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 28, 1997

                                       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 X NO

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 $80,000*.
* Value based on most recent annual independent valuation.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest  practicable  date:  9,567,500 as of September 19,
1997.

There are no documents incorporated by reference herein.


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                                     PART I

Item 1.  Business
         Herff Jones,  Inc. (the "Company",  "Herff Jones", or the "Registrant")
         is an Indiana  corporation,  incorporated  in 1985 but founded in 1920.
         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.

         The Company was publicly  traded from 1945 until 1973, when the Company
         was acquired by Carnation Company  ("Carnation").  The Company operated
         as a division of Carnation  until July 1985 when  Carnation  sold Herff
         Jones' assets to senior  management in a leveraged buyout  transaction.
         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".

         On April 29, 1996 Herff  Jones,  Inc.  closed an  agreement to purchase
         certain  assets  of  the  Delmar  Companies   Division   ("Delmar")  of
         Continental Graphics Corporation. The assets acquired consist of notes,
         accounts  receivable,  inventories,  property,  plant & equipment,  and
         prepaid expenses. The purchase price was determined based upon the book
         value of inventories, property, plant & equipment, and prepaid expenses
         plus a premium over book value of $3.257 million combined with accounts
         and notes  receivable at 85% of net book value The total purchase price
         was approximately  $15.3 million in cash plus the assumption of certain
         operating  liabilities.  The  purchase  was funded  from  Herff  Jones'
         existing revolving credit facility. Delmar operates a yearbook printing
         plant and a school photography  processing facility at a single site in
         Charlotte,  North Carolina.  Herff Jones intends to continue to use the
         assets  purchased to manufacture  and sell yearbooks and process school
         photography products.

         Product Lines
         While the Company is engaged  essentially  in one line of business,  it
         principally has five product lines based upon manufacturing,  marketing
         and sales control criteria.

         Scholastic  Product Line: The Scholastic  product line is the Company's
         largest,  accounting  for  approximately  34%,  35% and 36% of sales in
         fiscal  1997,   1996  and  1995   respectively.   It  consists  of  the
         manufacturing  and  marketing  of class rings and  special  recognition
         medals and awards (collectively  referred to as "Jewelry"),  as well as
         diplomas,    graduation    announcements   and   related    accessories
         (collectively referred to as "Fine Paper"). Historically, approximately
         75% of sales of Scholastic products are made to the high school market,
         with the remaining 25% made to the college and commercial markets.  The
         Scholastic  product line has achieved  modest  growth in recent  years,
         principally as a result of increased prices.


<PAGE>

         The large  majority  of Jewelry  sales  consists  of class  rings.  The
         Company offers a complete line of rings,  with a wide choice of styles,
         metals,  stones and customization  options.  Over the past three fiscal
         years,  karat-quality gold rings accounted for approximately two-thirds
         of the  Company's  class ring unit  volume.  Other  non-precious  metal
         choices, which provide the customer with lower cost alternatives,  made
         up the  remaining  class ring unit  volume.  During  fiscal  1997,  the
         Company sold class rings through  approximately  2,500 high schools and
         approximately  1,800  universities  and colleges  throughout the United
         States.

         The class ring business is highly  seasonal.  Over 40% of the Company's
         unit sales are made in the fall season, as students place orders at the
         beginning of the school year for delivery prior to the holiday  season.
         A second order cycle,  which accounts for  approximately  50% of sales,
         allows  students to order rings in the winter months for delivery prior
         to graduation. The remaining sales are from orders placed in the spring
         for delivery at the beginning of the following school year.

         Fine  Paper  includes  a  wide  array  of   custom-designed   diplomas,
         graduation  announcements,  name cards and fine paper accessory  items.
         Sales of these products are also highly seasonal,  with peak production
         between November and May. To help smooth the seasonal production curve,
         the  Company   offers   discounts   for  early  orders  and   partially
         manufactures  the following  year's products during the summer and fall
         months.  All orders must be  accompanied by a  non-refundable  deposit,
         often for the full amount of the purchase. The Company sells Fine Paper
         products to several thousand high schools and colleges.

         The  Company's  Scholastic  product  line is sold  through a network of
         approximately 270 (in fiscal 1997)  independent sales  representatives.
         These sales  representatives  solicit school  administrators or student
         advisors  for approval as the school's  authorized  Scholastic  product
         line  supplier.  The sales  representative  then markets the  Company's
         Scholastic products directly to the students,  although some Scholastic
         products, such as awards, medals and diplomas, are sold directly to the
         school or school district. Sales representatives earn commissions equal
         to any premium  paid over the  Company's  list price of the  Scholastic
         products.

         The June 28, 1997 backlog of  Scholastic  product line sales related to
         fiscal 1998 is  approximately  $21.1  million  compared to a backlog of
         $15.7 million at June 29, 1996 related to fiscal 1997.

         Cap & Gown Product  Line:  The Cap & Gown product  line  accounted  for
         approximately 12% of consolidated sales in fiscal 1997 and 13% for each
         of the previous two fiscal years.  The Cap & Gown product line consists
         of the design, manufacture and marketing of fine quality caps and gowns
         and encompasses four principal areas: rental caps and gowns, single-use
         disposable caps and gowns for sale,  accessory sales (which include cap
         tassels and honor stoles  which are worn over robes) and apparel  sales
         (which include choir robes,  judicial robes and academic regalia).  The
         Company  markets these products under the trade name  "Collegiate Cap &
         Gown" (R),  which the Company  believes is  well-recognized  among high
         schools and colleges nationwide.

         During each of the past two fiscal  years,  the Company  sold or rented
         Cap & Gown  products to students at  approximately  11,800 high schools
         and  colleges  and 4,400  middle  schools and  pre-schools.  Cap & Gown
         customers  consist  predominantly  of schools,  but also include church
         choirs,  judges and college  faculty  members.  High school and college
         sales or rentals are generally made through school  administrators  who
         have authority to select the school's graduation cap and gown supplier.
         This  business is divided  approximately  equally  between  rentals and
         sales and accounted for  approximately  64% of total Cap & Gown product
         line sales in fiscal 1997.



<PAGE>

         The Company's Scholastic product line sales representatives  market Cap
         & Gown products to high schools and colleges. In addition, Cap and Gown
         has  approximately 20 sales  representatives  who sell exclusively caps
         and gowns and apparel products,  including student and faculty caps and
         gowns,   school  and  church  choir  robes,  and  judicial  robes,  and
         approximately  75 sales  representatives  who sell church  apparel on a
         part-time basis. Sales representatives earn commissions generally based
         on a prescribed  percentage of the sales price or rental fee of the Cap
         & Gown products.

         Sales of Cap & Gown  products  are highly  seasonal  with most  revenue
         recognition occurring in May and June, when the majority of graduations
         take  place.  Nevertheless,  the Company  attempts  to keep  production
         levels even throughout the year.

         In  September  1994,  the  Company  consolidated  into a new  plant the
         production,  warehousing  and  shipping  of  disposable  caps and gowns
         previously  handled  in  part  in  four  other  facilities.  Management
         believes that the  consolidation  of disposable cap and gown production
         into the new plant has allowed  for  production  efficiencies  and cost
         savings  which have  enabled  the Company to  increase  profit  margins
         earned on the Cap & Gown product line.

         Yearbook   Product  Line:  The  Yearbook  product  line  accounted  for
         approximately 32% of consolidated  sales in fiscal 1997 and fiscal 1996
         and 29% in fiscal 1995.

         Each school's  yearbook is a unique  product every year.  The Company's
         average yearbook contract,  which is typically signed for the school by
         an administrator,  covers approximately 500 yearbooks.  In fiscal 1997,
         the Company produced approximately 3.3 million yearbooks.  The June 28,
         1997 backlog of Yearbook  product line sales  related to fiscal 1998 is
         approximately  $72.1 million  compared to a backlog of $73.6 million at
         June 29, 1996 related to fiscal 1997.

         After soliciting the order from a school  administrator,  typically the
         yearbook student advisor, the independent sales representative will aid
         the students in designing  and laying out the  yearbook,  often meeting
         periodically  with  a  particular  school's  yearbook   committee.   In
         addition,  the sales  representative  provides each yearbook  committee
         with Company software to aid them in putting together the yearbook.

         Yearbook  shipments  are made in two  periods.  During the past several
         years,  approximately three fourths of yearbooks have been delivered in
         the late spring in time for graduation.  Such yearbooks typically cover
         activities  for the first half of the school  year.  The  remainder  of
         yearbooks  have been  delivered in the fall,  which  generally  include
         activities for the entire school year.

         Yearbooks are sold approximately 12 to 18 months prior to delivery.  As
         such,  yearbook  orders  collected  in January to May are for  yearbook
         deliveries  to be made  the  following  May  and  June.  The  Company's
         Yearbook  product line is sold through a network of  approximately  250
         (in fiscal 1997) independent sales  representatives,  most of whom only
         sell   yearbooks   and  not   other   Company   products.   The   sales
         representatives  earn commissions  based on the Company's list price of
         the yearbook plus any premium paid over the list price.

         The Company has sold yearbooks to approximately 6,500 schools in fiscal
         1997,  of which  approximately  88% are high  schools  and junior  high
         schools. The remaining 12% are predominantly colleges. The Company also
         sells and produces  yearbooks in Canada.  Canadian sales  accounted for
         approximately  4%, 5% and 6% of  fiscal  1997,  1996 and 1995  Yearbook
         product line sales, respectively.

         As part of the  Delmar  acquisition,  the  Company  acquired a yearbook
         manufacturing  facility in Charlotte,  North  Carolina,  as well as the
         related customer base. Fiscal 1996 included two months activity for the
         acquisition and fiscal 1997 a full years' activity.



<PAGE>

         Photography  Product Line: The  Photography  product line accounted for
         approximately 15% of consolidated  sales in fiscal 1997 and 12% in each
         of fiscal 1996 and fiscal 1995.  Photography  products and services are
         divided into three segments. First, individual pictures for students in
         Kindergarten  through 11th grade  ("school  portraits")  accounted  for
         approximately 73% of fiscal 1997 Photography sales; second,  processing
         of senior  portraits  and  other  professional  photography  processing
         services  accounted for  approximately  20% of fiscal 1997  Photography
         sales;  and third,  sales of  equipment  and  supplies to  professional
         photographers accounted for the remainder.

         The Company is generally  engaged to provide student photo services for
         a school by the principal,  administrator and/or local parent - teacher
         organization.  Once  accepted  by  the  school,  the  Company  provides
         students with marketing materials and order forms for them to take home
         to their  families.  This material  enables  parents to purchase school
         portraits of their  child.  The Company  takes school  portraits at the
         school during scheduled days. The portrait  business is seasonal,  with
         the  majority  of  portraits  taken and  delivered  between  August and
         December.

         Part of the recent acquisition of Delmar was a photographic  processing
         lab in Charlotte, North Carolina.  Included in fiscal 1996 results were
         two months  activity for the  acquisition and fiscal 1997 a full years'
         activity.

         The Company employs 44 sales representatives (in fiscal 1997) to market
         its  Photography  products.  These  salespersons  are  employees of the
         Company,  rather than independent sales  representatives,  and they are
         compensated with a salary, with the potential to earn bonuses.

