**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 20-F**

 
| **(Mark One)**                                                                                                                                                                                                                        |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                                                  |       |
| ** **                                                                                                                                                                                                                            | **o**      | **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)  OR (g) OF** |
| **THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                                                              |
| ** **                                                                                                                                                                                                                            |
| **OR**                                                                                                                                                                                                                                |
| ** **                                                                                                                                                                                                                            |
| ** **                                                                                                                                                                                                                            | **ý** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE** |
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                   |
| ** **                                                                                                                                                                                                                            |
| **For the fiscal year ended: December 31,  2004**                                                                                                                                                                                |
| ** **                                                                                                                                                                                                                            |
| **OR**                                                                                                                                                                                                                                |
| ** **                                                                                                                                                                                                                            |
| ** **                                                                                                                                                                                                                            | **o**      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE** |
| **SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                   |
| ** **                                                                                                                                                                                                                            |
| **For the transition period  from                to                ** |
| ** **                                                                                                                                                                                                                            |
| **Commission file number 333-11768**                                                                                                                                                                                                  |

 

**BUHRMANN NV**

(Exact name of Registrant as specified in its charter)

 

**THE NETHERLANDS**

(Jurisdiction of incorporation or organization)

 

**Hoogoorddreef 62, 1101 BE Amsterdam ZO, TheNetherlands**

(Address of principal executive offices)

 

Securities registered orto be registered pursuant to Section 12(b) of the Act.

 
| **Title of each class** | ** ** | **Name of each exchange on which  registered** |
|-------------------------|------------|------------------------------------------------|
| None                    |       | None                                           |

 

Securities registered orto be registered pursuant to Section 12(g) of the Act.

 

**None**

(title of class)

 

Securities for whichthere is a reporting obligation pursuant to Section 15(d) of the Act.

 

**81⁄4% Senior Subordinated Notes due 2014 and**

**Ordinary Shares at a par value of EUR 1.20 pershare each,**

**represented by American Depositary Shares**(Title of Class)

 

Indicate thenumber of outstanding shares of each of the issuer’s classes of capital orcommon stock as of the close of the period covered by the annual report.

 

138,126,528 Ordinary Shares

53,281,979 Preference Shares A

0 Preferences Shares B

43,628 Preference Shares C

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13or 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 suchreports), and (2) has been subject to such filing requirements for the past 90days.

 

| Yes | ý |   | No | o |
|-----|--------|--------|----|---|

Indicate by checkmark which financial statement item the registrant has elected to follow.

 

| **ITEM  17** | **o** | ** ** | **ITEM  18** | **ý** |
|--------------|-------|------------|--------------|------------|

 

 

----

 

###### **ITEM 1: IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS**

 

Not applicable

 

 

**ITEM 2:OFFER STATISTICS AND EXPECTED TIMETABLE**

 

Not applicable

 

2

----

 

**ITEM 3:KEY INFORMATION**

 

**Selected Financial Data**

 

The following tablespresent selected consolidated financial data for Buhrmann as of and for theyears ended December 31, 2000, 2001, 2002, 2003 and 2004. The selectedconsolidated financial data should be read in conjunction with our consolidatedfinancial statements and the notes thereto included in Item 18 of thisAnnual Report. The selected financial data set forth below is presented inaccordance with Dutch GAAP, and where specified, in accordance with U.S. GAAP.For a discussion of the material differences between Dutch GAAP and U.S. GAAP,as applicable to Buhrmann, please see note 34 to our consolidatedfinancial statements. Additionally, please see Item 4 “Information on theCompany” and Item 5 “Operating and Financial Review and Prospects—Major Events”and “—Acquisitions and Divestments” for a description of major events andsignificant acquisitions or divestments that may affect the comparability ofthe results of operations presented below.

 

We note that under Dutch GAAP, as from January 1,2002, the results from discontinued operations are included in operatingresults until the date the operations are actually sold (prior to 2002, suchresults were included until the moment the divestment decision was made),whereas under U.S. GAAP, the results from discontinued operations are presentedseparately from continuing operations. Accordingly, under U.S. GAAP theconsolidated statements of income for previous years are restated fordiscontinuance of an operation. The Paper Merchanting Division, which was soldwith effect from October 31, 2003, qualifies as a discontinued operation.

 
| ** **                                                     | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                     | ** ** | **2000**                         | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004** | ** ** | **2004(1)** | ** ** |
| ** **                                                     | ** ** | **(in millions except ratios)**  | ** ** |
| ** **                                                     | ** ** | **(audited)**                    | ** ** |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| **Statement of Income Data:**                                  |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with Dutch GAAP*                        |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                      |       | €                           | 9,603      |   | € | 10,408 |   | € | 9,948 |   | € | 8,053 |   | € | 5,539 |   | $ | 7,499 |   |
| Added value                                                    |       | 2,341                            |       | 2,396 |   | 2,253 |   | 1,854 |   | 1,476 |   | 1,999 |   |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Operating result                                               |       | 491                              |       | 341 |   | (301 | ) | 171 |   | 161 |   | 218 |   |
|                                                           |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Result from operations before taxes                            |       | 270                              |       | 131 |   | (500 | ) | (86 | ) | 58 |   | 79 |   |
| Total taxes                                                    |       | (55                              | )          | (24 | ) | (18 | ) | 68 |   | 33 |   | 45 |   |
| Total results from participations and other  financial results |       | 5                                |       | (3 | ) | 16 |   | (102 | ) | 6 |   | 8 |   |
| Total minority interests                                       |       | (9                               | )          | (9 | ) | (12 | ) | (12 | ) | (17 | ) | (22 | ) |
| Net result from operations                                     |       | 211                              |       | 95 |   | (514 | ) | (132 | ) | 80 |   | 109 |   |
| Extraordinary result, after tax                                |       | 10                               |       | (40 | ) | (74 | ) | — |   | 0 |   | 0 |   |
| Net result                                                     |       | €                           | 221        |   | € | 55 |   | € | (588 | ) | € | (132 | ) | € | 80 |   | $ | 109 |   |

 

3

----

 
| ** **                                                                 | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                 | ** ** | **2000**                         | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004** | ** ** | **2004(1)** | ** ** |
| ** **                                                                 | ** ** | **(in millions except ratios)**  | ** ** |
| ** **                                                                 | ** ** | **(audited)**                    | ** ** |
| ** **                                                                 | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Amounts in accordance with U.S. GAAP*                                     |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Net sales(2)                                                               |       | €                           | 6,581      |   | € | 7,310 |   | € | 6,967 |   | € | 5,840 |   | € | 5,550 |   | $ | 7,514 |   |
| Operating result(2)                                                        |       | 250                              |       | 116 |   | (718 | ) | 182 |   | 213 |   | 288 |   |
|                                                                       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Result from continuing operations(2)                                       |       | 57                               |       | 13 |   | (849 | ) | (59 | ) | 104 |   | 141 |   |
| Discontinued operations(2)                                                 |       | 30                               |       | 22 |   | (92 | ) | (249 | ) | 4 |   | 5 |   |
| Net result before cumulative effect of change in  accounting principles(2) |       | 87                               |       | 35 |   | (941 | ) | (308 | ) | 108 |   | 146 |   |
| Cumulative effect of change in accounting  principles, after tax(2)        |       | —                           |       | — |   | — |   | (29 | ) | — |   | — |   |
| Net result(2)                                                              |       | €                           | 87         |   | € | 35 |   | € | (941 | ) | € | (337 | ) | € | 108 |   | $ | 146 |   |
|                                                                       |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance Sheet Data (at period end):**                                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with Dutch GAAP*                                    |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                               |       | €                           | 6,418      |   | € | 7,117 |   | € | 5,409 |   | € | 3,677 |   | € | 3,481 |   | $ | 4,713 |   |
| Long-term debt                                                             |       | 2,070                            |       | 2,059 |   | 1,678 |   | 949 |   | 822 |   | 1,112 |   |
| Group equity                                                               |       | 1,948                            |       | 2,671 |   | 1,811 |   | 1,484 |   | 1,474 |   | 1,996 |   |
|                                                                       |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| *Amounts in accordance with U.S. GAAP*                                     |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Total assets(2)                                                            |       | €                           | 7,127      |   | € | 7,701 |   | € | 5,607 |   | € | 3,791 |   | € | 3,683 |   | $ | 4,986 |   |
| Long-term debt                                                             |       | 2,070                            |       | 2,059 |   | 1,678 |   | 949 |   | 862 |   | 1,167 |   |
| Group equity(2)                                                            |       | 2,513                            |       | 3,157 |   | 1,910 |   | 1,504 |   | 1,530 |   | 2,071 |   |

 

4

----

 
| ** **                                                                                  | ** ** | **Year Ended December 31,**             | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                  | ** ** | **2000**                                     | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004** | ** ** |
| ** **                                                                                  | ** ** | **(in €, unless otherwise  indicated)** | ** ** |
| **Other Data:**                                                                             |       |                                         |       |   |   |   |   |   |   |   |   |
| *Amounts in accordance with or derived from Dutch  GAAP*                                    |       |                                         |       |   |   |   |   |   |   |   |   |
| EBITDA (in millions of €) (3)                                                          |       | 672                                          |       | 439 |   | (216 | ) | 213 |   | 280 |   |
| Depreciation of tangible fixed assets and internally  used software (in millions of €) |       | (113                                         | )          | (109 | ) | (114 | ) | (104 | ) | (84 | ) |
| Amortization of goodwill (in millions of €)                                            |       | (55                                          | )          | (67 | ) | (70 | ) | (52 | ) | (45 | ) |
| Impairment of goodwill (in millions of €)                                              |       | 3⁄4                                       |       | 3⁄4 |   | (573 | ) | (53 | ) | 3⁄4 |   |
| Operating result (in millions of €)                                                    |       | 491                                          |       | 341 |   | (301 | ) | 171 |   | 161 |   |
|                                                                                        |       |                                         |       |   |   |   |   |   |   |   |   |
| Capital expenditures (in millions of €)                                                |       | 122                                          |       | 127 |   | 107 |   | 79 |   | 59 |   |
| Capital stock - Ordinary (in millions of €)                                            |       | 116                                          |       | 157 |   | 158 |   | 164 |   | 166 |   |
| Number of Ordinary Shares outstanding at year-end  (in thousands)                           |       | 102,544                                      |       | 131,835 |   | 132,628 |   | 136,692 |   | 138,12727 |   |
| Dividend declared in € per Ordinary Share                                              |       | 0.60                                         |       | 0.16 |   | 0.07 |   | 0.07 |   | 0.07 |   |
|                                                                                        |       |                                         |       |   |   |   |   |   |   |   |   |
| Basic net result per Ordinary Share before  extraordinary results                           |       | 1.80                                         |       | 0.49 |   | (4.14 | ) | (1.23 | ) | 0.32 |   |
| Basic extraordinary result per Ordinary Share                                               |       | 0.10                                         |       | (0.32 | ) | (0.56 | ) | 3⁄4 |   | 3⁄4 |   |
| Basic net result per Ordinary Share                                                         |       | 1.90                                         |       | 0.17 |   | (4.70 | ) | (1.23 | ) | 0.32 |   |
|                                                                                        |       |                                         |       |   |   |   |   |   |   |   |   |
| Fully diluted net result per Ordinary Share before  extraordinary results (5)               |       | 1.64                                         |       | 0.49 |   | (4.14 | ) | (1.23 | ) | 0.32 |   |
| Fully diluted extraordinary result per Ordinary  Share (5)                                  |       | 0.08                                         |       | (0.28 | ) | (0.48 | ) | 3⁄4 |   | 3⁄4 |   |
| Fully diluted net result per Ordinary Share (5)                                             |       | 1.72                                         |       | 0.17 |   | (4.70 | ) | (1.23 | ) | 0.32 |   |

 

5

----

 
| ** **                                                                                              | ** ** | **Year Ended December 31,**             | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2000**                                     | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004** | ** ** |
| ** **                                                                                              | ** ** | **(in €, unless otherwise  indicated)** | ** ** |
| ** **                                                                                              |       |                                         |       |   |   |   |   |   |   |   |   |
| In millions of €:                                                                                  |       |                                         |       |   |   |   |   |   |   |   |   |
| Net cash provided by operating activities                                                               |       | 66                                           |       | 469 |   | 258 |   | 272 |   | 223 |   |
| Net cash provided by (used in) investing activities                                                     |       | (317                                         | )          | (766 | ) | (138 | ) | 544 |   | (82 | ) |
| Net cash provided by (used in) financing activities                                                     |       | 163                                          |       | 420 |   | (208 | ) | (681 | ) | (127 | ) |
|                                                                                                    |       |                                         |       |   |   |   |   |   |   |   |   |
| Dividend declared per Ordinary Share (in USD) (4)                                                       |       | 0.81                                         |       | 0.22 |   | 0.09 |   | 0.09 |   | 0.09 |   |
|                                                                                                    |       |                                         |       |   |   |   |   |   |   |   |   |
| *Amounts in accordance with U.S. GAAP*                                                                  |       |                                         |       |   |   |   |   |   |   |   |   |
| Basic result from continuing operations per Ordinary  Share                                             |       | 0.24                                         |       | (0.16 | ) | (6.68 | ) | (0.68 | ) | 0.49 |   |
| Basic net result before cumulative effect of change  in accounting principle per Ordinary Share         |       | 0.55                                         |       | 0.01 |   | (7.38 | ) | (2.53 | ) | 0.52 |   |
| Basic net result per Ordinary Share                                                                     |       | 0.55                                         |       | 0.01 |   | (7.38 | ) | (2.75 | ) | 0.52 |   |
|                                                                                                    |       |                                         |       |   |   |   |   |   |   |   |   |
| Fully diluted result from continuing operations per  Ordinary Share                                     |       | 0.24                                         |       | (0.16 | ) | (6.68 | ) | (0.68 | ) | 0.45 |   |
| Fully diluted net result before cumulative effect of  change in accounting principle per Ordinary Share |       | 0.54                                         |       | 0.01 |   | (7.38 | ) | (2.53 | ) | 0.48 |   |
| Fully diluted net result per Ordinary Share                                                             |       | 0.54                                         |       | 0.01 |   | (7.38 | ) | (2.75 | ) | 0.48 |   |

 

6

----

----

(1)          Certaineuro amounts for 2004 have been translated into United States dollars at theNoon Buying Rate at December 31, 2004 of 1.3538 U.S. dollars to the euro.Such translations should not be construed as representation that the euroamounts represent, or have been or could be converted into, United Statesdollars at that or any other rate.

 

(2)          SeveralU.S. GAAP adjustments have been made to net result under Dutch GAAP to complywith U.S. GAAP. These adjustments have been made, among other things to:

 

•                  recognize discontinuance of certain operations;

 

•                  recognize goodwill on acquisitions that waspreviously written off to equity;

 

•                  adjust goodwill for restructuring and integrationprovisions that did not qualify under U.S. GAAP;

 

•                  reverse those restructuring and integrationprovisions and other provisions not allowed under U.S. GAAP;

 

•                  amortize intangible assets;

 

•                  write-off capitalized software;

 

•                  add extraordinary items to operating income;

 

•                  record derivative instruments at fair value;

 

•                  recognize pension assets;

 

•                  defer revenue for timing differences in recognition;

 

•                  write-off and amortize financing fees;

 

•                  expense operating lease payments on a straight-linebasis;

 

•                  as of 2002, reverse amortization and adjustimpairment of goodwill; and

 

•                  as of 2003, defer revenue from catalogcontributions.

 

7

----

 

Several U.S. GAAP adjustments have been made to totalassets under Dutch GAAP to comply with U.S. GAAP. These adjustments have beenmade, among other things, to:

 

•                  recognize goodwill on acquisitions that was writtenoff to equity under Dutch GAAP;

 

•                  adjust goodwill for restructuring and integrationprovisions not allowed under U.S. GAAP;

 

•                  recognize intangible assets;

 

•                  expense software costs which do not qualify forcapitalization under U.S. GAAP;

 

•                  recognize deferred tax assets under U.S. GAAP;

 

•                  recognize pension assets;

 

•                  adjust our capitalization of financing fees;

 

•                  accrue for operating lease payments on astraight-line basis;

 

•                  as of 2002, reverse amortization and adjustimpairment of goodwill; and

 

•                  as of 2003, reduce inventory values for catalogcontributions.

 

(3)          We define “EBITDA” as “netresult before interest and other financing costs, taxes, depreciation oftangible fixed assets and internally used software and before amortization ofgoodwill.” This is a non-GAAP financial measure for which the most directlycomparable GAAP financial measure is “net result.” In the past we definedEBITDA as operating result before depreciation of tangible fixed assets andinternally used software and amortization and impairment of goodwill andtherefore our presentation of EBITDA in certain past disclosure documentationcannot be compared to the presentation of EBITDA in this annual report ofForm 20-F.

 

Buhrmann evaluates itsoperating performance based on several factors, including the financial measureEBITDA. Buhrmann believes EBITDA to be an important indicator of theoperational strength and performance of its business, including the ability togenerate cash and to repay long-term debt. For a discussion of the reasons weuse EBITDA to evaluate our operating performance, and its limitations, and areconciliation between the GAAP measure of “net result” and the non-GAAPfinancial measure “EBITDA”, see Item 5 “Operating and Financial Review andProspects —Use of Non-GAAP Financial Measures—EBITDA”.

 

(4)          The dividend wastranslated from euro to U.S. dollar at the March 11, 2005 Noon Buying Rate(as defined below in “Exchange Rates”) for cable transfers of €1 = 1.3465 U.S.dollar.”

 

(5)          A mathematicalcalculation of net result per Ordinary Share before extraordinary result on fullydiluted basis would be € 0.38 in 2004, € (0.76) in 2003, € (3.39) in 2002 and €0.56 in 2001. Net result per Ordinary Share on fully diluted basis would be €0.38 in 2004, € (0.76) in 2003, € (3.87) in 2002 and € 0.28 in 2001. UnderDutch GAAP, in case fully diluted earnings per share figures are higher thanbasic earnings per share figures, fully diluted earnings per share figuresshould be adjusted downwards to basic earning per share figures.

 

8

----

 

###### **EXCHANGE RATE INFORMATION**

 

Amounts expressed in this Annual Report in “euro,” “EUR”or “€ “ relate to the single currency of the member states of the EuropeanUnion that have adopted such currency in accordance with legislation of theEuropean Union relating to European Economic and Monetary Union. Amountsexpressed in “GBP” relate to the British pound, amounts in “AUD” relate toAustralian dollars and amounts expressed in “USD,” “$” or “U.S. dollar” relateto dollars of the United States of America.

 

In January 1999, Buhrmann started reporting ineuro. We prepare our financial statements in euro.

 

The following table sets forth, for the periodsindicated, certain information regarding the Noon Buying Rate for the euro forthe period 2000-2004. The term “Noon Buying Rate” means the noon buying rate inNew York City for cable transfers into foreign currencies as certified for customspurposes by the Federal Reserve Bank of New York:

 
| ** **   | ** ** | **U.S. dollar per euro** | ** ** |
|--------------|------------|--------------------------|------------|
| **Year**     | ** ** | **Year end**             | ** ** | **Average** | ** ** | **High** | ** ** | **Low** | ** ** |
| *** *** |       |                     |       |   |   |   |   |   |   |
| 2000         |       | 0.9388                   |       | 0.9207 |   | 1.0335 |   | 0.8270 |   |
| 2001         |       | 0.8901                   |       | 0.8909 |   | 0.9535 |   | 0.8370 |   |
| 2002         |       | 1.0485                   |       | 0.9495 |   | 1.0485 |   | 0.8594 |   |
| 2003         |       | 1.2597                   |       | 1.1315 |   | 1.2597 |   | 1.0361 |   |
| 2004         |       | 1.3538                   |       | 1.2439 |   | 1.3625 |   | 1.1801 |   |

 

The average Noon Buying Rate for each year iscalculated by using the average of the Noon Buying Rates on the last day ofeach month during the year.

 

In determining earnings originally stated in foreigncurrencies, Buhrmann used an average of daily exchange rates of the respectivecurrency versus the euro. For the balance sheet, Buhrmann used the exchangerates of the last business day of the reported period. The following tableshows the applicable rates used for such purposes for the periods indicated:

 
| ** **                 | ** ** | **Balance sheet as of  December 31, 2002** | ** ** | **Income statement for year ended December 31, 2002** | ** ** |
|----------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------------------------|------------|
|                       |       |                                            |       |                                                            |       |
| Australian dollar per euro |       | 1.8556                                          |       | 1.7365                                                          |       |
| Canadian dollar per euro   |       | 1.6550                                          |       | 1.4828                                                          |       |
| British pound per euro     |       | 0.6505                                          |       | 0.6287                                                          |       |
| U.S. dollar per euro       |       | 1.0487                                          |       | 0.9448                                                          |       |

 
| ** **                 | ** ** | **Balance sheet as of December 31,  2003** | ** ** | **Income statement for year  ended December 31, 2003** | ** ** |
|----------------------------|------------|-------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                 | ** ** | ** **                                      | ** ** | ** **                                                       | ** ** |
| Australian dollar per euro |       | 1.6802                                          |       | 1.7384                                                           |       |
| Canadian dollar per euro   |       | 1.6234                                          |       | 1.5821                                                           |       |
| British pound per euro     |       | 0.7048                                          |       | 0.6918                                                           |       |
| U.S. dollar per euro       |       | 1.2630                                          |       | 1.1307                                                           |       |

 

9

----

 
| ** **                 | ** ** | **Balance sheet as of December 31,  2004** | ** ** | **Income statement   for year ended  December 31, 2004** | ** ** |
|----------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------------------|------------|
|                       |       |                                            |       |                                                          |       |
| Australian dollar per euro |       | 1.7459                                          |       | 1.6891                                                        |       |
| Canadian dollar per euro   |       | 1.6416                                          |       | 1.6169                                                        |       |
| British pound per euro     |       | 0.7051                                          |       | 0.6785                                                        |       |
| U.S. dollar per euro       |       | 1.3621                                          |       | 1.2434                                                        |       |

 

The following table sets forth the high and low NoonBuying Rate for the euro of each of the monthly periods indicated in U.S.dollar per euro:

 
| **Month**           | ** ** | **High** | ** ** | **Low** | ** ** |
|---------------------|------------|----------|------------|---------|------------|
| *** ***        |       |     |       |    |       |
| September 2004 |       | 1.2417   |       | 1.2052  |       |
| October 2004   |       | 1.2783   |       | 1.2271  |       |
| November 2004  |       | 1.3288   |       | 1.2703  |       |
| December 2004  |       | 1.3625   |       | 1.3224  |       |
| January 2005   |       | 1.3476   |       | 1.2954  |       |
| February 2005  |       | 1.3274   |       | 1.2773  |       |

 

On March 11, 2005, the exchange rate of the euroto the U.S. dollar based on the Noon Buying Rate of the Federal Reserve Bank ofNew York was €1.00 = $1.3465.

 

10

----

 

**RISK FACTORS**

 

*The keyrisks related to our business and our industry are described below.  These risks are not the only ones we face;additional risks of which we are presently not aware or that we currently deemimmaterial may also impair our business.*

 

**Risks Relating to Our Business**

 

*Buhrmann has material debt.*

 

Buhrmann has indebtedness that is material in relationto its shareholders’ equity. A substantial portion of Buhrmann’s cash flow fromoperations is dedicated to the payment of principal and interest on Buhrmann’sdebt. At December 31, 2004, we had a total indebtedness of approximately€861 million. As a result, we are a highly leveraged company.

 

Buhrmann’s indebtedness could have importantconsequences, including that:

 

•                  Buhrmann’s ability to obtain additional financingfor working capital, capital expenditures, acquisitions, or general corporatepurposes may be impaired;

 

•                  certain of Buhrmann’s borrowings are and willcontinue to be at variable rates of interest, which exposes Buhrmann to therisk of increasing interest rates;

 

•                  it may increase our vulnerability to general adverseeconomic and industry conditions;

 

•                  it may make it more difficult for us to satisfy ourobligations with respect to the 81/4% Senior SubordinatedNotes due 2014 (the 2014 Notes);

 

•                  it may limit our flexibility in planning for, orreacting to, changes in our business and the industry in which we operate;

 

•                  a substantial part of Buhrmann’s assets has beenpledged to secure Buhrmann’s obligations under the Senior Credit Facility andin connection with its securitization program and will be unavailable to secureother debt; and

 

•                  Buhrmann may be more leveraged than certain of itscompetitors, which may place Buhrmann at a competitive disadvantage.

 

Buhrmann’s ability to make scheduled payments or torefinance its obligations with respect to its indebtedness will depend onBuhrmann’s financial and operating performance, which, in turn, is subject toprevailing economic conditions and to certain financial, business and otherfactors beyond its control, including interest rate exposure and credit risks.Buhrmann’s operating performance, cash flow and capital resources may not besufficient for payment of its debt in the future. If Buhrmann’s cash flow andcapital resources are insufficient to fund its debt service obligations,Buhrmann may be forced to reduce or delay scheduled expansion and capitalexpenditures, sell material assets or operations, obtain additional capital orrestructure its debt. In the event that Buhrmann is required to dispose ofmaterial assets or operations, obtain additional capital, or restructure itsdebt to meet its debt service and other obligations, the terms of any suchtransaction may not be as advantageous to Buhrmann as they otherwise might be.

 

11

----

 

*Buhrmann is restricted by the terms of its debt.*

 

The terms of the SeniorCredit Facility limit Buhrmann’s flexibility in operating its business. Inparticular, the Senior Credit Facility limits Buhrmann’s ability to, amongother things, incur other debt, pay dividends, make investments and enter intocertain corporate transactions. The Senior Credit Facility also requiresBuhrmann to meet certain financial ratios and tests. Buhrmann may not be ableto do so for reasons beyond its control. If Buhrmann fails to comply with theobligations in the Senior Credit Facility, there could be an event of defaultunder the Senior Credit Facility. This may cause Buhrmann to renegotiate theterms of the Senior Credit Facility, which may lead to an increase of interestexpenses and may further restrict Buhrmann’s ability to operate its business,including making acquisitions and paying dividends. In addition, if an event ofdefault occurs, the lenders under the Senior Credit Facility could declare thedebt under that agreement immediately due and payable, and seek to foreclose onBuhrmann’s assets that secure the Senior Credit Facility. If there is a defaultunder the Senior Credit Facility, Buhrmann may not have sufficient assets torepay the debt under that facility and other debt.

 

In addition, otherfunding instruments such as the accounts receivable securitization program, our2% Subordinated Convertible Bonds due 2010 (the Subordinated ConvertibleBonds), and the 8(1)¤4%Senior Subordinated Notes due 2014 (the 2014 Notes) have certain restrictionsattached. Failure to comply with the restrictions imposed in relation to anysuch instruments could result in a default under those agreements.

 

*Buhrmann may not be able to manage its growth effectively.*

 

Challenges which mayresult from organic growth, as well as growth through acquisitions, includeBuhrmann’s ability to:

 

•                  improve the efficiency of growing operations;

 

•                  manage efficiently the operations and employees ofexpanding businesses;

 

•                  hire and retain enough qualified personnel to staffnew or expanded operations;

 

•                  maintain its existing customer base and the amountof sales to these customers; and

 

•                  assess the value, strength and weaknesses ofacquisition candidates.

 

Buhrmann cannot ensurethat it will be able to adequately address these concerns. Buhrmann’s failureto address these concerns could prevent Buhrmann from achieving its strategicinitiatives and could also lead to a material adverse effect on its business,financial condition and results of operations.

 

*Adverse developments in equity and bond markets may requireBuhrmann to make additional contributions to its pension funds.*

 

Buhrmann is operating avariety of pension funds, including a number of defined pension schemes thatare separately insured in trusts (pension funds). Local law or specificarrangements with these pension funds require a minimum funding level ofbenefit obligations of these pension funds. The funding levels are calculatedbased on certain assumptions, including expected return on plan assets. Thevalue of the assets under management of these trusts varies, particularly withdevelopments in the equity and bond markets, which can affect the costs toBuhrmann. Declining returns on the equity and bond markets may require Buhrmannto make additional contributions to these pension funds in order to meet theminimum funding levels, which may adversely affect Buhrmann’s business,financial condition and results of operations.

 

12

----

 

*We face risks associated with acquisitions and divestitures.*

 

We have made a number ofacquisitions over the last five years, and our growth strategy relies in parton selective acquisitions in the industries in which we operate. Risks we couldface with respect to recent and future acquisitions include:

 

•                  difficulties in the integration of operations,technologies, products and personnel of the acquired entity;

 

•                  diversion of management’s attention away from otherbusiness concerns; and

 

•                  expenses of any undisclosed or unknown potentialliabilities of the acquired entity.

 

In addition, futureacquisitions could result in the incurrence of debt and the assumption ofliabilities, including contingent liabilities. Any of the foregoing could havea significant negative impact on our business, financial condition and resultsof operations.

 

Buhrmann has alsodivested various subsidiaries and divisions, some of which were substantial. Inconnection with these divestments, Buhrmann has agreed to indemnify thepurchasers against various potential liabilities, such as liabilities relatedto legal and regulatory proceedings, environmental liabilities and liabilitiesrelated to taxes. Buhrmann has established reserves for such potentialliabilities that Buhrmann believes are adequate. However, Buhrmann cannotassure you that these reserves will in fact be sufficient to cover thesepotential liabilities. The lack of adequate reserves could have a materialadverse effect on Buhrmann’s business, financial condition and results ofoperations.

 

*Buhrmann’s exposure to exchange rate fluctuations may affectits reported results of operations and financial condition.*

 

A major proportion ofBuhrmann’s activities is conducted in currencies other than the euro, which isBuhrmann’s reporting currency. The position in relation to the U.S. dollar is,in particular, relevant, as approximately two-thirds of Buhrmann’s revenues andmore than two-thirds of Buhrmann’s operating results were generated in U.S.dollars in 2004. This results in foreign exchange translation exposure when ourresults are translated into euro in our consolidated financial statementsincluded elsewhere in this Annual Report. For example, a 10% weakening in thevalue of the U.S. dollar in relation to the euro (i.e., a 10% change inthe U.S. dollar/euro exchange rate) would have decreased the net result fromordinary operations before amortization and impairment of goodwill in 2004 byapproximately 7%. Under the Company’s foreign exchange policy, translation risksin these subsidiaries are, in general, not hedged. This means that fluctuationsin exchange rates may positively or negatively affect results of operationsreported in euro.

 

Of Buhrmann’s externallong-term debt at December 31, 2004, approximately 80% was denominated inU.S. dollars and approximately 20% in other currencies after hedging. Buhrmannfinances its subsidiaries predominantly through internal debt denominated inlocal currencies. Exchange rate fluctuations may lead to currency translation adjustmentswhich may have a direct negative impact on the Buhrmann Group’s equity and maynegatively affect net result reported in euro.

 

*Inability to maintain and improve its information systemseffectively, and prevent and recover from serious breakdowns, could disruptBuhrmann’s business processes.*

 

Buhrmann needs tomaintain and consistently improve sophisticated information systems to grow itsbusinesses and achieve operating efficiencies. If Buhrmann fails to do so, itsinformation systems may not function correctly or efficiently, which could havean adverse effect on Buhrmann’s ability to perform administrative functions andprocess and distribute customer orders. This, in turn, could have an materialadverse impact on Buhrmann’s results of operations. Furthermore, in the eventof a serious breakdown of information systems, customers will expect a timelyrecovery. If Buhrmann fails to implement information technology improvements orrecover from serious breakdowns within the anticipated time frame, such failurecould have a material adverse effect on Buhrmann’s business, financialcondition and results of operations.

 

13

----

 

*If Buhrmann’s contract with Heidelberg were to beterminated, or Heidelberg were to cease operations, Buhrmann could lose most ofits Graphic Systems Division’s revenues.*

 

Buhrmann’s GraphicsSystems Division is the authorized distributor in a number of countries ofprinting equipment manufactured by Heidelberg. The Graphic Systems Divisionderives most of its revenues from the sale of that equipment. The exclusivedistribution agreement runs until June 30, 2008 but may be terminatedearlier by either party for cause. If Heidelberg were to terminate thedistribution agreement or cease operations (without a successor), Buhrmann’sbusiness, financial condition and results of operations could be materiallyadversely affected.

