446)          ---          ---               ---              (463)
Shares committed to be                                                                                             
released                        ---           ---            ---           ---       21,692            (4,389)           17,303
Tax benefit of cost over                                                                                           
market of ESOP shares                                                                                                  
committed to be released        ---           ---            ---           ---          ---             1,736             1,736
ESOP share purchase             ---           ---            ---           ---     (188,278)              ---          (188,278)
Foreign currency                                                                                                   
translation                     ---           ---            ---             5          ---               ---                 5
Net income                      ---           ---          1,958           ---          ---               ---             1,958
                          ---------        ------       --------       -------    ---------           -------         --------- 
Balance June 29, 1996     9,618,996        $5,728       $119,525       $    11    $(222,953)          $(2,653)        $(100,342)
                          =========        ======       ========       =======    =========           =======         =========
Dividends declared                                                                                                 
($.50/share)                    ---           ---          (906)           ---          ---               ---              (906)
Stock purchases             (49,692)         (25)        (1,282)           ---          ---               ---            (1,307)  
Shares committed to be                                                                                             
released                        ---           ---           ---            ---       16,513              (400)           16,113
Tax benefit of cost over                                                                                           
market of ESOP shares                                                                                                
committed to be released        ---           ---           ---            ---          ---               151               151
Foreign currency                                                                                                   
translation                     ---           ---           ---             (9)         ---               ---                (9)
Net income                      ---           ---        10,785                         ---               ---            10,785
                          ---------        ------       --------       -------    ---------           -------         --------- 
Balance June 28, 1997     9,569,304        $5,703       $128,122       $     2    $(206,440)          $(2,902)        $ (75,515)
                          =========        ======       ========       =======    =========           =======         =========
Dividends declared                                                                                                 
($.56/share)                    ---           ---        (1,296)           ---          ---               ---            (1,296)
Stock purchases             (39,148)         (20)        (1,241)           ---          ---               ---            (1,261)  
Shares committed to be                                                                                             
released                        ---           ---           ---            ---       16,513             3,635            20,148
Tax benefit of cost over                                                                                           
market of ESOP shares                                                                                                
committed to be released        ---           ---           ---            ---          ---            (1,320)           (1,320)
Foreign currency                                                                                                   
translation                     ---           ---           ---            (62)         ---               ---               (62)
Net income                      ---           ---         12,300           ---          ---               ---            12,300
                          ---------        ------       --------       -------    ---------           -------         --------- 
Balance June 27, 1998     9,530,156        $5,683       $137,885       $   (60)   $(189,927)          $  (587)        $ (47,006)
                          =========        ======       ========       =======    =========           =======         =========
</TABLE>







                (See Notes to Consolidated Financial Statements.)

<PAGE>
                                HERFF JONES, INC.
                                -----------------

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      ------------------------------------

       FOR THE YEARS ENDED JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
       ------------------------------------------------------------------
                       (Amounts in thousands of dollars)

<TABLE>
<CAPTION>
                                                                                        1998           1997           1996
                                                                                     ---------      ---------      ---------
Cash flows from operating activities:
<S>                                                                                  <C>            <C>            <C>      
     Net income                                                                      $  12,300      $  10,785      $   1,958
     Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                                   8,726          7,465          5,802
         Amortization and write off of financing cost                                    1,093            991          1,298
         ESOP compensation (before dividend exclusion)                                  20,148         16,113         17,303
         Tax benefit of ESOP                                                            (1,320)           151          1,736
         Long-term incentive plan expense                                                4,132            541            ---
         Other                                                                             (62)            (9)             5
         (Gain) loss on disposal of property, plant and equipment                          188             89           (408)
         Increase  (decrease)  in  cash  generated  by  changes  in  assets  and
         liabilities, net of effects from acquisition of business:
              Accounts receivable                                                       (8,980)        (1,643)         1,595
              Inventories                                                               (1,563)        (1,022)         5,115
              Prepaid expenses                                                            (505)           835           (911)
              Other assets                                                                  43             22            298
              Trade accounts payable                                                       769         (1,685)         2,099
              Salaries and wages                                                           382            980           (437)
              Interest Payable                                                            (892)           (75)         3,996
              Customer deposits                                                           (647)          (348)        (2,122)
              Commissions payable                                                        5,200          2,007            175
              Income taxes payable                                                       2,652          6,347         (7,228)
              Deferred income taxes                                                     (3,892)        (3,423)        (2,426)
              Other accrued liabilities                                                   (551)          (685)        (1,021)
                                                                                     ---------      ---------      ---------
         Total Adjustments                                                              24,921         26,651         24,869
                                                                                     ---------      ---------      ---------
         Net cash provided by operating activities                                      37,221         37,436         26,827
                                                                                     ---------      ---------      ---------