         As mentioned above, a significant portion of the Company's  Photography
         revenue is generated from the processing of senior  portraits and other
         professional   photography  processing  services,  such  as  processing
         wedding pictures. Many senior portraits are taken by local professional
         photographers.  Most local  professional  photographers  do not develop
         their  own film but  rather  send it to  photographic  labs such as the
         Company's for  processing.  The equipment sales area of the Photography
         product  line is an  offshoot of the Company  providing  equipment  and
         supplies to professional  photographers.  Although it represents only a
         small portion of Photography  revenues,  the Company  believes it gains
         loyalty from its professional  photographer  customers because of their
         ability to acquire  photography  equipment  and  supplies  through  the
         Company.


         Education  Product Line: The Company's  Education  product line differs
         from its other product lines in two  particular  ways.  First,  the end
         buyers  of the  products  are  not  students  but  schools  and  school
         districts.  Second,  the Education product line is not characterized by
         the degree of  seasonality  present  in the other  product  lines.  The
         Education  product line accounted for 8% of fiscal 1997 and fiscal 1996
         sales and 10% of sales in fiscal 1995.

         In 1973, the Company entered the multimedia educational products market
         through the  acquisition of A.J.  Nystrom  Company,  a manufacturer  of
         globes, maps and other educational products originally founded in 1903.
         The  "Nystrom"  (TM)  name is a  premier  name in the  market  that the
         Company  believes  is  associated  with  quality by schools  and school
         districts  nationwide.  The  Education  product line  consists of maps,
         globes,  atlases,   social  studies  instructional  programs,   science
         instructional  programs  and other  educational  products.  The primary
         market for the Education product line is schools teaching  Kindergarten
         through 8th grade.

         The  Company  employs  107 sales  representatives  (in fiscal  1997) to
         market   its   Education   products.   The   majority   of  the   sales
         representatives are employees of the Company and are compensated with a
         salary and bonus.





<PAGE>



         The  market  for  Education  products  is not  affected  as much by the
         seasonality of graduations  and is driven more by the demand for higher
         quality  education  than  by  population   shifts.   The  science-based
         electronic multimedia programs introduced by the Company in fiscal 1994
         have been discontinued and contributed significantly to the fiscal 1996
         sales  decline.  The Company is developing  new  electronic  multimedia
         educational  programs  in-house in the social studies area. The Company
         believes  social  studies  is the area  where the  "Nystrom"  (TM) name
         carries the greatest  benefit given the familiarity of many schools and
         teachers with "Nystrom" (TM) maps and globes.

Competition and Industry Information

         The scholastic  products market in which the Company operates is highly
         competitive.  The  Company  seeks to compete  on the basis of  pricing,
         service, product quality, product development and marketing. While each
         of its product lines faces  several  strong  competitors,  Herff Jones'
         principal  competitor  across the full breadth of its product  lines is
         Jostens,  Inc. The following  table sets forth the Company's  principal
         competitors.

         Product Line           Competitors (Parent)

         Scholastic:
              Jewelry      Commemorative Brands, Inc.; Jostens, Inc.
              Fine Paper   Commemorative Brands, Inc.; Jostens, Inc.
         Yearbook          Jostens, Inc.;  Lifetouch, Inc.; Taylor Publishing 
                           Company (Insilco Corporation); Walsworth Publishing 
                           Company, Inc.
         Cap & Gown        E. R. Moore Company; Jostens, Inc.
         Photography       Jostens, Inc.; Lifetouch, Inc.
         Education         George F. Cram Company Incorporated; Rand-McNally 
                           & Company


         The scholastic,  or "schoolhouse,"  market for recognition,  education,
         achievement  and  motivation  products is a  well-defined  niche market
         characterized   by   relatively   stable   demand  and  a   distinctive
         distribution network of primarily independent sales representatives.

         Demand for class rings, yearbooks, graduation apparel and the Company's
         other product lines is affected significantly by the population of high
         school and college students. According to U. S. Department of Education
         statistics,  the number of high school students declined  significantly
         from 1980 to 1994. However,  1993 saw an increase in the number of high
         school graduates 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 2.56 million U.S. high
         school  graduates in 1995. The U.S.  Department of Education  forecasts
         the number of high school graduates will reach 3.02 million by 2006.

         The  scholastic  industry  is  characterized  by a unique  distribution
         method.  Most  recognition,   achievement,   motivation  and  education
         products  gain  access to the  schoolhouse  through  administrators  or
         student  representatives  who are involved in the selection  process of
         the  authorized  supplier for their  school.  Suppliers  contact  these
         administrators  through  their sales  forces.  These  sales  forces are
         generally  comprised  of  independent  sales   representatives.   Sales
         representatives  must be well-trained and highly motivated.  Successful
         companies  in  the  scholastic   market  have  developed   their  sales
         organizations  over an extended period of time and devote  considerable
         resources  to  maintaining  and  improving  the  quality of their sales
         forces.  After gaining access to a school, a sales  representative must
         be able to provide a high level of service  to  complete  the sale.  In
         addition,  the  products  must be of high  quality and  delivered  in a
         timely manner in order to keep the school's business the following

<PAGE>



         year. As a result,  continuous  sales coverage is important and a sales
         representative's  relationship  at a school,  once  established,  is an
         important  competitive  factor. A good  relationship  between the sales
         representative and school  administrator helps ensure repeat sales from
         year  to  year.  Historically,   approximately  90%  of  the  Company's
         customers  across its major product lines (i.e.,  Scholastic,  Yearbook
         and Cap & Gown) have  renewed  their  orders from the prior year.  This
         feature of the Company's business,  and of the scholastic industry as a
         whole, contributes to the relative stability of the Company's sales, as
         does the  traditional  nature of its products,  such as class rings and
         caps and gowns.

         The stable nature of the scholastic  industry makes  increasing  market
         share difficult.  Acquisition opportunities have been limited in recent
         years, although the Company was able to acquire the Delmar Companies in
         fiscal  1996  and  will  continue  to  consider  favorable  acquisition
         opportunities  as they arise,  to the extent it may do so in accordance
         with the terms of its agreements governing its indebtedness. Other than
         growing market share via consolidation  within the industry,  increases
         or decreases of a company's  market share tend to occur  gradually over
         time through the addition or loss of  individual  schools or individual
         sales representatives.

Sales Network

         The  Company  solicits  orders  for its  products  through a network of
         approximately   700  primarily   independent   sales   representatives.
         Generally,  each  product  line has an  autonomous  sales  organization
         (except  that Cap & Gown  products  are  marketed  in  schools  through
         certain  Scholastic product line sales  representatives)  and, with the
         exception of  Education  and  Photography,  sales  representatives  are
         independent  contractors.  In  general,  a  sales  representative  will
         promote and sell  products of a single  product line  because  training
         requirements, marketing techniques and sales skills vary widely between
         product  lines.  Sales   representatives   are  assigned  a  geographic
         territory and their performance is monitored by area and regional sales
         managers, as well as a national sales manager.  Generally the Company's
         sales   representatives   promote   and  sell  Herff   Jones   products
         exclusively.

         Consistent  with  industry  practice,  Scholastic  and  Yearbook  sales
         representatives are issued draws in advance of commissions earned which
         results  in  an  increase  in  working   capital  until  such  time  as
         commissions  earned exceed  advances paid,  which usually occurs during
         the fourth fiscal quarter.  After  commissions  earned exceed advances,
         the  procedure   results  in  a  reduction  in  working  capital  until
         settlements are made with the sales  representatives  in August of each
         year. In addition,  Scholastic sales  representatives  are invoiced for
         product ordered by students at schools they service.  The invoice terms
         are  net 10  days;  however,  the  sales  representatives  are  allowed
         sufficient  time to make  delivery  of the  product in the  schools and
         forward the payment to the Company.  This process can extend payment up
         to 60-90  days from  invoice  date and this tends to  increase  working
         capital requirements. Furthermore, on most Yearbook orders, the Company
         receives  deposits equal to  approximately  85% of the contract  amount
         prior to shipment.  This has a positive impact on the Company's working
         capital requirements.

Raw Materials

         The Company's manufacturing and warehousing activities are conducted at
         18 facilities  located  throughout the United States and Canada, all of
         which are owned by the  Company.  Each  facility is devoted to a single
         product line, except for the Logan, Utah plant which produces yearbooks
         and  provides   photography   processing   services.   See  Item  2.  -
         "Properties."

         Each of the Company's product lines (except for Education)  operates in
         a niche market generally characterized by products with a high level of
         customization,  short production runs and pronounced  seasonality.  The
         Education  product line  experiences  longer  production  runs and less
         seasonality than the Company's other product lines. Manufacturing space
         is  configured  and  production  is  scheduled to respond to the unique
         demands of each product line's market.





<PAGE>




         The Company has several sources of supply for all of its raw materials,
         which  generally  are not  susceptible  to  spoilage  or  obsolescence.
         Hazardous  waste  products have not been a significant  problem for the
         Company historically. The Company currently believes its facilities are
         in substantial  compliance  with applicable  regulations  regarding the
         handling and disposal of hazardous materials.

         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,  it  resets  its ring  prices  every two weeks to
         reflect  the  current  price  of gold.  Second,  it  finances  its gold
         inventory  requirements through arrangements with two suppliers whereby
         it leases certain gold  inventories  not yet committed to  manufacture.
         These consignment  arrangements are with Gerald Metals,  Inc. and Rhode
         Island   Hospital   Trust  National  Bank   (collectively,   the  "Gold
         Suppliers").  Pursuant to the agreements  with the Gold Suppliers (each
         of which continues in effect  indefinitely  until  terminated by either
         party upon  thirty days  written  notice),  the  Company  pays the Gold
         Suppliers a monthly lease fee equal to  approximately  3.0% to 3.5% per
         annum of the market  value of its average  leased gold  inventory.  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 and the Company is responsible  for insuring the gold inventory
         against loss or damage. The Company believes this financing arrangement
         is on  favorable  terms and enables the  Company to  effectively  hedge
         against   fluctuations   in  the  spot   price  of  gold.   See   "Note
         13--Commitments   and   Contingencies"   to   the   Company's   audited
         consolidated financial statements appearing elsewhere herein.

         The  Company  seasonally  employs  up to  approximately  4,000  people,
         including  approximately 3,500 hourly employees.  Many of the Company's
         hourly employees perform tasks which require a high degree of skill and
         training.  The Company believes these employees  represent an important
         resource.  Approximately 200 employees at three facilities are employed
         pursuant  to  collective  bargaining   agreements.   All  other  hourly
         employees are not members of unions. The Company believes its relations
         with its employees are good.

         The Company hires  part-time and seasonal  employees  during periods of
         peak seasonal demand for each of its product lines.  Historically,  the
         Company  has not  encountered  any  major  difficulty  attracting  such
         employees   .   During   peak   seasons   (which   do  not  all   occur
         simultaneously), the number of hourly employees employed on all product
         lines is  approximately  4,500,  compared  with an  annual  average  of
         approximately 3,100.