 

*If Buhrmann’s relationship with Microsoft were to beterminated, or Microsoft were to cease operations, Buhrmann could lose most ofits revenues derived from its specialty business, ASAP Software, Inc.*

 

ASAP is a distributor ofMicrosoft software in a number of countries. The Office Products North AmericaDivision derives more than half of its revenues from the sale of Microsoftproducts through ASAP’s operations. If Microsoft were to appoint a third-partyexclusive distributor of its products in the markets in which ASAP operates orotherwise terminate its relationship with ASAP, or cease operations (without asuccessor), Buhrmann’s business, financial condition and results of operationscould be materially adversely affected.

 

*Our restructuring programs may not achieve expectedbenefits.*

 

From time to time,Buhrmann implements restructuring programs, including reductions in the numberof staff. Buhrmann expects that these programs will result in structural costsavings and will improve Buhrmann’s operating results. However, thisexpectation involves a number of assumptions and uncertainties, and as aresult, Buhrmann may not achieve the expected benefits. The savings expectedfrom these programs are often significant and need to be realized on a timelybasis. Buhrmann has recorded reserves for these restructuring programs.Buhrmann cannot assure you that additional reserves for restructuring programswill not be required in the future as well. In addition, these restructuringprograms absorb management time and can interrupt normal business operations.

 

*Changes in the assumptions underlying Buhrmann’s estimatedutilization of its considerable amount of tax loss carry-forwards could have amaterial adverse impact on its tax assets and effective tax burden.*

 

Buhrmann has aconsiderable amount of tax loss carry-forwards, pursuant to which it recordsdeferred tax assets. In addition, Buhrmann records certain valuation allowancesto reduce these deferred tax assets to the amount that Buhrmann estimates thedeferred tax assets are likely to be realized. In determining these valuationallowances and deferred tax liabilities, Buhrmann takes into account estimatedfuture taxable income, tax planning, applicable limitations on the use of taxloss carry-forwards and the possibility that prior year tax returns will bechallenged by the tax authorities. If actual future taxable income is differentthan originally assessed, if tax planning fails to materialize, if limitationson the use of tax loss carry-forwards apply or if the possibility that prioryear tax returns will be challenged turn out to be different than originallyassessed, the valuation allowances on deferred tax assets and deferred taxliabilities may have to be adjusted which could have a material adverse affecton Buhrmann’s reported tax expense and net result in future years and acorresponding effect on its financial condition and results of operations.

 

*Volatility of the market for our Ordinary Shares, the 2014Notes and the Subordinated Convertible Bonds.*

 

The market price ofBuhrmann’s Ordinary Shares, the 2014 Notes and the Subordinated ConvertibleBonds could be subject to wide fluctuations in response to numerous factors,many of which are beyond the control of Buhrmann. These factors include, amongother things, actual or anticipated variations in operating results, earningsreleases by the Buhrmann Group and its competitors, changes in financialestimates by securities analysts, market conditions in the industry and thegeneral state of the securities market, governmental legislation or regulation,currency and exchange rate fluctuations, as well as general economic and marketconditions, such as recessions.

 

14

----

 

**Risks Relating to Our Industry**

 

*The demand for Buhrmann’s products and services relates tothe number of white collar workers employed by Buhrmann’s customers, and as aresult, to general economic conditions.*

 

Buhrmann’s OfficeProducts business is concentrated in North America, Western Europe andAustralia. The demand for Buhrmann’s products and services, most notably inoffice products, relates to the number of white collar workers employed byBuhrmann’s customers in these markets. An interruption of growth in thesemarkets or a reduction of white collar workers employed by Buhrmann’s customersmay adversely affect Buhrmann’s operating results. A downturn in the UnitedStates and other western economies has recently had an adverse impact on anumber of our customers, resulting in some cases in cutbacks in the employmentof white collar workers and the related cutbacks in expenditures for officesupplies and other products and services that we sell to them. Any futuregeneral economic downturn, together with the negative effect this has on thenumber of white collar workers employed, may adversely affect Buhrmann’sbusiness, financial condition and results of operations.

 

*Customers are able to reduce their spend per white collarworker on short term notice, by postponing the purchase of items or through thesubstitution of lower-cost items and services.*

 

Buhrmann’s customers may,on short notice, postpone or reduce spending on Buhrmann’s products andservices per white collar worker, for instance, through the use of oureCommerce platforms. As a result, our level of sales can significantly changeover a short period of time. In addition, customers may also, on short notice,substitute certain of Buhrmann’s products and services for its other, lowermargin, products and services. We cannot assure you that a significant amountof our customers will not choose to postpone, reduce or eliminate theirspending on short notice, whether in response to market conditions orotherwise. Any such postponement, reduction or substitution would adverselyaffect Buhrmann’s business, financial condition and results of operations.

 

*Although our customer base is spread over many industries andsectors, including government institutions, most of our customers are largecorporations or institutions which frequently re-tender their office productscontracts.*

 

Many of our large accountcustomers frequently re-tender their office products contracts in order to takeadvantage of the competitive pricing within the office products industries andachieved efficiencies in office products distribution. Although we have tens ofthousands of customers, and no single customer represents more than 1% of our revenues,the loss of several large account customers in a relatively short period as aresult of contract re-tendering could materially adversely affect our business,financial condition and results of operations.

 

*Buhrmann could lose market share and profit margins due toincreased competitive pressures, or due to a disruption in its service levels.*

 

Each of Buhrmann’sdivisions operates in a highly competitive market. Many of Buhrmann’scompetitors offer the same or similar products that Buhrmann offers to the samecustomers or potential customers. Some of Buhrmann’s competitors may haveadvantages over Buhrmann, including greater financial resources, bettertechnical capabilities, better marketing capabilities, the ability to adaptmore quickly to changing customer requirements, greater name recognition andthe ability to devote greater resources to developing, promoting and sellingtheir products. Also, new entrants in Buhrmann’s markets such as new Internetbased businesses may, by offering alternative distribution channels, alter thecompetitive landscape to Buhrmann’s disadvantage. If Buhrmann’s competitorssuccessfully exploit these advantages, they could force Buhrmann to lower itsprices or may cause Buhrmann to sell fewer of its products, either of whichcould adversely affect Buhrmann’s business, financial condition and results ofoperations.

 

15

----

 

Furthermore, thecontinuation of office products contracts with our existing customers, and thesuccessful retention of new office products contracts, primarily depends onpricing and service levels. We believe that one of the key factorsdifferentiating Buhrmann from its competitors is its ability to providecompetitive pricing on products combined with high quality service levels. Anydisruption in the service levels that our customers have come to expect from uscould result in the loss of their business to our competitors and adverselyimpact sales going-forward, which, in turn, could adversely affect Buhrmann’sbusiness, financial condition and results of operations.

 

*Our reliance on suppliers’ allowances and promotionalincentives could impact profitability.*

 

We derive importantbenefits from suppliers’ allowances and promotional incentives provided by certainsuppliers of products and services. We cannot be certain that we will be ableto take advantage of any such suppliers’ allowances and promotional incentivesthat may be offered.

 

Should any of our keysuppliers reduce or otherwise eliminate suppliers’ allowances and promotionalbenefits, our profit margin for these products and services may be harmed.These occurrences may have a material adverse effect on our business, financialcondition and results of operations.

 

*Revenues in Buhrmann’s Graphic Systems Division arecyclical.*

 

A substantial part of theGraphic Systems Division’s revenues derives from the sale of printing equipmentwhich is regarded as a high-value investment good. The demand for this type ofgood depends to a large extent on developments in macro-economic circumstances,particularly in relation to the activity levels at commercial printers, andinnovation of technology at the Graphic Systems Division’s main suppliers. As aresult, the Graphic Systems Division experiences cyclicality in its revenueswhich could adversely affect Buhrmann’s business, financial condition andresults of operations.

 

*There may be substantial differences between our financialcondition as reported under Dutch GAAP from the equivalent data we would reportunder IFRS.*

 

We prepare our financialstatements in accordance with Dutch GAAP. From January 1, 2005, allEuropean publicly listed companies are required to report on the basis ofInternational Financial Reporting Standards (IFRS). Buhrmann started preparingfor the transition in 2003, aiming to begin external reporting on the basis ofIFRS from the 2005 reporting periods onwards. Within the limits of the IFRSframework we strive towards convergence with our U.S. GAAP reporting. There maybe substantial differences between the results of operations, cash flows andfinancial condition Buhrmann reports under Dutch GAAP from the equivalent dataBuhrmann would report under IFRS. Some of the accounting standards under IFRS,including their practical implementation, are not yet fully finalized, but weexpect that the classification as debt of our Preference Shares A under IFRS,which are classified as part of shareholders’ equity under Dutch GAAP, willhave a material impact. In addition, the European Financial Reporting AdvisoryGroup has not yet fully endorsed the adoption of all IFRS standards. SeparateIFRS information may not be available for periods prior to our 2004 financialyear.

 

*Forward-Looking Statements.*

 

This document containscertain forward-looking statements concerning Buhrmann’s future operations,economic performances, financial conditions and financing plans, including suchthings as business strategy and measures to implement strategy, competitivestrengths, goals, expansion and Buhrmann’s business and operations andreferences to future success. These statements are based on certain assumptionsand analyses made by Buhrmann in light of its experience and its perception ofhistorical trends, current conditions and expected future developments as wellas other factors it believes are appropriate under the circumstances. However,whether actual results and developments will conform with Buhrmann’sexpectations and predictions is subject to a number of risks and uncertainties,including, among other things, the risk factors discussed above. Consequently,all of the forward-looking statements made in this document are qualified bythese cautionary statements, and there can be no assurance that the actualresults or developments anticipated by Buhrmann will be realized or, even ifsubstantially realized, that they will have the expected consequences for oreffects on Buhrmann and its subsidiaries or their business or operations.

 

16

----

 

**ITEM 4: INFORMATION ON THE COMPANY**

######  

**HISTORY AND DEVELOPMENT OF THECOMPANY**

 

**Company History**

 

Buhrmannwas incorporated in 1875 under the name Koninklijke NederlandschePapierfabrieken N.V. (KNP). In 1993, KNP merged with Buhrmann-Tetterode N.V.and VRG-Groep N.V., forming N.V. Koninklijke KNP BT (KNP BT). KNP BT was activein three main areas: paper manufacturing, packaging, and business services anddistribution. In 1997 and early 1998, certain strategic decisions were madeconcerning the future of KNP BT. As a result, in April 1997, theprotective and flexible packaging activities of KNP BT were divested for€454 million to Tenneco, Inc. and, in December 1997, the papermanufacturing subsidiary, KNP LEYKAM, was sold to Sappi Ltd. (Sappi), aSouth African paper group. In consideration for the sale of KNP LEYKAM, KNP BTreceived €335 million in the form of loan notes (sold immediatelyfollowing the closing for €307 million in cash) and 44.6 millionshares in Sappi. Buhrmann sold these shares in two tranches; 31.5 millionas part of a global offering by Sappi in November 1999 and in February 2001the remaining 13.1 million. The remainder of KNP BT’s packaging businesswas sold in June 1998 for €1.4 billion to CVC and Cinven, two venturecapital groups.

 

In August 1998,KNP BT was renamed Buhrmann NV, which can be regarded as the continuation ofKNP BT’s business services and distribution activities.

 

On October 28, 1999,Buhrmann acquired 100% of the outstanding capital stock of CorporateExpress Inc., a global supplier of office and computer supplies, officefurniture, imaging and computer graphic supplies and computer desktop software.The acquisition and the related refinancing costs amounted to approximately$2.9 billion, raised by means of the Senior Credit Facility in the amountof $1.9 billion, the issue of the 2009 Notes in the amount of$350 million, the issue of Preference Shares C in the amount of$350 million and €300 million newly issued Buhrmann Ordinary Shares.

 

In the first half of2000, Buhrmann divested its Information Systems Division (comprising valueadded resellers of personal computers, computer networks, peripheral equipmentand related services, as well as an information technology training business),which was no longer considered a core business.

 

In April 2001, theoffice products division of Samas Groep NV (Samas) was acquired for€321 million in cash and in May 2001 the North American officeproducts business of U.S. Office Products Company (USOP) was acquired for$172 million in cash. The Samas and USOP acquisitions were financed partlyby means of additional debt under the Senior Credit Facility and partly bymeans of an issue of Buhrmann Ordinary Shares in March 2001 which raised€665 million, net of expenses. A precondition for approval by the EuropeanCommission of the acquisition of the Samas office supplies division was thesale of the office products division of Buhrmann’s then existing Dutch officeproducts subsidiary. This sale was effected in November 2001.

 

In September 2001,Buhrmann listed American Depository Shares (ADSs), representing its OrdinaryShares, on the New York Stock Exchange. The ADSs are quoted under the symbol “BUH.”The ADSs, evidenced by American Depositary Receipts (ADRs), each represent oneOrdinary Share of Buhrmann NV. Buhrmann’s primary listing of Ordinary Sharesremains at Euronext N.V. in Amsterdam, quoted under the symbol “BUHR”.

 

With effect from October 31,2003, Buhrmann completed the sale of its Paper Merchanting Division toPaperlinX Limited, an Australian-based paper manufacturer. The Division wassold on a debt-free and cash-free basis for a base cash consideration of€706 million. The sale resulted in a net consideration of€637 million after deduction of estimated debt and cash and net assetvalue adjustments. The net consideration from the sale of the Paper MerchantingDivision was used to reduce the Company’s indebtedness by approximately€600 million. The remainder was used to pay various costs related to thetransaction.

 

17

----

 

In December 2003,Buhrmann completed the issuance of its €115 million SubordinatedConvertible Bonds and entered into the Senior Credit Facility in the amount ofup to €730 million. The net proceeds from the issuance of the SubordinatedConvertible Bonds and the Senior Credit Facility were used to reduce theCompany’s debt under the previous senior credit facility, which was enteredinto in 1999 when Corporate Express Inc. was acquired.

 

In July 2004, theTerm Loans B were replaced by Term Loans C with tranches of €50 millionand $503 million. This increased the borrowings under the Senior CreditFacility by $125 million. The other terms and conditions under the SeniorCredit Facility remained the same except for a reduction in the payableinterest margin. In addition, Buhrmann issued $150 million 2014 Notes in aprivate placement. These Notes were exchanged for newly registered bonds in October 2004.

 

The proceeds of both the2014 Notes and the increase in the Senior Credit Facility were, together withavailable cash, used for a tender offer of Buhrmann’s existing $350 million2009 Notes. The tender offer and redemption of these bonds was completed in September 2004.

 

The legal name of theCompany is Buhrmann NV (Naamloze Vennootschap). It is incorporated under thelaws of the Netherlands and has its statutory seat in Maastricht (theNetherlands). Buhrmann’s corporate head office is located at, and itsregistered office address is, Hoogoorddreef 62, 1101 BE Amsterdam ZO, theNetherlands. Our telephone number is +31 20 651 1111, and our website iswww.buhrmann.com. Information included on our website does not form part ofthis Annual Report. Our agent in the United States for service of process inconnection with the 2014 Notes is CT Corporation System, 111 Eighth Avenue,13th Floor, New York, New York 10011. The transfer agent, registrar anddepositary for the ADSs is The Bank of New York, located at 101 BarclayStreet, New York, NY 10286.

 

**Recentdevelopments**

 

*Repurchase PreferenceShares C*

 

On February 22,2005, Buhrmann reached agreement with all the holders of the PreferenceShares C regarding the purchase by Buhrmann of all 43,628 issued andoutstanding Preference Shares C for an aggregate purchase price of

$520 million in cashtogether with certain options to acquire Ordinary Shares of Buhrmann in certaindefined circumstances. For further information regarding the repurchase ofPreference Shares C, see Item 7 “Major Shareholders and Related PartyTransactions— Related Party Transactions— Holders of Preference Shares C”.Provided that all conditions are fulfilled, Buhrmann expects to complete therepurchase of the Preference Shares C on or about April 1, 2005.

 

From January 1, 2005 Buhrmann willreport its financial results on the basis of International Financial ReportingStandards (IFRS). Under IFRS, the Preference Shares C are accounted for asdebt, combining a liability calculated by using the historic effective interestmethod and a derivative using the fair value approach. Consequently, underIFRS, the repurchase of the Preference Shares C is expected to result in anexceptional charge of €80 million to €100 million in the first quarter of2005. The exceptional charge constitutes the difference between the value paidand the bookvalue, reflecting among others, accrued interest, the buy-backpremium of the conversion option and the value of the specific contractualrights attached to the Preference Shares C.

 

*Placementof 7 **7**/**8% SeniorSubordinated Notes due 2015*

 

On February 24, 2005Buhrmann announced that it had successfully placed *7**7/**8*%**SeniorSubordinated Notes due 2015 (2015 Notes) with an aggregate principal amount of$150 million.  The proceeds of the 2015Notes are intended to be used to finance the planned repurchase of thePreference Shares C, together with adiscounted rights issue of approximately €250 million and cash on hand.  The proceeds of the 2015 Notes are beingplaced in escrow pending the completion of the repurchase transaction, which isexpected to occur on or about April 1, 2005.

 

18

----

 

The 2015 Notes have beenissued at a price of 99.151% of the par value to institutional investors in theUnited States and in Europe through a private placement pursuant to Rule 144Aand Regulation S under the US Securities Act of 1933. The effective yield onthe 2015 Notes is 8%. This transaction was closed on March 2, 2005.

 

**BusinessOverview**

 

### *Introduction*

 

Buhrmann is an international business-to-business servicesand distribution group, supplying office products and graphic systems andrelated services for the business market. A combination of modern Internettechnology and advanced logistic processes allows Buhrmann to distribute itsproducts in an efficient way. Internet sales account for a growing proportionof the Company’s total sales.

 

We believe we are amarket leader based on revenue, in the business-to-business market for officeproducts in North America and Australia. We operate in these markets mostlyunder the name Corporate Express. In Europe, we believe that Corporate Expressis one of the market leaders, based on revenue. Furthermore, we believe that weare one of the largest independent distributors of graphic systems in Europe,based on revenue.

 

Buhrmann generated salesin 2004 of €5.5 billion. At the end of 2004, Buhrmann had approximately18,000 employees in 18 countries.

 

***Office Products***

 

Buhrmann believes that itis one of the world leaders in the sale, distribution and service of office andcomputer products to the business market, based on revenue. Products of thistype are ideally suited for Internet selling. The vast majority of Buhrmann’scustomers have Internet access. Orders can be placed more easily, efficientlyand accurately via the Internet than using traditional methods such astelephone or fax, where there is a greater risk of incorrect data input. Thecosts are also lower as the process circumvents a number of administrativetasks. Customers place e-commerce orders by accessing one of our websites.Buhrmann arranges next-day on-site delivery. Due to the geographical spread ofits activities, Buhrmann is able to offer a high level of service to companiesoperating on a worldwide basis.

 

***Graphic Systems***

 

Buhrmann’s graphicsystems business is active in six European countries, supplying graphicmachines, materials and related services to the graphic industry. Buhrmann isan authorized distributor for Heidelberger Druckmaschinen AG. In addition tothe well-known Heidelberg presses, Buhrmann sells pre-press systems, cutting,folding and binding equipment and also supplies consumables, such as ink andspare parts.

 

###### **Business strategy**

 

***Continued focus on growth***

 

We continue to focus ongrowth in our existing businesses through the consolidation of our leadershipin the large account segment, the penetration of the mid-market segment, thefurther growth of our private brand product ranges and the extension of ourproduct range across all our geographic markets. We may support the growth inour existing businesses with selective acquisitions. Over the past five yearswe have demonstrated the flexible and efficient nature of our business modelthrough the successful integration of three significant acquisitions (namelyCorporate Express, the office products business of USOP, and the officeproducts division of Samas) as well as a number of smaller acquisitions.Following up on these successful experiences, Buhrmann intends to pursue thisbalanced strategy.

 

19

----

 

***Increase sales by leveraging globalservice capabilities***

 

Buhrmann intends toincrease sales through continued emphasis on service quality across all of itsbusiness segments. Buhrmann believes that, in its Office Products businesssegment, service quality (for example fill rates, lead time, delivery reliabilityand a high degree of customization of ordering processes through adaptiveinformation technology solutions) and the ability to provide a breadth ofproduct offerings in a large number of markets are the key criteria that itscustomers consider when selecting suppliers for office products. Buhrmannbelieves that it will further strengthen its position with businesses andinstitutions in North America, Europe and Australia, as these entitiesincreasingly demand single-source suppliers for their global office productneeds. Furthermore, Buhrmann has also been stepping up efforts to reach out tosmall- and medium-sized office supplies customers who can benefit from a totalsupply solution. Buhrmann can help these customers fulfill their sourcing needsin addition to lowering their overall supply chain costs.

 

***Consolidate market positions***

 

In our core OfficeProducts business segment aimed at strategic and large accounts, we willcontinue to consolidate our prominent market positions, while increasing ourglobal contract business through which we provide office products sourcingcoverage for global customers who operate in our North American, European andAustralian markets.

 

***Extend product lines***

 

By further leveraging itsdistribution network through product range extensions including forms,promotional items, facility, break room and safety supplies, Buhrmann hasexpanded its product-line. We will continue to focus on broadening our productline in order to further increase growth in our existing business.

 

***Extend our customer base***

 

We believe that in ourmajor geographical markets the strategic and large accounts market segmentrepresents approximately 80% of our total sales. Small- and medium-sizedcompanies account for the remainder of our total office product sales. We seekto increase sales to small- and medium-sized companies with a goal ofincreasing our overall customer base across different market segments and toutilize more fully the capacity of our distribution infrastructure.

 

***Expand private brands***

 

Buhrmann has alsosuccessfully introduced private brand product ranges, of which the “CorporateExpress” brand name is the most important. The extension of the private brandrange has positively impacted gross margins and operational profitability andit represents a profit growth opportunity which Buhrmann will continue toexploit.

 

***Extend preferred supplier relations***

 

Buhrmann actively pursuesa strategy of working with fewer, more strategic suppliers for a growing numberof product categories. Category management is an essential part of ourmerchandising strategy. By strategically sourcing a core range of consumablesupplies for our customers’ business environment from preferred suppliers, weare able to streamline the supply chain and improve our cost base. Thispreferred supplier initiative has positively impacted gross margins andoperational profitability and it represents a profit growth opportunity whichBuhrmann will continue to exploit.

 

***Focus on improving operating margins***

 

Buhrmann has identifiedopportunities to improve the operating margins in each of its businesssegments. In the Office Products Divisions, Buhrmann will try to improveoperating margins by (i) engaging in targeted marketing programs toincrease sales of value-added products that carry higher margins,(ii) eliminating unprofitable product lines and (iii) centralizing orregionalizing certain administrative and operational functions. In the GraphicSystems Division,

 

20

----

 

Buhrmannwill continue to develop its Triple S (service, supplies and spare parts) inorder to reduce the effect of cyclicality of equipment sales on the operatingmargin of this Division.

 

***Risks associated with our strategy***

 

You should also consider the risks we face that could limitour ability to implement our business strategies, including:

 

•                  a reduction in the number of white collar workersemployed by our customers or a reduction in the spending per white collarworker could adversely affect growth in our existing businesses;

 

•                  if we do not efficiently manage our growth, whetherthrough organic growth or as a result of acquisitions, we may not fully realizethe expected growth of our revenues;

 

•                  the terms of our debt may limit our flexibility inplanning for, or reacting to, changes in our business and the industry in whichwe operate and may limit our ability to, among other things, make acquisitions;

 

•                  if we are unable to maintain and improve ourinformation systems in a timely manner in order to correctly and efficientlyprocess and distribute customers’ orders on a global basis, this couldadversely affect our ability to successfully leverage our global servicecapabilities;

 

•                  the highly competitive nature of the markets inwhich we operate, combined with the fact that many of our competitors offer thesame or similar products, could adversely affect our ability to extend ourcustomer base and maintain our existing customers resulting in a loss of marketshare; and

 

•                  our strategy for the improvement of operatingmargins relies on the successful implementation of certain measures which maynot be sufficiently realized.

 

In addition, while we mayimplement individual elements of our strategies, the benefits derived from suchimplementation may be mitigated in part, or in whole, if we suffer from one ormore of the risks described in this Annual Report. As a result of these orother risks, we may decide to alter or discontinue aspects of our strategy andmay adopt alternative or additional strategies. Any failure to successfullyimplement our strategies could adversely affect our business, results ofoperation or financial condition. See “Risk Factors” and “Disclosure RegardingForward-Looking Statements.”

 

**Industry Trends**

 

### *Globalization/outsourcing*

 

Our customers areincreasingly concentrating their purchase volumes of office products or relatedproducts, while the customers expect delivery and services rendered to multiplelocations. In addition, customers concentrate on their key processes, whilethey outsource non-strategic tasks. We believe this trend has contributed tothe formation of our global office products business.

 

*Size and scale/consolidation*

 

In order to service ourcustomers, extensive logistical, sales and information technology infrastructureis required. In addition, purchasing volumes determine largely how attractiveproducts can be sourced. These factors underlie the economies of scale of ourbusiness model, hence the trend in our industry for the formation of largerentities in Office Products.

 

21

----

 

*Internet/eCommerce*

 

Due to the low value perorder, high order volume, dispersed ordering points at our customers, extensiveassortments and relatively high administrative costs, our business model issuitable for eCommerce developments. This has resulted in significant growth ofvolumes sold over the Internet.

 

*Service*

 

Notwithstanding theimportance of attractive pricing and ease of ordering, service in terms ofquick and complete delivery is essential in our industry.

 

*Seasonality*

 

The seasonality of salesin the office products business segment is limited as sales primarily relate toemployees at work in the office. Therefore, sales in this segment are spreadmore or less in accordance with the effective working days in a quarter.Discretionary items such as software or furniture are typically negotiated atmonth or quarter ends. In the Graphic Systems Division, historically, mostprinting presses are sold in the last quarter of the fiscal year.

 

22

----

 

**DIVISIONAL OVERVIEW**

 

Buhrmann’s business activities are organized into fourdivisions. These are the three Office Products Divisions of North America,Europe and Australia and the Graphic Systems Division. For reporting purposes,the Office Products Europe Division and Office Products Australia Division arecombined. Therefore, both of them are addressed together in this section.

 

## **OfficeProducts North America**

 

Key figures (in millionsof euro, except number of employees)

 
| ** **                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                       |       | 3,628    |       | 3,939    |       | 4,931    |       |
| Operating result                |       | 138      |       | 115      |       | (273     | )          |
| Number of employees at year-end |       | 10,544   |       | 10,775   |       | 12,211   |       |

 

*General*

 

We believe our OfficeProducts North America Division is a market leader, based on revenue, in thebusiness-to-business market for office products and related services in theUnited States and Canada. Its Office Products business operates under the nameCorporate Express (Corporate Express North America). Corporate Express NorthAmerica manages a dynamic assortment of about 50,000 items. Its product rangeencompasses office products, computer and imaging supplies, furniture,promotional marketing products, forms management services, and, increasingly in2003 and 2004, facility, break room and safety supplies. Corporate ExpressNorth America has more than 200 facilities, including 38 distribution centers,and approximately 1,400 dedicated delivery vehicles, which helps providecustomers with next business day delivery services and has approximately 10,500employees, including approximately 2,500 sales and marketing representatives.The Division’s head office is located in Broomfield, Colorado. The OfficeProducts North America Division also includes ASAP (distributor of desktopsoftware).

 

Buhrmann believes thatlarge companies are increasingly opting to use a single supplier in order toconsolidate purchasing power and eliminate the internal costs associated withmultiple invoices, multiple deliveries, complex and varied ordering procedures,uneven service levels and inconsistent product availability. Many largecompanies operate from multiple locations and can benefit from selectingsuppliers who can service them in many of their locations.

 

*Industry overview*

 

The office productsindustry consists primarily of companies that operate in one or more of threebroad sales channels: the contract stationer (or contract distribution)channel, the direct marketing channel and the retail channel. Contractdistributors typically serve medium- and large-size business customers throughthe use of a product catalog and a direct sales organization and typicallystock certain products in distribution centers and deliver these products tocustomers on the next business day. The major contract stationers carry asignificant proportion of their merchandise in-stock, relying only uponwholesaler intermediaries for inventory backup and increased product breadth,while smaller contract distributors carry a much smaller portion of theirmerchandise in stock. Direct marketers of office products typically targetsmall business customers and home offices. While their procurement and orderfulfillment functions are similar to contract stationers, direct marketers relyalmost exclusively on catalogs and other direct marketing programs, rather thandirect sales forces, to sell their products, and generally use third parties todeliver products. Office product retailers typically serve smaller businesses,home offices and individual customers.

 

The non-store business-to-businessoffice product distribution industry in North America has been rapidlyconsolidating and undergoing other significant changes. As a result of thisconsolidation, the number of independent, mid-size office products contractdistribution companies has declined significantly. Large companies (includingCorporate Express North America) serving a broad range of customers haveacquired many of these smaller businesses. As the office products industrycontinues to consolidate, Buhrmann believes that many of the remaining smalleroffice products distribution companies will be unable to compete effectivelydue, in part, to their inability to purchase products

 

23

----

 

atfavorable prices or provide all of the services customers require. Buhrmannexpects that many of these independent businesses will be acquired by largercompanies or will cease to operate. Medium- and large-size companies, themarket segments in which Corporate Express North America operates, areincreasingly opting to use a single national supplier. Central purchasing ofoffice products (such as office supplies, computer supplies and officefurniture) and services provides several advantages for customers. For example,a customer could take advantage of the economies of scale Corporate ExpressNorth America offers and achieve uniformity in its office products services anddistribution company-wide, while reducing its procurement process costs bydealing with one supplier and a uniform system.

 

*Strateg**y***

 

In 2003, CorporateExpress North America completed its restructuring program announced in December 2002.Increased efficiencies were realized by centralizing and right-sizing theoperation. Back-office functions have been harmonized and were brought togetherto a large extent in one shared service center. Since early 2003, anenterprise-wide information system has been fully deployed throughout theUnited States. Following the completion of this integration and restructuring,Corporate Express North America, is now fully focused on driving growth in itsexisting businesses through a number of strategic initiatives.

 

Corporate Express NorthAmerica aims to consolidate its leading position in the strategic and largeclient segment, which represents approximately 80% of sales. We believe ourdedicated strategic sales organization should drive sales conversion,penetration and retention across product lines with large and strategicaccounts. Additionally, Corporate Express North America is focusing on growingsales in the small- and medium-sized enterprise market segment. Our approachconsists of database marketing techniques as part of an integrated sales effortutilizing direct sales, telemarketing sales, integrated sales teams, directmail, email and other communication tools to optimize customer contacts.

 

In addition, we aim tocontinue leveraging our strong core distribution channel to extend CorporateExpress North America’s product range, with a particular focus on thefacilities, break room and safety supplies market which we believe issignificant in size.

 

Corporate Express NorthAmerica is also pursuing various global sourcing initiatives including formingpartnerships with key suppliers on a global basis in order to maximizepurchasing power and expanding private brands, which should increase sourcingpotential, brand awareness and customer loyalty and contribute to improvingmargins.

 

Buhrmann is also asignificant provider of desktop software to organizations through itssubsidiary, ASAP. Together with its partners, ASAP helps its clients purchase,manage and deploy software solutions and volume licensing programs. ASAP plansto expand by gaining market share in the segment of small- and medium-sizedorganizations and by penetrating new geographic markets, mostly in Europe. Itwill further enhance its strong technological position by integrating itssystems into a single worldwide application, introducing an enhanced eBusinesscapability into new markets, and expanding the scope of its offering ofmanagement tools for monitoring software installation, utilization andlicensing.

 

24

----

 

*Product offerings*

 

Corporate Express North America offers its customers a fullrange of office products, including:

 

•                  traditional consumable office supplies, such aspencils, pens, paper clips, paper and writing pads;

 

•                  consumable computer products, including toner andinkjet cartridges, magnetic media products, CDs, and diskettes;

 

•                  office furniture such as desks, filing cabinets andchairs;

 

•                  desktop software products such as well knownoperating systems and applications as well as anti-virus applications and CDlabel printing software;

 

•                  digital printing equipment and services, includingcopiers;

 

•                  print and forms management services, such asbusiness cards, general business forms, labels and direct mail;

 

•                  customized corporate gifts and promotional itemssuch as caps and mugs;

 

•                  facility equipment and supplies, such as papertowels, liquid soap and dusters;

 

•                  break room supplies, including coffee, plastic cupsand chewing gum; and

 

•                  safety equipment and supplies, such as padlocks andfire extinguishers.