Cash flows from investing activities:
     Proceeds from disposal of property, plant and equipment                                47             29            503
     Capital expenditures                                                               (8,815)        (7,556)        (4,722)
     Acquisition of business                                                               ---            ---        (15,332)
     Sale of marketable securities                                                         ---            ---          6,219
                                                                                     ---------      ---------      ---------
     Net cash used by investing activities                                              (8,768)        (7,527)       (13,332)
                                                                                     ---------      ---------      ---------
Cash flows from financing activities:
     Redemptions of common stock                                                        (1,261)        (1,307)          (463)
     Dividends declared                                                                 (1,296)          (906)        (3,221)
     Decrease in long-term debt                                                        (31,192)        (9,537)        (6,750)
     Increase (decrease) in the revolver, net                                            8,417        (15,039)       (21,607)
     Advance term loan payment                                                             ---         (5,957)           ---
     Financing cost incurred                                                               ---            ---         (5,854)
     New borrowings                                                                        ---            ---        216,646
     Purchase of shares by the ESOP Trust                                                  ---            ---       (188,278)
     Payment on ESOP debt                                                                  ---            ---        (69,826)
                                                                                     ---------      ---------      ---------
     Net cash used by financing activities                                             (25,332)       (32,746)       (79,353)
                                                                                     ---------      ---------      ---------

Cash and Cash Equivalents:
     Net increase (decrease)                                                             3,121         (2,837)       (65,858)
     Beginning of year                                                                   5,843          8,680         74,538
                                                                                     ---------      ---------      ---------
     End of year                                                                     $   8,964      $   5,843      $   8,680
                                                                                     =========      =========      =========
Supplemental cash flow information: 
     Cash paid during the year for:
         Interest                                                                    $  17,846      $  18,570      $  13,853
         Income taxes                                                                $   9,633      $   3,206      $   8,415
         Dividends                                                                         ---            ---      $   3,374

     Acquisition of business:
         Assets acquired                                                                   ---            ---      $  24,547
         Liabilities assumed                                                               ---            ---         (9,215)
                                                                                                                   ---------
         Net purchase price                                                                ---            ---      $  15,332
</TABLE>
                (See Notes to Consolidated Financial Statements.)

<PAGE>





                                HERFF JONES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                 JUNE 27, 1998, JUNE 28, 1997 AND JUNE 29, 1996
                 ----------------------------------------------


                        (Amounts in thousands of dollars
                             except for share data)


NOTE 1 - BUSINESS OF HERFF JONES, INC. (HERFF JONES)
----------------------------------------------------

Herff Jones is essentially in one line of business;  the manufacture and sale of
recognition,  education,  achievement and motivation products for the scholastic
and commercial markets;  including  instructional materials and programs for the
classroom; and photographic services.

Products include high school and college rings, medals, pins, awards,  diplomas,
graduation announcements and accessory items, yearbooks,  caps and gowns; senior
portraits,   underclass  school  pictures  and  photography  finishing  for  the
professional  photographer;  classroom  instructional  materials including maps,
globes, anatomical models and multi-media teaching programs; and similar jewelry
and award items for the commercial market.

Its products are marketed to schools and businesses nationwide and in Canada and
Puerto  Rico by  approximately  700  sales  representatives,  most  of whom  are
independent contractors who are paid commissions.

NOTE 2 - FISCAL 1996 RECAPITALIZATION
-------------------------------------

On June 15, 1995,  management of the Company distributed to shareholders a proxy
statement describing a proposed transaction whereby the  Company-sponsored  ESOP
trust ("ESOP") would acquire substantially all the outstanding shares of Company
stock  that  it did not  already  own.  This  plan  of  recapitalization  became
effective as of August 22, 1995. The recapitalization  significantly changed the
Company's financial  condition,  adding substantial  indebtedness which, coupled
with the  adoption  of new ESOP  accounting  standards,  resulted  in a  deficit
shareholders'  equity position.  The transaction  resulted in the ESOP obtaining
control  of  the  Company  and  the  Company  incurring  significant  additional
indebtedness  (approximately  $135,000,  including  the  issuance of $120,000 in
aggregate principal amount of 11% Senior Subordinated Notes due 2005 ("Notes")).
The proceeds from the transaction  were loaned,  along with other Company funds,
by the  Company  to the  ESOP  to  enable  it to  effect  the  transaction.  The
recapitalization resulted in a significant prepayment fee (approximately $9,505)
on the payoff of the Senior ESOP Notes,  which was recorded as an  extraordinary
charge in fiscal 1996.

NOTE 3 - ACCOUNTING POLICIES
----------------------------

The major  accounting  policies  and  practices  followed  by Herff Jones are as
follows:

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include the
accounts of Herff Jones and its wholly-owned  subsidiaries,  Herff Jones Canada,
Inc. (hereafter referred to as "Herff Jones Canada") and The Herff Jones Company
of Indiana,  Inc. The Company utilizes a 52/53 week year for accounting purposes
ending on the last  Saturday  in June.  Fiscal  1996  contained  53  weeks,  the
additional  week was included in the first  quarter  ended  September  30, 1995.
Fiscal  1997  and  1998  contained  52  weeks.  All  significant   inter-company
transactions  and  balances  have  been  eliminated  in  consolidation.  Foreign
operations are immaterial.