<PAGE>




Item 2.  Properties

         The Company's  properties are set forth below. Except for the Company's
headquarters,  all properties are manufacturing  facilities and are owned by the
Company. All properties are pledged as collateral on the Company's senior credit
facility. The Company believes that all of its properties are maintained in good
condition.


              Location                                         Approximate Size
                                                                (Square feet)
Scholastic
     Jewelry
         Indianapolis, Indiana                                       67,200
         Providence, Rhode Island                                    47,000
     Fine Paper
         Indianapolis, Indiana                                       62,100
         Scranton, Pennsylvania                                      50,000
         Iola, Kansas                                                60,000
Yearbook
         Montgomery, Alabama                                        120,000
         Logan, Utah                                                 66,000
         Gettysburg, Pennsylvania                                    67,000
         Marceline, Missouri                                         27,700
         Mission, Kansas                                             92,700
         Charlotte, North Carolina                                  129,800
         Winnipeg, Manitoba                                          26,700
Cap & Gown
         Champaign, Illinois                                        333,300
         Arcola, Illinois                                           100,000
Photography
         Lewiston, Minnesota (1)                                     79,000
         Burnsville, Minnesota                                       24,000
         Charlotte, North Carolina                                   89,500
Education
         Chicago, Illinois                                           97,000
Headquarters
         Indianapolis, Indiana-Exec. Building                        20,400
         Indianapolis, Indiana-Admin. Building                       22,300


(1)  Includes three separate buildings; two for manufacturing and one warehouse.

Item 3.  Legal Proceedings

         Herff Jones is involved in lawsuits and environmental  proceedings 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.

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

         None.




<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters
         There is no established  public trading market for the Company's shares
of Common Stock. The Company's shares of common stock are held of record by five
persons,  the  Company's  ESOP trust,  which holds  9,566,849  shares,  and four
individuals, who collectively hold 2,455 shares.

         Dividends  have been declared  during the last two fiscal years equally
on all classes of common shares as follows:

                    April, 1997                           $2.4 million
                    October, 1996                         $2.4 million
                    April, 1996                           $3.4 million
                    July, 1995                            $3.4 million

See "Item 7.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations"  below for a discussion of credit agreement  restrictions
on the Company's payment of dividends.

As discussed, in the Notes to Consolidated Financial Statements,  dividends paid
to the ESOP Trust are treated as a non-cash item.

Item 6.  Selected Financial Data

                                HERFF JONES, INC.
                         FIVE YEAR FINANCIAL HIGHLIGHTS
           (Amounts in Thousands of Dollars Except for Per Share Data)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                               1993           1994           1995           1996           1997
                             --------       --------       --------       --------       --------
Operating Results
<S>                          <C>            <C>            <C>            <C>            <C>     
Net Sales                    $245,799       $255,233       $264,309       $282,941       $309,488
Operating Profit               32,217         36,145         37,999         30,791         37,093
ESOP Compensation               3,222          3,025          5,556         16,665         15,357
Depreciation &
Amortization                    5,190          4,835          5,480          5,802          7,465
Interest Expense                6,661          6,367          6,263         19,482         20,031
Net income before
extraordinary item and
cumulative effect of
change in accounting
principle                      16,735         19,214         21,714          7,842         10,785
Net Income                     16,735         19,214         15,474          1,958         10,785
Earnings Per Share
before extraordinary
item and cumulative
effect of change in
accounting principle (1)       $13.53         $15.54         $17.56          $5.16          $5.19
Earnings Per Share  (1)        $13.53         $15.54         $12.51          $1.29          $5.19
-------------------------------------------------------------------------------------------------
Financial Position
Current Assets               $129,067       $149,602       $170,092       $107,659       $110,437
Cash & Marketable
Securities                     46,914         63,121         80,757          8,680          5,843
Current Liabilities            61,806         64,614         65,190         86,743         81,895
Working Capital                67,261         84,988        104,902         20,916         28,542
Current Ratio                    2.09           2.32           2.61           1.24           1.35
Total Assets                  164,120        188,235        209,640        162,303        164,041
Long-Term Debt  (2)            78,395         81,876         77,426        195,889        165,356
-------------------------------------------------------------------------------------------------

Per Share Valuation (3)        $28.65         $31.00         $21.25 (4)     $26.30         $32.50
</TABLE>

1    See Note 7 "Common Stock"  regarding  calculation  of the weighted  average
     number of common shares outstanding

2    Includes both the current and long-term components

3    Based on annual  independent  valuation  done for the ESOP as of the end of
     each respective fiscal year

4    Value determined after August, 1995 recapitalization

<PAGE>

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  2.51 and 2.56  million  U.S.  high school
graduates  in 1994  and 1995  respectively.  The U.S.  Department  of  Education
forecasts the number of high school graduates will reach 3.02 million by 2006.

ESOP Accounting Issues

         General

         The  Company   established  the  ESOP  in  1989.   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

<PAGE>

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 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 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 $1.29 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 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.


<PAGE>

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.

Capital Expenditures.  Capital expenditures in fiscal 1997 totaled $7.6 million,
as the Company continued to invest in its basic business.

Fiscal Year 1996 Compared to Fiscal Year 1995

General.  Net sales  rose  7.0% to $282.9  million  in fiscal  1996 from  $264.3
million in fiscal 1995.  Operating  profit  declined  19.0% to $30.8  million in
fiscal 1996 from $38.0 million in fiscal 1995. Net income declined 87.3% to $2.0
million in fiscal 1996 from $15.5 million in fiscal 1995.  Earnings per share of
common stock decreased 89.7% to $1.29 in fiscal 1996 from $12.51 in fiscal 1995.

Net Sales.  Net sales  increased  $18.6  million or 7.0%,  to $282.9  million in
fiscal 1996 from $264.3  million in fiscal  1995,  due  primarily  to sales from
Delmar of $12.7 million for two months,  increased volume in the Photography and
Scholastic  product lines and modest price  increases  across all product lines,
partially   offset  by  decreases  in  the  Education   product  line  from  the
discontinuance of a product.

Cost of Sales. Cost of sales increased $7.3 million,  or 5.7%, to $135.6 million
in fiscal 1996 from $128.3  million in fiscal  1995,  primarily as a function of
increased sales.  Cost of sales as a percentage of net sales decreased  slightly
to 47.9% in  fiscal  1996 from  48.5% in  fiscal  1995.  This  decrease  was due
principally  to a reduction in worker's  compensation  expenses  from prior year
levels, the discontinuing of the discretionary profit sharing plan contribution,
as contemplated in connection with the ESOP  Transactions,  and reduced costs in
the Photography and Cap & Gown product lines.

Selling and Administrative Expense. Selling and administrative expense increased
$5.2  million,  or 5.7%,  to $97.7  million in fiscal 1996 from $92.5 million in
fiscal  1995.  This  increase  was  predominantly  due  to the  increase  in the
Company's  commission  expense resulting from increased net sales in fiscal 1996
and normal cost increases.  However,  despite the dollar increase in selling and
administrative  expense during fiscal 1996, selling and  administrative  expense
declined  as a  percentage  of net sales to 34.5% in fiscal  1996 from  35.0% in
fiscal 1995,  primarily as a result of discontinuing  the  discretionary  profit
sharing plan contribution.


<PAGE>

ESOP Compensation.  ESOP compensation  increased $11.1 million, to $16.7 million
in fiscal  1996 from $5.6  million in fiscal  1995 due to the ESOP  Transactions
which were  completed  during the year.  The  recapitalization  described  above
resulted in a  significant  increase in the number of shares to be  allocated to
employee accounts  effective each December 31 from 1995 through 2009. The shares
allocated  effective  December 31, 1995 related to service rendered by employees
during calendar 1995. ESOP compensation expense for the year ended June 29, 1996
includes $4.0 million  relating to employee service rendered in the prior fiscal
year and $12.7  million  relating  to employee  service  rendered in the current
year.  The increase in the current  year's expense over the prior year's expense
results  primarily  from the  increase in the number of shares  committed  to be
released, offset by a reduction in the market value of the shares.

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 decreased $7.2 million,  or 19.0%, to $30.8
million in fiscal 1996 from $38.0  million in fiscal  1995.  This  decrease  was
predominantly due to the increased ESOP compensation expense partially offset by
strong operating performance by the Cap & Gown and Photography product lines.

Interest Income and Expense.  Interest income decreased $1.4 million,  or 69.2%,
to $.6 million in fiscal 1996 from $2.0 million in fiscal 1995 due predominantly
to a decrease in the Company's  investments  in marketable  securities  and cash
equivalents.  Interest  expense  increased  $13.2 million,  or 211.1%,  to $19.5
million in fiscal  1996 from $6.3  million in fiscal  1995 due to the  increased
interest cost associated with the recapitalization.

Income Taxes.  Income taxes decreased $8.0 million, or 66.0%, to $4.1 million in
fiscal  1996 from $12.1  million in fiscal  1995 due to the  decrease  in income
before taxes.

Net Income.  Net income  decreased  $13.5 million,  or 87.3%, to $2.0 million in
fiscal 1996 from $15.5 million in fiscal 1995. Moreover, net income decreased as
a percentage  of net sales to .7% in fiscal 1996 from 5.9% in fiscal 1995.  Such
decreases  were  primarily the result of higher ESOP  compensation  and interest
expense arising from the recapitalization  associated with the ESOP Transactions
and the restructuring charge.

Dividends.  Two $.35 per share dividends were paid during fiscal 1996,  totaling
$6.8 million, which was the same as dividends paid in fiscal 1995. Approximately
$4.4 million of the $6.8 million of fiscal 1996  dividends  was paid to the ESOP
which used such dividend income to make payments on the loan from the Company.

Capital Expenditures.  Capital expenditures in fiscal 1996 totaled $4.7 million,
as the Company continued to invest in its basic business.

Impact of Inflation

         Although  increases in demand for, or costs of,  certain  materials can
adversely  effect 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.

<PAGE>

         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 3.5% 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 1997,
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):

                    First Quarter  Second Quarter  Third Quarter  Fourth Quarter
                    -------------  --------------  -------------  --------------
Net Sales
     Fiscal 1997      $46,656        $68,288         $58,264         $136,281
     Fiscal 1996       43,543         56,275          50,239          132,884
     Fiscal 1995       39,837         58,932          46,358          119,182

Operating Profit
     Fiscal 1997      $(7,965)        $7,080         $(1,203)         $39,181
     Fiscal 1996       (8,767)         4,665          (1,295)          36,188
     Fiscal 1995       (2,606)         6,827            (103)          33,881

         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 New Credit  Agreement,  described
below.  Ongoing seasonal  borrowings  during fiscal 1997 peaked at approximately
$44.3  million  and  averaged  approximately  $25.4  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.

         Net cash provided by operating  activities  was $37.4 million in fiscal
1997 up from $26.8 million in fiscal 1996 and $33.3 million in fiscal 1995.  The
increase  from  fiscal  1996 was  primarily  the result of the  increase  in net
income,  coupled with an increase in depreciation.  The reduction in fiscal 1996
from  fiscal  1995 was  primarily  the  result of the  reduction  in net  income
partially offset by an increase in the ESOP related adjustments.