 

*Sales and marketing*

 

The marketing strategy isdesigned to increase the customer base of medium- and large-sized businessesand institutions by flexibly and responsively demonstrating to customers andpotential customers that the total overall cost of managing their officeproducts needs can be reduced by focusing on process alignment. CorporateExpress North America works with customers to simplify and reduce the costs ofthe office product procurement process by providing services such ascustomized, sophisticated e-commerce procurement solutions.

 

Corporate Express NorthAmerica markets its products and services to customers using a centrallyproduced catalog of its products and services. A large part of the productsoffered in these full-line catalogs are kept in stock at the distributioncenters. Additionally, Corporate Express North America is linked electronicallyto certain wholesalers so that items not in stock can also be delivered to acustomer on a next-day basis. In addition to the full-line catalog, CorporateExpress North America produces a substantial number of customized andpromotional catalogs. Customers can also place orders through the Internetusing E-Way, Corporate Express North America’s full-line Internet orderingsystem.

 

Corporate Express NorthAmerica markets and sells its products and services to both contract andnon-contract business customers through a network of national account managersservicing national accounts and local employee sales representatives. Contractcustomers enter into agreements setting prices for certain products over aparticular time period. The primary responsibility and priority of the nationalaccount managers is to acquire, retain and increase sales of the wide array ofproducts and services to large, multiple location customers.

 

25

----

 

 

Account managers are assigneda list of prospective customers for whom the account manager takesresponsibility in directing all marketing efforts. Additional responsibilitiesof the account managers include designing and implementing customizedmerchandise and service packages for each of their accounts as well asresponding to all special service requests. A company-wide network of personneland resources supports all account managers, including information technologyresources. The local sales force is generally commission-based and is organizedwithin each of the major customer segments with specialists in each of theproduct categories. In order to maximize the productivity as well as theproduct and service knowledge of the sales force, Corporate Express NorthAmerica is focusing on expanding its national account customer base to increasethe cross-selling opportunities among its various product lines and gainingshare in the mid-market by structuring the sales force to reflect customersegmentation.

 

*Logistics and Purchasing*

 

Corporate Express NorthAmerica receives approximately 65% of its office supplies orders through EDIsystems and through E-Way, its electronic commerce ordering and fulfillmentsystem, and the remaining amount of its orders by telephone, fax, mail-in purchaseorder and other traditional methods. After an order has been placed, pickingdocuments are created for those items in stock and routed to the appropriatedistribution center for order fulfillment. At the same time, the EDI systemstransmit those portions of the orders not in stock to the vendors andwholesalers. Corporate Express North America is able to acquire many itemsunavailable in their own inventory on the same day and to combine such itemswith the in-stock items to yield a first time fill rate in the United Statesexceeding 99%.

 

The Division’s largerdistribution centers typically have in stock over 10,000 SKUs of officeproducts. The most popular items are contained in Corporate Express NorthAmerica’s catalog available in both printed and electronic versions, providinga comprehensive selection of more than 13,000 items in the core categories ofoffice and computer supplies. Corporate Express North America offers brandssuch as 3M, Microsoft and Hewlett-Packard, as well as its own “CorporateExpress” private label. A large majority of these items are maintained ininventory in the distribution centers. Corporate Express North America also hasaccess, through EDI and other supplier ordering systems, to about 50,000 SKUsof office supplies, computer supplies and catalog furniture from wholesalersand other suppliers, enabling it to provide its customers with immediate accessto a broad range of products, including those not stocked at its facilities.Corporate Express North America provides a wide variety of customized valueadded services, such as customer specific electronic catalogs, which aredesigned to reduce the customer’s total overall cost of managing its officeproducts needs.

 

Most of the distributioncenters use bar coding, radio frequency and scanning technology to ensureaccuracy and efficiency. After an order is picked and packed, conveyors andoverhead scanning systems are utilized to route and manifest outgoing customers’deliveries. Significant detailed reporting is available to optimize warehouseproductivity, inventory turns, SKU selection and to evaluate vendorperformance.

 

The distribution centersgenerally have a logistical reach of up to approximately four to five hours bytruck in any direction and a combination of owned vehicles and third-partydelivery services are used to deliver office products. Corporate Express NorthAmerica typically operates from a single regional distribution center thatgenerally supports multiple distribution breakpoints and satellite sales offices.

 

Corporate Express NorthAmerica intends to continue to invest in enhanced warehouse and distributiontechnology in order to improve customer service capabilities. Technologies suchas “Pick-to-Voice” (automated voice picking technology) in its distributioncenters increase the group’s ability to assemble multi-line orders accuratelyand efficiently. Another example is “RoadNet”, a program for vehicles thatdirects deliveries quickly. During 2002, two new technologically advanceddistribution centers went on line in the New York and Los Angeles metropolitanareas. In 2003, another state-of-the-art distribution center was opened inBaltimore serving the Baltimore/Washington DC metropolitan area.

 

26

----

 

Corporate Express NorthAmerica purchases a large majority of the products in volume directly frommanufacturers or major office products wholesalers, who deliver the merchandiseto each of the distribution centers.

 

To maximize itspurchasing capabilities, Buhrmann’s purchasing strategy has been to establishpreferred relations with certain suppliers with whom it can capitalize onpurchasing economies. This “preferred supplier” strategy creates advantageouspricing relationships and has led to competition among suppliers for inclusionin this group. To further maximize its purchasing power, Corporate ExpressNorth America has been consolidating, and will continue to consolidate, itspurchases from key suppliers to increase its importance to those suppliers, includingthe sourcing of the office products sold under the private brand names, ofwhich “Corporate Express” is the most important. Additionally, CorporateExpress North America has utilized, and will continue to utilize, the abilityto further consolidate sourcing by combining with the European and AustralianOffice Products Divisions as part of the purchasing strategy.

 

*Competition*

 

Corporate Expressoperates in North America in a highly competitive environment. The primarycompetitive factors in the North American office products distribution industryare service, ability to customize supply chain efficiency and productofferings, including price. The North American office products industry isestimated to be $100 billion to $120 billion, including retail.

 

The principalcompetitors, varying in the different regions, are national office productsdistributors, traditional contract stationers, direct mail order companies,retail office products superstores and stationery stores. The target market ismedium and large-sized businesses and other institutions. Buhrmann believesthat existing customers and potential customers in this market prefer to dealwith large value-added office products distributors, which can provide thelowest total overall cost of managing their office products needs, high levelsof service, convenience and rapid delivery.

 

The largest competitorsare the Contract Division of OfficeMax, Inc. and the Business ServicesDivisions of Office Depot, Inc. and Staples, Inc. These businesses,and many smaller office products distributors and other businesses penetratingthe office products market, compete for and sell office products to many of thesame kind of customers as Corporate Express. Buhrmann believes that CorporateExpress competes favorably with these companies on the basis of its customizedand value-added services and the breadth of its product offerings. On the otherhand, some of our main competitors have greater financial resources thanBuhrmann and, particularly in the case of the retail office product superstoresin the United States, significant name recognition.

 

*Information technology*

 

Corporate Express NorthAmerica currently employs automated order entry, EDI, reporting and otherinformation technology systems designed to decrease response times and errorrates and improve customer service, and has several operating systems toenhance its operations. E-Way is the Internet on-line catalog ordering system,which generates an increasing amount of fully automated orders, thus reducingcosts for both the customers and Corporate Express.

 

This system is linked tothe general order entry system, called ISIS. Key features of the ISIS systeminclude the use of three-tier client server architecture that allows customersand suppliers to better communicate with Corporate Express, object orienteddesign techniques, and a relational database designed to handle customerinquiry, data warehouse, and management information applications.

 

Through theimplementation of these enhanced systems, Buhrmann plans to make the productsand services available to a broader range of customers and to furtherpersonalize customer services and account information while lowering thecustomer’s overall procurement cost.

 

27

----

 

 

Corporate Express NorthAmerica also provides its customers with billing and usage information in hardcopy, magnetic tape, cartridge or diskette media, in each case designed to aparticular customer’s specifications. Customized cost center billing allows acustomer with this assistance to analyze and rationalize its ordering and usageof office supplies and to use such information for budgeting purposes.

 

The informationinitiatives and administrative programs, together with the increased sales and purchasingpower, are designed to decrease operating costs as a percentage of sales andincrease operating profitability.

 

**Office Products Europe and Australia**

 

Key figures (in millionsof euro, except number of employees)

 
| ** **                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                       |       | 1,500    |       | 1,479    |       | 1,540    |       |
| Operating Result                |       | 47       |       | (23      | )          | (75      | )          |
| Number of employees at year-end |       | 6,003    |       | 5,873    |       | 6,023    |       |

 

*Genera**l***

 

The Office ProductsEurope Division, operating under the name Corporate Express (Corporate ExpressEurope), is a supplier and service provider of office supplies: stationery,office papers, information technology consumables, office furniture,presentation equipment, document printing equipment (including copiers, faxmachines and printers), promotional products, telecommunications and facilitymanagement. Corporate Express Europe operates from approximately 130 locationsin Austria, Belgium, Germany, France, Hungary, Ireland, Italy, Luxembourg, theNetherlands, Poland, Sweden and the United Kingdom, and employs approximately3,800 employees. Through partnerships in countries like Denmark, Norway, Spain,Slovenia and Switzerland, Corporate Express Europe has a European network thatspans 24 nations in total.

 

Also operating under thename of Corporate Express is the Australian Office Products Division (CorporateExpress Australia), covering both Australia and New Zealand. We believe thatCorporate Express Australia is one of the largest providers of office productsand related services in the region, based on revenue. Corporate ExpressAustralia employs approximately 2,200 staff and services customers from 49locations throughout Australia and New Zealand.

 

*Industry overview*

 

The office productsbusiness in most major international markets is following similar trends tothose seen in the United States in recent years. The industry in Europe isfragmented and is being consolidated by major office product distributors,including Corporate Express. As in the United States, large contract stationersare establishing customer relationships with medium and large corporations thatare seeking to lower the cost of procurement for consumable office supplies. Inthe case of smaller customers, the direct marketing segment is developing inglobal markets, especially in Europe. The retail superstore concept in theUnited States is not as widely accepted in other international markets, due tothe high cost of real estate in major global markets and strong ties betweensmall end-users and traditional small retail dealers. There is growinginterest, particularly in European markets, in multinational relationshipsbetween large global corporations and the major contract stationers withinternational operations, such as Corporate Express. Increasingly, medium- andlarge-sized companies, the market segment where Corporate Express Europeoperates, are opting to use a single pan-European supplier. There are severaladvantages for customers which use central purchasing of office supplies,office furniture, machines and services. For example, a customer could takeadvantage of the economies of scale offered by Corporate Express Europe andachieve uniformity in its office products services and distributioncompany-wide while reducing procurement process costs by dealing with onesupplier and system.

 

28

----

 

*Strategy*

 

Corporate Express Europecontinues to harmonize its European business and operations and to integrateits international account management in order to strengthen its position as afull-service distributor of office products and related services to businessesand institutions in Europe. In 2003, Corporate Express Europe focused on costsavings and right-sizing the organization. Headcount was reduced and CorporateExpress Europe continued to strengthen management and sales. Certain Europeanfunctions, like purchasing, international account management, internationalcategory management and eCommerce management, have been centralized on aEuropean level in Amsterdam.

 

We continue to strengthenour sales organization, particularly in Germany, Benelux, the United Kingdomand France. With management concentrating on an extended period of integrationand restructuring in recent years, development of dedicated sales organizationsfor each market sector has been a mixed success. Also hampered by unfavorableeconomic circumstances, our major operating companies were unable to fulfilltheir ambitions to boost top-line growth. Nevertheless, significant progresshas been made in stabilizing the business and ramping up new prospects.

 

Corporate Express Europewill continue to focus on growth of its existing business. We believe CorporateExpress Europe can leverage its strong infrastructure and informationtechnology systems to enable it to offer its customers a superior officeproducts procurement solution through a single source. We believe significantopportunities exist to allow Corporate Express Europe to gain market share inevery national market in the market segments for medium- and large-sizedcompanies.

 

We have clustered ourmerchandising organization into four regions (Central, West, South and North).The markets within each region show a similarity in product assortment,customer usage habits and brand presence. The four regions are supported bycentralized procurement, marketing and international sales organizations.

 

Corporate ExpressAustralia’s growth strategy focuses on being the single-source provider ofchoice via expanding its product range and geographic coverage through organicgrowth and continued acquisitions, to gain a larger share of its existingcustomers’ business. In addition, Corporate Express Australia will increasinglyaim to expand its customer base by focusing on the small and medium-sizedenterprise market segments.

 

*Product Offerings*

 

Corporate Express Europeoffers its customers a full range of office products, including office supplies(such as computer supplies, stationery and office paper), office furniture,copiers and office equipment. It also offers services relating to advertisingspecialty and promotional products and business (printing and distribution)forms. Corporate Express Europe increasingly acts as a single-source supplierwith print-forms, janitorial and catering products. Corporate Express Europehas approximately 5,000 to 6,000 SKUs of office supplies contained in itsseparate European country catalogs. It also has access, through its EDI andother ordering systems, to thousands of additional SKUs of office supplies,computer supplies and catalog furniture from wholesalers and other suppliers,enabling Corporate Express Europe to provide its customers with immediateaccess to an increasing range of products. Corporate Express Europe has astrong private brand, “Corporate Express”, which accounts for approximately 25%of its office supplies sales. Corporate Express Europe will seek to increasethe percentage of office supplies sales attributable to the “Corporate Express”brand, through leveraging existing distribution networks.

 

The Australian and NewZealand businesses also offer customers a comprehensive range of supplies forthe office, including computer supplies, stationery, information technologyproducts, office furniture, facility and break room, print and forms managementand promotional products. The private brand “EXP,” available throughoutAustralia and New Zealand, provides customers with high-quality, cost-savingproduct alternatives. The EXP private brand program continues to expand,developing the brand as an alternative to the higher cost original products.

 

29

----

 

 

*Sales and marketing*

 

Products are marketedthrough a dedicated sales force in each national market which focuses on medium-to large-size accounts using catalogs of the product and service offerings.Buhrmann works with customers to simplify and reduce the costs of the officeproduct procurement process by providing services such as customized andtailored catalogs and electronic ordering and information systems. Buhrmannintends to make greater use of direct marketing, through eCommerce andtelephone sales to small customers in an effort to reduce costs and to growsales.

 

Corporate Express Europe markets its products and servicesto customers through a local dedicated sales force using a separate full-colorcatalog of its product and service offerings in each country. Corporate Expressruns a European catalog which contains a range of approximately 2,800 commonarticles to all the markets plus approximately 3,000 additional products, whichare specific for the local markets. The catalog is also available in CorporateExpress’ eCommerce tool, as well as on CD-ROM. Corporate Express Europedeveloped a new pan-European catalog that is increasingly being used by itsinternational customers throughout Europe. It believes that the new catalogwill be helpful to its international customers, in that the customers will havea uniform catalog of items available for immediate delivery to any of thecustomers’ European locations. The catalog will also enhance the image and presenceof Corporate Express as an international player in the European office productsindustry.

 

Corporate Express Europeemploys a “differentiated sales approach” whereby it tailors its sales approachto the type of customer Corporate Express is targeting. For example, aninternational account management approach is frequently used for largeinternational companies, while direct marketing is more appropriate for smalloffice and home office operations. Corporate Express Europe keeps most of theoffice products it offers in its catalogs in stock at its distribution centers.Additionally, Corporate Express maintains electronic links to certain suppliersso that items not in stock can be delivered to a customer on a next-day basisand it can better manage its inventory levels. In addition to Corporate Express’main catalogs, Corporate Express Europe produces a substantial number ofcustomized and promotional catalogs. Together, Corporate Express Europe’s localsales force and catalogs are key elements of its marketing strategy.

 

Leveraging its broadgeographic infrastructure, linked via one computer system, Corporate ExpressAustralia is able to offer customers a common national service with outletslocated throughout Australia and New Zealand. A specialist national accountsteam, offering a high level of service, manages these national customers.Corporate Express Australia also employs new sales channels such astelemarketing and direct mail to reach customers efficiently.

 

*Logistics and Purchasing*

 

Corporate Express Europereceives orders increasingly through eCommerce, as well as by telephone, faxand other traditional methods. Orders are routed to the warehouse to be pickedup. Corporate Express Europe achieves an average first order fill ratio of over95%. The distribution centers use different technologies for picking up ordersand delivery. Corporate Express Europe has decided to change or replace methodsand systems for those distribution centers that have become obsolete orinefficient operations or for which the capacity must be extended in order toserve more customers. New distribution centers in the Netherlands and theUnited Kingdom were built in 2002 and 2003 to replace regional distributioncenters.

 

The distribution centers use conveyor belts, automatic barcode scanning, (pallet) flow racks, wave-based order picking, weight checks andcase calculation, all with the objective of achieving high quality andefficiency. Corporate Express Europe has introduced a new warehouse managementsystem that has improved the operational control of all the pick and packactivities, as well as all resource management activities. Corporate ExpressEurope uses different transportation options, such as delivery by truck andparcel services. The transportation method chosen depends on the size of theorder and the location of the customer. Corporate Express Europe both ownsdelivery trucks and contracts deliveries out to third parties.

 

Corporate Express Europepurchases most of its products in high volume, directly from manufacturers whodeliver the merchandise to distribution centers. Corporate Express’ goal hasbeen to establish strong relationships with a limited number of suppliers witha view to achieving both lower prices and lower inventory levels as a result ofthe suppliers’ willingness to provide prompt delivery out of their inventory.Corporate Express Europe has accomplished this

 

30

----

 

byentering into agreements to purchase large quantities from certain suppliers ona centralized basis. It is then able to negotiate favorable discounts andrebates that apply to purchases by all of Corporate Express’ branches. Thisstrategy has led to competition among certain suppliers to be chosen as one ofits suppliers. As a result, Corporate Express Europe will consider furtherconsolidating its purchases from key suppliers to increase its importance tothose suppliers, thereby increasing its bargaining power with its largestsuppliers.

 

Certain of CorporateExpress Europe’s suppliers are linked through EDI with its on-line order entrysystem. If products ordered through the Corporate Express’ on-line order entrysystem are not in stock, Corporate Express purchases such productsautomatically through EDI from such suppliers. The suppliers deliver theseproducts to Corporate Express’ warehouses in time for next-day delivery to thecustomer.

 

Corporate ExpressAustralia has achieved a rationalization in supply partners in Australia andNew Zealand. That rationalization has resulted in increased trading with aconsolidated group of major suppliers. It also increases the level of serviceavailable to customers, while reducing costs through efficiency in the supplychain and elimination of duplicative processes.

 

*Competition*

 

Corporate Express Europeoperates in a highly competitive environment. The two most significantcompetitive factors in the office products distribution industry in Europe areservice (including, in particular, delivery speed and reliability) and price.New elements in the competitive environment are the power of eCommerce and theability to deliver products to a customer on a pan-European basis. Having awide variety of product offerings can also give a company in the industry acertain competitive advantage. Product quality is less significant than in manyother industries, due to the perceived uniformity of products.

 

The office productsindustry in Europe is highly fragmented, with no single company accounting formore than 10% of the total European market. Corporate Express Europe offers awide variety of products and services, and frequently competes againstcompanies that focus on only a few products or categories of products.Corporate Express Europe’s competitors include national office productsdistributors, traditional contract stationers, direct mail order companies,e-tailers and portals and, to a lesser extent, office products superstores andstationery stores. Its principal competitors include Lyreco and Guilbert/OfficeDepot. In addition, Corporate Express Europe faces increasing competition fromdirect marketing companies.

 

Corporate Express Europe’starget market is medium- and large-sized businesses and other institutions. Itbelieves that existing customers and potential customers in this market preferto deal with large value added office products distributors, such as CorporateExpress, which can provide customers the lowest total overall costs of managingtheir office products needs, high levels of service, convenience and rapiddelivery.

 

We believe that CorporateExpress Australia is the market leader in the office products market inAustralia and is placed second in this respect in New Zealand, based onrevenue. Corporate Express Australia has demonstrated an ability to maintainthese leading market positions in the past five years.

 

*Information technology*

 

The office productsindustry is witnessing strong growth in the number of orders placed on-line.The option of placing orders on-line supplements the other common methods ofplacing orders such as by telephone, fax and PC-based remote order entry.Corporate Express Europe currently uses a variety of national electronic retailprice systems for sales, order entry and warehouse management applications as aresult of the different systems used by the numerous businesses it acquiredover the last few years.

 

31

----

 

In 2003, CorporateExpress Europe started to replace “SyntraNet” with the new generation “ExpressNet®”,which allows for the on-line placement of orders. ExpressNet was enhanced and,since 2004, four solutions have been operational which offer varying levels offeatures and integration solutions tailored to each market segment:

 

•                  ExpressConnect for strategic and large accounts, asoftware solution that interfaces with customer systems, delivering 100% dataintegration;

 

•                  ExpressProcure for large organizations, aneProcurement service that offers on-line supply chain management tools;

 

•                  ExpressOrder for medium-sized companies, an easy touse Internet-based ordering system; and

 

•                  ExpressDirect, an open web shop for smallbusinesses.

 

Our catalog databasemanagement system enables Corporate Express Europe to produce catalogs in aflexible and efficient manner. In particular, Corporate Express Europe expectsto be able to produce customer-specific catalogs that can be printed at thecustomers’ premises by sales staff using their laptop computers.

 

Customers of CorporateExpress Australia increasingly use its Internet ordering site, NetXpress.biz,one of the most transacted business-to-business systems in Australia. Sales viathe Internet represented 53% of Corporate Express Australia’s total linesordered at the end of 2004, down from 56% in 2003, and continues to provide anexcellent cost saving alternative to traditional paper-based processes.Customers using the Internet are able to increase expenditure control via userlog-in and tailored product selection. They are also able to speed up theirordering process by viewing stock availability and pricing.

 

**Graphic Systems**

 

Key figures (in millionsof euro, except number of employees)

 
| ** **                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                       |       | 411      |       | 369      |       | 489      |       |
| Operating Result                |       | 0        |       | (13      | )          | 23       |       |
| Number of employees at year-end |       | 1,002    |       | 1,114    |       | 1,139    |       |

 

*General*

 

Buhrmann’s GraphicSystems Division supplies graphic consumables, equipment (pre-press systems,printing presses, folding, cutting and binding machines) and provides serviceand maintenance for the graphic industry in Belgium, Greece, Italy, Luxembourg,the Netherlands and Spain.

 

The Graphic Systems Division is an agent for Heidelberg, thelargest manufacturer of printing equipment in the world. The Division has beena preferred Heidelberg distributor in the countries mentioned above for over75 years and currently operates under a distribution contract which tookeffect as of July 1, 2003. The distribution contract runs for five yearsand has a termination period of 18 months.

 

The Division offers itscustomers a full range of Heidelberg offset printing presses, both sheetfed andwebfed, together with digital pre-press (scanner equipment, computer-to-filmand computer-to-plate equipment), as well as finishing systems. It also sellsproducts manufactured by Polar BASF, Kodak, and Polychrome Graphics.

 

The Division maintainsand services a large installed machine base that holds over 80,000 stock itemsin five spare parts warehouses in Europe. The Division offers some 4,000different consumables, ranging from offset plates to printing inks.

 

32

----

 

 

Theemergence of new technologies has led to more streamlined and simplifiedprinting processes. The application of these new technologies allowsinformation to be transferred directly from the computer to the print-plate andvia the printer to the finishing equipment where the cutting, folding andbinding takes place.

 

TheGraphic Systems Division experiences more cyclicality in its results thanBuhrmann’s other Divisions because a substantial part of its sales consists ofcapital goods with dominant market shares, such as printing presses, and thusis more directly susceptible to changes in the general economic climate.However, the increasing non-cyclical income derived from service, supplies andspare parts enhance the Division’s resilience throughout the economic cycle.

 

*Industry overview*

 

Themarket for graphic systems is comprised of three basic categories:(i) sales of printing systems hardware, (ii) service contracts, and(iii) sale of consumables. Approximately 60% of the industry’s sales areattributable to hardware, and approximately 40% of sales result from providingspare parts, supplies and services.

 

Offsetprinting accounts for a significant portion of the market and has grown at asteady rate of 2% to 3% per annum over the last decade, although sales haveshown significant cyclicality depending on the economic environment andtechnological changes. A good portion of the existing population of printingpresses need to be replaced or adapted to directly receive digitizedinformation. Since there are lead times between ordering and installing theequipment, an economic upswing does not immediately correlate with sales forthe Division.

 

Amajor trade show for the graphic arts industry, DRUPA, is held only once everyfour years. This event usually results in increased order intake of printingequipment in the year of the DRUPA because new technology is showcased at thistrade show. The most recent DRUPA was held in May 2004.

 

Themajority of printhouses in Europe are small companies employing no more than 20people. By tradition, printers handle all the steps of the printing process(pre-press, printing, assembling and mailing) under one roof. Few printersspecialize, for example, as a service bureau (essentially for pre-press), as abindery or as a print center (handling low-quality and short-run print).

 

*Strategy*

 

TheDivision is concentrating on the distribution and service of graphic equipmentin six European countries. Its underlying strategic goal is to remainHeidelberg’s preferred distribution channel to the graphic arts market.

 

OfferingTriple S is our primary strategy to balance the cyclical revenues associatedwith capital investments in printing equipment. In 2004, our sales in Triple Sgrew to €151, representing 37% of total divisional sales. Our focus continuesto be on growing Triple S sales, which will not only continue to enhance ourresilience to future cyclical reductions in equipment sales but also strengthenour relationships with customers. This focus has made the Division less dependentthan it has been previously on the distribution of capital goods, as a resultof which the Division expects its operating results to be less vulnerable todownturns in the economy than they were in the past.

 

Wecontinue to encourage our customers to convert from the traditional forms ofordering to the more efficient and simpler Internet model. All product linesare available through the online system. In 2004, Internet orders for suppliesincreased to 30% as compared to 25% in 2003.

 

33

----

 

Customersin all our markets continue to experience cautious spend in graphic production.We expect that consolidation of the printing industry will reduce the number ofcommercial printing companies in Europe in the coming years. We will continueto invest in building strong customer relationships by offering a totalsolution service that includes the best printing equipment available in themarket and the specialist expertise to support our customers.

 

In2004, Heidelberg divested its digital printing business, partly due todisappointing growth. We, in turn, have also adjusted our expectations forgrowth in this sector, and divested the assets related to our digital sales andservice organizations.

 

*Sales and marketing*

 

TheDivision’s marketing strategy focuses on the selling and servicing of totalsolution printing systems. This includes its training, support programs andextended knowledge of print processes. In addition, the customer relationshipsthat the Division has maintained over the years are particularly important inmarketing investment goods such as printing systems.

 

TheDivision’s customer base is comprised of print shops and related specializedservice bureaus. The sales cycle of printing equipment is lengthy and canspread over several years. Sales are generated through the sales force.Customer dedicated sales managers receive commissions on sales, providing anincentive for meeting sales targets.

 

*Logistics and purchasing*

 

TheGraphic Systems Division has five main logistics centers which are located inAmsterdam, Athens, Barcelona, Brussels and Milan. These centers stock spareparts, graphic consumables and smaller equipment. Shipping is mainly throughthird-party delivery services. Large printing presses are shipped directly fromHeidelberg to the Division’s customers.

 

TheDivision purchases all of its products directly from Heidelberg and othermanufacturers and is an authorized distributor for Heidelberg in the sixEuropean markets in which its operates. Annual purchasing volumes are agreedupon with vendors and updated monthly. Delivery lead-time (time betweenpurchase and delivery to the customer) for large presses can be up to sixmonths and occasionally even more when new technology is introduced, such as atthe DRUPA. The Division requires a down payment from the customer prior topurchasing the printing press.

 

*Competition*

 

Competitionin this market is primarily driven by product quality, pricing, service andsales coverage. The Division believes it has a strong advantage as to serviceand sales coverage over its competitors.

 

Buhrmann’sGraphic Systems Division has participated in the graphic arts markets for morethan 75 years and has achieved a high market penetration in such markets.Graphic equipment sold by the Division can be found in print shops throughoutthe markets in which operates. Good customer database management and complexprinting process knowledge combined with high-quality service and equipmentprovide entrance barriers in these markets.

 

Theconsumables market (film, plates and ink) is more fragmented and characterizedby many small orders which need to be delivered on very short notice.

 

34

----

 

*Information technology*

 

Printingsystems have become increasingly complex due to built-in functionalities andintegrated expert guidance is needed to understand the benefits of oneequipment offering versus another. The Graphic Systems Division employssophisticated simulation tools to allow the customers to select the investmentand machine configurations appropriate for them.

 

Eachoperating company has an Internet website that is linked to the worldwideBuhrmann and Heidelberg networks. An in-house eCommerce platform has beendeveloped. Besides supplies, also the services and spare parts business will bemigrated to the new eCommerce platform which enables lower-cost sales growthand greater efficiency in ordering, servicing and distribution.

 

**Riskcontrol framework**

 

*Company-level controls, control environment*

 

Incombination with our corporate governance structure, the internal arrangementsas defined in our Management Charter provide the base for Buhrmann’s controlsystem. Except for detailing our Business Principles and Code of Ethics (seeour web site: www.buhrmann.com), it outlines our risk assessment processes(describing most of the responsibilities and authority levels for thedivisional and operational managers), our mission and our performance approach.It includes specific authorisation levels for items such as capitalexpenditure, acquisitions and divestments, restructuring and remunerationissues.

 

Various aspects of theManagement Charter are further defined in a set of mandatory policies andmanuals completed with best practice guidelines. Our policies address forinstance the application of financial disclosures procedures, insider-tradingrules and compliance to Competition Laws. Manuals are available on subjectslike accounting principles and reporting, insurance and financial management.As strong recommendations we have guidelines in place for example on ICTbusiness continuity matters.

 

Also a ‘whistle-blower’procedure is in existence. Adherence is being monitored at various levels inthe organisation.

 

In terms of arrangements ofthe Company on internal control, we have taken guidance from the COSO internalcontrol framework (COSO-I).

 

*Monitoring, assessment and reporting*

 

Buhrmannuses a comprehensive management reporting system to monitor the Company’sperformance. This comprises a coherent set of instruments, which cover adoptionof strategy, portfolio analysis, budgeting and reporting of current results, aswell as projected results. Internally, we set financial targets and judgebusiness performance primarily by using an economic-value-creation basedconcept. Reporting and analysis of actual results take place on a monthly basisand covers not only results, but also balance sheet and cash flow information.

 

Themanagement of risks associated with business activities, and compliance withlocal legislation and regulations functions through the responsibility of localoperational management following normal reporting lines to senior management. Asystem of authority limits for divisional and local operational management hasbeen established. Besides requesting the relevant manager to obtain approvalfrom a higher level of authority for a number of matters, the system alsotriggers a flow of information to senior management of Buhrmann. The sameapproach to applies to corporate matters.

 

Following new more formalinternal control requirements (the Sarbanes-Oxley Act in the United States andthe Dutch Code on Corporate Governance), an extensive review of the design,documentation and functioning of critical internal control processes related tofinancial reporting has been carried out. This resulted in specific minimum requirements on the level of controllaid down in a draft internal control manual. Also, every quarter, operationalmanagement is required to confirm by means of a letter-of-representation that compliance is maintained with, among

 

35

----

 

other things, the ManagementCharter, policies, manuals, internal control standards, fraud procedures andrepresentation and disclosure requirements.

 

In order to support theExecutive Board in matters related to disclosure controls and procedures, ourinternal Disclosure Committee reviews, discusses and reports on disclosurerelated issues quarterly (the minutes of the Disclosure Committee are alsoprovided to the Audit Committee).The main purpose is to ensure that alldisclosures made by Buhrmann are accurate, complete, timely and fairly presentthe financial condition and the results of operations in all material respects.