FOREIGN  CURRENCY  TRANSLATION - The financial  statements of Herff Jones Canada
have been  translated to U.S.  dollars in accordance with FASB Statement No. 52,
"Foreign  Currency  Translation."   Accordingly,   assets  and  liabilities  are
translated  at the rate in  existence  at the balance  sheet  date.  Revenue and
expense items are  translated at average rates  prevailing  during the year. Any
translation  gains  and  losses  are  accumulated  as a  separate  component  of
shareholders' equity.
<PAGE>

CASH AND CASH  EQUIVALENTS - For purposes of balance sheet and statement of cash
flows  classification,  investments with maturities of three months or less from
date of purchase are deemed to be cash equivalents.

INVENTORIES - Inventories are stated at the lower of cost  (first-in,  first-out
basis) or market with the exception of gold inventories  which are stated at the
lower of the last-in, first-out (LIFO) cost method or market.

DEFERRED FINANCING - Deferred financing costs are amortized over the term of the
related debt.

PROPERTY,  PLANT AND  EQUIPMENT - Property,  plant and  equipment are carried at
cost less accumulated depreciation.

Depreciation is provided on a straight-line basis for financial reporting and on
an accelerated basis for income tax purposes over the following estimated useful
lives of the assets:

     Building and leasehold improvements                       10 to 35 years
     Machinery and equipment                                    5 to 10 years
     Furniture and fixtures                                     3 to 10 years
     Rental cap and gown stock                                  6 to 10 years

The  carrying   value  of  property,   plant  and  equipment  is  assessed  when
circumstances  indicate that carrying value may be impaired or not  recoverable.
The Company  determines  such impairment by measuring  undiscounted  future cash
flows. If an impairment is present, the assets are reported at fair value.

Maintenance and repairs are charged to expense as incurred. Cost of renewals and
betterments are capitalized and depreciated using the applicable rates.

REVENUE  RECOGNITION - Revenue and related costs are recognized when the product
is shipped to the customer.

COMMISSIONS - The Company provides advances to sales representatives,  which are
offset by commissions  earned.  For both tax and financial  reporting  purposes,
salesman  advances  paid in  excess  of  commission  earned,  which  are  deemed
uncollectible, are charged to expense.

ESOP PLAN - During fiscal 1990,  the Company  established  a leveraged  employee
stock ownership plan (the "Plan") which covers  substantially all U.S. non-union
employees.  On November 9, 1989,  the ESOP purchased just over 30% of the common
stock of the Company from  shareholders  using  proceeds of the 1989 Senior ESOP
Notes,  which were prepaid in fiscal 1996. In May 1995,  the Company's  Board of
Directors adopted a plan of  recapitalization  which resulted in the August 1995
purchase, by the ESOP, of substantially all shares of the Company's common stock
that it did not already hold (6,724,200 shares).

The Plan is non-contributory and is funded through annual Company  contributions
equal to the Plan's  debt  service  less  dividends  received  by the Plan.  All
dividends  received  by the Plan are used  for  debt  service.  The ESOP  shares
initially were pledged as collateral for its debt. As the debt is repaid, shares
are released from  collateral and allocated to eligible  active  employees.  The
Company  accounts for its ESOP in  accordance  with AICPA SOP 93-6,  "Employers'
Accounting For Employee Stock  Ownership  Plans."  Accordingly,  the cost of the
unallocated shares pledged as collateral is reported as deferred compensation in
the balance  sheet.  As shares are  committed  to be released  and  allocated to
employee  accounts,  the Company reports ESOP compensation  expense equal to the
most  recent  estimate of the fair value of the  shares,  and the shares  become
outstanding for  earnings-per-share  (EPS) computations.  Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings.

Shares of the Company's  stock are allocated to  employees'  accounts,  based on
dividends paid and compensation levels, in essentially equal annual amounts over
the life of the ESOP debt  (through  December  2009).  Upon  retirement  (at the
normal retirement age), or earlier termination  (assuming the ESOP loan has been
repaid),  the employee  can request  that the Company buy his/her  shares at the
latest price determined by an annual valuation.

Since there is no market for the Company's  shares,  an annual  valuation of the
shares is performed by an independent valuation firm. Between annual valuations,
management  estimates  fair value for  purposes of recording  ESOP  compensation
expense.  The latest annual valuations were $32.50 and $26.30 per share and were
performed  after the close of the fiscal  year ended June 28,  1997 and June 29,
1996,  respectively.  Management's  estimate of the fair value of the  Company's
shares as of June 27, 1998 is $39.00 per share. In accordance with the ESOP plan
requirements, the independent valuation of the June 27, 1998 share value will be
prepared and presented to the ESOP Administrative Committee in September, 1998.