<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 $1.1 million for
the plan  year  ending  December  31,  1996 and are  projected  to vary  between
approximately  $1.1  million and $6.3  million per year,  and are  estimated  to
amount to $30.8 million 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,  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 "New Credit  Agreement")
pursuant  to which  The  First  National  Bank of  Boston  and  other  financial
institutions  named therein have provided the Company with a new $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.

         Covenants under the indenture  governing the Subordinated Notes and the
New  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.

         As a  result  of  the  issuance  of  the  Subordinated  Notes  and  the
incurrence of additional  indebtedness  under the New Credit Agreement to effect
the ESOP  Transactions,  as well as working  capital  borrowings,  the Company's
interest expense increased significantly in fiscal 1996 and 1997 and such higher
interest  expense is expected to continue for a number of years.  The Company is
highly  leveraged and the prospective  amount of ESOP  contributions to amortize
the ESOP Loan is required to be set forth as a deferred  compensation off-set to
shareholders' equity. As a result, the Company will have a shareholders' deficit
for a number of years. 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  New  Credit  Agreement  and  share  repurchase  obligations,   although  no
assurances to that effect can be given.

         Cash  flows  from  investing  activities  represented  a usage  of $7.5
million in fiscal 1997  compared to a usage in fiscal 1996 of $13.3  million and
funds  provided of $9.8  million in fiscal  1995.  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 increase in funds
used in fiscal  1996  compared to fiscal  1995 was  primarily  the result of the
Delmar acquisition and a reduction in the sale of marketable securities. Capital
expenditures  in fiscal 1997 were $7.6  million,  generally for  maintenance  of
property and  equipment,  and  investments  in  technology.  The higher  capital
expenditures  in fiscal 1995 as compared to 1996 were the result of spending for
a new  facility  in the  Cap & Gown  product  line.  The  Company  expects  cash
generated from operations plus the working capital  facility  portion of the New
Credit  Agreement  to be adequate to meet  anticipated  capital  needs in future
years.

         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 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>

         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 New Credit
Agreement and on-going  working capital  requirements  for the acquisition  will
also be financed from the New Credit  Agreement.  The acquisition is expected to
contribute  significantly to sales in the Yearbook and Photography product lines
over the long-term.

         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 New  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. Cash flows from financing activities represents a usage of
$79.4  million in fiscal  1996  compared  to a usage of $10.3  million in fiscal
1995.  The primary  reason for the  increase in fiscal 1996 over fiscal 1995 was
the result of the purchase of shares by the ESOP Trust and the prepayment of the
previous ESOP debt partially offset by net new borrowings and related  financing
costs by the Company.

Item 8.  Financial Statements and Supplementary Data

Index to Financial Statements

Financial Statements:

         Report of Independent Accountants
         Consolidated Balance Sheet as of June 28, 1997
              and June 29, 1996
         Consolidated Statement of Income for the
              years ended June 28, 1997, June 29, 1996
              and June 24, 1995
         Consolidated Statement of Shareholders' Equity for the years ended June
              28, 1997, June 29, 1996 and June 24, 1995
         Consolidated Statement of Cash Flows for the years ended June 28, 1997,
              June 29, 1996 and June 24, 1995
         Notes to Consolidated Financial Statements
         Financial Statement Schedules for the three years
              ended June 28, 1997

         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  statement  or notes
         thereto.








<PAGE>

                      (Letterhead of Price Waterhouse LLP)



July 31, 1997

                        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 28, 1997 and June 29, 1996,  and the
results of their  operations and their cash flows for each of the three years in
the period ended June 28, 1997, 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/Price Waterhouse LLP
                                                         -----------------------
                                                           Indianapolis, Indiana



<PAGE>
                                HERFF JONES, INC.
                           CONSOLIDATED BALANCE SHEET

                         JUNE 28, 1997 AND JUNE 29, 1996
                        (Amounts in thousands of dollars,
                             except for share data)

<TABLE>
<CAPTION>

Assets                                                                  1997             1996
                                                                      --------         --------
     Current Assets:
<S>                                                                  <C>              <C>   
         Cash and cash equivalents                                      $5,843           $8,680
         Accounts receivable, less allowances of
              $5,754 (1997) and $4,883 (1996) for
              returns and doubtful accounts                             55,709           54,066
         Inventories                                                    37,963           36,941
         Prepaid expenses                                                1,816            2,651
         Deferred income taxes                                           9,106            5,321
                                                                      --------         --------
              Total Current Assets                                     110,437          107,659

     Deferred financing cost, net and other assets                       4,590            5,603
     Property, plant and equipment, net                                 49,014           49,041
                                                                      --------        ---------

              Total Assets                                            $164,041         $162,303
                                                                      ========         ========

Liabilities and Shareholders' Equity
     Current Liabilities:
         Trade accounts payable                                         $5,856           $7,541
         Salaries and wages payable                                      5,048            4,068
         Interest payable                                                5,082            5,157
         Customer deposits                                              19,508           19,856
         Commissions payable                                            16,864           14,857
         Income taxes accrued                                            9,547            3,200
         Other accrued liabilities                                       9,613            9,749
         Current portion of long-term debt                              10,377           22,315
                                                                        ------          -------
              Total Current Liabilities                                 81,895           86,743

     Other                                                               2,239            2,247
     Long-term debt                                                    154,979          173,574
     Deferred income taxes                                                 443              81
                                                                       -------          -------
              Total Liabilities                                        239,556          262,645
                                                                       -------          -------

     Commitments and Contingencies

     Shareholders' Equity (Deficit):
         Common stock - No par value, shares authorized
              - 16,500,000; shares issued and outstanding
              -   9,569,304 (1997) and 9,618,996 (1996)                  5,703            5,728
         Retained earnings                                             128,122          119,525
         Deferred compensation                                        (206,440)        (222,953)
         Foreign currency translation                                        2               11
         Excess of cost over market (shares committed
         to be released)                                                (2,902)          (2,653)
                                                                      --------        ---------
              Total Shareholders' Equity (Deficit)                     (75,515)        (100,342)
                                                                      --------        ---------

              Total Liabilities & Shareholders' Equity (Deficit)      $164,041         $162,303
                                                                      ========         ========
</TABLE>





                (See Notes to Consolidated Financial Statements.)


<PAGE>



                                HERFF JONES, INC.

                        CONSOLIDATED STATEMENT OF INCOME

                  FOR THE YEARS ENDED JUNE 28, 1997, JUNE 29,
                             1996 AND JUNE 24, 1995

                        (Amounts in thousands of dollars
                             except for share data)

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME                  1997           1996           1995
                                             -----------    -----------    -----------
<S>                                          <C>            <C>            <C>        
Net sales                                    $   309,489    $   282,941    $   264,309

Cost of sales (excludes ESOP compensation)       150,373        135,625        128,282

Selling and administrative expenses              106,666         97,719         92,472
(excludes ESOP compensation)

ESOP compensation

   Current year service                           15,357         12,632          5,556
   Prior year service                                 --          4,033             --
  
Restructuring charge                                  --          2,141             -- 
                                             -----------    -----------    -----------
Operating profit                                  37,093         30,791         37,999

Interest income                                       15            627          2,034

Interest expense                                  20,031         19,482          6,263
                                             -----------    -----------    -----------

Income before taxes                               17,077         11,936         33,770

Income taxes                                       6,292          4,094         12,056
                                             -----------    -----------    -----------

Net income before extraordinary item
and cumulative effect of change in
accounting principle                              10,785          7,842         21,714

Extraordinary item:  Prepayment fee
on the Senior ESOP notes retirement, less
applicable tax benefit of $3,621                      --         (5,884)            --

Cumulative effect of change in accounting
for ESOP compensation, less applicable
tax benefit of $3,464                                 --             --         (6,240)
                                             -----------    -----------    -----------
Net income                                   $    10,785    $     1,958    $    15,474
                                             ===========    ===========    ===========

Per common share:
Net income before extraordinary item
    and cumulative effect of
    change in accounting principle           $      5.19    $      5.16    $     17.56
Extraordinary item                                    --          (3.87)            --
Cumulative effect of change in
    accounting principle                              --             --          (5.05)   
                                             -----------    -----------    -----------
Net income                                   $      5.19    $      1.29    $     12.51
                                             ===========    ===========    ===========
Weighted average number of
common shares outstanding                      2,076,431      1,521,263      1,236,494
                                             ===========    ===========    ===========

</TABLE>



                (See Notes to Consolidated Financial Statements.)


<PAGE>

                                HERFF JONES, INC.

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                     FOR THE YEARS ENDED JUNE 28, 1997, JUNE
                           29, 1996 AND JUNE 24, 1995

             (Amounts inthousands 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 25, 1994     9,656,828        $5,753       $110,525      $   ---      $(74,276)        $    ---          $  42,002
                          =========        ======       ========      =======      ========         ========          =========
Dividends declared              ---           ---         (5,305)         ---           ---              ---             (5,305)
($.70/Share)                                                                                                       
Stock purchases             (16,360)           (8)          (500)         ---           ---              ---               (508)
Shares committed to be                                                                                             
released                        ---           ---            163          ---         5,933              ---              6,096
Fiscal 1994 shares                                                                                                 
committed to be released                                                                                           
in fiscal 1995 (reclass                                      183                      2,967              ---              3,150
from accrual)                                                                                                      
Cumulative accounting                                                                                               
change                                                       694                      9,009              ---              9,703
Foreign currency                                                                                                          
translation                     ---           ---            ---             6          ---               ---                 6
Net income for the year         ---           ---         15,474           ---          ---               ---            15,474
                          ---------        ------       --------       -------    ---------           -------         --------- 
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)
                          =========        =====        ========       =======    ==========           =======         ========
                                                                                                                 
 </TABLE>




                (See Notes to Consolidated Financial Statements.)