 

Theadequacy of the design and proper functioning of internal control systems ofour operations are periodically investigated by the Internal Audit Departmentwho reports its findings to division management and the Executive Board.Although the Internal Audit Department functions directly under theresponsibility of the Executive Board, the head of internal audit discusses atleast annually the control status of our operations with the Audit Committee.The external auditor has full access to these reports. The head of InternalAudit attends the meetings with the Audit Committee.

 

***External auditor***

 

The external auditorreports on findings on internal control as part of the audit of theConsolidated Financial Statements. Also the external auditor attends the meetings with the Audit Committee.The external auditor’s reports are discussed at the appropriate levels in theorganization.  The Group levelreports are reviewed both by the Executive Board and the Audit Committee. Inrespect of the conclusions and observations about the Annual Report a finalreporting takes place to the Executive Board and Supervisory Board jointly.

 

Theindependence of our external auditor is required by the rules under theprovisions of our Policy on External Auditors Independence and Services. Thispolicy stipulates, among other things, what services may not be provided and towhat extent certain non-audit services may be provided by the external auditor.Other provisions require, for example, that the lead audit partner and reviewpartner rotate from their position after a maximum period of five years.In thecontext of a pending court case against Béfec (a predecessor ofPricewaterhouseCoopers, France), the independence of our external auditors wasdiscussed between the Executive Board, the Audit Committee and the signingpartners of our external auditors, PricewaterhouseCoopers Accountants N.V.after which it was concluded that there are appropriate measures in place atthe external auditor to safeguard their independence.

 

36

----

 

*Evaluation of risk control framework*

 

The Executive Board of Buhrmann is responsible forthe design and operation of the Company’s internal risk control systems.Although the purpose of these systems is to enable risks to be optimallymanaged, such systems, no matter how well designed and operated, can neverprovide absolute assurance regarding achievement of our Company’s objectives,or entirely prevent material losses, fraud and the violation of laws orregulations from occurring. Also, like with other business propositions, weneed to apply our judgement in evaluating the cost-benefit relationship ofpossible controls and control procedures, while taking into account thedevelopments in our business and the external environment.

 

During 2004, as part of itsongoing involvement in our Company, the Executive Board has continuouslyanalysed and assessed the performance, the control environment and risks towhich our Company is exposed. We also reviewed the operating effectiveness ofthe risk control systems and have initiated improvements if and when deemednecessary.

 

Our operational and corporatesenior management have carried out similar assessments and reported results to theExecutive Board in business reviews, letters-of-representations and ad hocmeetings where required. The Executive Board has assessed their findings, inconjunction with the results of internal and external audits; it resulted inidentifying a small number of cases where additional activities have been respectivelyare being carried out to further strengthen controls. No major issues werereported.

 

37

----

 

**EnvironmentalOverview**

 

Ingeneral, we believe that we have relatively little impact on the environment, giventhe fact that we are not a manufacturer. Despite the fact that we areconsidered to be active in a low impact industry, we do provide environmentalinformation upon request where relevant data is available. For example, in thispast year we have responded to questionnaires from various research firms,banks, investment advisers, fund managers, governments, and non-governmentalorganizations as well as numerous requests from customers.

 

Ourguiding principle is to conduct business activities in a responsible mannerthat meets or exceeds all recognized standards for environmental issues. Assuch, we are implementing policies and practices to help better manage theenvironmental impacts of our products, services and supporting activities. Ingeneral we therefore adhere to the following principles:

 

•                  ensure environmentally appropriate sourcing of theproducts we sell;

 

•                  determine measurable objectives that promotecontinuous improvement toward pollution prevention;

 

•                  conduct effective communication and training tomaintain environmental protection;

 

•                  communicate to employees and subcontractors thatenvironmental protection is a condition of employment;

 

•                  integrate environmental considerations, includingidentifying and controlling risks, into business decisions, plans andoperations, and

 

•                  comply with all applicable legislation, regulationsand relevant industry standards.

 

We areactive in environmental associations and place great emphasis on offeringenvironmental friendly products to customers. For example, in 2003 CorporateExpress North America participated in an industry-wide initiative, theEnvironmental Responsibility Task Force, to define industry environmentalprocurement standards under the auspices of the School, Home, and OfficeProducts Association. Corporate Express Europe is represented in TheEnvironmental Standard for Office Supplies Association. This industryassociation promotes a proactive environmental sustainability policy throughoutthe entire sector, by providing clear, uniform, and standardized environmentalinformation on a product level for all office products.

 

CorporateExpress North America has worked extensively with suppliers since 1991 to offerits customers a comprehensive line of EarthSaver(r) products. In catalogs, thissymbol identifies products that contain recycled materials. Today approximately2,700 products containing recycled materials are available through oursourcebook, representing over 20% of our catalog product offering.

 

One ofour most successful customer initiatives is in toner and inkjet printercartridge collection. Corporate Express North America conducts toner refill anddisposal programs for numerous contract clients. In 2003, Corporate ExpressNorth America encouraged customers to recycle over 225,000 inkjet cartridges.Internally, environmental policies reduce energy use in our own office space,the materials we use for our promotional activities, and our employees areencouraged to adopt positive environmental practices in all of their everyday tasks.In our warehouses, software automatically selects the optimal size box or bagfor every product shipment in order to eliminate waste. Whenever possible,factory cartons are used for full case shipments. Bags are composed of 35%recycled materials and envelopes are used for small items. We continue toemphasize using fewer corrugated boxes and more bags in field operations.

 

38

----

 

**Organization**

 

BuhrmannNV is the ultimate parent company over the subsidiary companies which conducttheir business on a worldwide basis. All significant subsidiaries are whollyowned, except for our Australian and New Zealand subsidiaries (CorporateExpress Australia Ltd and Corporate Express New Zealand Ltd), inwhich Buhrmann owns a 52% interest.

 

**Property,Plant and Equipment**

 

Welease our principal executive offices, which are located at Hoogoorddreef 62,1101 BE Amsterdam ZO, the Netherlands. We own and lease additional propertiesin the United States and Europe for use in the ordinary course of business,which includes numerous sales offices, distribution centers and warehouses. Landand buildings had a book value of €99 million at December 31, 2004.Many of our leases contain options to renew and/or purchase the property. We donot own or lease any physical property which is considered material to us as awhole.

 

Weperiodically reassess the adequacy of our facilities and acquire or lease newproperties as is necessary to provide adequate facilities for our business. Webelieve that our facilities are adequate for our current level of business. Weare considering closing and selling or subleasing certain of our existingfacilities as part of our ongoing rationalization process.

 

39

----

 

**ITEM 5: OPERATING AND FINANCIALREVIEW AND PROSPECTS**

 

The information in this section should be read inconjunction with, and is qualified by reference to, our consolidated financialstatements and the notes thereto included elsewhere in this Annual Report. Thisdiscussion contains forward-looking statements. Our actual results may differmaterially from those contemplated in the forward-looking statements. Forwardlooking statements involve a number of risks, uncertainties and assumptions,and include trend information and other factors that could cause actual resultsto differ materially, including, but not limited to, those set forth under the section entitled“Risk Factors” in Item 3.

 

**General**

 

Thefollowing discussion and analysis of our results of operations and financialcondition, which should be read together with our consolidated financialstatements and the notes thereto appearing elsewhere in this document, isorganized as follows:

 

•                  *Overview*. This section provides a brief description ofthe activities of Buhrmann and its Divisions.

 

•                  *Use of Non-GAAP FinancialMeasures.* This section discussesthe presentation and use by the Company of certain non-GAAP financial measuresin this Annual Report and provides an explanation of why we believe each ofthese non-GAAP financial measures provides useful information regarding theCompany’s financial condition and results of operations.

 

•                  *Critical Accounting Policies.* This section provides a discussion of certainaccounting estimates and assumptions involved in the application of Dutch GAAPand U.S. GAAP that may have a material impact on our reported financialcondition and operating performance, and on the comparability of thisinformation over different periods.

 

•                  *Major Events and Acquisitions andDivestments.* These sections providea brief description of major events and significant acquisitions or divestmentsthat may impact the comparability of the results of operations being analyzed.

 

•                  *Results of Operations.* This section provides an analysis of Buhrmann’sresults of operations for the year ended December 31, 2004 as compared tothe year ended December 31, 2003 and an analysis of results of operationsfor the year ended December 31, 2003 as compared to the year ended December 31,2002. The analysis in this section is presented on a consolidated and asegment basis.

 

•                  *Liquidity and Capital Resources.* This section provides an analysis of Buhrmann’sfinancial condition for the year ended December 31, 2004, and cash flowsfor the year ended December 31, 2004 as compared to the year ended December 31,2003, and includes a discussion of our off-balance sheet arrangements,contingent liabilities and contractual obligations.

 

•                  *New Accounting Pronouncements.* This section provides a brief analysis of newaccounting changes for Buhrmann which might have an impact on results ofoperations, financial position and cash flows from January 1, 2005,including the impact of the IFRS, which is Buhrmann’s primary basis ofaccounting as of January 1, 2005.

 

40

----

 

Ourconsolidated financial statements have been prepared in accordance with DutchGAAP, which, in certain significant aspects, differ from U.S. GAAP. For adiscussion of the principal differences between Dutch GAAP and U.S. GAAP, asthey relate to us, and a reconciliation of net result and group equity fromDutch GAAP to U.S. GAAP, please see note 34 to our consolidated financialstatements included elsewhere in this Annual Report.

 

**Overview**

 

Webelieve Buhrmann is one of the world’s leading suppliers of office products tobusinesses and institutions in North America, Europe, Australia and NewZealand, based on revenue. Our Office Products business is comprised of threedivisions: North America, Europe and Australia. For reporting purposes, theOffice Products Europe and Office Products Australia Divisions are combined. TheOffice Products Divisions combined represented 93% of Buhrmann’s total sales in2004.

 

Inaddition, we believe Buhrmann is a leading supplier of graphic equipment andrelated services, supplies and spare parts to commercial printers in sixEuropean countries, based on revenue. Our Graphic Systems Division sells,maintains and services graphic equipment. For related services it holds over80,000 stock items in five warehouses in Europe. The Graphic Systems Divisionrepresented 7% of Buhrmann’s total sales in 2004.

 

On October 31,2003, Buhrmann completed the sale of its Paper Merchanting Division. Buhrmann’sPaper Merchanting Division was a distributor of paper and related products tothe graphic, office and display markets.

 

**Useof Non-GAAP Financial Measures**

 

Ournon-GAAP financial measures should be considered in addition to, and not as asubstitute for or as a superior measure to, measures of financial performancereported in our primary financial statements. Where we discuss non-GAAPfinancial measures, the most directly comparable GAAP figures have beenpresented together with a reconciliation of the GAAP and non-GAAP figures.Below is an explanation of why we believe each of the non-GAAP financialmeasures used in this Annual Report provides useful information regarding ourfinancial condition and results of operations. Our financial statements arepresented in this Annual Report beginning on page F-1.

 

*EBITDA*

 

Wedefine “EBITDA” as “net result before interest and other financing costs,taxes, depreciation of tangible fixed assets and internally used software andbefore amortization of goodwill.” This is a non-GAAP financial measure forwhich the most directly comparable GAAP financial measure is “net result.” Wepresent EBITDA because we consider it, and we believe that our investors andlenders consider it, to be an important supplemental measure of our performanceand believe it is frequently used by securities analysts, investors and otherinterested parties in the evaluation of companies in our industry. We believeissuers of “high yield” securities also present EBITDA because investors,lenders, analysts and rating agencies consider them useful in measuring theability of those issuers to meet debt service obligations. We believe EBITDA isan appropriate supplemental measure of debt service capacity because cashexpenditures on interest are, by definition, available to pay interest, and taxexpense is inversely correlated to interest expense because tax expense goesdown as deductible interest expense goes up. Depreciation and amortization arenon-cash charges.

 

In the past we definedEBITDA as operating result before depreciation of tangible fixed assets andinternally used software and before amortization and impairment of goodwill andtherefore the presentation of EBITDA in certain of our past disclosuredocumentation cannot be compared to the presentation of EBITDA in this AnnualReport. 

 

41

----

 

EBITDA has limitations as analytical tools, and you should notconsider them in isolation, or as substitutes for analysis of our results asreported under Dutch GAAP or U.S. GAAP. Some of these limitations are:

 

•                  EBITDA does not reflect our cash expenditures, orfuture requirements, for capital expenditures or contractual commitments;

 

•                  EBITDA does not reflect changes in, or cashrequirements for, our working capital needs;

 

•                  EBITDA does not reflect changes in tax;

 

•                  EBITDA does not reflect the significant interestexpense, or the cash requirements necessary to service interest or principalpayments, on our debts;

 

•                  although depreciation and amortization are non-cashcharges, the assets being depreciated and amortized will often have to bereplaced in the future, and EBITDA does not reflect any cash requirements forsuch replacements; and

 

•                  other companies may calculate EBITDA differentlythan we do, limiting its usefulness as comparative measures.

 

Becauseof these limitations, EBITDA should not be considered as a measure ofdiscretionary cash available to us to invest in the growth of our business. Wecompensate for these limitations by relying primarily on our Dutch GAAP resultsand using EBITDA only as supplementary measure.

 

Buhrmannevaluates its operating performance based on several factors, including itsfinancial measure of EBITDA. EBITDA is a supplemental measure of ourperformance that is not required by, or presented in accordance with, DutchGAAP or U.S. GAAP. EBITDA is not a measure of our financial performance underDutch GAAP or U.S. GAAP and should not be considered as an alternative to netresult, operating result or any other performance measures derived inaccordance with Dutch GAAP or U.S. GAAP or as an alternative to cash flow fromoperating activities as a measure of our operating liquidity.

 

Inaddition, we believe that the presentation of EBITDA as a financial measureprovides useful information because it excludes the inconsistent impact ofamortization of goodwill on operating result across the Company’s Divisions.Prior to January 1, 1997, under Dutch GAAP, goodwill was written offdirectly to shareholders’ equity. This means that no amortization or impairmentexpense is recorded for goodwill on acquisitions which were made prior to January 1,1997.

 

42

----

 

Thereconciliation between the Dutch GAAP measure of “net result” and the non-GAAPfinancial measure “EBITDA” is as follows (based on Dutch GAAP):

 
| ** **                                                          | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **2004**                         | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                          | ** ** | **(in millions)**                | ** ** |
| Net result                                                          |       | €                           | 80         |   | € | (132 | ) | € | (588 | ) |
| Interest and other financing costs                                  |       | 103                              |       | 257 |   | 199 |   |
| Taxes                                                               |       | (33                              | )          | (68 | ) | (11 | ) |
| Depreciation of tangible fixed assets and internally  used software |       | 84                               |       | 104 |   | 114 |   |
| Amortization of goodwill                                            |       | 45                               |       | 52 |   | 70 |   |
| EBITDA                                                              |       | €                           | 280        |   | € | 213 |   | € | (216 | ) |

 

*Constant exchange rates*

 

Wepresent our results in euro. Results of subsidiaries denominated in currenciesother than the euro are translated into euro at an average exchange rate forthe period. In our operating and financial review and prospects we includediscussions on the performance of our business based on constant exchangerates. We use constant exchange rate analysis to give a year-on-year measure ofchange which excludes the effect of fluctuations in currency exchange ratesbecause fluctuations in currency exchange rates are outside of our control andmay distort our underlying performance and result.

 

Changesof results at constant exchange rates as disclosed elsewhere in this AnnualReport are calculated by translation of prior year results into euro at acurrent year average exchange rate.

 

Changesof results at constant exchange rates can be materially different to changesbased on our reported results because prior year average exchange rates can besignificantly different from current year average exchange rates.

 

*“Organic” Analysis*

 

The “organic”analysis presented in this Annual Report eliminates all factors that disturb alike-for-like comparison in our relevant business Divisions. In addition to thecurrency exchange rate movements discussed above, these factors include suchitems as acquisitions, divestitures, variations in the number of working days,and with respect to our Office Products North America Division, the change to acommission-based model at our subsidiary ASAP Software Express, Inc. (ASAP),and the change in the sales recognition of the Graphic Systems Division. We use“organic” analysis, in conjunction with constant exchange rates to give ameasure of the underlying growth year-on-year. The factors mentioned above canhave a significant impact on a Division’s reported results. Their exclusionprovides a useful insight into the underlying performance of the Division andenables us to monitor the performance of both the underlying businesses andacquired businesses. Organic performance can be materially different to theDivision’s reported performance. In each instance where we present organicresults, we also present a table which illustrates the basis on which theresult is derived and a reconciliation to the nearest comparable GAAP measure.

 

43

----

 

**CriticalAccounting Policies**

 

Thepreparation of financial statements in accordance with Dutch GAAP and U.S. GAAPrequires management to make estimates and assumptions that affect the reportedamounts of assets, liabilities, revenue and expenses, and related disclosure ofcontingent assets and liabilities. Buhrmann bases its estimates on historicalexperience which are evaluated on an on-going basis. If actual amounts orestimates are different than previously estimated, the revisions are includedin the Company’s results for the period in which the revised amounts becomeknown. Buhrmann believes that the accounting policies that are most critical indetermining the presentation of the financial condition and which requiresubjective or complex judgments from management are the following:

 

•                  impairment and amortization of goodwill;

 

•                  other receivables in respect of rebates fromsuppliers;

 

•                  provisions for restructuring and integration;

 

•                  provisions for legal proceedings;

 

•                  pensions;

 

•                  taxation in respect of deferred taxes; and

 

•                  currency translation and exchange differences onloans and currency swaps.

 

Buhrmann’saccounting policies, including the aforementioned critical accounting policies,are discussed in the notes to the consolidated financial statements includedelsewhere in this Annual Report, including note 34, which also discusses theprincipal differences between Dutch GAAP and U.S. GAAP as they relate toBuhrmann.

 

*Impairment of goodwill*

 

Goodwillis tested for impairment at least once annually or more frequently if changesin circumstances indicate that an impairment may have occurred. Under theimpairment test under Dutch GAAP, the fair value of the cash-generating unitthat contains the goodwill is compared to its book value, including thegoodwill. Under Dutch GAAP, any excess of book value over fair value isrecorded as an impairment of goodwill, if the impairment is expected to bepermanent. The fair value of the cash-generating unit is calculated based ondiscounted future cash flows and residual values. Under U.S. GAAP, a two-stepprocess is performed to analyze whether or not goodwill has been impaired. Stepone is to test for potential impairment, and requires that the fair value ofthe reporting unit be compared to its book value including goodwill. The fairvalue of the reporting unit is calculated based on discounted future cash flowsand residual values as under Dutch GAAP. If the fair value is higher than thebook value, no impairment is recognized. If the fair value is lower than thebook value, a second step is performed. The second step is to measure theamount of impairment loss, if any, and requires that assets and liabilities,including unrecognized intangible assets such as customer and supplierrelationships and brand names, be assigned fair values in a hypotheticalpurchase price allocation to determine the implied fair value of goodwill. Thisfair value is then compared to the carrying value of goodwill. If the impliedfair value is lower than the carrying value, an impairment must be recorded forthe difference.

 

Theannual impairment test did not result in an impairment of goodwill in 2004under Dutch GAAP or U.S. GAAP. In 2003, Buhrmann recorded an impairment chargeon goodwill of €53 million under Dutch GAAP and €49 million underU.S. GAAP. In 2002, an impairment charge of €573 million under Dutch GAAPand €1,012 million under U.S. GAAP was recorded. Our judgment relating tothe fair value of assets and liabilities, including unrecognized intangibleassets, is affected by such factors as assumed economic conditions andexpectations about our markets and our operating performance. These factors maychange over time and may cause the Company to record additional impairmentcharges which may adversely impact operating result and net result. Also thefair value and hence the impairment charge is sensitive to the discount ratechosen. The discount rate is derived from the estimated weighted cost ofcapital, reflecting the risks inherent to our business and a normativefinancing profile. A 0.5% higher discount rate would have resulted in an

 

44

----

 

approximately€14 million higher impairment under both Dutch GAAP and U.S. GAAP in 2003and €160 million in 2002. Conversely, a 0.5% lower discount rate wouldhave resulted in an approximately €16 million lower impairment chargeunder both Dutch GAAP and U.S. GAAP in 2003 and €180 million in 2002. Asalmost the full amount of the impairment charge is not tax deductible, thehigher or lower amount of impairment would impact net result almost fully.

 

*Amortization of goodwill*

 

UnderDutch GAAP, goodwill is amortized over the expected economic life of the asset;goodwill is not amortized under U.S. GAAP. The assessment of the economic lifeof an asset is based on the consideration that a permanent advantage is beingrealized. Consequently, Buhrmann applies the maximum amortization period of40 years as allowed under Dutch GAAP. The table below demonstrates theincrease in the amortization charge in the event that the economic life of theasset is less than originally assessed by showing the amount by which theamortization charge of €45 million in 2004 would be increased (amounts inmillions of euro):

 
| **Revised economic life:** | ** ** | **Increase in amortization charge  (annualized):** | ** ** |
|----------------------------|------------|----------------------------------------------------|------------|
| 30 years                   |       | 60                                                 |       |
| 20 years                   |       | 91                                                 |       |
| 10 years                   |       | 181                                                |       |

 

Asalmost the full amount of this amortization charge is not tax deductible, theabove additional charges would impact net result almost fully.

 

*Other receivables in respect of rebates from suppliers*

 

Buhrmannreceives various types of rebates from suppliers, which are based on the volumeof goods purchased (volume-based rebates) or based on the inclusion of certainproducts of the supplier in Buhrmann’s catalog offerings (catalogcontributions) or are received for entering into a contract with a supplier(contract-based rebates).

 

Volume-basedrebates are settled in arrears, mostly not exceeding one year. For each reportingperiod Buhrmann accrues volume-based rebates on the basis of prudentlyestimated purchased volumes for the rebate period. Rebates received or accruedrelating to goods not yet sold are deducted from the value of the relatedinventories. These inventory related rebates are recognized as income in theperiod when the relevant inventories are sold to third-parties.

 

Catalogcontributions from suppliers are usually settled in arrears and are based onthe number of pages dedicated to the products of a supplier in a catalog or onpurchased volumes from a catalog. Before January 1, 2003, catalogcontributions were recognized as income over the life of the related catalogboth under U.S. GAAP and Dutch GAAP. As of January 1, 2003, for U.S. GAAPpurposes only, Buhrmann adopted a policy of treating all catalog contributionsas a reduction of purchase cost in accordance with Emerging Issues Task Force(EITF) Issue No. 02-16, “Accounting by a Reseller for Cash ConsiderationReceived from a Vendor.” This means that under U.S. GAAP, as of January 1,2003, a portion of the catalog contributions will be deferred in inventory andwill be recognized as a reduction of cost of sales when the products are sold,similar to the practice for volume-related rebates. The allocation to purchasecosts of catalog contributions that are based on the number of pages in acatalog is based on an implied relationship with purchases of products, as theyare not related to volumes. The designation of an implied relationship requirescertain subjective judgments from management.

 

Contract-basedrebates are recorded as income evenly over the life of the contract, unless itqualifies as compensation for costs incurred in relation to the changing of aspecific supply arrangement.

 

Provisionsfor collection risk are recorded up to recoverable value only if specificevents indicate that collection of the rebates is less certain due to a creditevent at the supplier or a dispute on the actual rebate amount accrued.

 

Actualrebates received and the allocation to purchase costs could be different thanoriginally assessed which could impact operating result and net result.

 

45

----

 

*Provisions for restructuring and integration*

 

Buhrmannrecords provisions for restructuring and integration relating to cost-savingrestructuring measures and the integration of acquired businesses. Theseprovisions are based on Buhrmann’s best estimate of costs to be incurred for,among other things, severance payments, termination fees and penalties forrental and other contracts. If actual costs are different than originallyestimated, the provisions for restructuring and integration may be insufficientwhich could affect operating result and net result. Furthermore, additional restructuringmeasures may be necessary depending on changes in economic conditions andoperating performance, which may result in additional provisions, which in turnmay affect operating result and net result. Restructuring and integrationactivities in 2004 and 2003 were not significant.

 

*Provisions for legal proceedings*

 

Buhrmannis involved in various legal and regulatory proceedings arising in the normalcourse of its business. Buhrmann accrues for the estimated probable costs toresolve these proceedings if a reasonable estimate can be made of the outcomeof which the incurrence is judged to be probable. After consultation ofin-house and outside legal counsel, these accruals are based on the analysis ofpossible outcomes of litigation and settlements. Operating result and netresult could be affected if actual outcomes are different than originallyestimated.

 

*Pensions*

 

Buhrmann’soperating companies in Europe offer a variety of defined benefit plans. Incountries such as the Netherlands and the United Kingdom, these defined benefitplans are maintained in separate trusts (pension funds) to which Buhrmann makescontributions.

 

UnderDutch GAAP, these pension funds are not included in the consolidated financialstatements. The periodically paid contributions to these pension funds areexpensed when incurred. In case the Company is obligated to make additionalcontributions to the pension plans in order to meet minimum funding levels, asrequired by local law or specific arrangements, an accrual is recorded. Thefunding levels are based on, among other things, actuarial assumptions,estimated returns and the market value of the pension funds’ assets. Actualcircumstances could change the impact of these assumptions, which could resultin additional contributions, which in turn could have an adverse affect onBuhrmann’s operating result and net result.

 

UnderU.S. GAAP, the Company accounts for pensions in accordance with SFASNo. 87 under which pension expense and related plan assets and benefitobligations are based on a specific methodology that reflects the concepts ofaccrual accounting. SFAS No. 87 requires re-adjustment of the significantactuarial assumptions annually to reflect current market and economicconditions. Amounts are reflected in the income statement systematically overthe service lives of the employees covered by the plan. Amounts expensed aretypically different from amounts funded. Application of SFAS No. 87requires that management makes use of assumptions regarding discount rate, expectedreturn on plan assets and rates of compensation, state pension and pensionincreases in assessing plan assets, benefit obligations and periodic pensioncosts. Actual circumstances could change the impact of these assumptions givingrise to different plan assets and benefit obligations, reflected as additionalincome or expense which could have an affect on Buhrmann’s operating result andnet result.

 

46

----

 

*Taxation in respect of deferred taxes*

 

Buhrmannhas a considerable amount of loss carry forwards. For these loss carry forwardsand for temporary differences in the valuation of assets and liabilities forreporting and fiscal purposes, deferred tax assets and deferred tax liabilitiesare recognized. Buhrmann records valuation allowances to reduce deferred taxassets to the amount of the deferred tax assets likely to be realized. Indetermining these valuation allowances and deferred tax liabilities, Buhrmann’sassessment of future taxable income, tax planning and the possibility thatprior year tax returns will be challenged by the tax authorities, are factorstaken into account. These factors are determined in consultation with in-houseand outside tax experts. If actual future taxable income is different than originallyassessed, if tax planning fails to materialize or if the possibility that prioryear tax returns will be challenged turn out to be different than originallyassessed, the valuation allowances on deferred tax assets and the deferred taxliabilities may have to be adjusted which may have an affect on Buhrmann’sreported tax expense and net result in future years.

 

*Currency translation and exchange differences on loansand currency swaps*

 

Translationand exchange differences on loans and currency swaps are recorded in incomeexcept if they relate to inter-company loans extended by a Group company,including the parent, to another Group company insofar as these loans aredesignated as permanently invested, in which case differences are recordeddirectly in shareholders’ equity. Translation differences on loans extended bythird parties and currency swaps concluded with third parties, which aredesignated as, and effective as, economic hedges of net investments (equityinvestments or permanently invested loans) in a foreign Group company are alsorecorded directly in shareholders’ equity.

 

Thedesignation of loans as permanently invested requires certain subjectivejudgments from management as to, among other things, the intended renewal ofloans at maturity and hedge effectiveness.

 

**MajorEvents**

 

Thefollowing events substantially affected our results of operations for theperiods presented and our Consolidated Financial Statements for 2004, 2003 and2002 and should be considered in light of these events:

 

*2004*

 

In thesecond and third quarter of 2004, changes to the capital structure were made.We repaid the $350 million 12 1/4% SeniorSubordinated Notes due 2009. We funded the repayment by issuing$150 million of new 8 1/4% Senior Subordinated Notesdue 2014, increasing the Term Loans under the Senior Credit Facility by$125 million and using available liquidity in the Company. Simultaneously,certain term loans (Term Loans B) were replaced by the Term Loans C,thereby lowering the interest rate throughout the pricing matrix by 25 basispoints.

 

TheU.S. dollar continued to weaken against the euro with the year-end exchangerate 7% lower, and the average exchange rate 9% lower as compared to 2003.

 

Anumber of exceptional items were reported affecting the net result by negative€14 million.

 

*2003*

 

In thefourth quarter, the existing senior credit facility was repaid and replaced bythe Senior Credit Facility and the issuance of the €115 millionSubordinated Convertible Bonds.

 

In thefourth quarter, an impairment charge on goodwill for Office Products Europe of€53 million was recorded.

 

In thefourth quarter, the sale of the Paper Merchanting Division was completed,leading to an exceptional loss after tax of €167 million, and to a netcash inflow of €637 million.

 

47

----

 

In thefirst quarter, an indemnity payment of €79 million was received whichresulted in an exceptional net profit of approximately €58 million.

 

TheU.S. dollar continued to weaken against the euro with the year-end exchangerate 17% lower, and the average exchange rate 16% lower as compared to 2002.

 

*2002*

 

In thefourth quarter, extraordinary charges of €111 million before tax weretaken for restructuring plans, which include further reductions in theworkforce and write-offs of redundant IT systems and distribution facilities.

 

In thefourth quarter, an impairment charge on goodwill of €573 million wasrecorded.

 

Theyear-end exchange rate of the U.S. dollar against the euro was 19% lower and theaverage exchange rate was 6% lower as compared to 2001.

 

**Acquisitionsand Divestments**

 

In2004, 2003 and 2002, Buhrmann made a number of smaller acquisitions, mainly inthe Office Products Australia Division.

 

In thefourth quarter of 2004, Buhrmann sold the digital printing activities of itsGraphic Systems Division to NexPress Solutions, Inc., a subsidiary ofEastman Kodak Company (NexPress).

 

On October 31,2003, Buhrmann completed the sale of the Paper Merchanting Division toPaperlinX Limited. The initial consideration for the sale was€706 million. As the sale was made on a debt-free and cash-free basis, theconsideration was accordingly reduced by €6 million. Under the terms ofthe final purchase agreement, there were certain agreed purchase price adjustmentsmainly related to the net asset value of the Paper Merchanting Division,pensions and restructuring. These purchase price adjustments resulted in afurther reduction of the purchase price of €63 million. For furtherinformation, see note 3 to our consolidated financial statements includedelsewhere in this Annual Report. Net sales of the Paper Merchanting Divisionwere €2,266 million in 2003, until October 31, 2003, and€2,988 million in 2002.

 

In April 2003,Buhrmann sold the assets of DocVision B.V. (DocVision) (mailroom, copy andprint services and archives management).

 

In2002, no major divestments were made by Buhrmann.

 

Theseacquisitions and divestments affect the comparability of Buhrmann’s results ofoperations over the three-year period ending December 31, 2004.