<PAGE>

At June 27, 1998 and June 28, 1997, the ESOP shares were as follows:

                                                    1998               1997
                                                 ---------          ----------
Allocated Shares                                 2,717,922           2,138,316
Shares committed to be released                    289,803             289,803
Unreleased shares                                6,665,475           7,245,081
                                                 ---------           ---------
Total ESOP shares                                9,673,200           9,673,200
Shares purchased and retired or distributed       (145,555)           (106,351)
                                                 ---------           ---------
Net ESOP shares                                  9,527,645           9,566,849
                                                 =========           =========

Approximately  36,000  shares may be put back to the  Company in fiscal  1999 in
connection  with  scheduled  distributions.  Further,  an  ESOP  diversification
provision  provides for participants who have attained the age of 55 and have 10
years of ESOP  participation  (from  1990) to  diversify a portion of their ESOP
holdings into investments  other than Herff Jones stock. In order to accommodate
this provision, participants' shares must be purchased by the Company. In fiscal
year 2001, approximately 100,000 shares are expected to be eligible to be put to
the Company in accordance with the diversification provision.

LONG-TERM  INCENTIVE PLAN - The  appreciation in the projected value of units in
excess of an established minimum amount is accrued by the Company and charged to
compensation  expense over the five year performance periods (Note 11). FASB No.
123,  "Accounting  for Stock-Based  Compensation"  was adopted by the Company in
fiscal 1997. The Company  adopted the disclosure  requirements  of this standard
and continued to follow APB 25,  "Accounting  for Stock Issued to Employees" for
expense recognition purposes.

EARNINGS  PER SHARE - Earnings  per share have been  computed  by  dividing  net
income by the weighted  average number of allocated and committed to be released
ESOP shares outstanding during the year.

INCOME TAXES - Deferred income taxes are provided for the temporary  differences
between financial reporting and income tax reporting of the Company's assets and
liabilities in accordance with FASB No. 109, "Accounting For Income Taxes."

PENSION  PLAN  -  Herff  Jones  has  one  defined   benefit  plan  which  covers
substantially all bargaining unit employees at the Indianapolis, Indiana Jewelry
operation (Note 10). The benefit is based on a defined  benefit level,  which is
periodically re-negotiated, multiplied by years of service. Net periodic pension
cost was determined using the Unit Credit Cost Method prescribed by FASB No. 87,
"Accounting  For  Pensions."  Plan funding is based on the Projected Unit Credit
Cost Method.

FAIR VALUE OF FINANCIAL  INSTRUMENTS  - In the normal  course of  business,  the
Company  enters  into   transactions   involving   various  types  of  financial
instruments.  These instruments have credit risk and may also be subject to risk
of loss due to interest rate  fluctuations.  Management  has estimated  that the
fair value of cash and cash  equivalents,  accounts  receivable,  trade accounts
payable  and  customer  deposits  approximates  the  carrying  value  due to the
relatively short period of time until expected realization.  Management has also
estimated the fair value of the Senior Subordinated Notes based upon the trading
price  of the  notes at year end  (Note  6).  The  estimated  fair  value of the
Industrial  Revenue  Bonds and the  Senior  Bank  Facility  (revolver  and term)
approximate  the carrying  values due to periodic  interest rate  adjustments to
current market rates.

USE OF ESTIMATES - The  preparation  of the  financial  statements in accordance
with generally accepted accounting principles requires the use of estimates made
by management. Actual results could differ from those estimates.

RECLASSIFICATION  - Certain  1997  amounts  have been  reclassified  in order to
conform to the 1998 presentation.

NEW ACCOUNTING  PRONOUNCEMENTS - The Financial Accounting Standards Board issued
FASB No. 130, "Reporting  Comprehensive Income," FASB No. 131, "Disclosure about
Segments of an Enterprise and Related  Information,"  FASB No. 132,  "Employers'
Disclosures about Pensions and Other Postretirement  Benefits" and FASB No. 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  FASB No. 130
establishes standards for reporting and presenting  comprehensive income and its
components.  FASB No. 131 establishes  standards for defining operating segments
and reporting certain information  regarding  operating  segments.  FASB No. 132
refines standard  disclosure  requirements for pension and other  postretirement
benefits.  FASB Nos. 130, 131 and 132 are effective in fiscal 1999.  The Company
does not believe that FASB Nos. 130, 131 and 132 will have a material  impact on
its  financial  statements.  If the Company  determines  that it has a reporting
obligation under the new standards,  the necessary information will be disclosed
as part of the  Company's  financial  reporting  when  effective.  FASB No. 133,
effective in fiscal 2000,  establishes  accounting  and reporting  standards for
derivative instruments,  including certain derivatives embedded in contracts and
for hedging activities. The Company does not believe that FASB No. 133 will have
a material impact on its financial statements.


<PAGE>

NOTE 4 - INVENTORIES
--------------------

Inventories consist of the following:

                                        1998                  1997
                                      -------               -------
Raw materials and supplies
     (includes gold)                  $17,023               $16,736
Work-in-process                        14,169                13,187
Finished goods                          8,334                 8,040
                                      -------               -------
                                      $39,526               $37,963
                                      =======               =======


Gold  inventories  recorded at the lower of LIFO cost or market at June 27, 1998
and June 28, 1997 are $781 and $1,325, respectively, and approximate replacement
cost at both dates.


NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------

Property, plant and equipment consist of the following:

                                              1998                  1997
                                            --------               -------
Buildings and leasehold improvements         $22,394               $22,262
Machinery and equipment                       55,190                51,577
Furniture and fixtures                         4,811                 3,956
Rental cap & gown stock                       12,488                11,483
                                            --------               -------
                                              94,883                89,278
Less - Accumulated depreciation              (51,029)              (45,364)
                                            --------               -------
                                              43,854                43,914
Land                                           3,064                 3,065
Construction in progress                       1,950                 2,035
                                            --------               -------
                                            $ 48,868               $49,014
                                            ========               =======

NOTE 6 - FINANCING
------------------

Long-term debt consists of the following:
                                              1998                1997
                                            --------            --------
Senior Bank Facility (Revolver)             $  8,417            $    ---
Senior Bank Facility (Term Loan)              27,379              37,756
Senior Subordinated Notes                     99,185             120,000

1994 Industrial Development
     Revenue Bonds Due in 2019                 7,600               7,600
                                            --------            --------
                                             142,581             165,356

Less:   current portion                      (19,678)            (10,377)
                                            --------            --------

Long-term debt                              $122,903            $154,979
                                            ========            ========

On August 22,  1995,  the Company  issued  $120,000 in aggregate  principal  11%
Senior  Subordinated  Notes.  The notes mature in September,  2005. Based on the
bond price at June 27, 1998, the fair value of the Senior  Subordinated Notes is
approximately  $107,000. The notes are unsecured but contain certain restrictive
covenants,  including limitations on indebtness, liens, leases, dividends, stock
purchases and certain investments.


<PAGE>

Also on August 22, 1995, the Company entered into the Revolving  Credit and Term
Loan  Agreement,  pursuant to which  financial  institutions  have  provided the
Company with a $120,000 credit  facility,  comprised of a $60,000 Senior Secured
Term Loan and a $60,000 Senior Secured Revolving Credit Facility, which includes
a letter  of credit  facility  with a  $12,000  sublimit.  The Term Loan and the
Revolving  Credit  Facility  have  a  final  maturity  of  September  30,  2000.
Amortization of the Term Loan is in quarterly installments of increasing amounts
which commenced December 31, 1995. The cash flow pattern and expectations of the
Company's  highly seasonal  business result in the  classification,  at June 27,
1998 of the Revolving Credit Facility as a current  liability,  although payment
within the next year is not required.

All loans  made  under  the Term Loan and the  Revolving  Credit  Facility  bear
interest either at the BankBoston,  N.A.,  Alternate Base rate or the Eurodollar
rate, plus, in each case, the "Applicable  Margin," (adjusted annually depending
on the  ratio  of the  Company's  senior  debt to  certain  cash  flows  for the
preceding fiscal year). The Company pays a commitment fee of 0.375% per annum on
the unused  portion of the Revolving  Credit  Facility.  The  commitment  fee is
payable  quarterly  in arrears and  increases or  decreases  depending  upon the
financial performance of the Company. The Company pays the applicable Eurodollar
Rate Margin on the  maximum  amount  available  to be drawn under each letter of
credit plus a fee of .20% on the maximum amount available to be drawn under each
letter of credit upon  issuance.  The Term Loan rate on June 27, 1998 was 6.66%.
The Revolving Credit Facility rate on June 27, 1998 was 6.63%.

The obligations under the Term Loan and the Revolving Credit Facility constitute
Senior  Debt and are  secured by a blanket  perfected  first  priority  security
interest in  substantially  all tangible and  intangible  assets of the Company,
including  a  pledge  of all of the  stock  of the  Company's  subsidiaries.  In
addition,  the obligations under the Term Loan and the Revolving Credit Facility
are guaranteed by each of the Company's subsidiaries (the "Guarantors"), and the
obligations of each of the  Guarantors  under such guarantee are in turn secured
by a perfected  first  priority  security  interest in all assets of each of the
Guarantors.

The effective rate of interest on the 1994 Industrial  Development Revenue Bonds
is re-set  weekly at a rate to allow the Bonds to be priced at par.  Interest is
paid  quarterly  and the  interest  rate on June  27,  1998 was  3.7%.  They are
unsecured but are backed by an irrevocable Letter of Credit.

The Revolving  Credit and Term Loan  Agreement and the Letters of Credit contain
customary  financial and other  covenants  that,  among other things,  limit the
ability of the Company (subject to customary and negotiated  exceptions) to: (i)
incur additional liens, (ii) incur additional  indebtedness,  (iii) make certain
kinds of  investments,  (iv) prepay  indebtedness,  (v) make  distributions  and
dividend  payments to its stockholders,  (vi) engage in affiliate  transactions,
(vii) make certain asset dispositions,  (viii) make significant acquisitions and
(ix)  participate  in certain  mergers  or  consolidations.  A required  advance
payment  on the Term Loan of $5,957  was made in the  first  quarter  of 1997 in
addition to the scheduled amortization payments.  Subsequently, a 1997 amendment
eliminated the requirement for advanced payments.