<PAGE>



                                HERFF JONES, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 28, 1997, JUNE 29,
                             1996 AND JUNE 24, 1995
                        (Amounts in thousands of dollars)

<TABLE>
<CAPTION>

                                                                                  1997               1996            1995
<S>                                                                             <C>                <C>            <C>     
Cash flows from operating activities:
     Net income                                                                 $ 10,785           $  1,958       $ 15,474
     Adjustments to reconcile net income to
     net cash provided by operating activities:
         Depreciation and amortization                                             7,465              5,802          5,480
         Amortization and write off of financing cost                                991              1,298             --
         ESOP compensation (before dividend exclusion)                            16,113             17,303          6,096
         Cumulative effect of accounting change                                       --                 --          9,704
         Tax benefit of ESOP                                                         151              1,736             --
         Other                                                                        (9)                 5            188
         (Gain) loss on disposal of property, plant and equipment                     89               (408)          (474)
         Increase  (decrease)  in  cash  generated  by  changes  in  assets  and
         liabilities, net of effects from acquisition of business:
              Accounts receivable                                                 (1,643)             1,595         (1,722)
              Inventories                                                         (1,022)             5,115           (336)
              Prepaid expenses                                                       835               (911)           449
              Other assets                                                            22                298          2,440
              Trade accounts payable                                              (1,685)             2,099            680
              Salaries and wages                                                     980               (437)           (34)
              Interest Payable                                                       (75)             3,996             --
              Customer deposits                                                     (348)            (2,122)            17
              Commissions payable                                                  2,007                175          1,564
              Income taxes payable                                                 6,347             (7,228)           223
              Deferred income taxes                                               (3,423)            (2,426)        (4,891)
              Other accrued liabilities                                             (144)            (1,021)        (1,565)
                                                                                 -------             ------         ------
         Total Adjustments                                                        26,651             24,869         17,819
                                                                                 -------             ------         ------
         Net cash provided by operating activities                                37,436             26,827         33,293
                                                                                 -------             ------         ------

Cash flows from investing activities:
     Proceeds from disposal of property, plant and equipment                          29                503          1,338
     Capital expenditures                                                         (7,556)            (4,722)        (6,732)
     Acquisition of business                                                          --            (15,332)            --
     Purchase of marketable securities                                                --                 --           (900)
     Sale of marketable securities                                                    --              6,219         16,063
                                                                                 -------             ------         ------
     Net cash provided (used) by investing activities                             (7,527)           (13,332)         9,769
                                                                                 -------             ------         ------

Cash flows from financing activities:
     Purchase of shares by the ESOP Trust                                             --           (188,278)            --
     Redemptions of common stock                                                  (1,307)              (463)          (508)
     Dividends declared                                                             (906)            (3,221)        (5,305)
     Financing cost incurred                                                          --             (5,854)            --
     Decrease in long-term debt                                                   (9,537)            (6,750)            --
     Paydown on the revolver, net                                                (15,039)           (21,607)            --
     Advance Term Loan Payment                                                    (5,957)                --             --
     New borrowings                                                                   --            216,646             --
     Payment on ESOP debt                                                             --            (69,826)        (4,450)
                                                                                  ------            --------        -------
     Net cash used by financing activities                                       (32,746)           (79,353)       (10,263)
                                                                                 -------             ------         ------

Cash and Cash Equivalents:
     Net increase (decrease)                                                      (2,837)           (65,858)        32,799
     Beginning of year                                                             8,680             74,538         41,739
                                                                                   -----             ------         ------
     End of year                                                                 $ 5,843            $ 8,680        $74,538
                                                                                 =======            =======        =======

Supplemental cash flow information: Cash paid during the year for:
         Interest                                                                $18,570            $13,853         $6,304
         Income taxes                                                             $3,206             $8,415        $13,281
         Dividends                                                                    --             $3,374         $6,758

     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 28, 1997, JUNE 29, 1996 AND JUNE 24, 1995


                        (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 - 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.  The  recapitalization  also  resulted in
significant  financial  effects from adoption of new ESOP  accounting  standards
contained  in the AICPA's  Statement  of Position,  "Employers'  Accounting  for
Employee Stock Ownership  Plans" (SOP 93-6),  including:  (a) restatement of the
Company's Fiscal 1995 financial statements,  which reflect a non-cash charge for
the  cumulative  effect  of the  change  in  accounting  for  ESOP  compensation
(approximately  $9,704) for ESOP shares acquired prior to the  transaction;  (b)
the  determination  of ESOP  compensation  expense  based upon the fair value of
shares  committed to be released;  and (c) for earnings per share  computations,
only ESOP shares  committed to be released and allocated  shares are  considered
outstanding.

Upon issuance of financial statements for fiscal 1996, the transition provisions
of  SOP  93-6  required  the  Company  to  restate  its  consolidated  financial
statements  as of and for its year ended  June 24,  1995,  the most  significant
effect of which was the adoption of a new methodology for the  determination  of
ESOP compensation  expense.  Beginning in fiscal 1995,  compensation  expense is
based upon the fair  value of shares  committed  to be  released.  Further,  the
dividend  exclusion  used  to  reduce  compensation  expense  is  based  on only
allocated  ESOP shares.  The adoption of SOP 93-6 also  resulted in a charge for
the  cumulative  effect of applying the shares  allocated  method of calculating
ESOP compensation expense for the years prior to fiscal 1995.


                                    
<PAGE>

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  1995  contained  52  weeks.  All  significant   inter-company
transactions  and  balances  have  been  eliminated  in  consolidation.  Foreign
operations are relatively insignificant.

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.

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.

MARKETABLE SECURITIES - Marketable  securities,  primarily tax exempt government
securities,  are  available  for sale and are stated at  amortized  cost,  which
approximates  market.  Net realized  gains on the sale of marketable  securities
were insignificant in 1996 and 1995.

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

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

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 the 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).


<PAGE>

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 active  employees.  The Company
accounts for its ESOP in accordance with SOP 93-6. Accordingly,  the debt of the
ESOP is not reflected in the Company's financial  statements and 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.

The number of shares  allocated  annually  approximates the total unreleased and
committed  to  be  released  shares  amortized  in  equal  installments  through
December,  2009.  Shares of the  Company's  stock are  allocated  to  employees'
accounts, based on compensation levels, in 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  valuation  was $26.30 per share and was  performed
after the close of the fiscal  year ended June 29,  1996.  The  previous  annual
valuation  was  $21.25  per share and was done  after  the  recapitalization  in
August, 1995. The latest interim management estimate is $27.80 per share and was
used to record ESOP compensation expense in fiscal 1997.

At June 28, 1997 and June 29, 1996, the ESOP shares were as follows:

                                                1997                 1996
                                                ----                 ----
    Allocated Shares                          2,138,316            1,558,710
    Shares committed to be released             289,803              289,800
    Unreleased shares                         7,245,081            7,824,690
                                              ---------            ---------
    Total ESOP shares                         9,673,200            9,673,200
    Shares purchased and retired               (106,351)             (56,659)
                                              ---------            ---------
    Net ESOP shares                           9,566,849            9,616,541
                                              =========            =========

Approximately  32,000  shares may be put back to the  Company in fiscal  1998 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
purchased by 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  period.  Statement  of
Financial Accounting Standards 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 FAS No. 109.


<PAGE>




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  multiplied
by years of service.  Net periodic  pension cost was  determined  using the Unit
Credit Cost Method prescribed by FASB Statement No. 87. 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)
approximates  the carrying  value 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 1996 and 1995 amounts have been reclassified in order
to conform to the 1997 presentation.



NOTE 4 - INVENTORIES

Inventories consist of the following:

                                                   1997             1996
                                                   ----             ----
Raw materials and supplies
     (includes gold)                               $16,736         $16,017
Work-in-process                                     13,187          13,008
Finished goods                                       8,040           7,916
                                                  --------         -------
                                                   $37,963         $36,941
                                                    ======          ======


LIFO cost of gold  inventories at June 28, 1997 and June 29, 1996 are $1,325 and
$945,  respectively,  and are $19 higher and $125 lower than replacement cost in
the respective years.


NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

                                              1997                  1996
                                              ----                  ----
Buildings and leasehold improvements         $22,262               $22,283
Machinery and equipment                       51,577                47,959
Furniture and fixtures                         3,956                 2,612
Rental cap & gown stock                       11,483                10,635
                                              ------                ------
                                              89,278                83,489
Less - Accumulated depreciation              (45,364)              (38,712)
                                            ---------              -------
                                              43,914                44,777
Land                                           3,065                 3,126
Construction in progress                       2,035                 1,138
                                            --------               -------
                                            $ 49,014               $49,041
                                             =======                ======




<PAGE>



NOTE 6 - FINANCING

Long-term debt consists of the following:
                                               1997                1996
                                               ----                ----
Senior Bank Facility (Revolver)           $     -                 $15,039
Senior Bank Facility (Term)                    37,756              53,250
Senior Subordinated Notes                     120,000             120,000

1994 Industrial Development
     Revenue Bonds Due in 2019                  7,600               7,600
                                            ---------            --------
                                              165,356             195,889

Less:   Current Portion                       (10,377)            (22,315)
                                            ----------            -------

Long-Term Debt                               $154,979            $173,574
                                              =======             =======


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 28, 1997, the fair value of the Senior  Subordinated Notes is
$129,400.  The notes are unsecured but contain  certain  restrictive  covenants,
including limitations on indebtness,  liens, leases, dividends,  stock purchases
and certain investments.

In connection with the ESOP Transaction,  the Company entered into the Revolving
Credit  and Term  Loan  Agreement,  dated as of August  22,  1995  ("New  Credit
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 which commenced December 31, 1995.

All loans  made  under  the Term Loan and the  Revolving  Credit  Facility  bear
interest either at The First National Bank of Boston  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 28, 1997 was 6.94%.

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 28,  1997 was  4.40%.  They are
unsecured but are backed by an irrevocable Letter of Credit.

The New Credit 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   subordinated   indebtedness,   including  the  Notes,   (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.  Pursuant to the Credit Agreement, a required advance payment in
addition to the scheduled  amortization  payments on the Term Loan of $5,957 was
made in the first quarter of 1997. Subsequently, a 1997 amendment eliminated the
requirement for advanced  payments.  

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

                  1998                                    $10,377
                  1999                                     11,261
                  2000                                     12,806
                  2001                                      3,312
                  2002 and thereafter                     127,600
                                                          -------
                                                         $165,356



<PAGE>




NOTE 7 - COMMON STOCK

                                      1997          1996              1995
                                   ----------     ----------       ----------
Authorized:
     Common Shares                 16,500,000     16,500,000
     Class A                                                        5,000,000
     Class B                                                        6,500,000
     Class C                                                        5,000,000
                                   ----------     ----------       ----------
   Total Common Stock Authorized   16,500,000     16,500,000       16,500,000

Outstanding:
     Common Shares                  9,569,304      9,618,996
     Class A                                                        3,247,970
     Class B                                                        3,478,100
     Class C                                                        2,914,398
                                   ----------     ----------       ----------
   Total Common Stock Outstanding   9,569,304      9,618,996        9,640,468



In  connection  with  the  August  22,  1995  recapitalization,   the  Company's
outstanding Class A, B and C shares were converted into a single class of common
stock on a share-for-share  basis. The ESOP then purchased  virtually all of the
shares of common stock so converted held by shareholders other than the ESOP.

As a  consequence  of the August 22, 1995  recapitalization  plan,  the weighted
average number of common shares  outstanding was calculated on a pro forma basis
assuming the  recapitalization  occurred at June 25, 1995.  The number of common
shares  outstanding  immediately  after  the  recapitalization  took  place  was
1,236,494. This number has been used as the pro forma weighted average number of
common shares outstanding for all periods prior to September 1995.

In  accordance  with the  provisions  of SOP 93-6,  for  purposes of computing a
weighted average number of common shares outstanding, ESOP shares that have been
committed to be released are considered  outstanding,  ESOP shares that have not
been  committed to be released are not considered  outstanding  for fiscal 1997,
1996 and 1995.

The actual  weighted  average number of common shares  outstanding  for the year
ended June 28, 1997,  June 29, 1996 and June 24, 1995, was 2,076,431,  3,383,379
and  7,686,204,  respectively.  The  income per  common  share  using the actual
weighted average number of common shares outstanding for the year ended June 28,
1997, June 29, 1996 and June 24, 1995, was $5.19, $.58 and $2.02, respectively.