 

48

----

 

**Resultsof Operations**

 

Thefollowing table sets forth, for the periods indicated, net sales, added valueand operating result by Buhrmann’s divisions as well as net sales and operatingresult by geographic region.

 
| ** **                                              | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                              | ** ** | **2004**                         | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                              | ** ** | **(in millions)**                | ** ** |
| **Summary by Division**                                 |       |                             |       |   |   |   |   |
| ***Net Sales:***                                        |       |                             |       |   |   |   |   |
| Office products North America                           |       | €                           | 3,628      |   | € | 3,939 |   | € | 4,931 |   |
| Office products Europe and Australia                    |       | 1,500                            |       | 1,479 |   | 1,540 |   |
| Graphic Systems                                         |       | 411                              |       | 369 |   | 489 |   |
| **Sub-total excluding the Paper Merchanting  Division** |       | 5,539                            |       | 5,787 |   | 6,960 |   |
| Paper Merchanting Division                              |       | —                           |       | 2,266 |   | 2,988 |   |
| Total Group                                             |       | €                           | 5,539      |   | € | 8,053 |   | € | 9,948 |   |
| *** ***                                            |       |                             |       |   |   |   |   |
| ***Added Value:***                                      |       |                             |       |   |   |   |   |
| Office products North America                           |       | €                           | 961        |   | € | 1,018 |   | € | 1,261 |   |
| Office products Europe and Australia                    |       | 420                              |       | 392 |   | 413 |   |
| Graphic Systems                                         |       | 95                               |       | 85 |   | 118 |   |
| **Sub-total excluding the Paper Merchanting  Division** |       | 1,476                            |       | 1,495 |   | 1,792 |   |
| Paper Merchanting Division                              |       | —                           |       | 359 |   | 461 |   |
| Total Group                                             |       | €                           | 1,476      |   | € | 1,854 |   | € | 2,253 |   |
|                                                    |       |                             |       |   |   |   |   |   |   |   |
| ***Operating Result:***                                 |       |                             |       |   |   |   |   |
| Office products North America                           |       | €                           | 138        |   | € | 115 |   | € | (273 | ) |
| Office products Europe and Australia                    |       | 47                               |       | (23 | ) | (75 | ) |
| Graphic Systems                                         |       | 0                                |       | (13 | ) | 23 |   |
| Corporate                                               |       | (24                              | )          | 37 |   | (20 | ) |
| **Sub-total excluding the Paper Merchanting  Division** |       | 161                              |       | 116 |   | (345 | ) |
| Paper Merchanting Division                              |       | —                           |       | 55 |   | 44 |   |
| Total Group                                             |       | €                           | 161        |   | € | 171 |   | € | (301 | ) |
|                                                    |       |                             |       |   |   |   |   |   |   |   |
| **Summary by Geographic Region**                        |       |                             |       |   |   |   |   |
| ***Net Sales:***                                        |       |                             |       |   |   |   |   |
| United States                                           |       | €                           | 3,268      |   | € | 3,667 |   | € | 4,665 |   |
| United Kingdom                                          |       | 148                              |       | 884 |   | 1,251 |   |
| The Netherlands                                         |       | 281                              |       | 772 |   | 961 |   |
| Germany                                                 |       | 321                              |       | 701 |   | 817 |   |
| Rest of European Union members                          |       | 710                              |       | 1,188 |   | 1,458 |   |
| Australia and New Zealand                               |       | 589                              |       | 496 |   | 419 |   |
| Rest of the World                                       |       | 222                              |       | 345 |   | 377 |   |
| Total Group                                             |       | €                           | 5,539      |   | € | 8,053 |   | € | 9,948 |   |
|                                                    |       |                             |       |   |   |   |   |   |   |   |
| ***Operating Result:***                                 |       |                             |       |   |   |   |   |
| United States                                           |       | €                           | 116        |   | € | 96 |   | € | (296 | ) |
| United Kingdom                                          |       | 0                                |       | 22 |   | 28 |   |
| The Netherlands (including Corporate)                   |       | (14                              | )          | 0 |   | 33 |   |
| Germany                                                 |       | (10                              | )          | (10 | ) | (15 | ) |
| Rest of European Union members                          |       | 6                                |       | 12 |   | (101 | ) |
| Australia and New Zealand                               |       | 48                               |       | 31 |   | 33 |   |
| Rest of the World                                       |       | 15                               |       | 20 |   | 17 |   |
| Total Group                                             |       | €                           | 161        |   | € | 171 |   | € | (301 | ) |

 

49

----

 

**Resultsof operations—year ended December 31, 2004 compared to year ended December 31,2003**

 

Netsales for the Buhrmann Group were €5,539 million in 2004 compared to€5,787 million in 2003, excluding the Paper Merchanting Division. Atconstant exchange rates this is an increase of 1.1%. Added value decreased from€1,495 to €1,476. At constant exchange rates, this is an increase of 4.3%,excluding the Paper Merchanting Division. Market conditions in North Americagradually improved, while Europe remained difficult and Australia continued togrow.

 

Marginenhancement was supported by two of our key strategic initiatives: our PrivateBrand program and our Preferred Supplier initiative. There was an increase oforders and sales for printing equipment in our Graphic Systems Division.

 

Wecontinued our disciplined working capital management and cost control. Combinedwith our improved operating results, return on capital employed improvedfurther.

 

Ourcapital structure was further optimized. The Senior Credit Facility and theissue of the Subordinated Convertible Bonds in the fourth quarter of 2003resulted in lower financing costs in 2004. In the third quarter of 2004, thematurity of our debt portfolio was extended. This was achieved by thesuccessful placing of the 2014 Notes and an increase of loans under the SeniorCredit Facility. Cash on hand from the proceeds was used to fund the tender forour 12 1/4% Senior Subordinated Notes due 2009 (the 2009Notes).

 

Weagain achieved a positive available cash flow in 2004.

 

Witheffect from October 31, 2003, we divested our Paper Merchanting Division,which affects the comparability of our results of operations for the year endedDecember 31, 2004 with the year ended December 31, 2003. Theconsolidated statements of income and cash flows for 2003 only include incomeand cash flows of the Paper Merchanting Division for the period January 1to October 31.

 

In December 2003,we recorded an impairment charge on goodwill for the Office Products EuropeDivision. No goodwill impairment charges were required in 2004.

 

Althoughthe major proportion of our activities is conducted in U.S. dollars, ourfinancial position, results of operations and cash flows as reported in eurowere affected by the translation effects of the weakening of the exchange rateof the U.S. dollar to the euro in both 2004 and 2003. Changes at constantexchange rates in the tables below exclude the effect of fluctuations incurrency exchange rates on reported numbers in euro.

 

50

----

 

**ConsolidatedResults**

 

*Net sales; Added value; Operating result*

 

Thefollowing table shows net sales, added value and operating result, excludingthe Paper Merchanting Division and its related Corporate holding companies.

 
| ** **                                    | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 5,539      |     | €     | 5,787                |       | (4.3                            | )%         | 1.1 | % |
| Added value                                   |       | 1,476                                  |       | 1,495    |       | (1.2                 | )%         | 4.3                             | %          |
| Operating result                              |       | €                                 | 161        |     | €     | 116                  |       | 38.4                            | %          | 47.5 | % |
| Added value as a percentage of net sales      |       | 26.7                                   | %          | 25.8     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 2.9                                    | %          | 2.0      | %          |                 |       |                            |       |

 

Thefollowing table shows net sales, added value and operating result, includingthe Paper Merchanting Division and its related corporate holding companies(until October 31, 2003).

 
| ** **                                    | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 5,539      |     | €     | 8,053                |       | (31.2                           | )%         | (27.3 | )% |
| Added value                                   |       | 1,476                                  |       | 1,854    |       | (20.3                | )%         | (15.8                           | )%         |
| Operating result                              |       | €                                 | 161        |     | €     | 171                  |       | (6.0                            | )%         | 0.2 | % |
| Added value as a percentage of net sales      |       | 26.7                                   | %          | 23.0     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 2.9                                    | %          | 2.1      | %          |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales of our Group were €5,539 million in 2004 compared with €5,787 in2003, excluding the Paper Merchanting Division, a decrease of 4.3% which isattributable to the further weakening of the U.S. dollar. At constant exchangerates, net sales were up 1.1%, excluding the Paper Merchanting Division. Netsales in the Office Products Europe and Australia Divisions combined, werelevel with last year at constant exchange rates, whereas the Graphics SystemsDivision increased net sales by 11.6%.

 

In2004, the organic sales growth of the Group, excluding the Paper MerchantingDivision, was 2% positive against a decline of 4% in 2003, mainly reflectingthe recovery of demand in North America. Sales to our existing large accountcustomers increased as a result of our initiative to extend the product range.Also, software sales progressed markedly in 2004 compared to 2003. We noticedencouraging signs of recovery in our business in the United Kingdom while ourcontinental European operations continued to experience difficult marketconditions. Our Australia and New Zealand based office products businesscontinued to perform strongly in 2004.

 

Globally,our mid-market sales did not live up to our expectations, but we continued ourinvestments in marketing, sales and service models for these markets.

 

OurGraphic Systems Division achieved noticeable growth in printing equipmentorders in the second half of 2004, primarily reflecting the impact of the DRUPAexhibition in May 2004 and increased investment relating to the economicrecovery.

 

51

----

 

The following table presents a calculation, on an organicbasis, of net sales for the Group in 2004 as compared to 2003.

 
| ** **                                                                 | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in %** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                                                 | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                                                  |       | €                                 | 5,539      |     | €     | 8,053           |       |   |   |
| Divestment of the Paper Merchanting Division                               |       | —                                 |       | (2,266   | )          |            |       |
| Net sales excluding the Paper Merchanting Division                         |       | 5,539                                  |       | 5,787    |       |            |       |
| Effect of currency exchange rate movements                                 |       | —                                 |       | (312     | )          |            |       |
| Net sales at constant exchange rates excluding Paper  Merchanting Division |       | 5,539                                  |       | 5,474    |       |            |       |
| Acquisitions and divestments                                               |       | (14                                    | )          | 9        |       |            |       |
| Variation in the number of working days                                    |       | (14                                    | )          | —   |       |            |       |
| Change to commission-based model at ASAP(1)                                |       | 243                                    |       | 153      |       |            |       |
| Change in sales recognition of Graphic Systems  Division(2)                |       | —                                 |       | 13       |       |            |       |
| Net sales on an organic basis                                              |       | €                                 | 5,743      |     | €     | 5,649           |       | 2 | % |

 

----

(1)                                  Changeto commission-based model at ASAP relates to sales of software products by ASAPwhereby the manufacturer performs the billing and ASAP receives a commissionfrom the manufacturer which is recorded as sales by ASAP. In the past, ASAPperformed the billing of these sales and ASAP recorded sales and cost of salesseparately rather than only the commission.

 

(2)                                  Changein sales recognition in the Graphic Systems Division relates to graphicmachines of which the sale, as of January 1, 2003, is recognized atinstallation whereas prior to January 1, 2003, the sale was recognized atdelivery of the machines.

 

52

----

 

*Added value*

 

In2004, the added value of the Group benefited from increased sales and marginenhancement. The added value was €1,476 million in 2004 compared to€1,495 million in 2003, excluding the Paper Merchanting Division, adecrease of 1.2%. At constant exchange rates however, added value improved by4.3% despite competitive pricing pressure. Added value as a percentage of netsales, excluding the Paper Merchanting Division, improved from 25.8% to 26.7%in 2004. This is largely attributable to our successful strategic initiativesto increase our share of private brand products and to convert customers to theproducts of preferred suppliers.

 

GraphicSystems continued its strategy to make sales less dependent on the economiccycle by increasing sales of Triple S, which also has higher margins.

 

In2003, an exceptional charge of €5 million was recorded in added value inthe Australian Division to fully comply with Buhrmann’s rebate and catalogincome recognition policies. In 2004, no exceptional results were recorded inadded value.

 

*Operating result*

 

Operatingresult of the Group increased 38.4% from €116 million in 2003, excludingthe Paper Merchanting Division, to €161 million in 2004. At constantexchange rates the increase amounted to 47.5%, excluding the Paper MerchantingDivision, driven by the increased added value.

 

Amortizationof goodwill in 2004 amounted to €45 million, compared with€49 million in 2003, excluding the Paper Merchanting Division,predominantly due to the lower exchange rate of the U.S. dollar and a lowergoodwill number due to an impairment charge of €53 million in 2003. Thischarge was recorded following the annual goodwill impairment test, as thecalculated fair value of the European Office Products Division was lower thanthe book value. For 2004, no impairment charge was required, reflecting theimproved business performance and prospects.

 

Depreciationcosts of tangible fixed assets and internally used software decreased by 3.4%(at constant exchange rates, the increase was 2.4%) to €84 million in 2004from €87 million in 2003, excluding the Paper Merchanting Division.Depreciation costs for 2004 include an incidental charge of €2 million forthe write-off of software that could not be effectively used.

 

Thenumber of full time employees, excluding the Paper Merchanting Division, wasreduced by 1.2% to 17,618 at year-end 2004.

 

In2004, exceptional results as part of operating result amounted to a loss of€5 million which consisted of a provision for announced restructuringactivities in Office Products Europe. These restructuring activities includedreorganizations at the Benelux offices as well as the copier division inGermany.

 

53

----

 

In2003, total exceptional operating results amounted to an income of€43 million, excluding the Paper Merchanting Division, and consisted ofthe following:

 

•                  Office Products North America: a reassessment oflease commitments of vacant properties, which were included in the 2002restructuring charge (expense of €6 million).

 

•                  Office Products Europe and Australia: an adjustmentof catalog income recognition of Office Products Australia to fully comply withBuhrmann accounting policies (expense of €5 million); and additionalrestructuring charges in Office Products Europe (expense of €3 million).

 

•                  Graphic Systems: a restructuring charge (expense of€1 million).

 

•                  Corporate: primarily the result of an indemnitypayment (income of €58 million net of costs) awarded to Buhrmann as theoutcome of arbitration proceedings against the French company Ipfo Bail S.A.

 

Theabove mentioned factors resulted in an improvement of operating result as apercentage of net sales from 2.0% in 2003 (excluding the Paper MerchantingDivision) to 2.9% in 2004.

 

*Financial income and expense; Minority interests;Taxation*

 
| ** **                                               | ** ** | **2004**          | ** ** | **2003** | ** ** |
|----------------------------------------------------------|------------|-------------------|------------|----------|------------|
| ** **                                               | ** ** | **(in millions)** | ** ** |
| Total financing costs                                    |       | €            | (103       | )        | €     | (257 | ) |
| Results from participations and other financial  results |       | 6                 |       | (102     | )          |
| Total minority interests                                 |       | (17               | )          | (12      | )          |
| Total taxes                                              |       | 33                |       | 68       |       |
| Total financial items                                    |       | €            | (81        | )        | €     | (303 | ) |

 

***Total financing costs***

 

Netfinancing costs consist of interest costs and amortization of capitalizedfinancing fees.

 

Excludingtranslation differences, interest costs were reduced by €79 million from€144 million in 2003 to €65 million in 2004, as a result of the loweraverage interest bearing debt level and lower interest rates following theoptimization of the capital structure. After obtaining the Senior CreditFacility and issuing the Subordinated Convertible Bonds in the fourth quarterof 2003, we repaid our $350 million 2009 Notes in the third quarter of 2004.We financed the repayment with an issue of $150 million of new 2014 Notes,an increase of $125 million of Term Loans under the Senior Credit Facilityand the balance and fees out of cash on hand. Simultaneously, the Term Loans Bwere replaced by Term Loans C as we used the opportunity to lower the intereston the Term Loans C by 0.25% compared to the Term Loans B.

 

Amortizationof capitalized financing fees was €5 million in 2004 and €14 millionin 2003.

 

54

----

 

In2004, exceptional financing costs, before taxes, in a total amount of€35 million were recorded, consisting of:

 

•                  a premium paid to holders of the 2009 Notes in June 2004of € 27 million;

 

•                  a non-cash write-off of capitalized financing feesof €4 million; and

 

•                  an exceptional financing cost of €4 million wasrecorded for actuarial results on the pensions of our U.S. forms managementbusiness.

 

In2003, exceptional financing costs of €96 million were recorded. Thisincludes an impairment of capitalized financing fees of €53 million as aresult of repayments of debt with the proceeds from the sale of the PaperMerchanting Division, the replacement of our old Senior Credit Facility and theissue of the Subordinated Convertible Bonds. This also includes a charge of€40 million as a result of settlement of interest rate swaps following thedebt reduction in order to achieve a fixed to variable rate profile in linewith our policy for hedging interest rate risks. In addition, in connectionwith the refinancing of our old senior credit facility with the Senior CreditFacility and the issue of the Subordinated Convertible Bonds, exceptionaladvisory costs of €5 million were recorded.

 

Totalfinancing costs also includes the resulting currency translation differences onaccounts receivable, cash and liabilities after application of currency forwardcontracts and certain currency translation differences on intercompany loansamounting to an income of €2 million in 2004 and a loss of €3 millionin 2003.

 

*Results from participations and other financial results*

 

Exceptionalother financial results in 2004, of €6 million in total, includeexceptional income from the release of contractual provisions related to formerdivestments as well as write-offs of some minor investments.

 

Exceptionalother financial results in 2003 include a book loss of € 79 million fromthe sale of the Paper Merchanting Division, related transaction costs of€15 million and provisions for indemnities and warranties of€18 million. Also included is a €7 million gain from the sale ofDocVision and a gain of €2 million due to a release of a divestment relatedprovision which was no longer needed.

 

*Minority interests*

 

Minorityinterests mainly represent the 48.5% share of third-parties in the result ofCorporate Express Australia Ltd., a publicly traded company. In 2003,exceptional results of €2 million of income were included relating to theadjustment of catalog income recognition of Office Products Australia to fullycomply with Buhrmann accounting policies.

 

55

----

 

*Taxes on result from ordinary operations*

 

Theeffective tax rate amounted to negative 9% in 2004 (2003: positive 12%) and isbelow Buhrmann’s weighted average statutory tax rate of 31% (2003: 28%) due tochanges in valuation allowances, predominantly related to the valuation oflosses carried forward, exempt income, non-deductible expenses and incentives.Tax results in 2004 and 2003 benefited from changes in the composition of thegeographic distribution of taxable earnings and finalized tax audits leading toa release of allowances, which were recorded in previous years, and which areno longer deemed necessary. As a result of finalizing tax audits€8 million of tax provisions was released in 2004. Exceptional profit taxin 2004 of €20 million includes an exceptional non-cash benefit of€14 million related to the refinancing and financial results on thepensions of our U.S. forms management business. In addition, a tax benefit of€6 million was recorded on the fiscal finalization of the divestment ofthe Paper Merchanting Division.

 

In2003, exceptional non-cash tax benefits of €76 million were recorded.Following the receipt of the indemnity payment, a tax benefit of€30 million was recognized resulting from the release of a valuationallowance regarding the former ISD (France) investments. The transactionstructure for the sale of the Paper Merchanting Division and the subsequentdebt reduction resulted in an €8 million tax benefit. The refinancing ofBuhrmann led to a further impairment of capitalized financing fees resulting inthe recognition of a tax asset of €11 million. Improved outlook on futuretaxable results triggered the release of a valuation allowance of €15 million.Tax provisions related to the acquisitions of both Corporate Express in 1999and USOP in 2001 were released to an amount of €10 million.

 

*Net result*

 
| ** **            | ** ** | **2004**          | ** ** | **2003** | ** ** |
|-----------------------|------------|-------------------|------------|----------|------------|
| ** **            | ** ** | **(in millions)** | ** ** |
| Operating result      |       | €            | 161        |     | €     | 171 |   |
| Total financial items |       | (81               | )          | (303     | )          |
| Net result            |       | €            | 80         |     | €     | (132 | ) |

 

56

----

 

**OfficeProducts North America**

 
| ** **                                    | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 3,628      |     | €     | 3,939                |       | (7.9                            | )%         | 0.5 | % |
| Added value                                   |       | 961                                    |       | 1,018    |       | (5.6                 | )%         | 3.2                             | %          |
| Operating result                              |       | €                                 | 138        |     | €     | 115                  |       | 19.5                            | %          | 30.0 | % |
| Added value as a percentage of net sales      |       | 26.5                                   | %          | 25.9     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 3.8                                    | %          | 2.9      | %          |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Office Products North America Division decreased by 7.9% from€3,939 million to €3,628 million, but increased by 0.5% at constantexchange rates. The office products business strengthened its position in thelarge account segment benefiting from the single sourcing strategy and productrange extensions. As an example, the category of facility products achieveddouble-digit growth, exceeding expectations. Also, customers’ total procurementcosts were addressed by our eCommerce tools and OneShopExpress® (one order, oneinvoice, one payment for multiple product lines) and as a result, new contractshave been won. Mid-market sales did not live up to our expectations, but wecontinued our investments in marketing, sales and service models for thesemarkets.

 

ASAPsales decreased from €788 million in 2003 to €768 million in 2004. Atconstant exchange rates, however, net sales increased by 5.3%. Reported netsales declined due to the continued shift of invoiced sales to a commission-basedsystem whereby the manufacturer performs the billing and ASAP receives acommission from the manufacturer. In the past, ASAP performed the billing ofthese sales and ASAP recorded sales and costs of sales rather than only thecommission. However, this shift had a minimal effect on the profitability ofthe business. ASAP continued its successful expansion and opened a new salesoffice in Canada.

 

Salesin the Office Products North America Division increased by 3%, on an organicbasis, reflecting the gradually improved economic conditions with growth ofwhite collar employment and stabilized spend on office products per whitecollar employee. Organic sales growth of office supplies (the office suppliesbusiness excludes the Division’s speciality business: software, forms andpromotional marketing) was level with last year. This includes the impact ofthe increased share of lower priced products under our own Corporate Expressbrand name which results in a lower sales value but higher returns. Adjustingfor this substitution effect, organic sales growth was 4% for the wholeDivision.

 

57

----

 

Thefollowing table presents a calculation, on an organic basis, of net sales forthe Office Products North America Division in 2004 as compared to 2003.

 
| ** **                                                                                  | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in %** | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                                                                  | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                                                                   |       | €                                 | 3,628      |     | €     | 3,939           |       |   |   |
| Effect of currency exchange rate movements                                                  |       | —                                 |       | (329     | )          |            |       |
| Net sales at constant exchange rates                                                        |       | 3,628                                  |       | 3,610    |       |            |       |
| Variation in the number of working days                                                     |       | —                                 |       | —   |       |            |       |
| Change to commission-based model at ASAP(1)                                                 |       | 243                                    |       | 153      |       |            |       |
| Net sales on an organic basis before effect of sales  under Corporate Express brand name(2) |       | 3,871                                  |       | 3,763    |       | 3               | %          |
| Effect of sales under Corporate Express brand name                                          |       | 35                                     |       | —   |       |            |       |
| Net sales on an organic basis after effect of sales  under Corporate Express brand name     |       | €                                 | 3,907      |     | €     | 3,763           |       | 4 | % |

 

----

(1)                                  Changeto commission-based model at ASAP relates to sales of software products by ASAPwhereby the manufacturer performs the billing and ASAP receives a commissionfrom the manufacturer which is recorded as sales by ASAP. In the past, ASAPperformed the billing of these sales and ASAP recorded sales and cost of salesseparately rather than only the commission.

 

(2)                                  Thisincludes the impact of the increased share of lower priced products under ourown Corporate Express Brand name.

 

*Added value*

 

Addedvalue of Office Product North America Division decreased by 5.6%, from€1,018 million in 2003 to €961 million in 2004, reflecting theweakening of the U.S. dollar. At constant exchange rates, added value improvedby 3.2%.

 

Inaddition to higher sales volumes, costs of goods sold were lower as a result ofour successful strategic initiatives to increase the share of our own CorporateExpress brand products and to convert customer products to our PreferredSupplier program, which allowed us to benefit from suppliers’ allowances andpromotional incentives.

 

ASAPdelivered an added value of €73 million in 2004 (an increase of 11.2%compared to 2003 and at constant exchange rates an increase of 20.4%).

 

As aresult of the initiatives, added value as a percentage of net sales of theOffice Products North America division increased from 25.9% in 2003 to 26.5% in2004, despite the negative impact of the higher share of lower margin softwaresales. ASAP realized an added value as percentage of net sales of 9.5% (8.3% in2003).

 

58

----

 

*Operating result*

 

Theoperating result in Office Products North America Division benefited from theimproved added value, maintaining high productivity, following therestructuring effort in previous years, and efficient logistics infrastructure.Operating result increased from €115 million in 2003 to €138 millionin 2004 (an increase of 19.5%). At constant exchange rates, operating resultincreased 30.0%.

 

Totaloperating costs, excluding depreciation of tangible fixed assets and internallyused software, as a percentage of net sales were 20.1% in 2004 as compared to20.4% in 2003. In 2003, this included an exceptional expense of €6 millionwhich was recorded due to a reassessment of lease commitments of vacantproperties which were included in the 2002 restructuring program. In 2004, noexceptional operating expenses were recorded.

 

Amortizationof goodwill decreased to €33 million in 2004 from €37 million in 2003due to the lower exchange rate of the U.S. dollar.

 

Depreciationof tangible fixed assets and internally used software was €60 million in2004 compared to €63 million in 2003. This is a decrease of 3.4%, however,measured at constant exchange rates, an increase of 5.8%. The depreciationcharge of 2004 includes an incidental charge of €2 million for thewrite-off of software that could not be effectively used.

 

As apercentage of net sales, operating result improved, from 2.9% in 2003 to 3.8%in 2004. ASAP achieved an operating result of €31 million (4.0% of netsales). At constant exchange rates, ASAP’s operating result improved 32.3%compared to 2003.

 

59

----

 

**OfficeProducts Europe and Australia**

 
| ** **                                    | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 1,500      |     | €     | 1,479                |       | 1.4                             | %          | 0.1 | % |
| Added value                                   |       | 420                                    |       | 392      |       | 7.1                  | %          | 5.7                             | %          |
| Operating result                              |       | €                                 | 47         |     | €     | (23                  | )          |                            |       |   |   |
| Added value as a percentage of net sales      |       | 28.0                                   | %          | 26.6     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 3.1                                    | %          | (1.6     | )%         |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Office Products Europe and Australia Divisions combined increasedby 1.4%, from €1,479 million in 2003 to €1,500 million in 2004. Atconstant exchange rates net sales were level with last year.

 

InEurope, we strengthened our position within the segment of large businesses andinstitutions, both locally and internationally. Our business in the UnitedKingdom showed first signals of gaining momentum and had a positive turn in thesales per day trend in the second half of 2004. In Germany, the largestEuropean operating unit, the core office products business outperformed themarket, but the copier business suffered from losses and has now been broughtunder the management of our Dutch business in an attempt to improve itsefficiency. In the Netherlands we were impacted by the weak economic climate.In addition, we discontinued the unprofitable portions of our Dutch wholesalebusiness, leading to a reduced sales value. Our operations in France showedparticularly good growth rates while our other European operations showed amixed but generally stable picture.

 

InAustralia and New Zealand, net sales increased 15.3% in 2004 compared to 2003measured at constant exchange rates. We maintained our strong performance inthese markets as a leading full service distributor, due to our single-sourcebusiness model, extended market coverage and new product categories. Thefacility products offer was extended and established in the majority of ourlocations with designated marketing and sales people. CE Direct (a dedicatedsales and marketing team, rolling out a low cost “maximum touch point strategy”)was launched for the medium and small business segments in the Sydney market.

 

Organically,sales in the Office Products Europe and Australia Divisions combined decreasedby 2% in 2004 compared to 2003 due to a 7% organic sales decline in Europe,partly offset by organic growth of 8% in Australia and New Zealand.

 

60

----

 

Thefollowing tables present a calculation, on an organic basis, of net sales forthe Office Products Europe and Australia Divisions, respectively, in 2004 ascompared to 2003.

 

**OfficeProducts Europe Division**

 
| ** **                                 | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in %** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                 | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                  |       | €                                 | 911        |     | €     | 983             |       |   |   |
| Effect of currency exchange rate movements |       | —                                 |       | 3        |       |            |       |
| Net sales at constant exchange rates       |       | 911                                    |       | 986      |       |            |       |
| Acquisitions and divestments               |       | —                                 |       | (7       | )          |            |       |
| Variation in the number of working days    |       | (5                                     | )          | —   |       |            |       |
| Net sales on an organic basis              |       | €                                 | 905        |     | €     | 978             |       | (7 | )% |

 

**OfficeProducts Australia Division**

 
| ** **                                 | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in %** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                 | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                  |       | €                                 | 589        |     | €     | 496             |       |   |   |
| Effect of currency exchange rate movements |       | —                                 |       | 14       |       |            |       |
| Net sales at constant exchange rates       |       | 589                                    |       | 510      |       |            |       |
| Acquisitions and divestments               |       | (14                                    | )          | 17       |       |            |       |
| Variation in the number of working days    |       | (4                                     | )          | —   |       |            |       |
| Net sales on an organic basis              |       | €                                 | 571        |     | €     | 527             |       | 8 | % |

 

*Added value*

 

Addedvalue in the Office Products Europe and Australia Divisions combined showed animprovement of 7.1%, from €392 million in 2003 to € 420 million in2004; at constant exchange rates, the increase was 5.7%. In 2003, this includedan exceptional charge for the Australian Division of €5 million to fullycomply with Buhrmann’s rebate and catalog income recognition policies. As apercentage of net sales, added value improved significantly to 28.0%, supportedby our strategic initiatives. Both Divisions increased their share of privatebrand sales; the Australian Division extended the program to most of itsspecialty businesses (facilities, catering, promotional marketing, furniture).The European Division continued its product harmonization and rationalizationinitiative.

 

*Operating result*

 

Theoperating result for the combined Office Products Europe and AustraliaDivisions, increased from a loss of €23 million in 2003 to a profit of€47 million in 2004. Operating result as a percentage of net salesimproved from negative 1.6% in 2003 to positive 3.1% in 2004 as a result of increasedadded value due to improved sourcing, private brand progress and marginmanagement initiatives particularly in Germany. In Europe, operating costs werelowered in 2004 compared to 2003 due to reduction in staff levels, while inAustralia headcount and costs increased.

 

Amortizationof goodwill decreased to €6 million in 2004 from €8 million in 2003due to a lower amount of goodwill after the impairment recorded in 2003.Following the outcome of the annual goodwill impairment test, an impairment of€53 million was recorded in 2003 as the calculated fair value of theEuropean Office Products businesses combined was lower than the book value. Noimpairment charge was recorded in 2004.

 

61

----

 

Depreciationof tangible fixed assets and internally used software was stable at€20 million in both 2004 and 2003.

 

In2004 and 2003, exceptional operating costs of €5 and €3 million,respectively, for additional restructuring charges in Europe were recorded.

 

**GraphicSystems**

 
| ** **                                    | ** ** | **2004**                               | ** ** | **2003** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 411        |     | €     | 369                  |       | 11.6                            | %          | 11.6 | % |
| Added value                                   |       | 95                                     |       | 85       |       | 11.9                 | %          | 11.9                            | %          |
| Operating result                              |       | €                                 | 0          |     | €     | (13                  | )          |                            |       |   |   |
| Added value as a percentage of net sales      |       | 23.2                                   | %          | 23.1     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 0.0                                    | %          | (3.6     | )%         |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Graphic Systems Division increased by 11.6%, from €369 million in 2003 to €411 million in 2004. While macro-economicconditions are still delaying a recovery, the lowest point of the investmentcycle seems to have passed. Traditionally, sales of equipment of the Divisioncorrelate with the long-term investment cycle and therefore experience a levelof cyclicality. The increase in orders for printing equipment in 2004 was inpart a direct result of the successful presentation of productivityimprovement for equipment shown at the DRUPA exhibition. The Division continuedits strategy to make sales less dependent on the investment cycle by increasingthe sales of Triple S in the Division’s total sales. The Division also sold itsdigital printing activities to NexPress in the fourth quarter of 2004.

 

*Added value*

 

Theadded value of the Graphic Systems Division was €95 million in 2004compared with €85 million in 2003, an increase of 11.9%. Graphic SystemsDivision continued its strategy to make sales less dependent on the economiccycle by increasing Triple S sales which produce higher margins. Addedvalue as a percentage of net sales increased slightly to 23.2% in 2004.

 

62

----

 

*Operating result*

 

Operatingresult in the Graphic Systems Division improved from a loss of €13 millionin 2003 to break even in 2004. This was the result of higher sales volumes andslightly better added value margins. Also, the Division further reduced itscost base due to the divestment of its digital print and reduced staffing levels.Operating results improved from negative 3.6% in 2003 to break even in 2004.

 

TheDivision did not incur amortization or impairment cost of goodwill in 2004 or2003.

 

Depreciationcosts were stable at €4 million in 2004.

 

In2003, exceptional operating costs of €1 million were recorded asadditional restructuring charges. In 2004, no exceptional operating costs wererecorded.

 

**Corporate**

 

Netcorporate operating costs not allocated to the Divisions, were €18 millionin 2004, an increase of €2 million compared to 2003 mainly because, in2003, we benefited from some non-recurring benefits in operating costs.