Long-term debt is scheduled to be repaid in the following fiscal years:

                  1999                        $  19,678
                  2000                           12,806
                  2001                            3,312
                  2002                              ---
                  2003                              ---
                  Thereafter                    106,785
                                               --------
                                               $142,581
                                               ========

NOTE 7 - COMMON STOCK
---------------------

As a consequence  of the August 22, 1995  recapitalization  plan,  the number of
common shares outstanding  immediately after the recapitalization took place was
1,236,494,  as compared to 9,618,996 immediately preceding the recapitalization.
In accordance with the provisions of AICPA SOP 93-6,  "Employers' Accounting For
Employee Stock  Ownership  Plans," for purposes of computing a weighted  average
number of common shares  outstanding,  ESOP shares that have been  allocated and
those  that have been  committed  to be  released  are  considered  outstanding.
Unreleased ESOP shares are not considered outstanding.

Earnings per share for fiscal 1996 have been  restated in  conjunction  with the
Company's  fiscal  1998  adoption  of FASB No.  128,  "Earnings  Per Share." The
restated  amount  was  computed  using the  weighted  average  of actual  shares
outstanding during the year.

During fiscal 1996 and 1997 the cost of ESOP shares committed to be released was
greater than the  estimated  fair value of such shares.  The excess of cost over
market was recorded as a charge to a separate component of shareholders' equity,
net of the related tax effect.  Beginning in fiscal  1998,  the  estimated  fair
value of ESOP shares committed to be released exceeds cost. The excess of market
over cost will be credited to excess of cost over market, net of the related tax
effect,  to the extent of the previous  net charges  recorded.  Thereafter,  the
excess will be credited to retained earnings.

NOTE 8 - INCOME TAXES
---------------------

The provision for income taxes charged to income before  extraordinary items was
as follows:
<TABLE>
<CAPTION>


                                                       1998          1997          1996
                                                     --------      --------      --------
Current income tax expense:
<S>                                                  <C>           <C>           <C>
     Federal                                         $ 10,680      $  8,874      $  7,535
     State and local                                    1,471         1,167         1,075
                                                     --------      --------      --------
Total current income tax expense                       12,151        10,041         8,610

Deferred income tax expense:
     Federal                                           (3,361)       (3,079)       (3,498)
     State and local                                     (701)         (670)         (635)
                                                     --------      --------      --------
Total deferred income tax expense                      (4,062)       (3,749)       (4,133)
                                                                                   

Benefit of state operating loss carryforward              ---           ---          (383)
                                                     --------      --------      --------
Total tax provision (before extraordinary items)     $  8,089      $  6,292      $  4,094
                                                     ========      ========      ========
</TABLE>

The provision for income taxes differs from the amount of income tax  determined
by applying the  applicable  U.S.  statutory  federal income tax rate to pre-tax
income from continuing operations as a result of the following differences:
<TABLE>
<CAPTION>


                                                            1998         1997         1996
                                                          ------       ------       ------
<S>                                                        <C>          <C>          <C>  
U.S. statutory rate                                        35.0%        35.0%        35.0%
State income taxes, net of federal tax benefit              2.2          1.9          1.5
Dividend on ESOP stock                                     (2.0)        (1.9)        (2.5)
All other, net                                              1.4          1.8           .3
                                                          -----       ------       ------
Financial reporting rate (before extraordinary items)      36.6%        36.8%        34.3%
                                                          =====       ======       ======
</TABLE>

<PAGE>




Deferred tax assets (liabilities) are comprised of the following:

                                       1998          1997
                                     --------      --------
Deferred tax assets:
   Estimated product returns         $  1,132      $  1,135
   Medical insurance                      596           396
   Inventory cost capitalization          328           462
   Bad debts                              198           743
   Vacation pay                           825           834
   Workers compensation                   798           873
   ESOP                                11,115         8,656
   Management incentive                 1,851           214
   Other                                  815           840
                                     --------      --------
        Total assets                   17,658        14,153

   Deferred tax liabilities:
   Depreciation                        (4,395)       (4,757)
   Other                                 (708)         (733)
                                     --------      --------
        Total liabilities              (5,103)       (5,490)
                                     --------      --------
   Net deferred tax asset            $ 12,555      $  8,663
                                     ========      ========

No valuation allowance was deemed necessary at June 27, 1998 and June 28, 1997.


NOTE 9 - EMPLOYEE RETIREMENT PLANS
----------------------------------

ESOP  compensation  expense  was $19,001  (1998),  $15,357  (1997),  and $16,665
(1996).  ESOP  compensation  expense is based upon the  estimated  fair value of
shares committed to be released plus  administrative  costs, offset by dividends
on  allocated  ESOP  shares.  The 1998  expense of $19,001  was net of $1,296 in
dividends  paid to the Plan.  The 1997  expense  of  $15,357  was net of $906 in
dividends  paid to the Plan.  The 1996  expense  of  $16,665  was net of $865 in
dividends paid to the Plan.

The Company has three profit sharing plans covering  substantially all non-union
employees.  Accrued  but unpaid  contributions  through the end of each year are
included in Other Accrued  Liabilities.  Profit sharing  expense for these plans
was $2,051 in 1998, $1,875 in 1997 and $749 in 1996.