The excess of cost over market  balance  represents  the  cumulative  difference
between the market  value of shares  committed  to be  released  and the cost of
those shares to the ESOP, net of tax effects.

NOTE 8 - INCOME TAXES

Pre-tax income from  operations for the years ended June 28, 1997, June 29, 1996
and June 24, 1995 was taxed under the following jurisdictions:

                      1997             1996                1995
                      -----            ----                ----
   Domestic         $16,902          $11,722             $33,519
   Foreign              175              214                 251
                    -------          -------             -------
   Total            $17,077          $11,936             $33,770
                    =======          =======             =======


<PAGE>



The  provision  for income  taxes  charged to income  before  extraordinary  and
cumulative effect items was as follows:

<TABLE>
<CAPTION>

                                                             1997                1996              1995
                                                             ----                ----              ----
Current income tax expense:
<S>                                                        <C>                <C>                 <C>    
   Federal                                                 $8,798             $ 7,453             $11,110
   State and local                                          1,167               1,075               2,232
   Foreign                                                     76                  82                 ---
                                                           ------             -------             -------
   Total current income tax expense                        10,041               8,610              13,342

Deferred income tax expense:
   Federal                                                 (3,079)             (3,497)             (1,149)
   State and local                                           (670)               (635)               (238)
   Foreign                                                    ---                  (1)                101
                                                           ------            ---------            -------
   Total deferred income tax expense                       (3,749)             (4,133)             (1,286)

Benefit of State operating loss carryforward                  ---                (383)                ---
                                                           ------            ---------            -------

Total tax provision (before extraordinary and
cumulative effect items)                                  $ 6,292             $ 4,094             $12,056
                                                           ======              ======              ======

</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>
                                                                    1997               1996                  1995
<S>                                                                 <C>                <C>                   <C>  
U.S. statutory rate                                                 35.0%              35.0%                 35.0%
State income taxes, net of federal income tax                        1.9                1.5                   4.3
Dividend on ESOP stock                                              (1.9)              (2.5)                 (2.1)
All other, net                                                       1.8                 .3                  (1.5)
                                                                   -----              -----                 -----
Financial reporting rate (before extraordinary item or
cumulative effect)                                                  36.8%              34.3%                 35.7%
                                                                   =====               ====                  ====
</TABLE>

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


                                           1997            1996
Deferred Tax Assets:
   Estimated Product Returns             $ 1,135         $    600
   Medical Insurance                         396              442
   Inventory Cost Capitalization             462              288
   Bad Debts                                 743              231
   Vacation Pay                              834              681
   Workers Compensation                      873            1,077
   ESOP                                    8,656            6,396
   Other                                   1,054              513
                                          ------          -------

       Total Assets                       14,153           10,228

Deferred Tax Liabilities:
   Depreciation                           (4,757)          (4,511)
   Profit Sharing                           (198)            (177)
   Property Taxes                            (40)             (47)
   Other                                    (495)            (253)
                                          -------         --------
       Total Liabilities                  (5,490)          (4,988)
                                           ------           ------

       Net Deferred Tax Asset            $ 8,663          $ 5,240
                                          ======           ======

No valuation  allowance was deemed necessary at June 28, 1997, June 29, 1996 and
June 24, 1995.

The  tax  effect  related  to  the  extraordinary  item  and  cumulative  effect
approximates the statutory U.S. tax rate.


<PAGE>




NOTE 9 - EMPLOYEE RETIREMENT PLANS

ESOP compensation expense was $15,357 (1997),  $16,665 (1996) and $5,556 (1995).
The 1997 expense of $15,357,  including  administrative cost, was net of $906 in
dividends paid to the Plan. The 1996 figure of $16,665 including  administrative
cost, was net of $865 in dividends paid to the Plan. The 1995 expense of $5,556,
including  administrative  cost,  was net of $605 in dividends paid to the Plan.
ESOP compensation expense is based upon the fair value of shares committed to be
released, offset by dividends on allocated ESOP shares.

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 $1,875 in 1997, $749 in 1996 and $3,365 in 1995.

NOTE 10 - JEWELRY BARGAINING UNIT PENSION PLAN

Pre-tax  pension  expense  of $13 for  1997  and $97 for  1996  and $65 for 1995
consist of the following components:


                                                    1997        1996        1995
                                                    ----        ----        ----
         Service cost                               $186        $167       $173
         Interest cost                               618         595        582
         Actual return on assets                  (1,098)     (1,631)      (249)
         Difference between assumed return
            and actual return on assets              371       1,035       (372)
         Amortization of over-funded position
            and unrecognized prior service           (64)        (69)       (69)
                                                     ----        ---        ----
                                                    $ 13        $ 97       $ 65
                                                     ===         ===         ==


Assumptions  used in  determining  the net  pension  expense  for  1997 and 1996
included  a discount  rate of 7.5% and a rate of return on plan  assets of 8.5%.
Assumptions  used in  determining  the net pension  expense for 1995  included a
discount rate of 8.0%, and a rate of return on plan assets of 8.5%.

The following  table sets forth the plan's funded status and amounts  recognized
in the company's consolidated balance sheet at June 28, 1997 and June 29, 1996:

                                                      1997                1996
                                                      ----                ----
Projected benefit obligation, including
         vested benefits of $8,616 (1997)
         and $7,929 (1996)                         $(9,010)          $  (8,314)

Plan assets at fair value, primarily listed
         stocks and corporate obligations            9,388               8,833
                                                     -----               -----
         Over-funded position                          378                 519

Unamortized over-funded position                      (692)               (830)
Unrecognized (loss) gain on assets                     (25)                313
Unrecognized prior service cost                        859                 531
                                                    ------             -------
Total pension asset                              $     520           $     533
                                                   =======             =======


The Company's pension obligation and assets were valued as of March 31, 1997 for
fiscal 1997 and as of March 31, 1996 for fiscal 1996.


<PAGE>




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  numbers of units that may be issued
subject to the Incentive Plan is 1,500,000,  subject to proportional  adjustment
in the  event of any  change  in  Company  stock  outstanding  by  reason of any
issuance   of    additional    shares,    recapitalization,    reclassification,
reorganization, combination of shares or similar transaction. 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 the  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 ($33.56 and $27.12 for the units granted in 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 the performance cycle.

As of June  28,  1997,  1,008,500  units  have  been  granted  to  participating
employees under two performance cycles; of which,  505,000 and 498,500 units are
outstanding for the 1996 and 1997 performance  cycles,  respectively.  The units
granted  in fiscal  1996 had an  estimated  value of $2.68  each while the units
granted in fiscal 1997 had no value at June 28, 1997  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 $541 in 1997.

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  ($6,876  at June 28,  1997 and  $6,097  at June 29,  1996)  for which
appropriate insurance coverage has been obtained.

Herff  Jones is involved in  lawsuits  that  periodically  arise from the normal
course of  business.  Management  believes  that the  ultimate  outcome of these
lawsuits  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.


<PAGE>




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

          None.



                                    PART III

Item 10. Directors and Executive Officers of The Registrant.

         The directors  and  executive  officers of the Company are as set forth
below:

<TABLE>
<CAPTION>

     NAME                   AGE                 TITLE
     ----                   ---                 -----
<S>                          <C>       <C>                                     
A.J. Hackl                   71         Chairman of the Board of Directors
Andre B. Lacy                58         Director
Thomas E. Reilly, Jr.        57         Director
James W. Hubbard             62         Chief Executive Officer, President and Director
Bernard R. Crandall, Jr.     50         Vice President-Cap & Gown and Director
Robert S. Potts              54         Vice President-Yearbook and Director
Patrick T. Rogers            54         Vice President - Human Resources/Risk Management and Director
Joe K. Slaughter             49         Vice President-Scholastic and Director
Lawrence F. Fehr             53         Vice President, Chief Financial Officer, Secretary and Director
Boyd P. Boynton              53         Vice President and General Manager - Photography
</TABLE>



         Albert J. Hackl,  Chairman of the Board of  Directors,  served as Herff
Jones'  principal  executive  officer from 1968 to May 1995. Mr. Hackl served as
Chairman of the Board of Directors  and Chief  Executive  Officer since 1985. In
May 1995, Mr. Hackl resigned as Chief  Executive  Officer.  Mr. Hackl joined the
Company  in 1968  from  Worthington  Corporation,  where his last  position  was
president of the Worthington  Air  Conditioning  Division.  Mr. Hackl received a
Bachelor of Mechanical  Engineering from the Georgia  Institute of Technology in
1946 and served in the United  States  Navy  during  World War II and the Korean
War.

         Andre B. Lacy has been a director since 1995 and is Chairman and CEO of
the managing  general  partner of LDI,  Ltd., an investment  management  holding
company with a wholesale  distribution  group, a door and lumber mill work group
and a private investment  portfolio.  He is also Chairman of the Board of Finish
Master,  Inc.,  a  distributor  of  automotive  paints and  finishing  supplies,
controlled by LDI, Ltd. He is a Director of the Albemarle Corporation, Richmond,
Virginia;  IPALCO  Enterprises,  Indianapolis;  Tredegar  Industries,  Richmond,
Virginia;  Patterson Dental Company, St. Paul, Minnesota;  and The National Bank
of Indianapolis.  He is on the Board of Trustees of the Hudson Institute and the
Board of Managers of Rose-Hulman Institute of Technology.  Past affiliations and
awards include  President of  Indianapolis  Board of School  Commissioners,  and
recognition as Indiana Master  Entrepreneur of the Year (1994). He is a graduate
of Denison University.

         Thomas E.  Reilly,  Jr. has been a director  since 1995 and is Chairman
and CEO, Reilly Industries, Inc., Indianapolis,  Indiana, a diversified chemical
manufacturing  firm.  He is  Director  of  First  Chicago  NBD  Corp.,  Chemical
Manufacturers  Association,   Lilly  Industries,   Inc.,  American  United  Life
Insurance Company, and Past President, Board of Trustees, Indiana State Teachers
Retirement Fund. He is a member of the Board of Trustees, Butler University. Mr.
Reilly is a graduate  of  Stanford  University,  BS, and MBA,  Harvard  Business
School.


<PAGE>




         James W.  Hubbard  has been with the  Company for the past 25 years and
has 35 years of industry experience.  Mr. Hubbard has served as a Director since
1985  and as Chief  Executive  Officer  and  President  since  May  1995.  Other
positions  Mr.  Hubbard  has  held  at the  Company  include:  Plant  Manager  -
Yearbooks;  General  Manager -  Yearbook  Division;  Vice  President  - Yearbook
Division; and Group Vice President -  Photography/Yearbooks  (which he held from
1985 to 1995).  Mr. Hubbard  received a Bachelor of Arts in Journalism  from the
University of Iowa in 1957. He has served as a Major in the United States Marine
Corps Reserve.

         Bernard R. Crandall, Jr. has been with Herff Jones for 24 years. He has
served as Vice President Cap & Gown since September 1990 and as a Director since
1993. Other positions he has held at the Company include:  Department Supervisor
- Indianapolis  Jewelry;  Customer Service Manager - Montgomery  Yearbook Plant;
Director of Marketing - Yearbook Division; Resident Manager - Marceline Yearbook
Plant;  and Resident  Manager - Logan Yearbook  Plant. He received a Bachelor of
Science in Business Management from Indiana University in 1971.