 

In2003, an exceptional operating income, not allocated to the Divisions, of€58 million was recorded which is the result of an indemnity payment (netof costs) awarded to Buhrmann as the outcome of arbitration proceedings againstthe French company Ipfo Bail S.A. In 2004, no exceptional operating income orcosts were recorded.

 

Amortizationcost of goodwill not allocated to the Divisions was € 6 million in 2004and €5 million in 2003.

 

63

----

 

**Resultsof operations—year ended December 31, 2003 compared to year ended December 31,2002**

 

Themajority of Buhrmann’s business activities are conducted in U.S. dollars.Buhrmann’s financial position, results of operations and cash flows reported ineuro were significantly affected by the weakening of the exchange rate of theU.S. dollar to the euro in 2003. Changes at constant exchange rates in thetables below exclude the effect of currency exchange rate movements on reportednumbers in euro.

 

Ingeneral, our business was affected by continuing difficult economic conditionsin our major markets. Personnel reductions and lower spend per white collaremployee resulted in lower demand from our existing office products customers.We partially compensated for this reduction in demand through product rangeextensions and the addition of new customers. In addition, customers of ourgraphic equipment were postponing their investments, leading to reduced saleslevels in our Graphic Systems Division.

 

Asthese difficult economic conditions restricted the growth of our business, wefocused on restructuring our office products operations, strengthening ourmanagement teams, modifying our sales and marketing strategies, integratingcompanies acquired over the past years, reducing costs, managing workingcapital and realizing a satisfactory cash flow. Ongoing investments were madein technology and the launch of our global sourcing and private labelinitiatives. We achieved significant debt reduction in 2003 due to strong cashflow generation from operating activities and the sale of the Paper MerchantingDivision.

 

Ourglobal office products business, mainly operating under the name of CorporateExpress, made significant progress in optimizing operations. Our North Americanoffice supplies business completed streamlining its operations and centralizingback-office functions improving labor productivity by more than 10% in 2003.Our European office products operations were strengthened by the appointment ofseveral new national management teams, reduced personnel numbers and furtheraligned their infrastructure. Our operations in Australia and New Zealandcontinued to expand geographic coverage and multiple lines of business throughselective acquisitions. We continued to invest in these operations tostrengthen our sales and marketing approach and enhance customer experiencewhile helping them take cost out of their procurement process, thus maintainingour competitive advantage. In addition, information technology investmentscontinued to drive operational efficiencies, fostering a more efficientinternal administrative and operational service.

 

Thesale of the Paper Merchanting Division in 2003 facilitated a substantialreduction in our net debt. The net consideration for the sale amounted to€637 million. The sale of the Paper Merchanting Division also enabled usto focus more of our attention and efforts on the office products business. Webelieve that the office products market offers attractive growth opportunities,a high profit margin, and a good return on capital employed.

 

During2003 we reduced our total interest bearing debt by €899 million. At theend of 2003, Buhrmann’s total interest bearing debt amounted to€836 million compared to €1,735 million at the end of the previousyear. In view of the relatively high financing costs in relation to the Company’searnings performance, debt reduction was given the highest priority, whileavailable cash flow was maximized through further stringent working capitalmanagement. The changed composition of the Group, the composition of our debtportfolio and the favorable capital market environment gave rise to an in-depthand favorable revision of Buhrmann’s financing structure with the refinancingof our senior credit facility with the Senior Credit Facility and the issue ofthe Subordinated Convertible Bonds, see “Financing activities” below.Particular attention was given to optimizing the duration and the compositionof the debt portfolio to match the requirements of the Group going forward. Inaddition, the Senior Credit Facility enhances the flexibility in ouroperational and financial activities.

 

64

----

 

**Consolidatedresults**

 

***Net sales; Added value; Operating result***

 

Thefollowing table shows net sales, added value and operating result of theBuhrmann Group, including the Paper Merchanting Division which was sold witheffect from October 31, 2003.

 
|                                          |   | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** |   |
|-----------------------------------------------|--------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|--------|
|                                          |   | **(in millions, except  percentages)** |       |
| Net sales                                     |   | €                                 | 8,053      |     | €     | 9,948                |       | (19.0                           | )%     | (10.8 | )% |
| Added value                                   |   | 1,854                                  |       | 2,253    |       | (17.7                | )%         | (8.6                            | )%     |
| Operating result                              |   | €                                 | 171        |     | €     | (301                 | )          | —                          |   | — |   |
| Added value as a percentage of net sales      |   | 23.0                                   | %          | 22.6     | %          |                 |       |                            |   |
| Operating result as a percentage of net sales |   | 2.1                                    | %          | (3.0     | )%         |                 |       |                            |   |

 

Thefollowing table shows net sales, added value and operating result excluding thePaper Merchanting Division and related Corporate holding companies.

 
|                                          |   | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|--------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
|                                          |   | **(in millions, except  percentages)** |       |
| Net sales                                     |   | €                                 | 5,787      |     | €     | 6,960                |       | (16.9                           | )%         | (6.4 | )% |
| Added value                                   |   | 1,495                                  |       | 1,792    |       | (16.5                | )%         | (5.7                            | )%         |
| Operating result                              |   | €                                 | 116        |     | €     | (348                 | )          | —                          |       | — |   |
| Added value as a percentage of net sales      |   | 25.9                                   | %          | 25.7     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |   | 2.0                                    | %          | (5.0     | )%         |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why we believethe presentation of this non-GAAP financial measure provides useful informationregarding our financial performance in the “Use of Non-GAAP Financial Measures”section of this Item 5.

 

65

----

 

*Net sales*

 

Netsales of the Group in 2003 were €8,053 million compared with€9,948 million in 2002, a decrease of 19.0%. Excluding the PaperMerchanting Division, net sales in 2003 were €5,787 million compared with€6,960 million in 2002, a decrease of 16.9%. This decrease is to a largeextent attributable to the weakening of the U.S. dollar, which adverselyaffected net sales in the Office Products North America Division. At constantexchange rates, the decrease in net sales was 10.8% for the total Group and a decreaseof 6.4% excluding the Paper Merchanting Division.

 

Personnelreductions and lower spend on office products per employee continued across ourcustomer base in 2003. Especially with respect to our large-account customers,which we serve primarily in our key markets, such as the United States,Germany, and the Netherlands, we experienced reduced demand for officeproducts. Our business in the United Kingdom was negatively impacted byinternal restructuring, leading to a decline in sales. In Australia, NewZealand, Canada and in most other European countries we continued to grow. Thisis primarily attributable to increased sales to small- and medium-sizedbusinesses. Even in the face of difficult market conditions in our majormarkets, most Buhrmann businesses increased market share within our corecustomer segment, the large and strategic accounts.

 

Theorganic sales growth for Buhrmann as a whole, excluding the Paper MerchantingDivision, was negative 4.0% in 2003 as compared to 2002.

 

Thefollowing table presents a calculation, on an organic basis, of net sales forthe Group in 2003 as compared to 2002.

 
| ** **                                                                     | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in %** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                                                     | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                                                      |       | €                                 | 8,053      |     | €     | 9,948           |       |   |   |
| Divestment of the Paper Merchanting Division                                   |       | (2,266                                 | )          | (2,988   | )          |            |       |
| Net sales excluding the Paper Merchanting Division                             |       | 5,787                                  |       | 6,960    |       |            |       |
| Effect of currency exchange rate movements                                     |       | —                                 |       | (780     | )          |            |       |
| Net sales at constant exchange rates excluding the  Paper Merchanting Division |       | 5,787                                  |       | 6,180    |       |            |       |
| Acquisitions                                                                   |       | (26                                    | )          | 17       |       |            |       |
| Divestments (excluding the Paper Merchanting  Division)                        |       | (7                                     | )          | (28      | )          |            |       |
| Variation in the number of working days                                        |       | 41                                     |       | —   |       |            |       |
| Change to commission-based model at ASAP(1)                                    |       | 168                                    |       | 87       |       |            |       |
| Change in sales recognition in the Graphic Systems  Division(2)                |       | 16                                     |       | —   |       |            |       |
| Net sales on an organic basis                                                  |       | €                                 | 5,979      |     | €     | 6,256           |       | (4 | )% |

 

----

(1)                                  Changeto commission-based model at ASAP relates to sales of software products by ASAPwhereby the manufacturer performs the billing and ASAP receives a commissionfrom the manufacturer which is recorded as sales by ASAP. In the past, ASAPperformed the billing of these sales and ASAP recorded sales and cost of salesseparately, rather than only the commission.

 

(2)                                  Changein sales recognition in the Graphic Systems Division relates to graphicmachines of which the sale, as of January 1, 2003, is recognized atinstallation, whereas prior to January 1, 2003 the sale was recognized atdelivery of the machines.

 

66

----

 

*Added value*

 

Totaladded value of the Group was €1,854 million in 2003 compared to€2,253 million in 2002. This represented a decrease of 17.7%, or 8.6% atconstant exchange rates. Total added value excluding the Paper MerchantingDivision was €1,495 million in 2003 compared to €1,792 million in2002, a decrease of 16.5%, or 5.7% at constant exchange rates. This decreasewas predominantly a result of lower sales volumes. Added value as a percentageof net sales before exceptional results, excluding the Paper Merchanting Division,was 25.9% in 2003 compared to 25.7% in 2002.

 

In2003, an exceptional charge of €5 million was recorded in added value inthe Australian Division to fully comply with Buhrmann’s rebate and catalogincome recognition policies.

 

*Operating result*

 

Theoperating result of the Buhrmann Group was an income of €171 million in2003, compared to a loss of €301 million in 2002.

 

In2003, a goodwill impairment charge of €53 million was recorded followingthe annual goodwill impairment test, as the calculated fair value of theEuropean Office Products Division was lower than the book value. This reflectsprimarily the Division’s business performance, which was lower than expectedwhen 2002’s impairment test was made. Following the annual goodwill impairmenttest in 2002, a goodwill impairment charge of €573 million was recordedwhich includes the Office Products North America Division (€ 423 million),the Office Products Europe Division (€124 million) and the PaperMerchanting Division (€26 million).

 

Theamortization of goodwill was €52 million in 2003 compared to€70 million in 2002, a reduction of 25.7% or 15.2% measured at constantexchange rates which is due to a lower amount of goodwill as a result of animpairment charge in 2002.

 

Asfrom the financial year 2003, Buhrmann’s operating result includes a number of “exceptional”results that are disclosed separately in order to increase comparability ofresults from normal operations (following new Guidelines for Annual Reportingin the Netherlands). In 2002, most of these exceptional results were excludedfrom operating result and classified as extraordinary result.

 

Totalexceptional results in 2003 as part of operating result amounted to€51 million and consisted of the following:

 

•                  Office Products North America: a reassessment oflease commitments of vacant properties which were included in the 2002restructuring charge (€ 6 million negative).

 

•                  Office Products Europe and Australia: an adjustmentof catalog income recognition of Office Products Australia to fully comply withBuhrmann accounting policies (€5 million negative); and additionalrestructuring charges in Office Products Europe (€3 million negative).

 

•                  Graphic Systems: a restructuring charge(€1 million negative).

 

•                  Corporate: primarily the result of an indemnitypayment (€58 million positive net of costs) awarded to Buhrmann as theoutcome of arbitration proceedings against the French company Ipfo Bail S.A.

 

•                  Paper Merchanting Division: a reassessment ofrestructuring commitments related to revised numbers of redundancies and acontinuation of property usage (€8 million positive).

 

67

----

 

Depreciation costs oftangible fixed assets and internally used software was €104 million in2003 compared to €114 million in 2002. This is a decrease of 8.5%,however, measured at constant exchange rates it was an increase of 2.5%. Theincrease is a result of large investments in information technology systems,internally used software and distribution facilities in the past years.

 

Operatingresult was negatively affected by lower sales volumes which were partiallyoffset by lower labor and other operating costs, mainly as a result of ourrestructuring and integration efforts.

 

Excludingthe Paper Merchanting Division and related corporate holding companies, theoperating result was an income of €116 million in 2003 compared to a lossof €348 million in 2002.

 

*Financial income and expense; Minority interests;Taxation*

 
| ** **                                               | ** ** | **2003**          | ** ** | **2002** | ** ** |
|----------------------------------------------------------|------------|-------------------|------------|----------|------------|
| ** **                                               | ** ** | **(in millions)** | ** ** |
| Total financing costs                                    |       | €            | (257       | )        | €     | (199 | ) |
| Results from participations and other financial  results |       | (102              | )          | 16       |       |
| Total minority interests                                 |       | (12               | )          | (12      | )          |
| Total taxes                                              |       | 68                |       | (18      | )          |
| Total financial items                                    |       | €            | (303       | )        | €     | (213 | ) |

 

*Total financing costs*

 

Interestcosts were substantially reduced in 2003 to €144 million from€182 million in 2002, a reduction of 20.9%. This is predominantly a resultof lower average interest-bearing debt due to early repayments, especially fromthe proceeds of the sale of the Paper Merchanting Division, as well as from thepositive cash flow from operations. Interest costs were also reduced in thecourse of 2003 as a number of interest rate swaps with relatively high fixedrates either matured or were cancelled. Interest rate margins in 2003, however,were slightly higher than in 2002 due to the application of the pricingstructure of the Senior Credit Facility.

 

Amortizationof capitalized financing fees was €14 million in 2003 and €22 millionin 2002. In 2003, an exceptional impairment of capitalized financing fees of€53 million was recorded as a result of repayments of debt following theproceeds from the sale of the Paper Merchanting Division, the replacement ofthe Senior Credit Facility and the issue of the Subordinated Convertible Bonds.

 

As aconsequence of the debt reduction, interest rate swaps were settled in order toachieve a fixed to variable rate profile in line with our policy for hedginginterest rate risks. This resulted in an exceptional charge of€40 million.

 

Inaddition, in connection with the refinancing of our senior credit facility withthe Senior Credit Facility and the issue of the Subordinated Convertible Bonds,exceptional advisory costs of €5 million were recorded.

 

Totalfinancing costs also includes the resulting currency translation differences onaccounts receivable, cash and liabilities after application of currency forwardcontracts and certain currency translation differences on intercompany loans.

 

68

----

 

*Results from participations and other financial results*

 

Thesale of the Paper Merchanting Division resulted in a loss of €112 millionin 2003, consisting of a book loss of €79 million, related transactioncosts of €15 million and provisions for indemnities and warranties of€18 million. The profit from the sale of the assets of DocVision of€7 million was also included in the 2003 results. In 2002, an income of€13 million was recorded as a result of the release of a provision relatedto uncollectability of loan notes which were received with the sale of theInformation Systems Division in 2000. These loan notes were redeemed in 2002prior to their stated maturity.

 

*Minority interests*

 

Minorityinterests mainly represent the 48% share of third parties in the result ofCorporate Express Australia Ltd, a publicly traded company. This includesan exceptional income of €2 million in connection with the adjustment ofthe recognition of catalog contributions in the Office Products AustraliaDivision to fully comply with Buhrmann accounting policies.

 

*Taxes on result from ordinary operations*

 

In2003, exceptional non-cash tax benefits of €76 million were recorded whichinclude a tax gain of €30 million as a result of the receipt of theindemnity payment awarded to Buhrmann as the outcome of arbitration proceedingsagainst the French company Ipfo Bail S.A. The transaction structure for thesale of the Paper Merchanting Division and the subsequent debt reductionresulted in an €8 million tax benefit. The refinancing of Buhrmann led toa further impairment of capitalized financing fees resulting in the recognitionof a tax asset of €11 million. Improved outlook on future taxable resultstriggered the release of a valuation allowance of €15 million. Taxprovisions related to the acquisitions of both Corporate Express in 1999 andUSOP in 2001 were released to an amount of €10 million.

 

Taxexpense on result from operations before exceptional tax results was€8 million in 2003 compared to €18 million in 2002. The decrease intax expense is mainly due to lower taxable income in 2003 due to loweroperating result before amortization and impairment of goodwill which arepredominantly non-deductible. In addition, taxes on result from operations in2003 and 2002 benefited from changes in the composition of the geographicdistribution of taxable income and finalized tax audits which led to a releaseof allowances on deferred tax assets which were recorded in previous years andwhich are no longer deemed necessary.

 

Buhrmann’seffective tax rate was 12.5% in 2003 and 12.2% in 2002. The effective tax rateis determined based on the ratio of taxes on result from operations to theamount of result from operations before taxes and exceptional and extraordinaryresults and before, as these items are predominantly exempted from taxes,amortization and impairment of goodwill. Buhrmann’s effective tax rate is belowBuhrmann’s weighted average statutory tax rate of 28% in 2003 (2002: 26%) dueto changes in valuation allowances, predominantly related to the valuation oflosses carried forward, exempt income, non-deductible expenses and incentives.

 

69

----

 

*Result from operations; Extraordinary result; Netresult*

 
| ** **                                         | ** ** | **2003**          | ** ** | **2002** | ** ** |
|----------------------------------------------------|------------|-------------------|------------|----------|------------|
| ** **                                         | ** ** | **(in millions)** | ** ** |
| Operating result                                   |       | €            | 171        |     | €     | (301 | ) |
| Total financial items                              |       | (303              | )          | (213     | )          |
| Result from operations before extraordinary result |       | (132              | )          | (514     | )          |
| Extraordinary result                               |       | —            |       | (74      | )          |
| Net result                                         |       | €            | (132       | )        | €     | (588 | ) |

 

***Extraordinary result***

 

Extraordinaryresult in 2002 consisted of extraordinary income of €10 million andextraordinary losses of €113 million and a related tax gain of€29 million. Extraordinary income relates to a release of €10 millionof a provision for warranties relating to divested companies in previous yearswhich were settled in 2002. Extraordinary losses in 2002 includes a charge of€111 million relating to both restructuring measures and write-offs oninformation technology and distribution infrastructure. As of January 1,2003, these items are no longer presented as extraordinary results.

 

**OfficeProducts North America Division**

 
| ** **                                    | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 3,939      |     | €     | 4,931                |       | (20.1                           | )%         | (5.6 | ) % |
| Added value                                   |       | 1,018                                  |       | 1,261    |       | (19.2                | )%         | (4.0                            | )%         |
| Operating result                              |       | €                                 | 115        |     | €     | (273                 | )          | —                          |       | — |   |
| Added value as a percentage of net sales      |       | 25.9                                   | %          | 25.6     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 2.9                                    | %          | (5.5     | )%         |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Office Products North America Division decreased by 20.1% to€3,939 million in 2003, compared to €4,931 million in 2002. Atconstant exchange rates, sales were 5.6% lower than in 2002. The perceivedrecovery of the economic growth in the United States did not result in 2003 inan increase in employment rates, and therefore did not result in increasedsales in the Office Products North America Division, as the demand for officeproducts relates primarily to the number of office workers employed by our customersand their spending per office worker. Sales of office supplies on an organicbasis were almost level with 2002. The office supplies business excludes theDivision’s specialty businesses ASAP, forms and promotional marketing. TheDivision’s software sales also declined due to a continuing shift from invoicedsales to a commission-based system. Also in 2002, software sales benefitedstrongly from promotional activities of a major supplier, which were notrepeated to the same extent in 2003.

 

70

----

 

Organically, sales were3% lower in 2003 compared to 2002.

 

Thefollowing table presents a calculation, on an organic basis, of net sales forthe Office Products North America Division in 2003 as compared to 2002.

 
| ** **                                  | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in %** | ** ** |
|---------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                  | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                   |       | €                                 | 3,939      |     | €     | 4,931           |       |   |   |
| Effect of currency exchange rate movements  |       | —                                 |       | (760     | )          |            |       |
| Net sales at constant exchange rates        |       | 3,939                                  |       | 4,171    |       |            |       |
| Acquisitions                                |       | (14                                    | )          | —   |       |            |       |
| Variation in the number of working days     |       | 33                                     |       | —   |       |            |       |
| Change to commission-based model at ASAP(1) |       | 168                                    |       | 87       |       |            |       |
| Net sales on an organic basis               |       | €                                 | 4,126      |     | €     | 4,258           |       | (3 | )% |

 

----

(1)                                  Changeto commission-based model at ASAP relates to sales of software products by ASAPwhereby the manufacturer performs the billing and ASAP receives a commissionfrom the manufacturer which is recorded as sales by ASAP. In the past ASAPperformed the billing of these sales and ASAP recorded sales and cost of salesseparately, rather than only the commission.

 

*Added value*

 

In ourOffice Products North America Division, added value decreased by 19.2% to€1,018 million in 2003 from €1,261 million in 2002. Measured atconstant exchange rates, the decrease was 4.0%. Added value as a percentage ofnet sales increased slightly to 25.9% in 2003 from 25.6% in 2002, reflectingthe change in the product mix with a lower share of software sales. Within theoffice supplies business, the share of the strategic and large-accountcustomers remained high and the proportion of competitively priced “contract”sales increased further. Margin levels per product group were relativelystable, however margins in the mid- and small-market segment increased. Marginimprovements were achieved through global sourcing initiatives and theexpansion of the Division’s private brand program. Rebates from suppliersincreased and allowances paid to customers increased, both in comparison withsales levels. In 2003, software sales contributed €66 million to theDivision’s added value or 8.3%, of software sales, which is at the same levelas in 2002.

 

*Operating result*

 

Amortizationof goodwill decreased to €37 million in 2003 from €48 million in 2002due to the lower exchange rate of the U.S. dollar and a lower amount ofgoodwill after the impairment recorded in 2002. Following the outcome of theannual goodwill impairment test, an impairment of €423 million on theremaining goodwill was recorded in 2002 as the business performance was lowerthan expected when the relevant acquisitions were made. In 2003, the annualimpairment test did not result in a goodwill impairment for Office ProductsNorth America.

 

Depreciationof tangible fixed assets and internally used software was €63 million in2003 compared to €69 million in 2002. This is a decrease of 8.7%, however,measured at constant exchange rates, this is an increase of 8.7%. This increaseis due to the large investments in information technology systems, internallyused software and distribution facilities made in the past years.

 

Operatingresult was negatively affected by lower added value which was partiallycompensated by lower labor and other operating costs, largely due torestructuring measures implemented in the course of 2003. The restructuringentailed among other things a significant reduction in the number of employees,the closure of several facilities and the expansion of the Division’s sharedservice facility. Total operating costs, excluding depreciation of tangiblefixed assets and internally used software, as a percentage of net sales were20.4% in 2003 as compared to 20.2% in 2002, despite the decline in sales and anexceptional expense of €6 million in 2003 due to a reassessment of leasecommitments of vacant properties which were included in the 2002 restructuringprogram. The charge for the restructuring program in 2002 was recorded as anextraordinary expense.

 

71

----

 

**OfficeProducts Europe and Australia Division**

 
| ** **                                    | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 1,479      |     | €     | 1,540                |       | (4.0                            | )%         | (3.0 | )% |
| Added value                                   |       | 392                                    |       | 413      |       | (5.1                 | )%         | (3.6                            | )%         |
| Operating result                              |       | €                                 | (23        | )        | €     | (75                  | )          | (68.8                           | )%         | (69.3 | )% |
| Added value as a percentage of net sales      |       | 26.6                                   | %          | 26.8     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | (1.6                                   | )%         | (4.9     | )%         |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Office Products Europe and Australia Divisions combined, decreasedby 4.0% to €1,479 million in 2003 from €1,540 million in 2002.Measured at constant exchange rates, the decrease amounted to 3.0%. Sales inparticular declined in Germany and the Benelux. In these markets our strategicand large-account customers implemented personnel rationalization andcost-reduction initiatives. In addition, our business in the United Kingdomlost sales due to internal restructuring, which was resolved in the second halfof 2003. In those European countries where the customers are predominantlysmall- and medium-sized, sales continued to grow. The Office Products EuropeDivision made progress in harmonizing its local European businesses. In each ofthe Division’s local businesses, dedicated sales teams were established forboth the strategic and large account and the mid-market account segment.

 

OurAustralia and New Zealand-based office products business continued to performstrongly in 2003 with an increase in net sales of 18.4% to € 496 millionin 2003 from €419 million in 2002. The increase at constant exchange rateswas practically the same at 18.5%. Large customers decreased their officeproducts spending but this was more than offset by growth and increasedpenetration in the mid- and small-markets, using dedicated sales teams. Theexpansion of specialty product categories (such as facility, break room andsafety supplies) reflected the successful development of the single-sourcebusiness model.

 

On anorganic basis, sales in the Office Products Europe Division were 9% lower thanin 2002 whereas sales in the Office Products Australia Division were 11% higherthan in 2002 on an organic basis.

 

72

----

 

Thefollowing tables present a calculation, on an organic basis, of net sales forthe Office Products Europe and Australia Divisions, respectively, in 2003 ascompared to 2002.

 

**OfficeProducts Europe Division**

 
| ** **                                 | ** ** | **2003**                              | ** ** | **2002** | ** ** | **Change in %** | ** ** |
|--------------------------------------------|------------|---------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                 | ** ** | **(in millions, except percentages)** | ** ** |
| Net sales                                  |       | €                                | 983        |     | €     | 1,121           |       |   |   |
| Effect of currency exchange rate movements |       | —                                |       | (20      | )          |            |       |
| Net sales at constant exchange rates       |       | 983                                   |       | 1,101    |       |            |       |
| Divestments                                |       | (7                                    | )          | (28      | )          |            |       |
| Variation in the number of working days    |       | (4                                    | )          | —   |       |            |       |
| Net sales on an organic basis              |       | €                                | 972        |     | €     | 1,072           |       | (9 | )% |

 

**OfficeProducts Australia Division**

 
| ** **                                 | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in %** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|----------|------------|-----------------|------------|
| ** **                                 | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                  |       | €                                 | 496        |     | €     | 419             |       |   |   |
| Effect of currency exchange rate movements |       | —                                 |       | (1       | )          |            |       |
| Net sales at constant exchange rates       |       | 496                                    |       | 418      |       |            |       |
| Acquisitions                               |       | (12                                    | )          | 17       |       |            |       |
| Net sales on an organic basis              |       | €                                 | 484        |     | €     | 435             |       | 11 | % |

 

*Added value*

 

Addedvalue in the Office Products Europe and Australia Divisions combined, decreasedby 5.1% to €392 million in 2003 from €413 million in 2002 or 3.6% measuredat constant exchange rates. Added value as a percentage of net sales was 26.6%in 2003, the same level as in 2002. In 2003, an exceptional charge of€5 million was recorded in the Australian Division to fully comply withBuhrmann’s rebate and catalog income recognition policies. In Europe, sales ofstationery supplies showed a decline whereas sales of computer suppliesremained stable. As a result of the continuing weak economic climate andcompetitive pressure, price and margin pressure remained present in 2003. TheEuropean business launched a new private brand offering in 2003 and theAustralian business increased the share of sales under its own brand whichhelped to maintain margins and offers our customers an attractive alternativeto manufacturers’ brands.

 

73

----

 

*Operating result*

 

Amortizationof goodwill decreased to €8 million in 2003 from € 15 million in 2002due to a lower amount of goodwill after the impairment recorded in 2002.Following the outcome of the annual goodwill impairment test, an impairment of€53 million was recorded in 2003 as the calculated fair value of theEuropean Office Products businesses combined was lower than the book value.This reflects primarily the recent performance of the European Office ProductsDivision, which is lower than we expected when the 2002 impairment test wasmade which resulted in an impairment of goodwill of €124 million.

 

Depreciationof tangible fixed assets and internally used software was stable at €20 millionin both 2003 and 2002.

 

Operatingresult in the Office Products Europe and Australia Divisions combined, wasnegatively affected by the decline in added value in Europe due to lower saleslevels, which was only partly offset by the increase in added value inAustralia.

 

InEurope, labor and other operating costs were 4.3% lower, which was the resultof further integration and streamlining of the operations. In the Netherlands,a new distribution center was brought into use while in other countries, suchas Italy, facilities were modernized. The implementation of a new warehousesystem in Australia had a temporary negative impact on labor and operatingcosts.

 

In2003, exceptional operating costs of €3 million for additionalrestructuring charges in Europe were recorded. In 2002, the charge forrestructuring was recorded as an extraordinary expense.

 

**GraphicSystems Division**

 
| ** **                                    | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at  constant  rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|-----------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 369        |     | €     | 489                  |       | (24.5                             | )%         | (24.5 | )% |
| Added value                                   |       | 85                                     |       | 118      |       | (28.0                | )%         | (28.0                             | )%         |
| Operating result                              |       | €                                 | (13        | )        | €     | 23                   |       | —                            |       | — |   |
| Added value as a percentage of net sales      |       | 23.1                                   | %          | 24.1     | %          |                 |       |                              |       |
| Operating result as a percentage of net sales |       | (3.6                                   | )%         | 4.7      | %          |                 |       |                              |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Graphic Systems Division decreased by 24.5% to €369 millionin 2003 from €489 million in 2002, and organically by 21%. Sales ofmachinery were sharply down from 2002 as the European graphic industrycontinued to postpone capital investments in the wake of low business volumesin the market for print publications. Traditionally, sales of machinery in ourGraphic Systems Division correlate with the investment cycle, and thereforeexperiences more cyclicality than Buhrmann’s other divisions. Additionally, thetight lending climate in 2003 made it difficult for printers to buy newequipment. Overall however, the Division made good progress in its strategy tomake its sales less dependent on the economic cycle. Sales of services (such asconfiguration and repairs), supplies and spare parts continued to grow toapproximately 40% of the Division’s total sales in 2003.

 

74

----

 

*Added value*

 

Addedvalue in the Graphic Systems Division decreased by 28.0% to €85 million in2003 from €118 million in 2002. The added value as a percentage of netsales decreased to 23.1% in 2003 from 24.1% in 2002. Margins on machinerydeclined in 2003 due to severe competition as commercial printers continued toface a low capacity utilization and manufacturers have overcapacity. Higherinventory and receivables provisions also had a negative impact on added value.Conversely, the increase in sales of services, supplies and spare parts, whichhave higher margins, had a positive effect on added value.

 

***Operating result***

 

Thedecrease in operating result was due to a decline in added value as a result oflower sales while employee levels were reduced and cost levels, includingdepreciation, remained stable.

 

TheDivision did not incur amortization or impairment cost of goodwill in 2003 or2002.

 

Exceptionalcosts of €1 million in 2003 were recorded as additional restructuringcharges. In 2002, the charge for restructuring was recorded as an extraordinaryexpense.

 

**PaperMerchanting Division**

 
| ** **                                    | ** ** | **2003**                               | ** ** | **2002** | ** ** | **Change in €** | ** ** | **Change at constant rates(1)** | ** ** |
|-----------------------------------------------|------------|----------------------------------------|------------|----------|------------|----------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **(in millions, except  percentages)** | ** ** |
| Net sales                                     |       | €                                 | 2,266      |     | €     | 2,988                |       | (24.2                           | )%         | (21.0 | )% |
| Added value                                   |       | 359                                    |       | 461      |       | (22.1                | )%         | (18.7                           | )%         |
| Operating result                              |       | €                                 | 55         |     | €     | 44                   |       | 25.0                            | %          | 32.8 | % |
| Added value as a percentage of net sales      |       | 15.8                                   | %          | 15.4     | %          |                 |       |                            |       |
| Operating result as a percentage of net sales |       | 2.4                                    | %          | 1.5      | %          |                 |       |                            |       |

 

----

(1)                                  Wepresent our results on a constant currency basis by converting our prior yearresults into euro at the current year average exchange rate. We explain why webelieve the presentation of this non-GAAP financial measure provides usefulinformation regarding our financial performance in the “Use of Non-GAAPFinancial Measures” section of this Item 5.

 

*Net sales*

 

Netsales in the Paper Merchanting Division from January 1 to October 31,2003 (Buhrmann divested its Paper Merchanting Division with effect from October 31,2003) were 10.3% lower compared to the same period in 2002. Sales measured ineuro were negatively impacted by a weaker exchange rate of the British poundsterling. Measured at constant exchange rates, the decrease in sales amountedto 6.5%. The sales mix between stock and lower priced indent (paper orderedthrough merchants but delivered directly from the mills) was stable in 2003.

 

*Added value*

 

Addedvalue in the Paper Merchanting Division decreased by 8.2% in the period January 1to October 31, 2003 compared to the same period in 2002. Measured atconstant exchange rates, the decline was 3.7%. This decrease was due to loweraverage paper prices while gross margins were stable in 2003 compared to 2002.Added value as a percentage of net sales in the Paper Merchanting Division wasslightly higher at 15.8% in 2003 compared to 15.4% in 2002.