NOTE 10 - JEWELRY BARGAINING UNIT PENSION PLAN
----------------------------------------------

Pre-tax  pension  expense of $33 for 1998, $13 for 1997 and $97 for 1996 consist
of the following components:

                                           1998         1997         1996
                                         -------      -------      -------
Service cost                             $   200      $   186      $   167
Interest cost                                654          618          595
Actual return on assets                   (2,911)      (1,098)      (1,631)
Difference between assumed return
   and actual return on assets             2,139          371        1,035
Amortization of over-funded position
   and unrecognized prior service            (49)         (64)         (69)
                                         -------      -------      -------
                                         $    33      $    13      $    97
                                         =======      =======      =======


Assumptions  used in determining the net pension expense for 1998, 1997 and 1996
included a discount rate of 7.5% and a rate of return on plan assets of 8.5%.


<PAGE>





The following  table sets forth the plan's funded status and amounts  recognized
in the company's consolidated balance sheet at June 27, 1998 and June 28, 1997:

                                                  1998                1997
                                                --------            --------
Projected benefit obligation, including
         vested benefits of $9,595 (1998)
         and $8,616 (1997)                      $(10,007)           $ (9,010)

Plan assets at fair value, primarily listed
         stocks and corporate obligations         11,709               9,388
                                                --------            --------
         Over-funded position                      1,702                 378

Unamortized over-funded position                    (553)               (692)
Unrecognized (gain) loss on assets                (1,431)                (25)
Unrecognized prior service cost                      769                 859
                                                --------            --------
Total pension asset                             $    487            $    520
                                                ========            ========


The Company's pension obligation and assets were valued as of March 31, 1998 for
fiscal 1998 and as of March 31, 1997 for fiscal 1997.

NOTE 11 - LONG-TERM INCENTIVE PLAN
----------------------------------

The Herff Jones, Inc. Long-Term Incentive Plan ("Incentive Plan") was adopted by
the Company  effective July 1, 1995.  Employees whose performance is expected to
contribute  significantly to the long-term  strategic  performance and growth of
the Company are eligible to participate in the Incentive Plan. The  Compensation
Committee  of the  Board  of  Directors  selects  employees  for  participation.
Participating  employees  are  granted an award of units at the  beginning  of a
five-year performance cycle. The maximum number of units that may be outstanding
subject to the Incentive  Plan is 1,500,000.  Each unit is equal in value to one
share of common stock, but is not a share and carries no shareholder rights. The
value of units  corresponds to the value of shares of common stock as of the end
of each  Company  fiscal  year,  as  determined  for the ESOP by an  independent
valuation firm. The participants will be entitled to payment of a cash incentive
award after each  five-year  performance  cycle is completed  provided  they are
employees of the Company.  The award will be equal to the  appreciation in value
of the  participant's  units in excess of a minimum amount  ($41.48,  $33.56 and
$27.12 for the units granted in 1998,  1997 and 1996,  respectively)  set by the
Compensation  Committee  over the  course of the  performance  cycle and will be
payable in a single lump sum in the  January  immediately  following  the end of
each performance cycle.

Through June 27, 1998, the Company has made grants  totaling  1,510,000 units to
participating  employees  under three  performance  cycles;  of which,  505,000,
493,500  and  501,500  units  are  outstanding  for the  1996,  1997,  and  1998
performance cycles, respectively.  The units granted in fiscal 1996 and 1997 had
an  estimated  value of $11.88  and $5.44  each,  respectively,  while the units
granted in fiscal 1998 had no value at June 27, 1998  because the minimum  value
at the end of the year  was  greater  than the  latest  estimated  share  value.
Compensation  expense under the Incentive Plan was $4,132 in 1998,  $541 in 1997
and $0 in 1996.

NOTE 12 - RESTRUCTURING CHARGE
------------------------------

The Company  incurred a  restructuring  charge of $2,141 in the third quarter of
fiscal  1996  resulting  from a one  time  voluntary  early  retirement  program
completed  in  one  Scholastic  plant  location.  The  program  was  offered  to
management and supervisory  employees,  of whom 17 elected to participate in the
program. All of the restructuring charges were paid in fiscal 1996.


NOTE 13 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

Herff Jones has an agreement with a national bank association (the "Bank") and a
precious  metal broker (the  "Broker")  under which gold inventory is shipped on
consignment to Herff Jones.  Title to such gold inventory  remains with the Bank
and the  Broker  until  Herff  Jones has paid for  amounts  used.  The amount of
consigned  gold  inventory with the Bank is limited to the lesser of 21,500 troy
ounces,  a fair market value of $9,000 or 95% of Herff Jones'  entire troy ounce
gold  inventory.  The  amount of  consigned  gold  inventory  with the Broker is
limited to the lesser of 10,000 troy ounces or a fair market value of $4,500. In
the event that gold held on consignment  exceeds any  consignment  limit,  Herff
Jones  must  transfer  the  excess  gold to the Bank or the Broker or any of its
authorized  agents or pay for such excess.  In addition,  Herff Jones must pay a
monthly consignment fee for the use of such gold inventory on consignment. Herff
Jones  bears  the  risk of loss,  theft,  damage  or  destruction  of such  gold
inventory  ($6,064  at June 27,  1998 and  $6,876  at June 28,  1997)  for which
appropriate insurance coverage has been obtained.