         Robert S. Potts has been with Herff Jones for 25 years and has 30 years
of industry  experience.  He has served as Vice  President - Yearbook since July
1993 and as a Director since 1990.  Other positions he has held with the Company
include:  Sales  Representative;  Scholastic  Area Sales  Manager;  Director  of
Marketing  Yearbooks;  National  Sales  Manager -  Yearbook  Division;  and Vice
President  -Yearbook Sales (which he held from prior to 1990 to July 1993).  Mr.
Potts holds a Bachelor of Arts in Biology from Long Island University.

         Patrick T.  Rogers has been with Herff Jones for 23 years.  Mr.  Rogers
has served as Vice President-Human  Resources/Risk Management since October 1996
and as a Director since 1990. Prior to his current position,  Mr. Rogers was the
Corporate  Administrative  Manager from June 1995 - October 1996, Corporate Risk
Manager from 1987 until June 1995 and the Corporate  Credit Manager from 1974 to
1987.  Before  joining  Herff  Jones,  he held  several  positions in the credit
industry.  Mr. Rogers attended Xavier University and is a member of the Board of
Directors of the Indiana Chapter of the Risk and Insurance Management Society.

         Joe K. Slaughter has been with Herff Jones for 24 years.  He has served
as Vice  President  Scholastic  since February 1995 and as a Director since May,
1995.   Other   positions   he  has  held  with  the  Company   include:   Sales
Representative;  Area Sales Manager;  National Sales Manager - College Division;
Regional  Sales Manager;  Vice President - Scholastic  Sales (which he held from
January  1990 to  October  1993);  and Vice  President  -  Scholastic  Sales and
Marketing  (which he held from October 1993 to February 1995).  Prior to joining
Herff  Jones,  he was a  Professor  of  Philosophy  at Grace  College in Warsaw,
Indiana.  Mr.  Slaughter  received  his Bachelor of Arts and Master of Arts from
Michigan State University in 1969 and 1971, respectively.

         Lawrence  F. Fehr has been with Herff  Jones for the past 25 years.  He
has served as Vice President  since 1987 and as Corporate  Secretary since 1989.
Mr. Fehr became Chief Financial  Officer and a Director in 1995. Other positions
he has held at the  Company  include:  Jewelry  Division  Controller;  Corporate
Controller; and Vice President - Controller (which he held from prior to 1990 to
1995). Prior to Herff Jones, Mr. Fehr worked for six years in various accounting
positions with Burger Chef. He holds a Bachelor of Science in Accounting  (1967)
and a Master of Business Administration (1969) from Butler University. He became
a  Certified  Public  Accountant  in  1970  and is  currently  a  member  of the
Indianapolis Chapter of the Financial Executives Institute.

         Boyd P.  Boynton has been with the Company for 30 years.  He has served
as Vice President and General Manager - Photography  since prior to 1990.  Other
positions he has held at the Company include:  School  Photographer;  Production
Manager - School  Division;  Assistant  to the General  Manager;  Personnel  and
Training  Manager;   Professional   Division  Manager;   Operations   Manager  -
Photography  Division;  and General Manager  Photography  Division.  Mr. Boynton
holds a Bachelor  of Arts in  Business  Administration  from the  University  of
Minnesota, which he received in 1966.




<PAGE>



Item 11. Executive Compensation
<TABLE>
<CAPTION>

                                                       SUMMARY COMPENSATION TABLE

                                                                                          Long Term 
                                                                                        Compensation
                                                                          Annual         Securities   
                                                                       Compensation      Underlying               All Other
                         Name and                                          Salary        Options/SARs            Compensation
                    Principal Position                        Year      ($)    (1)     (#)        (2)            ($)       (3)
<S>                                                          <C>         <C>                 <C>                    <C>   
James W. Hubbard...........................................  1997        $348,996            30,000                  $4,500
President, Chief Executive Officer and Director              1996         331,500            40,000                   4,500
                                                             1995         216,916              --                    11,119

Robert S. Potts............................................  1997         175,000            15,000                   4,500
Vice President and Director                                  1996         165,000            20,000                   4,500
                                                             1995         158,500              --                    28,136

Joe K. Slaughter...........................................  1997         166,000            15,000                   4,500
Vice President and Director                                  1996         158,000            20,000                   4,500
                                                             1995         139,166              --                     9,300

Lawrence F. Fehr...........................................  1997         149,000            15,000                   4,350
Vice President, Chief Financial Officer,                     1996         137,499            20,000                   3,653
Secretary and Director                                       1995         109,750              --                     7,639


Bernard R. Crandall, Jr. ..................................  1997         128,500            12,500                  38,016
Vice President and Director                                  1996         117,500            15,000                  28,087
                                                             1995         109,000              --                    19,440
</TABLE>


         (1)      The  named  officers  of  the  Company  did  not  receive  any
                  remuneration in 1997, 1996 or 1995 in addition to their annual
                  salary except to the extent they participated in the Company's
                  Profit  Sharing  Plan (the  "401(k)  Plan"),  group  insurance
                  arrangements   or  other   benefit   programs   available   to
                  substantially  all  non-union  employees.  The officers  named
                  above,  except  for  Mr.  Crandall,  are  not  currently  ESOP
                  participants.

         (2)      Phantom units  granted  under the Incentive  Plan as described
                  below.

         (3)      All other compensation for 1997 consists solely of 401(k) plan
                  contributions  by the  Company  for  Messrs.  Hubbard,  Potts,
                  Slaughter and Fehr,  and a $3,750  contribution  to the 401(k)
                  Plan by the  Company  and a  $34,266  allocation  to the  ESOP
                  account  of Mr.  Crandall.  For 1996 this  consists  solely of
                  401(k) Plan contributions by the Company for Messrs.  Hubbard,
                  Potts,  Slaughter and Fehr, and a $3,300  contribution  to the
                  401(k)  Plan by the Company  and a $24,787  allocation  to the
                  ESOP account of Mr. Crandall. For 1995 this consists solely of
                  401(k) plan contributions by the Company for Messrs.  Hubbard,
                  Slaughter and Fehr, and a $11,119  contribution  to the 401(k)
                  Plan by the  Company  and a  $17,017  allocation  to the  ESOP
                  account of Mr. Potts, and a $7,481  contribution to the 401(k)
                  Plan by the  Company  and a  $11,959  allocation  to the  ESOP
                  account of Mr. Crandall.





<PAGE>




Employment Agreements

         Each of the named executive officers owned Company shares and sold such
         shares to the ESOP in the ESOP  Transactions.  In  anticipation  of the
         ESOP Transactions, the Company required each employee selling shares to
         enter  into a  three-year  employment  and  non-competition  agreement,
         including  Mr.   Hubbard  and  Mr.  Potts.   In  such   employment  and
         non-competition  agreements,  each  employee  agreed  to stay  with the
         Company for at least three years and the Company agreed (i) to pay each
         employee a salary  commensurate  with the position each employee  holds
         determined from time to time by the Board of Directors or an authorized
         officer;  (ii) to allow each  employee  to  participate  in all benefit
         programs,  plans and fringe  benefits in which the  Company's  salaried
         employees   participate  generally  to  the  extent  permitted  by  the
         respective plans and/or  applicable tax  regulations,  and (iii) not to
         terminate  or demote  each  employee  without  cause  for three  years.
         "Cause" is defined in the employment and non-competition  agreements as
         (a) willful or gross  misconduct or willful or gross  negligence in the
         performance of duties for the Company;  or (b)  intentional or habitual
         neglect of duties for the Company;  or (c) theft or misappropriation of
         Company funds or the conviction of a felony.  Each employee also agreed
         not to compete with the Company for at least three years after the ESOP
         Transactions are consummated (or, if later, two years after termination
         of employment) and not to disclose outside the Company any confidential
         matters of the Company unless such  disclosure is made as a proper part
         of  performing  duties  for the  Company  or is made  with the  express
         written consent of the Company.

Incentive Plan

         The Herff Jones, Inc.  Long-Term  Incentive Plan ("Incentive Plan") was
         adopted by the  Company  effective  July 1, 1995.  The named  executive
         officers  and  other  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 phantom  units at the  beginning  of a  five-year  performance
         cycle.  The maximum numbers of phantom units that may be issued subject
         to the Incentive Plan is 1,500,000,  subject to proportional adjustment
         in the event of any change in the  outstanding  Company stock by reason
         of   any    issuance   of    additional    shares,    recapitalization,
         reclassification,  reorganization,  combination  of shares  or  similar
         transaction. Each phantom unit is equal in value to one share of common
         stock, but is not a share and carries no shareholder  rights. The value
         of phantom units will correspond to the value of shares of common stock
         as of the end of each Company  fiscal year  determined  for the ESOP by
         its independent  valuation firm. The  participants  will be entitled to
         payment of a cash incentive award after the five-year performance cycle
         is completed.  The award will be equal to the  appreciation in value of
         the  participant's  phantom units in excess of a minimum  amount 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  the  performance  cycle.  Notwithstanding  the
         foregoing,  the Company will not pay the incentive awards to the extent
         payment  would  result  in  breach of  covenants  under the New  Credit
         Agreement or the  Indenture;  payment of the  incentive  awards will be
         subordinated  in full to the prior  payment in cash of all amounts then
         due in respect of the Notes.  The  Company may impose  other  financial
         restrictions  as to the payments which, if not met, would result in the
         payments being deferred.  Participants will also be able to voluntarily
         defer payment of all or a portion of their  incentive  awards and elect
         to have the deferred amounts accounted for as an unsecured Company debt
         bearing  interest at a reasonable  rate. The following table summarizes
         grants to the named executive  officers under the Incentive Plan during
         fiscal 1997.








<PAGE>


<TABLE>
<CAPTION>
                                                    OPTION/SAR GRANTS IN FISCAL 1997

                                                                                                       Potential Realizable
                                              Number of         % of Total                            Value at Assumed Annual
                                              Securities       Options/SARs    Exercise                Rates of Stock Price
                                              Underlying        Granted to     or Base                    Appreciation for
                                              Options/SARs     Employees in     Price     Expiration        Option Term
                    Name                      Granted (#) (1)   Fiscal Year     ($/Sh)       Date     5% ($)        10% ($)
                    ----                      ---------------   -----------     ------       ----     ------        ------- 
<S>                                               <C>              <C>          <C>         <C>         <C>        <C>     
James W. Hubbard............................      30,000           6.0%         $33.56      6/2001    - 0 -        $264,000
President,   Chief  Executive   Officer  and
Director

Robert S. Potts.............................      15,000           3.0%          33.56      6/2001    - 0 -        $132,000
Vice President and Director

Joe K. Slaughter............................      15,000           3.0%          33.56      6/2001    - 0 -        $132,000
Vice President and Director

Lawrence F. Fehr............................      15,000           3.0%          33.56      6/2001    - 0          $132,000
Vice President, Chief Financial Officer,    
Secretary and Director

Bernard R. Crandall, Jr.....................      12,500           2.5%          33.56      6/2001    - 0 -        $110,000
Vice President and Director
</TABLE>

(1)      See the description of Incentive Plan grants above.