 

75

----

 

*Operating result*

 

Operatingresult in the Paper Merchanting Division increased to €55 million in 2003from €44 million in 2002. This is predominantly due to the impairmentcharge of goodwill of €26 million in 2002 resulting from the annualgoodwill impairment test. In 2003, no goodwill impairment was recorded.

 

Therewas no major change in depreciation of tangible fixed assets and internallyused software in the period January 1 to October 31, 2003 compared tothe same period in 2002.

 

Operatingresult was negatively affected by the decrease in added value while labor andother operating costs were 5.3% lower than in the same period in 2002, or 1.0%at constant exchange rates. This was compensated for by an exceptionaloperating income of €8 million in 2003 due to a reassessment ofrestructuring commitments resulting from the 2002 restructuring program. In2002, the charge for these restructuring commitments was recorded as anextraordinary expense.

 

**Corporate**

 

Corporatenet operating costs not allocated to the Divisions were €16 million in2003 and in 2002. In 2003, higher labor costs could be compensated by lowerother operating costs (such as insurance and consultancy costs).

 

Furthermore,there was an exceptional income, not allocated to the Divisions, in 2003 of€58 million which was the result of an indemnity payment (net of costs)awarded to Buhrmann as the outcome of arbitration proceedings against theFrench company Ipfo Bail S.A.

 

Amortizationcost of goodwill not allocated to the Divisions was € 5 million in 2003and €4 million in 2002.

 

76

----

 

**Liquidityand Capital Resources**

 

*Liquidity*

 

Buhrmann’sliquidity requirements arise primarily from the need to fund the expansion ofits business, working capital requirements, capital expenditure andrestructuring. Our primary source of liquidity is cash generated fromoperations. The following table sets forth cash flow movements for the periodsindicated (includes the Paper Merchanting Division until October 31,2003):

 
| ** **                                          | ** ** | **Twelve Months ended December 31,** | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                          | ** ** | **2004**                                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                          | ** ** | **(in millions)**                         | ** ** |
| Net cash provided by operating activities           | ** ** | €                                    | 223        |   | € | 272 |   | € | 258 |   |
| Net cash provided by (used in) investing activities |       | (82                                       | )          | 544 |   | (138 | ) |
| Available cash flow                                 |       | 141                                       |       | 816 |   | 120 |   |
| Net cash (used in) financing activities             |       | (127                                      | )          | (681 | ) | (208 | ) |
| Net cash flow                                       |       | €                                    | 14         |   | € | 135 |   | € | (88 | ) |

 

***Net cash provided by operating activities***

 

Netcash provided by operating activities was €223 million in 2004, comparedwith €272 million in 2003 (including the Paper Merchanting Division).

 

An€83 million lower operating result in 2004 compared 2003 adjusted fornon-cash items (depreciation of tangible fixed assets and internally usedsoftware, amortization and impairment of goodwill, additions to/releases fromprovisions) was more then compensated by lower spending related to cost savingrestructuring activities of €25 million and lower interest payments of€72 million. Operating result in 2003 includes the Paper MerchantingDivision until October 31.

 

Workingcapital was further reduced by €36 million in 2004 and €81 million in2003. Average working capital as a percentage of net sales decreased from 12.3%in 2003 to 9.5% in 2004.

 

Interestpayments decreased as a result of the lower average interest-bearing debt atlower average interest rates following the optimization of our debt portfolioin fourth quarter of 2003 and the third quarter of 2004.

 

Profittax payments were stable at €22 million.

 

Cashflow from operating activities in 2003 includes a receipt of € 79 millionof indemnities resulting from the arbitration proceedings against the Frenchcompany Ipfo Bail.

 

77

----

 

***Net cash provided by (used in) investing activities***

 

Netcash used in investing activities was €82 million in 2004 compared to€544 million provided in 2003.

 

Capitalexpenditure amounted to €59 million in 2004 compared to €79 millionin 2003. A significant portion of our capital expenditure represents thedevelopment of information technology, eCommerce and logistics systems.

 

Cashused for acquisitions predominantly relates to the Office Products AustraliaDivision and amounted to €6 million in 2004, compared with€10 million in 2003.

 

In2004, €10 million was paid for transaction fees related to divestedcompanies.

 

Divestmentproceeds in 2003 were €641 million, which include the proceeds from thesale of the Paper Merchanting Division (€637 million) and the sale of theassets of DocVision (€8 million), reduced by related payments.

 

Theresulting available cash flow from operations after giving effect to investmentactivities was €141 million in 2004 compared to € 816 million in2003.

 

***Net cash (used in) financing activities***

 

Netcash used in financing activities was €127 million in 2004 compared to€681 million in 2003.

 

In2004, Buhrmann successfully tendered for the $350 million 2009 Notes. Thetender, including a premium of $27 million paid to holders who tenderedtheir 2009 Notes, and the remaining 2009 Notes which were not tendered werefunded by an issue of $150 million of new 2014 Notes, an increase of$125 million of Term Loans and cash on hand of $118 million. In 2004,the financing fees, related advisory costs, tender premium for the tender, theissue of new 2014 Notes and the increase of Term Loans amounted to €35 million.Also, in 2004, fees of €4 million were paid related to the refinancing of2003.

 

In2003, early repayments of long-term debt were mostly funded out of the proceedsof the sale of the Paper Merchanting Division supplemented by cash flows from operations.In December 2003, Buhrmann placed its €115 million of SubordinatedConvertible Bonds and entered into the Senior Credit Facility.

 

Thefinancing fees and related advisory costs paid for the issue of theSubordinated Convertible Bonds and the entering into the new Senior CreditFacility in December 2003 amounted to €25 million. As a result of therepayment of long-term debt, some interest rate swaps were settled, inaccordance with Buhrmann’s policy on hedging for interest rate risks, whichresulted in a cash outflow of €40 million in 2003.

 

In2004, Buhrmann paid cash dividends on its Preference Shares A of €11 million. The dividend on Preference Shares C for 2003, paid in 2004,was paid entirely in additional Preference Shares C. The dividend on OrdinaryShares for 2003, which was €0.07 per share, was paid out in additional OrdinaryShares.

 

Paymentsto minority shareholders amounted to €8 million in 2004 compared to€7 million in 2003.

 

Theresulting net cash flow was positive €14 million in 2004 compared topositive €135 million in 2003 which was reflected in the movements in netliquid funds.

 

78

----

 

**CapitalResources**

 

Buhrmann’scash requirements for needs in excess of cash generated by operations arelargely funded by borrowings under arrangements with commercial banks and debtraised in the capital markets.

 

Buhrmannincurred substantial indebtedness in connection with the acquisition ofCorporate Express in October 1999 which was partly funded through a seniorcredit facility and the issuance of $350 million 2009 Notes. After thesale of the Paper Merchanting Division, the original senior credit facility wasreplaced with the Senior Credit Facility in December 2003. In addition tothe new Senior Credit Facility, Buhrmann issued its €115 millionSubordinated Convertible Bonds in December 2003 which are listed on theAmsterdam Stock Exchange.

 

In July 2004,Buhrmann successfully tendered for the $350 million 2009 Notes. The tenderwas funded by an issue of 2014 Notes, an increase of Term Loans under theSenior Credit Facility and cash on-hand.

 

Buhrmannalso has an accounts receivable securitization program under which funds areraised by pledging accounts receivable from subsidiaries in the Netherlands andthe United States as security for short-term and medium-term borrowings.

 

*The Senior Credit Facility*

 

TheSenior Credit Facility was arranged in the course of 2003 and funded on December 31,2003. The Senior Credit Facility initially consisted of a Term Loan A of€120 million and Term Loans B with tranches of € 50 million and$380 million plus a working capital facility of €255 million. On July 1,2004, the Term Loans B were converted into Term Loans C. The U.S. dollartranche Term Loans C was increased by $125 million. The security providedfor the Senior Credit Facility is a pledge on assets by Buhrmann NV, BuhrmannUS Inc. and substantially all of Buhrmann’s existing and future U.S.subsidiaries and certain of its material non-U.S. subsidiaries. Borrowingsunder the Senior Credit Facility bear interest at floating rates related toLIBOR or EURIBOR, as applicable, for the relevant currency for varying fixedinterest periods. The interest rate margins for the working capital facility,the Term Loan A and the Term Loans C vary with the leverage ratio (pricinggrid). The initial margin for the working capital facility and the Term Loan Ais 2.50%. The initial margin for the Term Loans C is 2.50%. The working capitalfacility carries a fee of 0.75% for the undrawn balance. The documentation ofthe Senior Credit Facility provides for uncommitted increases in the workingcapital facility and term loans subject to meeting certain conditions such as amaximum senior leverage ratio.

 

TheSenior Credit Facility imposes certain restrictions on Buhrmann and certain ofits subsidiaries, including restrictions on the ability to incur additionalindebtedness. Also, Buhrmann is required to apply a percentage of the proceedsof any equity offering (other than certain equity offerings to finance thepurchase of the Preference Shares C) and sale of assets to the prepaymentof debt under the facility. Under the Senior Credit Facility, Buhrmann mustalso comply with certain financial covenants. Buhrmann was in compliance withthese financial covenants as of December 31, 2004. It is noted that amongother things, the earnings before depreciation of tangible fixed assets andinternally used software and amortization of goodwill used for banking covenantcalculation purposes may differ significantly from the EBITDA as derived fromour consolidated financial statements due to specific contractual definitions.Also, profit and loss items are calculated on a rolling four-quarterly basis.If Buhrmann fails to comply with the covenants in the Senior Credit Facility,there could be an event of default under the Senior Credit Facility. Inaddition, the lenders under the Senior Credit Facility could demand repaymentof the debt under the Senior Credit Facility, and seek to foreclose on Buhrmann’sassets that secure the Senior Credit Facility. Buhrmann can on occasion obtainconsent from its lenders to amend certain terms and conditions of the SeniorCredit Facility, which may involve additional fees.

 

79

----

 

*8*1/4*% Senior Subordinated Notesdue 2014*

 

In June 2004,Buhrmann US Inc. issued $150 million in aggregate principal amount of8 1/4% Senior Subordinated Notes due 2014 in a privateplacement. These bonds are unsecured obligations of Buhrmann US Inc., andare guaranteed by Buhrmann and certain of its subsidiaries. In September 2004,Buhrmann US Inc. filed a registration statement on Form F-4 with theSEC for $150 million in aggregate principal amount of the 2014 Notes, theterms of which were substantially identical to the unregistered bonds issued inJune. The registration statement filed by Buhrmann US Inc. was an offer toexchange all of its outstanding unregistered 2014 Notes for the newlyregistered 2014 Notes. Pursuant to this exchange offer, which closed in October 2004,registered bonds were issued to certain existing holders in exchange for theirunregistered bonds.

 

*7-year Subordinated Convertible Bonds*

 

Inaddition to the Senior Credit Facility, in December 2003, Buhrmann issuedits €115 million Subordinated Convertible Bonds, which are listed on theAmsterdam Stock Exchange. The Subordinated Convertible Bonds have a coupon of2% which is payable annually on June 18 and is convertible into BuhrmannOrdinary Shares at a conversion price of €8.40 per Ordinary Share. TheSubordinated Convertible Bonds must be redeemed on or before December 18,2010. Buhrmann has the option to redeem the Subordinated Convertible Bondsafter July 9, 2008 if the official closing price of Buhrmann’s Ordinary Shareshas been in excess of 150% of the conversion price for 20 trading days in aperiod of 30 trading days.

 

*Accounts Receivable Securitization Program*

 

Buhrmannhas an accounts receivable securitization program under which funds are raisedby pledging accounts receivable from operating companies in the Netherlands andthe United States as security for short-term and medium-term borrowings. Theoperating companies sell their accounts receivable to Buhrmann Silver SA andBuhrmann Silver US LLC, which in turn pledge the accounts receivable to third-partydedicated entities as security for short-term borrowings in the form of shortterm notes (Short Term Notes) and medium term notes (Medium Term Notes, andtogether with the Short Term Notes, the Term Notes). At December 31, 2004,accounts receivables of €239 million were pledged under this program. Theprogram delivers funding at attractive rates and at the same time diversifiessources of capital and increases financial flexibility. Both receivables andborrowings related to this program are included in our consolidated balancesheet.

 

TheShort Term Notes are issued in U.S. dollars, reflecting the currency of thepledged receivables. The amount of Short Term Notes outstanding against thereceivables pledged, fluctuates as a result of liquidity requirements, advancerates calculated and invoices outstanding. To ensure availability ofre-financing for the notes, a back-up liquidity facility has been arranged. At December 31,2004 and December 31, 2003, no Short Term Notes were issued oroutstanding.

 

80

----

 

In July 2002, Medium Term Notes in U.S. dollarsand GBP were issued. As a consequence of the sale of the Paper MerchantingDivision, the collateral for the Medium Term Notes denominated in GBP in theform of accounts receivables denominated in GBP generated by Paper Merchantingcompanies in the United Kingdom, no longer existed. The Medium Term Notesoutstanding in GBP, amounting to GBP 107 million were therefore redeemedon November 25, 2003. At December 31, 2004, $100 million of MediumTerm Notes were outstanding. The average interest margin, including issuerscost, is approximately 0.50% over LIBOR.

 

Thetransactions relating to the accounts receivable securitization program are asfollows:

 

TheDutch Originators sell their receivables on a true sale basis to the Europeanreceivables warehouse: Buhrmann Silver SA. Buhrmann Silver SA (a wholly ownedBuhrmann subsidiary) sells the receivables onward to the Silver SecuritisationB.V. (the European Master Purchaser). Silver Securitisation B.V. is a separatecompany of which the shares are held by a Stichting (Dutch Foundation) which iscontrolled by a board independent from Buhrmann. Silver Securitisation B.V.holds the European receivables and issues notes (Buhrmann Notes) with thereceivables as security to the investors in the Buhrmann Notes. Investors inthe Buhrmann Notes are Rheingold no 11 Ltd (a Jersey company sponsored byDeutsche Bank AG) as Initial Buhrmann Term Note Purchaser and SilverFunding Ltd as MTN issuer. The shares of Silver Funding are held by theSilver Funding Charitable Trust which is controlled by a board that isindependent from Buhrmann.

 

In theUnited States the U.S. Originators sell their receivables to Buhrmann Silver USLLC (the U.S. Master Purchaser), which is a partnership with the U.S.Originators as partners. The U.S. Master Purchaser issues notes (Buhrmann U.S.Notes) to both the Initial Buhrmann Notes Purchaser and the MTN Issuer. TheU.S. Master Purchaser and the European Master Purchaser have issued a crossguarantee on their respective receivables.

 

Withthe Buhrmann Notes and Buhrmann U.S. Notes as collateral, Rheingold no11 Ltd and Silver Funding Ltd raise funds in the market. Rheingold no11 issues Short Term Notes in the form of commercial paper through the CPIssuer Rheingold Securitisation Ltd. Silver Funding Ltd issues MediumTerm Notes, which are listed on the Luxembourg Stock Exchange, in U.S. dollarsand euro. As the euro denominated notes have the U.S. dollars pool as theirprimary collateral, the Term Notes outstanding in euro have been swapped toU.S. dollars until maturity of the Term Notes.

 

BuhrmannStafdiensten B.V. (a Dutch Buhrmann company) services the program.

 

Thereceivables sold by the Dutch Originators and the U.S. Originators to BuhrmannSilver SA and Buhrmann Silver US LLC are included in Buhrmann’s consolidatedbalance sheet, both under Dutch GAAP and U.S. GAAP. Also the Buhrmann Notesissued by Silver Securitisation B.V. And the Buhrmann U.S. Notes issued byBuhrmann Silver US LLC are included in Buhrmann’s consolidated balance sheet,both under Dutch GAAP and U.S. GAAP.

 

81

----

 

*Total scheduled debt payments, interest rate andcurrency hedges*

 

As at December 31,2004, Buhrmann is required to make the following scheduled debt payments:

 
| ** **                         | ** ** | **2005**          | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **>2009** | ** ** | **TOTAL** | ** ** |
|------------------------------------|------------|-------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|--------------|------------|-----------|------------|
| ** **                         | ** ** | **(in millions)** | ** ** |
| Term Loan A                        |       | €            | 16         |     | €     | 16       |       | €   | 26         |     | €     | 26           |       | €    | 27         |   | € | 0 |   | € | 112 |   |
| Term Loans C                       |       | 4                 |       | 4        |       | 4        |       | 4        |       | 4        |       | 396          |       | 417       |       |
| 2014 Notes                         |       | —            |       | —   |       | —   |       | —   |       | —   |       | 110          |       | 110       |       |
| Subordinated Convertible Bonds     |       | —            |       | —   |       | —   |       | —   |       | —   |       | 115          |       | 115       |       |
| Account receivables securitization |       | —            |       | —   |       | 74       |       | —   |       | —   |       | —       |       | 74        |       |
| Overdrafts & Others            |       | 19                |       | 12       |       | —   |       | —   |       | 2        |       | —       |       | 33        |       |
| Total debt                         |       | €            | 39         |     | €     | 32       |       | €   | 104        |     | €     | 31           |       | €    | 34         |   | € | 621 |   | € | 861 |   |

 

Buhrmannhas entered into a series of interest rate hedging agreements, the purpose ofwhich is to limit Buhrmann’s interest cost with respect to its long-term debt,of which 72% was issued at variable interest rates and 28% at fixed interestrates at December 31, 2004. The principal hedging agreements are a seriesof interest rate swaps (in euro and U.S. dollars) with a total principal of€294 million at December 31, 2004 for appropriate maturities. Theseswaps adjusted the interest rate profile of the long-term debt at December 31,2004 to 63% fixed and 37% variable. For more information about our hedgingpolicies and interest rate swaps, we refer to Item 11  “Quantitative and Qualitative Disclosuresabout Market Risk.”

 

Buhrmannalso purchases various financial instruments and enters into certain agreementsin the ordinary course of business in order to hedge price and foreign currencyrisks arising from the purchase of raw materials and the sale of its products.

 

BuhrmannUS Inc. is the principal borrower under the Senior Credit Facility and theissuer of the 2014 Notes for the Buhrmann Group. Proceeds from borrowingsreceived by Buhrmann US Inc. are used to finance the Group.

 

**Researchand development**

 

Buhrmann’spolicy is to expense costs of research as incurred and to capitalize costs ofdevelopment. Costs of research were insignificant in the years 2004, 2003 and2002.

 

**Inflation**

 

Costinflation has been in line with the general economic conditions at around 2% inBuhrmann’s primary U.S. and European markets for each of the last three fiscalyears.

 

82

----

 

**ContractualObligations, Contingent Liabilities, Commitments and Guarantees**

 

The tablebelow presents our on- and off-balance sheet contractual cash obligations as atDecember 31, 2004 (in millions).

 
| ** **                                   | ** ** | **Payments due by period** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|
| ** **                                   | ** ** | **Total**                  | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
| Total gross borrowings and interest          | ** ** | €                     | 1,047      |   | € | 71 |   | € | 194 |   | € | 112 |   | € | 670 |   |
| Rent and operating leases                    |       | 388                        |       | 75 |   | 114 |   | 77 |   | 122 |   |
| Repurchase guarantees                        |       | 52                         |       | 16 |   | 16 |   | 14 |   | 6 |   |
| Other contractual obligations and guarantees |       | 11                         |       | 9 |   | 0 |   | 2 |   | 0 |   |
| Total contractual cash obligations           |       | €                     | 1,498      |   | € | 171 |   | € | 324 |   | € | 205 |   | € | 798 |   |

 

Totalgross borrowings at December 31, 2004, were €861 million in total,which is further detailed under “Capital Resources “ above. Interest includedin the table above does not include the effect of interest rate swaps which aredescribed under off-balance sheet arrangements below.

 

Buhrmannhas certain contingent liabilities, commitments and guarantees which are notincluded in the consolidated balance sheet, but are disclosed in the relatednotes.

 

Rentand Operating Leases of €388 million in total at December 31, 2004(€436 million at December 31, 2003) are primarily related todistribution facilities and offices which the Company leases undernon-cancelable operating leases. The amounts are the nominal value of futurelease payments and are netted for sub-leases.

 

Repurchaseguarantees of €52 million in total at December 31, 2004(€64 million at December 31, 2003) mainly relate to repurchaseguarantees concerning graphic machines sold to customers and financed byexternal financing companies. Should the customer be declared in default, therespective financing company has a right of recourse, which, in general, willbe lower than market value. The amount included in the table is the maximumexposure under these guarantees.

 

Othercontractual obligations and guarantees of €11 million in total at December 31,2004 (€24 million at December 31, 2003) mainly relate to investmentcommitments relating to expenditure on projects, such as the development ofinformation technology systems.

 

83

----

 

**Off-balancesheet arrangements**

 

Buhrmann’soperating companies in Europe offer a variety of defined benefit plans, inaddition to Government schemes, as part of the remuneration package. Incountries like the Netherlands and the United Kingdom, the defined benefitplans are separated from Buhrmann in pension funds to which Buhrmann makescontributions. For its employees in the United States, Buhrmann sponsorsseveral defined contribution plans and a defined benefit plan with a relativelysmall number of participants. Depending on specific financing arrangements andfunding levels, Buhrmann may incur liabilities for certain deficits whichamounted to €10 million at December 31, 2004. No provisions were recordedin the balance sheet at December 31, 2004 in connection with thisliability.

 

Buhrmannhas commitments to purchasers of divested businesses with respect toindemnifications and representations and warranties. These commitments includeindemnifications for the imposition of additional taxes upon the divestedcompany and/or the purchaser covering the period before the divestment. Forthese indemnification and warranty commitments, a provision of €21 millionis included in the consolidated balance sheet at December 31, 2004. Thisprovision is calculated based on the expected payments to be made under theseindemnification and warranty commitments.

 

Inconnection with the accounts receivable securitization program (the Program),Buhrmann has entered into agreements pursuant to which Buhrmann has agreed toguarantee the performance of the Buhrmann operating companies in theNetherlands and the United States that sell their accounts receivable into theProgram (the Dutch Originators and the U.S. Originators respectively), and theservicers of the Program (including compliance with the terms of thedocumentation under the Program relating to selection and servicing ofreceivables). However, Buhrmann does not guarantee payment on any accountsreceivable sold to the master purchasers (Master Purchasers) in accordance withthe documentation under the Program nor does Buhrmann guarantee repayment ofany notes issued in connection with the Program. Buhrmann’s obligations underthe guarantees issued in connection with the Program are not quantifiable andare contingent in nature. For more information about the agreed guarantees inconnection with the Program, we refer to the material contracts related to theProgram which are filed as Exhibits 4.8 through 4.17. The transactionsin the Program are described under “Accounts Receivable Securitization Program”above.

 

Buhrmannhas entered into a number of forward foreign exchange and currency swapcontracts and interest rate swap contracts which had an estimated negative fairvalue of €5 million at December 31, 2004. The estimated fair value ofthe outstanding forward foreign exchange and currency swap contracts andinterest rate swap contracts indicates how much Buhrmann would have to pay asper the balance sheet date in exchange for termination of these contractswithout further commitments.

 

Buhrmannhas issued certain performance guarantees, usually in the form of standbyletters of credit, to an estimated maximum amount of €4 million at December 31,2004. The major part of these guarantees expire latest on September 1,2007.

 

84

----

 

**VariableInterest Entities**

 

FASBInterpretation No. 46 (FIN 46) ”Consolidation of Variable InterestEntities” requires certain disclosures of variable interest entities and, as ofJanuary 1, 2003, the consolidation of certain of these variable interestentities under U.S. GAAP.

 

Buhrmannhas determined that at December 31, 2004 it had a variable interest inSilver Securitisation B.V., Silver Funding Ltd and RheingoldSecuritisation Ltd which facilitate the accounts receivable securitizationprogram described above.  Aside from theaccounts receivable and liabilities in connection with the accounts receivablesecuritization program that are included in Buhrmann’s Consolidated BalanceSheet, these entities do not have other significant assets or liabilities.  Buhrmann has also determined that at December31, 2004 it had a variable interest in Faison Inc. which sells office productsmainly to government institutions in the United States.  The consolidation of this entity would nothave a material impact on net result or Group equity under US GAAP.

 

**NewAccounting Pronouncements**

 

*U.S. GAAP*

 

In November 2004,the FASB issued SFAS No. 151, “Inventory Costs—An Amendment of ARBNo. 43, Chapter 4”. SFAS No. 151 amends the guidance in ARBNo. 43, Chapter 4, “Inventory Pricing,” to clarify that abnormal amountsof idle facility expense, freight, handling costs, and wasted material(spoilage) must be recognized as current-period charges regardless of whetherthey meet the criterion of “so abnormal” as stated in ARB No. 43.Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 is effective for fiscal yearsbeginning after June 15, 2005. Buhrmann is currently reviewing the impactthat adoption of SFAS No. 151 will have on its consolidated results ofoperations, financial position and cash flows.

 

In December 2004,the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payments,” whichrevises SFAS No. 123, “Accounting for Stock-Based Compensation”, andsupersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.”SFAS No. 123 (revised 2004) requires all share-based payments toemployees, including grants of employee stock options, to be recognized in thefinancial statements based on their fair values, beginning with the firstinterim or annual period after June 15, 2005, with early adoptionencouraged. The pro forma disclosures previously permitted under SFASNo. 123, are no longer an alternative to financial statement recognition.Buhrmann intends to adopt this revised standard from January 1, 2005.Buhrmann is currently reviewing the impact that adoption of SFAS No. 123(revised 2004) will have on its consolidated results of operations, financialposition and cash flows. Buhrmann has not yet determined whether adoption ofSFAS No. 123 will result in amounts that are similar to the pro formadisclosures in note 34.

 

In December 2004,the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets—AnAmendment of APB Opinion No. 29. SFAS No. 153 eliminates theexception from fair value measurement for nonmonetary exchanges of similarproductive assets in paragraph 21(b) of APB Opinion No. 29, “Accountingfor Nonmonetary Transactions,” and replaces it with an exception for exchangesthat do not have commercial substance. SFAS No. 153 specifies that anonmonetary exchange has commercial substance if the future cash flows of theentity are expected to change significantly as a result of the exchange. SFASNo. 153 is effective for the fiscal periods beginning after June 15,2005. Buhrmann is currently reviewing the impact that adoption of SFASNo. 153 will have on its consolidated results of operations, financialposition and cash flows but expects that it will not have a material impact.

 

*International Financial Reporting Standards (IFRS)*

 

The2004 financial statements of Buhrmann have been prepared in accordance withgenerally accepted accounting principles in the Netherlands (Dutch GAAP).Therefore reviews, analyses and accounting policies disclosed in this AnnualReport are based on Dutch GAAP. From January 1, 2005, Buhrmann reports onthe basis of IFRS. In the process of conversion to IFRS, we have selectedaccounting policies of which the main policies are described below. Thesepolicies might change, among others, because the European Financial ReportingAdvisory Group has not yet fully endorsed the adoption of all IFRS standards.

 

Theconversion of our reporting to IFRS does not affect the underlying performanceof our business. Also, the conversion will not trigger any event related to ourexisting business or financing arrangements. In respect of our financial

 

85

----

 

policies (including ourpolicy on additions to retained earnings and dividends), an amendment may benecessary for maintaining the same effects in economic terms.

 

Withinthe limits of the IFRS framework we strive towards convergence with our U.S.GAAP reporting. We have decided to use some of the optional exemptions grantedby IFRS 1 “First-time Adoption of International Financial Reporting Standards”for, among others, pensions and business combinations. We have decided not touse the exemption provided by IFRS 1 that allows comparative information in the2005 financial statements to not comply with standards 32 and 39 (financialinstruments).

 

86

----

 

***Buhrmann Accounting Policies under IFRS***

 

*Basisof preparation*

 

Thefinancial statements have been prepared under the historical cost convention,unless indicated differently in the accounting policies below or in the notes.Preparing financial statements requires the use of estimates and assumptionsthat affect the recorded amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the reporting and the amountsof revenues and expenses during the reporting period. These estimates andassumptions are based on management’s best knowledge of current events andactions.

 

*Basisof consolidation*

 

Theconsolidated financial statements will include Buhrmann N.V. and the entitiescontrolled by Buhrmann (Group companies). Control is achieved when Buhrmann hasthe power to govern the financial and operating policies of an investee(subsidiary) so as to obtain benefits from its activities.

 

Subsidiariesare consolidated from the date on which control is obtained and are excludedfrom consolidation from the date that control ceases. The purchase method ofaccounting is used to account for the acquisition of subsidiaries.

 

Onacquisition, the identifiable assets, liabilities and contingent liabilities ofa Group company are accounted for at their fair values, based on Buhrmann’saccounting policies, that existed at the date of acquisition. Any excess of thecost of acquisition over the fair values of the Group’s share in theidentifiable net assets acquired is recognized as goodwill. Goodwill iscapitalized. After initial recognition goodwill is measured at cost lessaccumulated impairment losses. An excess of the fair value of the Group’s sharein the identifiable net assets acquired over the cost of acquisition isrecorded, after reassessment of the purchase price allocation as a gain in theincome statement.

 

At thedate a Group company is divested (cessation of control), the difference betweenthe realizable value and the net asset value, including the book value ofcapitalized goodwill, is recorded in the income statement.

 

Intercompanytransactions, balances and unrealized gains on transactions between Groupcompanies are eliminated; unrealized losses are only eliminated if cost can berecovered in an external transaction.

 

Theinterest of minority shareholders is stated at the minority’s proportion of thenet asset (equity) values.

 

87

----

 

*Foreigncurrencies*

 

Transactionsin currencies other than the local currency are recorded at the exchange ratesprevailing on the dates of the transactions. Monetary items (e.g. receivables,cash and deposits and liabilities) denominated in currencies other than thelocal currency are translated at the rates prevailing on the balance sheetdate. The resulting translation differences are reflected in the incomestatement.

 

Translationdifferences, net of related taxation, arising from long-term loans to Groupcompanies that have the nature of permanent investments, are recorded directlyin shareholders’ equity.

 

Translationand exchange differences on loans extended by third parties which aredesignated as, and effective as, hedges of net investments (equity investmentsor permanently invested loans) in a foreign Group company are recorded directlyin shareholders’ equity.

 

In theconsolidated financial statements, the income statements and cash flowstatement of Group companies whose local currency is not the euro, aretranslated into euro at average exchange rates. The assets and liabilities ofthese companies are translated into euro at the rates prevailing at the balancesheet date.

 

Resultingtranslation differences are recorded directly into shareholders’ equity.

 

When aGroup company is divested, the translation differences that were recorded inshareholder’s equity are recognized in the income statement as part of theresult on sale.

 

*Borrowingcosts*

 

Borrowingcosts that are directly attributable to an acquisition, construction orproduction of qualifying assets are capitalized as part of the cost of suchassets, until such assets are substantially ready for their use.

 

Allother borrowing costs are recognized in the income statement in the period inwhich they are incurred.

 

*Long-termemployee benefits*

 

*Pensionplans:*

 

Groupcompanies have various pension schemes in accordance with local conditions andpractices in the countries in which they operate.

 

Definedcontribution plans are post-employment plans under which an entity pays fixedcontributions into a separate entity (a fund) and will have no legal orconstructive obligation to pay additional contributions if the fund does nothold sufficient assets to pay all employee benefits relating to employeeservice in the current and prior periods.

 

Obligationsfor contributions to defined contribution pension plans are recognized as anexpense in the income statement as incurred.

 

Definedbenefit plans are post-employment benefit plans other than defined contributionplans.

 

Theliability or (contingent) asset in respect of defined benefit pension plans isrecorded in the balance sheet. The liability or (contingent) asset is the netof the fair value of plan assets and the defined benefit obligation at thebalance sheet date, including adjustments for unrecognized actuarial gains/lossesand past service costs. In case of an asset the amount recognized does notexceed the present value of any benefits in the form of refunds or reductionsin future employer contributions to the plan.

 

Actuarialgains and losses are amortized over the remaining service period when their netcumulative amount exceeds 10% of the assets or obligations of the plan(whichever is higher).