Herff Jones is involved in legal and  environmental  matters  that  periodically
arise from the normal course of business.  Management believes that the ultimate
outcome  of these  matters  will  not  have a  material  adverse  impact  on the
Company's financial condition.

NOTE 14 - ACQUISITION
---------------------

On April 29, 1996, Herff Jones purchased  certain assets of the Delmar Companies
Divisions  ("Delmar")  of  Continental  Graphics  Corporation.  As  part  of the
acquisition,  Herff Jones assumed certain liabilities.  The acquisition has been
accounted for as a purchase, and, accordingly, the results of the operation have
been  included in the  consolidated  Statement of Income  since the  acquisition
date. The purchase  price of $15,332 has been  allocated to the assets  acquired
and liabilities assumed on the basis of their relative fair market values.

NOTE 15 - EARLY EXTINGUISHMENT OF DEBT
--------------------------------------

The  Revolving  Credit and Term Loan  Agreement  (Note 6) permits the Company to
repurchase  limited amounts of its Senior  Subordinated Notes subject to certain
performance  parameters.  During fiscal 1998, the Company  elected to repurchase
$20,815 of such notes at a premium of $2,187. As a result,  the Company recorded
a net-of-tax  charge of $1,715  reflecting the premium cost and the write-off of
previously deferred financing costs.






<PAGE>






                                   SIGNATURES

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

                                            HERFF JONES, INC.

                                            By  /s/ Lawrence F. Fehr
                                              ----------------------------------
                                              Lawrence F. Fehr, Vice President, 
                                              Chief Financial Officer, 
                                              and Secretary

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.


(1)  Principal Executive Officer:

     /s/ James W. Hubbard         Chief Executive Officer, )
     ---------------------------  President and Director   )
     James W. Hubbard                                      )
                                                           )
(2)  Principal Financial                                   )
     and Accounting Officer:                               )
                                                           )
     /s/ Lawrence F. Fehr         Vice President,          )
     ---------------------------  Chief Financial Officer, )
     Lawrence F. Fehr             Secretary and Director   )
                                                           )
                                                           )
(3)  A Majority of the Board                               )September 11, 1998
     of Directors:                                         )
                                                           )
     /s/ A.J. Hackl               Director                 )
     ---------------------------                           )
     A.J. Hackl                                            )
                                                           )
     /s/ Bernard R. Crandall, Jr. Director                 )
     ---------------------------                           )
     Bernard R. Crandall. Jr.                              )
                                                           )
     /s/ Robert S. Potts          Director                 )
     ---------------------------                           )
     Robert S. Potts                                       )
                                                           )
     /s/ Patrick T. Rogers        Director                 )
     ---------------------------                           )
     Patrick T. Rogers                                     )
                                                           )
     /s/ Joe K. Slaughter         Director                 )
     ---------------------------                           )
     Joe K. Slaughter                                      )
                                                           )
     /s/ Andre B. Lacy            Director                 )
     ---------------------------                           )
     Andre B. Lacy                                         )
                                                           )
     /s/ Thomas E. Reilly, Jr.    Director                 )
     ---------------------------                           )
     Thomas E. Reilly, Jr.                                 )

<PAGE>



                       Herff Jones, Inc. and Subsidiaries          Schedule VIII
                                  Valuation and
                             Qualifying Accounts and
                          Reserves For the Years Ended
                          June 27, 1998, June 28, 1997
                                and June 29, 1996
                             (amounts in thousands)

<TABLE>
<CAPTION>

==============================================================================================================================
                                     Balance at
                                    beginning of         Charged to costs        Deductions, net of         Balance at end of
       Description                     period              and expenses              recoveries                   period
------------------------------------------------------------------------------------------------------------------------------
Allowance for returns and
    doubtful accounts
<S>                                  <C>                      <C>                        <C>                       <C>   
     Fiscal Year 1996                $3,019                   $2,466                     $602                      $4,883
     Fiscal Year 1997                $4,883                   $1,310                     $439                      $5,754
     Fiscal Year 1998                $5,754                   $  559                     $569                      $5,744
==============================================================================================================================

</TABLE>


<PAGE>
                       Herff Jones, Inc. and Subsidiaries             Schedule X
                  Supplemental Statement of Income Information
       For the Years Ended June 27, 1998, June 28, 1997 and June 29, 1996
                             (amounts in thousands)


================================================================================
                 Item                             Charged to Cost and Expenses
--------------------------------------------------------------------------------
        Maintenance and repairs

           Fiscal Year 1996                                  $4,028
           Fiscal Year 1997                                  $4,741
           Fiscal Year 1998                                  $4,898
================================================================================