<TABLE>
<CAPTION>
                                      AGGREGATED FISCAL YEAR END SAR VALUES

                                                                   No. Of Securities
                                                                       Underlying             Value of
                                                                  Unexercised SARS at       Unexercised
                           Name                                   Fiscal Year End (1)       In-the-Money
                                                                                        Fiscal Year End (1)

<S>                                                                      <C>                  <C>     
James W. Hubbard........................................                 70,000               $107,200
President, Chief Executive Officer and Director

Robert S. Potts.........................................                 35,000                 53,600
Vice President and Director

Joe K. Slaughter........................................                 35,000                 53,600
Vice President and Director

Lawrence F. Fehr .......................................                 35,000                 53,600
Vice President, Chief Financial Officer,                                 
Secretary and Director

Bernard R. Crandall, Jr.................................                 27,500                 40,200
Vice President and Director

</TABLE>

(1)      Under the Incentive  Plan phantom units are not  exercisable,  as such,
         but are payable after a five-year performance cycle unless deferred, as
         described above.

Director Compensation

         The present Directors of the Company who are also executive officers of
         the Company,  receive no additional  compensation  for their service as
         Directors or for attendance at meetings of the Board of Directors.  The
         Company  has  three  independent   persons  serving  on  the  Board  of
         Directors.  Such persons receive  compensation of $20,000 per year plus
         $750 per meeting for serving on the Board and its committees.

         The Company has entered  into a  consulting  agreement  with Mr.  Hackl
         pursuant  to which  he will be  available  to the  Company  to  provide
         ongoing  consultation  and advice to  management  and,  in  particular,
         ongoing  assistance with financing,  acquisitions and divestitures.  He
         maintains an office at the Company's  principal  executive  offices but
         works as an  independent  contractor,  determining  his own  hours  and
         method of performance. He receives a fee of $24,000 per year commencing
         in fiscal 1998  ($48,000 and  $100,000 for 1997 and 1996  respectively)
         and any fees payable to non-employee directors generally.  He serves at
         the  pleasure  of the  Board as its  Chairman  and as  chairman  of the
         Executive,  Finance,  Compensation and Audit Committees. The consulting
         agreement is  terminable  by either party at any time without cause and
         contains a three-year non-competition covenant.

Compensation Committee Interlocks and Insider Participation

         From the beginning of fiscal 1996 through  November 1995, Mr. Hackl was
         the  sole  member  of  the  Compensation  Committee  of  the  Board  of
         Directors.  Mr. Hackl is a former executive  officer of the Company and
         has a consulting  arrangement  with the Company as described above. Mr.
         Lacy and Mr. Reilly were added to the Compensation  Committee, of which
         Mr. Hackl is Chairman, in November, 1995.

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

         The only person that  beneficially  owns more than 5% of the  Company's
shares of Common Stock, without par value, is Bank One,  Indianapolis,  N.A., as
Trustee of the Herff Jones, Inc.  Employee Stock Ownership Plan ("ESOP"),  which
held 9,565,045 or 99.9% of the 9,567,500  shares of Common Stock  outstanding as
of September 19, 1997.

Except as set forth below, none of the named executive  officers or directors of
the registrant  owns shares of its common stock.  All of the shares shown in the
following  table are held by the ESOP and allocated to the accounts of the named
officers.

                                                 NUMBER OF
                                             ALLOCATED SHARES
                     NAME                                        % OF SHARES
                     ----                                        -----------
     Robert S. Potts                               2,557              *
     Bernard R. Crandall, Jr.                      4,401              *
     Patrick T. Rogers                             3,060              *
     Boyd P. Boynton                               2,148              *
     All Directors and Executive
     Officers as a Group (10 persons)             12,166              *
     ---------------------------------            ------              -

    *  Less than 1%

Item 13. Certain Relationships and Related Transactions.

         During  fiscal 1997,  the Company  repurchased  49,692 shares of Common
Stock from the ESOP to fund  distributions  to ESOP  participants  at $26.30 per
share or $1.3 million in the aggregate.


<PAGE>



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

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

         (1)    Financial Statements (Included Under Item 8)
                Report of Independent Accountants
                Consolidated Balance Sheet as of June 28, 1997
                    and June 29, 1996
                Consolidated Statement of Income for the
                    years ended June 28, 1997, June 29, 1996
                    and June 24, 1995
                Consolidated  Statement  of  Shareholders'  Equity for the years
                    ended June 28, 1997, June 29, 1996 and June 24, 1995
                Consolidated  Statement  of Cash Flows for the years  ended June
                    28, 1997, June 29, 1996 and June 24, 1995
                Notes to Consolidated Financial Statements
                Financial Statement Schedules for the three years
                    ended June 28, 1997

         (2)    Financial Statement Schedules (Set Forth Below)

                VIII.   Valuation and Qualifying Accounts and Reserves

                X.      Supplemental Statement of Income Information.

         (3)    The following exhibits are filed as a part of this Report:

Exhibit No.                           Description                          Page
-----------                           -----------                          ----

 2.1    Asset  Purchase  Agreement,  dated as of March 28, 1996,  between
        Herff  Jones,   Inc.  and   Continental   Graphics   Corporation.
        (Incorporated  by reference to Exhibit 2.1 to Form 8-K filed with
        the Commission, dated May 9, 1996.)                                 ---

 2.2    Amendment No. 1 to Asset  Purchase  Agreement.  (Incorporated  by
        reference  to Exhibit 2.2 to Form 8-K filed with the  Commission,
        dated May 9, 1996.)

 3.1    Articles of Incorporation of Herff Jones, Inc. as amended.           *

 3.2    Restated Code of By-Laws of Herff Jones, Inc.                        *

 4.1    Indenture dated as of August 22, 1995 between Herff Jones, Inc.
        and Bankers Trust Company.                                           *

 4.2    Revolving Credit and Term Loan Agreement among Herff Jones,
        Inc., The First National Bank of Boston and other financial
        institutions.                                                        *

 4.2(a) Amendment No. 1 to Revolving  Credit and Term Loan Agreement,
        November, 1996.

 4.2(b) Amendment No. 2 to Revolving  Credit and Term Loan  Agreement,
        June 13, 1997.

 4.3    Agreement to furnish documents relating to other long-term debt.     *

10.1    Consignment Agreement, dated February 8, 1994, between Herff
        Jones, Inc. and Gerald Metals, Inc. and the related Security
        Agreement, dated February 8, 1994, between Herff Jones, Inc.
        and Gerald Metals, Inc.                                              *

10.2    Amended and Restated  Consignment  Agreement,  dated  October 27,
        1989,  between Herff Jones,  Inc. and Rhode Island Hospital Trust
        National  Bank and the  related  Amended  and  Restated  Security
        Agreement,  dated October 27, 1989, between Herff Jones, Inc. and
        Rhode Island Hospital Trust National Bank.                           *

10.2(a) Amendment No. 2 to the Rhode Island Agreements.  (Incorporated by
        reference to Exhibit 10.1 to Form 10-Q, filed with the Commission
        May 14, 1996.)                                                      ---


10.2(b) Amendment  No.  3 to  Rhode  Island  Hospital  Trust  Consignment
        Agreement (Incorporated by reference to Exhibit 10.1 to Form 10-Q
        for quarter ended March 29, 1997)                                   ---

<PAGE>

10.3        Nonexclusive Multimedia Distribution Agreement dated
            September 25, 1993, between the Nystrom division of
            Herff Jones, Inc. and Videodiscovery, Inc.                        *

10.4        Exempt Loan Agreement (Restated) dated as of August 22, 1995,
            between Herff Jones, Inc. and Bank One, Indianapolis, NA as
            Trustee of the Herff Jones, Inc. Employee Stock Ownership Plan.   *

10.5        Registration Rights Agreement dated August 22, 1995 between
            Herff Jones, Inc. and Donaldson, Lufkin & Jenrette Securities
            Corporation.                                                      *

10.6        Purchase Agreement dated August 14, 1995 between Herff
            Jones, Inc. and Donaldson, Lufkin & Jenrette Securities
            Corporation.                                                      *

10.7 (a)    Consulting and Non-Competition Agreement dated June 1,
            1995 between Herff Jones, Inc. and A.J. Hackl.                    *

10.7 (b)    Amendment No. 1 to Consulting Agreement with A.J. Hackl.
            (Incorporated by reference to Exhibit 10.7(b) to the  
            Company's Form 10-K for the year ended June 29, 1996.)          ---

10.7 (c)    Amendment No. 2 to Consulting Agreement with A.J. Hackl.

10.8        Employment and Non-Competition Agreement dated July 7,
            1995 between Herff Jones, Inc. and James W. Hubbard.              *

10.9        Employment and Non-Competition Agreement dated July 5,
            1995 between Herff Jones, Inc. and Bernard R. Crandall, Jr.       *

10.10       Employment and Non-Competition Agreement dated June 21,
            1995 between Herff Jones, Inc. and Robert S. Potts.               *

10.11       Employment and Non-Competition Agreement dated June 21,
            1995 between Herff Jones, Inc. and Patrick T. Rogers.             *

10.12       Employment and Non-Competition Agreement dated July 6, 1995
            between Herff Jones, Inc. and Joe K. Slaughter.                   *

10.13       Employment and Non-Competition Agreement dated July 6, 1995
            between Herff Jones, Inc. and Lawrence F. Fehr.                   *

10.14       Employment and Non-Competition Agreement dated July 9, 1995
            between Herff Jones, Inc. and Boyd P. Boynton.                    *

10.15       Herff Jones, Inc. Long-Term Incentive Plan,
            effective July 1, 1995.                                           *

21          Subsidiaries of the Registrant                                    *

27          Fiancial Data Schedule

--------------
*        Incorporated  by  reference to the exhibit  (bearing the  corresponding
         exhibit  number) to the  Company's  Registration  Statement on Form S-4
         (Registration No. 33-96680) as amended, effective November 1, 1995.




<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,)
    James W. Hubbard              President and Director  )
                                                          )
(2) Principal Financial                                   )
    and Accounting Officer:                               )
                                                          )
    /s/ Lawrence F. Fehr          Vice President,         )
    Lawrence F. Fehr              Chief Financial Officer,)
                                  Secretary and Director  )
                                                          )
(3) A Majority of the Board                               )   September 19, 1997
    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 28, 1997, June 29, 1996 and June 24, 1995
                             (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 1995                   $2,927                  $645                 $553                      $3,019
      Fiscal Year 1996                   $3,019                $2,466                 $602                      $4,883
      Fiscal Year 1997                   $4,883                $1,310                 $439                      $5,754
</TABLE>

<PAGE>
                       Herff Jones, Inc. and Subsidiaries             Schedule X
                  Supplemental Statement of Income Information
       For the Years Ended June 28, 1997, June 29, 1996 and June 24, 1995
                             (amounts in thousands)


          Item                             Charged to Cost and Expenses
 Maintenance and repairs

    Fiscal Year 1995                                  $3,870
    Fiscal Year 1996                                  $4,028
    Fiscal Year 1997                                  $4,741