 

88

----

 

*Otheremployee benefits:*

 

Terminationbenefits are payable whenever an employee’s employment is terminated before thenormal retirement date or whenever an employee accepts voluntary redundancy inexchange for these benefits. Buhrmann recognizes termination benefits when itis demonstrably committed to either terminate the employment of currentemployees according to a detailed formal plan without possibility of withdrawalor to provide termination benefits as a result of an offer made to encouragevoluntary redundancy. Termination benefits due more than 12 months afterthe balance sheet date are discounted to present value.

 

*Incometaxes, deferred taxes and tax liabilities*

 

Theamount of tax included in the income statement is based on the reportedaccounting profit plus or minus permanent differences and includes changes invaluation allowances on deferred taxes.

 

Currenttax assets and liabilities are stated at nominal value using the tax ratesprevailing on the balance sheet date.

 

Deferredtax assets and liabilities are recognized for temporary differences in the carryingvalue in the balance sheet of assets and liabilities and their tax base and forloss carry-forwards.

 

Deferredtaxes are stated at nominal value and are determined at the tax rates that areexpected to apply to the period when the asset is realized or the liability issettled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted by the balance sheet date. Within tax groups, where theexercise periods permit and offsetting is legally enforceable, deferred taxassets and liabilities are netted.

 

Deferredtax assets are recognized insofar as realization is probable. In connectionwith the probability of realization, valuation allowances are recorded.Realization is dependent upon the generation of future taxable income before lossesexpire.

 

Taxexpense and income related to items that are recorded in shareholders’ equityare recorded likewise.

 

Nowithholding taxes are provided for the undistributed earnings of foreignsubsidiaries.

 

*Property,plant and equipment*

 

Property,plant and equipment (PP&E) are stated at cost less accumulated depreciationand accumulated impairment losses. Depreciation is recognized as an expense andcalculated in principle on a straight-line basis over the expected useful livesof the assets, taking into account a potential residual value.

 

Landis not depreciated.

 

Eachpart of an item of property, plant and equipment with a cost that issignificant in relation to the total cost of the item is depreciated separatelyover its own useful life.

 

Borrowingcosts to finance the construction of property, plant and equipment arecapitalized as part of the costs of the asset, during the period of time thatis required to complete and prepare the asset for its intended use.

 

Maintenance,repairs and renewals are generally charged to expense during the period inwhich they are incurred. However, major renovations are capitalized andincluded in the carrying amount of the asset when it is probable that futureeconomic benefits will increase beyond the originally assessed level. Majorimprovements are depreciated over the useful life of the component, notexceeding the remaining useful life of the related asset.

 

Wherethe estimated recoverable amount falls below the carrying amount of an asset,the asset is written down immediately (impairment) to its recoverable amount.

 

Therecoverable amount is the higher of the net selling price and its value in use.

 

89

----

 

Wherean impairment loss subsequently reverses, the carrying amount of the asset isincreased to the revised estimate of its recoverable amount, but so that theincreased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognized for the asset in prioryears. These results are recorded in the income statement.

 

*Goodwill*

 

Acquisitionsof companies are accounted for using the purchase accounting method.

 

Goodwillrepresents the excess of the cost of an acquisition over the fair value (basedon Buhrmann accounting policies) of the Group’s share of the net assets of theacquired company at the date of the acquisition.

 

Goodwillon acquisitions of Group companies is included in goodwill. Goodwill onacquisition of associates is included in investments in associates.

 

Goodwillon acquisitions that occurred prior to January 1, 1997 has been charged infull to retained earnings in shareholders’ equity; such goodwill has not beenretroactively capitalized and amortized.

 

Afterthe initial recognition, goodwill is measured at cost less accumulatedimpairment losses and less, until 2004, accumulated amortization. As per January 1,2004, under IFRS, amortization of goodwill has ceased.

 

Goodwillis tested for impairment at least annually. Goodwill related to cash-generatingunits whose carrying values exceed their recoverable amount are written down tothe higher of the net selling price or the discounted net future cash flowsexpected to be generated. Impairment losses are recognized as an expenseimmediately.

 

*Otherintangible assets*

 

Intangibleassets other than goodwill, such as software, are stated at cost lessaccumulated amortization and accumulated impairment losses. Amortization isrecognized as an expense and calculated on a straight-line basis over the expecteduseful lives of the assets, taking into account a potential residual value.

 

Borrowingcosts to finance the development of software are included in the cost of theasset during the period of time that is required to complete and prepare theasset for its intended use.

 

*Investmentsin associates*

 

Anassociate is an entity over which the Group is in a position to exercisesignificant influence, but not control, in the financial and operational policydecisions of the investee through participation. Significant influence isassumed when the Group holds 20% or more of the voting power.

 

Investmentsin associates are carried in the balance sheet at the Group’s share in thevalue of the net assets of the associate, plus the goodwill recognized atacquisition, less any impairment in the value of individual investments.

 

Resultsof associated companies are determined in accordance with Buhrmann’s accountingpolicies. For these companies, the proportional share in the result is shownusing the equity method. Distributions received from the investee reduce thecarrying amount of the investment.

 

90

----

 

* *

*Derivatives*

 

Derivatives(such as interest rate swaps and currency swaps) are measured at their fairvalue. The movements in the fair value of derivatives are in principle recordedin the income statement. The movements in the fair value of the interest rateswaps, which are designated as hedges and which meet the criteria for hedgeaccounting, are recorded directly in shareholders’ equity.

 

*Inventories*

 

Inventoriesrelated to goods for resale, used machines and goods in transit are valued atthe lower of costs or net realizable value. Cost is based on the weightedaverage cost (taking into account discounts and rebates from suppliers) andincludes import duties and other taxes (other than those subsequentlyrecoverable from the tax authority) and inbound transportation, handling andother costs directly attributable to the acquisition of finished goods.

 

Tradediscounts, rebates and other similar items are deducted in determining thecosts of purchase. However, cash discounts from suppliers for prompt paymentare recognized when incurred. The difference between cost of purchase and netrealizable value (if the latter is lower) is the allowance for obsolete andslow moving items.

 

*Tradereceivables*

 

Tradereceivables are recognized initially at fair value and subsequently measured atamortized cost using the effective interest method, less an allowance fordoubtful receivables.

 

*Otherreceivables*

 

Otherreceivables and prepayments are recognized initially at fair value andsubsequently measured at amortized cost using the effective interest method,less an allowance for doubtful receivables and includes rebates and catalogincome receivables.

 

*Cashand cash equivalents*

 

Cashand cash equivalents are carried in the balance sheet at fair value comprising:

 

•                                          cash on hand, deposits held at call with banks; and

 

•                                          other short-term highly liquid investments withoriginal maturities of three months or less.

 

91

----

 

*OrdinaryShares, Preference Shares and Subordinated Convertible Bonds*

 

Buhrmann’sOrdinary Shares are classified as shareholders’ equity.

 

Buhrmann’sPreference Shares A are classified as a liability. The Subordinated ConvertibleBonds are classified as a compound financial instrument and recordedaccordingly partly under equity and partly as liabilities. Buhrmann’sPreference Shares C are classified as compound financial instruments andaccordingly recorded as liabilities. The Preference Shares C have a conversionoption. As this option is indexed to both the share price and the USD/EURexchange rate, the conversion option classifies as a derivative. Therefore itis valued separately as a derivative (liability) at fair value.

 

Externalcosts directly attributable to the issue of new shares, other than in connectionwith business combinations, are shown in shareholders’ equity as a deduction,net of tax, from the share premium.

 

*Stockoption plans*

 

Stockoptions are granted to a group of employees and directors. The plans meet thedefinition of equity settled share based compensation.

 

Thefair value of the options is recognized as labor cost during the vestingperiod, with a corresponding increase in shareholders’ equity.

 

*Minorityinterest*

 

Theportion of third parties in the net equity of fully consolidated subsidiariesin which Buhrmann has less than 100% of the issued share capital is disclosedas minority interests in the balance sheet.

 

Minorityinterests in the net assets consist of:

 

•                                          the amount of those minority interests at the dateof the original acquisition calculated at fair value at that date; and

 

•                                          the minority’s share of changes in equity since thedate of the combination.

 

92

----

 

*Provisions*

 

Provisionsare recognized when the Group has:

 

•                                          a present legal or constructive obligation as aresult of past events;

 

•                                          it is probable that an outflow of resources will berequired to settle the obligation; and

 

•                                          a reliable estimate of the amount can be made.

 

Provisionsinclude integration and reorganization accruals following divestments andrestructuring of the business.

 

Provisionsfor restructuring as a result of an acquisition are only recognized as part ofthe cost of the acquisition if the acquired company has an existing liabilityfor restructuring recognized before the acquisition date.

 

Aprovision recognized after an acquisition cannot be recognized as part of thecost of the acquisition and is therefore not part of goodwill as result of theacquisition. In this case the provision is set up through the income statement.

 

*Non-currentfinancial liabilities*

 

Non-currentfinancial liabilities are recognized initially at the fair value (proceedsreceived net of transaction costs incurred).

 

Non-currentfinancial liabilities are subsequently stated at amortized cost. The differencebetween the net proceeds and the redemption value is recognized (accretion) onthe basis of the effective interest method in the income statement over theperiod of the non-current financial liabilities.

 

*Leases*

 

Leasesare classified as financial leases whenever the terms of the lease transfersubstantially all the risks and rewards incidental to ownership of the asset.

 

Allother leases are classified as operational leases.

 

Assetsunder finance leases are recognized as assets of the Group at their fair valueat the date of acquisition or, if lower, at the present value of the minimumlease payments.

 

Thecorresponding liability to the lessor is included in the balance sheet as afinance lease obligation. Lease payments are apportioned between financecharges and reduction of the lease obligation so as to achieve a constant rateof interest on the remaining balance of the liability.

 

Paymentsunder operating leases are expensed on a straight-line basis over the term ofthe relevant lease.

 

*Currentfinancial liabilities*

 

Currentliabilities, other than derivatives, are initially recognized at fair value(proceeds net of transaction costs incurred) and subsequently stated at theamortized cost using the effective interest method.

 

93

----

 

*Revenuerecognition*

 

Netsales represent the invoiced value, net of sales tax, of deliveries andservices rendered to third parties, less discounts and rebates to customers.

 

Salesof goods are recognized when:

 

•                                          significant risks and rewards of ownership have beentransferred to the buyer. In most cases, the significant risks and rewards ofownership are transferred at the point of delivery or at the moment afterinstallation (ready to operate), depending on shipping terms, contractualarrangements and performance obligations;

 

•                                          Buhrmann retains neither continuing managerialinvolvement nor effective control over the goods sold;

 

•                                          the amount of revenue can be measured reliably andcollectibility is reasonably assured; and

 

•                                          the related cost (of sales) can be measuredreliably.

 

If anentity retains only an insignificant risk of ownership, the transaction is asale and revenue is recognized.

 

Salesof services are recognized in the period in which the services are rendered.Rebates to clients are recognized based on the volumes sold over the contractperiod. During the year the accrual is based on estimates of volumes to berealized.

 

*Totalcost of trade goods sold*

 

Costof trade goods sold represent the purchase price of trade goods sold plusimport duties and other taxes (other than those subsequently recoverable fromthe tax authority) and inbound transportation, handling and other costsdirectly attributable to the acquisition of finished goods. The purchase priceis net of discounts and rebates received from suppliers.

 

Non-volumerelated catalog income (unconditional) less the costs to produce a catalog isrecognized under cost of goods sold linear over the period the catalog isgenerating sales (street-life).

 

Volumerelated catalog income (conditional) is treated as volume rebates.

 

*Otheroperating expenses*

 

Otheroperating expenses include costs of uncollectible amounts receivable.

 

94

----

 

*Disclosureof material items of income and expense*

 

Duringthe course of a year, certain events take place that may be viewed as part ofnormal business operations. These events however, may have uniquecharacteristics that set them apart from the Company’s standard day-to-dayoperations. These events may be infrequent and of such a size that reportingthem separately provides the opportunity to give a more operationally orientedview on the results of the business. Other events, such as materialrestructurings, impact the Group’s operations and cost structure significantly,such that reporting them separately clarifies the effect of these decisions onthe results of operations.

 

*CashFlow Statement*

 

Theconsolidated cash flow statement is reported under the indirect method and itis derived from the income statement and from other changes between the openingand closing balance sheets in local currencies, translated at average exchangerates.

 

Thecash flow statement shows three separate flows, each linked to a certainactivity:

 

•                                          Cash flow resulting from operating activities;

 

•                                          Cash flow resulting from investing activities; and

 

•                                          Cash flow resulting from financing activities.

 

95

----

 

###### **Recent developments**

######  

***Repurchase Preference Shares C***

 

On February 22,2005, Buhrmann reached agreement with all the holders of the PreferenceShares C regarding the purchase by Buhrmann of all 43,628 issued andoutstanding Preference Shares C for an aggregate purchase price of $520 millionin cash together with certain options to acquire Ordinary Shares of Buhrmann incertain defined circumstances. For further information regarding the repurchaseof Preference Shares C, see Item 7 “Major Shareholders and Related PartyTransactions— Related Party Transactions— Holders of Preference Shares C”..Provided that all conditions are fulfilled, Buhrmann expects to complete therepurchase of the Preference Shares C on or about April 1, 2005.

 

From January 1, 2005 Buhrmann will reportits financial results on the basis of International Financial ReportingStandards (IFRS). Under IFRS, the Preference Shares C are accounted for asdebt, combining a liability calculated by using the historic effective interestmethod and a derivative using the fair value approach. Consequently, underIFRS, the repurchase of the Preference Shares C is expected to result in anexceptional charge of €80 million to €100 million in the first quarter of2005. The exceptional charge constitutes the difference between the value paidand the bookvalue, reflecting among others, accrued interest, the buy-backpremium of the conversion option and the value of the specific contractualrights attached to the Preference Shares C.

 

***Placement of 7******7/******8% Senior SubordinatedNotes due 2015***

 

On February 24, 2005 Buhrmann announced that it had successfully placed *77/8*%**Senior**Subordinated Notes due 2015 (“2015 Notes”)with an aggregate principal amount of $150 million.  The proceeds of the 2015Notes are intended to be used to finance the planned repurchase of thePreference Shares C, together with a discounted rights issue ofapproximately €250 million and cash on hand. The proceeds of the 2015 Notes are beingplaced in escrow pending the completion of the repurchase transaction, which isexpected to occur on or about April 1, 2005.

 

The 2015 Notes have beenissued at a price of 99.151% of the par value to institutional investors in theUnited States and in Europe through a private placement pursuant to Rule 144Aand Regulation S under the US Securities Act of 1933. The effective yield onthe 2015 Notes is 8%. This transaction was closed on March 2, 2005.

 

**Trendinformation**

 

Buhrmannis in a good position, both operationally and financially, and we are poisedfor future growth in 2005. We have strong competitive market positions in ourkey markets in North America, Europe, and Australia/New Zealand. There arenascent signs of an improvement in the employment situation for white collarworkers in the United States and we have a solid structure in place to supportour key strategic initiatives. We continue concentrate on profitable salesgrowth and intend to strengthen our customer-focused and sales-driven corporateculture.

 

96

----

 

**ITEM 6: DIRECTORS, SENIORMANAGEMENT AND EMPLOYEES**

 

In accordance with Dutchlaw, Buhrmann has a two-tiered board structure, consisting of a SupervisoryBoard, with seven non-executive members, and an Executive Board with fourexecutive members as of December 31, 2004.

 

**SupervisoryBoard**

 

The followingbriefly describes the functions and characteristics of the Supervisory Boardand its various committees.

 

***Tasks and procedure***

 

Pursuantto the rules and regulations governing the Supervisory Board it is theSupervisory Board’s responsibility to supervise the policy of the ExecutiveBoard and the general affairs of Buhrmann as well as to assist the ExecutiveBoard by providing advice. In doing so, the Supervisory Board is guided by theinterests of the Company and the relevant interests of the Company’sstakeholders. The Supervisory Board is responsible for the quality of its ownfunctioning.

 

***Independence***

 

TheSupervisory Board is composed of persons such that the members can actcritically and independently of one another, and of the management and anyparticular self-interest.

 

TheBy-Laws of the Supervisory Board determine that the majority of the members ofthe Supervisory Board shall be independent as defined in the Dutch CorporateGovernance Code. As Holders of the Company’s Preference Shares C, each ofApollo and Bain have the conditional right to propose for nomination one Memberof the Supervisory Board, see Item 7 “Major Shareholders and Related PartyTransactions— Related Party Transactions— Holders of Preference Shares C—BoardRepresentation.” The members of the Supervisory Board appointed pursuant tothis right may not be considered “independent” members as defined in the DutchCorporate Governance Code.

 

***Expertise and composition***

 

Thequalification requirements for individual members of the Supervisory Board andthe requirements for the composition of the Supervisory Board are regulated inthe profile and the By-Laws of the Supervisory Board and provide that everySupervisory Board Member should be qualified to assess the broad outlines of theoverall policy of Buhrmann and should have the specific expertise necessary forthe fulfillment of his duty, as described in the profile of the SupervisoryBoard. The By-Laws of the Supervisory Board further provide that theSupervisory Board should be composed in such a way that it can carry out itsduties properly, and that the re-appointment of a Supervisory Board Member willonly take place after careful consideration.

 

Buhrmanndoes not apply the limit of five board memberships in Dutch listed companies asrecommended by the Dutch Corporate Governance Code. Instead, the By-Laws of theSupervisory Board determine that a Supervisory Board Member should limit thenumber and nature of his other positions so as to ensure due performance of hisduties as a Supervisory Board Member. This topic should be considered in theannual evaluation of the functioning of the Supervisory Board. Our opinion isthat the qualitative criterion we apply is a better standard than a limit onthe number of board memberships, as is advised by the Dutch CorporateGovernance Code, as the amount of time involved in board membership in acompany can vary greatly and the availability of a board member is notexclusively dependent on the number of companies where he is a member of thesupervisory board.

 

Membersof the Supervisory Board are appointed by the General Meeting of Shareholdersfor a period of four years. As of January 1, 2004, a new re-appointmentschedule has been drawn up, on the assumption that Supervisory Board members mayin principle serve a maximum of three terms of four years on the SupervisoryBoard.

 

97

----

 

***Composition and Role of Committees of the Supervisory Board***

 

Withoutprejudice to its own mandatory responsibilities pursuant to Dutch law and theBy-Laws of the Supervisory Board, the Supervisory Board has formed an AuditCommittee and a Compensation, Nominating and Corporate Governance Committee(the CNCG Committee), each consisting of at least three members of the SupervisoryBoard. Aside from the specific mandates given the Committees pursuant to theirrespective charters, the overall task of these Committees is in general toprepare the foundation to support and inform decision-making processes of theSupervisory Board. In its report the Supervisory Board reports on the duties ofthe Committees that have been carried out in the financial reporting year.

 

TheSupervisory Board can delegate decisions, concerning the execution of policiesadopted by it, to its Committees. This delegated authority should in all casesbe limited to a maximum of one year with the possibility of renewal and therespective Committee should report to the Supervisory Board those decisions ithas made on the basis of such delegation.

 

***Audit Committee***

 

Thepurpose of the Audit Committee is to assist the Supervisory Board in itsoversight responsibility concerning, among other things: the accounting andfinancial reporting practice, policies and procedures of the Company; thequality of the Company’s internal control systems and risk assessment; thequality of its disclosure controls and procedures; the integrity of thefinancial statements; and the performance and evaluation of the externalauditor. The current Audit Committee members are Messrs. Jacobs, Peelenand Smit.

 

Themeetings of the Audit Committee are attended by the Chief Executive Officer,the Chief Financial Officer, the Director Accounting & Control, theDirector Internal Audit and the external auditor, among others, unless, in theopinion of the Chairman of the Audit Committee or the majority of the membersof the Audit Committee such non-members should not attend.

 

TheAudit Committee has a delegated authority to make recommendations to theSupervisory Board about the approval of the “non-audit services” as set forthin the Company’s Policy on the External Auditor Independence and Services.

 

Consideringtheir major interests in the Company, matters concerning Buhrmann’s financingare discussed integrally in the meetings of the Supervisory Board.

 

***Compensation, Nominating and Corporate Governance Committee***

 

Giventhe size of the Supervisory Board, it was decided to combine the tasks in theareas of the Board nomination, remuneration policy and corporate governanceinto one Committee. The CNCG Committee is tasked with assisting the SupervisoryBoard with, among other things, drafting the remuneration policy for members ofthe Executive Board as well as drafting the remuneration report, makingproposals with respect to the remuneration of individual members of theExecutive Board, reviewing share-based compensation schemes, assessing thecomposition and performance of the Executive Board and the Supervisory Boardand advising on selection criteria and appointment procedures, reviewing the successionplan, evaluation process, selection criteria and appointment procedures andcompensation structure of the Company’s top management, and advising on thedevelopment and implementation of corporate governance guidelines.

 

TheSupervisory Board considers it important that the Chairman of the SupervisoryBoard occupies himself intensively with the appointment and re-appointment ofmembers of the Supervisory Board and the Executive Board and with the corporategovernance structure, two of three areas that are part of the Committee’s duty.For this reason, this Committee is chaired by the Chairman of the SupervisoryBoard. However, the CNCG Committee Charter determines that the CNCG Committeecannot be chaired by a former Buhrmann Executive Board Member or by a Member ofthe Supervisory Board who is a member of an executive board of another Dutchlisted Company.

 

Thecurrent members of the Compensation, Nominating and Corporate GovernanceCommittee are Messrs. Van den Hoek, Peelen and Zwartendijk.

 

98

----

 

***Conflicts of interests***

 

Pursuantto the By-Laws of the Supervisory Board, every form and appearance of aconflict of interest between Buhrmann and the Supervisory Board should beavoided. Decisions to engage in transactions in which interests of SupervisoryBoard members play a role, which have a material significance for the Companyand/or for the Supervisory Board members concerned, require approval by theSupervisory Board. The Supervisory Board is responsible for approving alldecision-making concerning the handling of conflicts of interest of members ofthe Executive Board and Supervisory Board, major shareholders and the externalauditor in relation to the Company.

 

Inaddition, the By-Laws of the Supervisory Board require that transactions withnatural persons or legal entities be disclosed if these natural persons orlegal entities control at least 10% of the voting power in the Company.

 

**Membersof the Supervisory Board**

 

Themembers of the Supervisory Board as of December 31, 2004 were as follows:

 

***Paul C. Van den Hoek (1939), Chairman***

 

Position:Barrister in Amsterdam (Stibbe). Nationality: Dutch. Appointed in 1991, currentterm of office until 2008. Supervisory directorships: AON Groep Nederland B.V.(Chairman), ASM International N.V. (Chairman), Ballast Nedam N.V. (Chairman),Robeco Groep N.V. (Chairman), Robeco N.V. (Chairman), Rolinco N.V. (Chairman),Rorento N.V. (Chairman), Het Financieele Dagblad Holding B.V. (Chairman), WavinB.V. (Chairman), Euronext Amsterdam N.V. Mr. Van den Hoek is a Member ofthe CNCG Committee.

 

***Aad G. Jacobs (1936), Vice Chairman***

 

Previousposition: Chairman of the Executive Board of ING Groep N.V. Nationality: Dutch.Appointed in 1998, current term of office until 2008. Supervisorydirectorships: N.V. Koninklijke Nederlandsche Petroleum Maatschappij(Chairman), VNU N.V. (Chairman), ING Groep N.V., Johan Enschedé B.V.(Chairman), IHC Caland N.V., Imtech N.V. (Chairman). Mr. Jacobs is aMember of the Audit Committee.

 

***Steve W. Barnes (1960)***

 

Position:Managing Director Bain Capital, LLC, Boston U.S.A. Nationality: American.Appointed in April 2004, current term of office until 2008. Supervisorydirectorships: SigmaKalon Group, Sealy Corporation, Unisource Worldwide,BrenntagMattress Holdings, Inc., Overseers of Children’s Hospital, Boston,Syracuse University School of Management Corporate Advisory Council, ExecutiveCommittee of the Young President’s Organization in New England. Mr. Barneswas named to the Supervisory Board under the terms of the October 1999stock purchase agreement between and among Buhrmann, Apollo and Bain.

 

***John J. Hannan (1953)***

 

Position:Managing Partner Apollo Management, L.P. Nationality: American. Appointed inOctober 2003, current term of office until 2007. Supervisorydirectorships: Apollo Investment Corporation, Vail Resorts Inc., PacerInternational, Inc., Mt Sinai Children’s Centre Foundation, The Centre forArts Education, The Nightingale Bamford School, The Allen-Stevenson School.Mr. Hannan was named to the Supervisory Board under the terms of theOctober 1999 stock purchase agreement between and among Buhrmann, Apolloand Bain.

 

99

----

 

***Jan Peelen (1940)***

 

Previousposition: Member Executive Committee of Unilever and member of Unilever Board.Nationality: Dutch. Appointed in 1999, current term of office until 2006.Supervisory directorships: VVAA Groep B.V. (Chairman), Friesland Coberco DairyFoods Holding N.V., Arcadis N.V., Albron B.V. Mr. Peelen is a Member ofthe Audit Committee and of the CNCG Committee.

 

***Gert H. Smit (1948)***

 

Previousposition: Chairman of the Executive Board of Vedior N.V. Principal position:Managing Director TriFinance Holding B.V. Nationality: Dutch. Appointed in1998, current term of office until 2005. Supervisory directorships: TransaviaAirlines C.V., Endemol B.V., Martin Schilder Holding B.V., M.S.J. Beheer B.V.(Chairman). Mr. Smit is a Member of the Audit Committee.

 

***Rob Zwartendijk (1939)***

 

Previousposition: Member of the Executive Board of Koninklijke Ahold N.V., Presidentand CEO Ahold USA, Inc. Nationality: Dutch. Appointed in 1999, currentterm of office until 2005. Supervisory directorships: Nutreco Holding N.V.(Chairman), Koninklijke Numico N.V. (Chairman), Randstad Holding N.V.,InnoConcepts N.V., Blokker Holding B.V. (Chairman), TelepanelSystems, Inc. Mr. Zwartendijk is a Member of the CNGC Committee.

 

Mr. Hannanand Mr. Barnes will resign from their positions as members of theSupervisory Board upon consummation of the Company’s repurchase of thePreference Shares C from Apollo and Bain (see Item 7 “Related PartyTransactions - Holders of Preference Shares C”).

 

***Remuneration***

 

TheGeneral Meeting of Shareholders determines the remuneration for the SupervisoryBoard members. The remuneration for members of the Supervisory Board does notdepend on the Company’s results. Remuneration for the members of theSupervisory Board is composed entirely of base remuneration. Members of theSupervisory Board are not eligible to participate in any bonus or profit-sharingplans, or in any other incentive-based plans maintained by the Company. TheCompany does not provide pension benefits for members of the Supervisory Board.

 

100

----

 

Remunerationto members of the Supervisory Board in 2004 amounted to approximately €270,000and may be specified as follows (in thousands of euro):

 
| ** **         | ** ** | **2004** | ** ** |
|--------------------|------------|----------|------------|
| P.C. Van den  Hoek |       | €   | 65.6       | (1)(2) |
| A.G. Jacobs        |       | 55.6     | (1)(2)     |
| R.C. Gay(3)        |       | 9.3      |       |
| J.J. Hannan        |       | 28.0     |       |
| S.W. Barnes(4)     |       | 18.6     |       |
| J. Peelen          |       | 32.6     | (2)        |
| G.H. Smit          |       | 30.3     | (2)        |
| R. Zwartendijk     |       | 30.3     | (2)        |
| **Total**          |       | €   | 270.3      |   |
|                    |            |          |            |  |  |

 

----

(1)                                  Includingremuneration received as a Member of the Supervisory Board of BuhrmannNederland Holding B.V.

 

(2)                                  Includingremuneration received as a Member of the Audit Committee and/or theCompensation, Nominating and Corporate Governance Committee, as applicable.

 

(3)                                  Mr. Gayretired from the Supervisory Board on April 29, 2004.

 

(4)                                  Mr. Barneswas appointed as a Member of the Supervisory Board on April 29, 2004.

 

**Shareholdingsof Members of the Supervisory Board**

 

Of themembers of the Supervisory Board, only the following persons held interests inthe capital stock of Buhrmann at December 31, 2004 as set forth below:

 
| ** **            | ** ** | **Ordinary Shares** | ** ** | **Depositary receipts of Preference Shares A** | ** ** |
|-----------------------|------------|---------------------|------------|-----------------------------------------------------|------------|
| P.C. Van den  Hoek(1) |       | 31,364              |       | —                                              |       |
| A.G. Jacobs           |       | 954                 |       | 411                                                 |       |
| **Total**             |       | 32,318              |       | 411                                                 |       |

 

----

(1)                                  Mr. Vanden Hoek transferred the discretionary management of his securities portfolioto an independent third party.

 

Membersof the Supervisory Board individually and in the aggregate own less than onepercent of Ordinary Shares and (depositary receipts of) Preference Shares A inBuhrmann.

 

**ShareOptions Held by Members of the Supervisory Board**

 

Themembers of the Supervisory Board hold no option rights to Buhrmann shares.

 

101

----

 

**ExecutiveBoard**

 

Thefollowing briefly describes the functions and characteristics of the ExecutiveBoard of Buhrmann.

 

***Role and procedure***

 

TheExecutive Board is responsible for managing the Company, which includes, amongother things, the responsibility for determining and achieving the objectivesof the Company, the strategy and policies, the development of results ofoperations and a sound personnel policy. The Executive Board reports on thesematters to the Supervisory Board and to the General Meeting of Shareholders. Indischarging its duty, the Executive Board focuses on the interests of theCompany taking into consideration the interests of its stakeholders. TheExecutive Board provides the Supervisory Board with all the informationnecessary for the exercise of its duties in a timely fashion.

 

TheExecutive Board is responsible for managing the Company’s compliance with allrelevant legislation and regulations, managing the risks associated with theCompany’s activities and the financing of the Company. The Executive Boardreports to the Supervisory Board and the Audit Committee on these matters anddiscusses the internal risk management and control systems with these bodies.

 

Currently,members of the Executive Board have been appointed for an indefinite term.Buhrmann is of the opinion that these appointments cannot be changedunilaterally by the Company into fixed term contracts. New members are appointedto a maximum period of four years provided that market circumstances so permit.

 

***Conflicts of interest***

 

It isthe policy of the Company to avoid any conflict of interest or apparentconflict of interest between the Company and members of the Executive Board.Decisions to engage in transactions where conflicts of interest of ExecutiveBoard members are involved, which are of material significance for the Companyand/or for the members of the Executive Board concerned, require the approvalof the Supervisory Board.

 

**Membersof the Executive Board**

 

Themembers of the Executive Board as of December 31, 2004 were as follows:

 

***Frans Koffrie (1952)***

 

Mr. Koffrieis President and CEO and joined Buhrmann in 1988. In 1990 he was appointed aMember of the Executive Board and became the Group’s President and CEO in 1998.Mr. Koffrie is a Dutch national, born in Weert, the Netherlands onMay 15, 1952. He holds a Master’s degree in Business Economics (AmsterdamUniversity) and a Bachelors degree in Law (Erasmus University Rotterdam).Before he joined Buhrmann’s predecessor VRG-Groep, he worked forVroom & Dreesmann and Triumph-Adler Nederland B.V. Within theExecutive Board he holds responsibility for Strategy, InvestorRelations & Corporate Communications, General and Legal Affairs, andInternal Audit. Mr. Koffrie currently holds a Supervisory Directorship inWessanen NV, a Dutch public company.

 

102

----

 

***George Dean (1947)***

 

Mr. Deanis responsible for the Graphic Systems Division and the Office ProductsAustralia Division and joined Buhrmann in 1990. He was appointed a Member ofthe Executive Board in 1998 and he was President of the Paper MerchantingDivision until the divestment of these activities on October 31, 2003. Inaddition to his responsibility for supervising the two aforementionedDivisions, Mr. Dean also holds responsibility within the Executive Boardfor Human Resources and Group Real Estate. Mr. Dean is a British nationaland was born in Perth (Scotland) on February 18, 1947. He holds a Bachelorof Science Honours Degree in Chemical Engineering from the University ofEdinburgh. Before he joined Buhrmann’s predecessor VRG-Groep in 1990, he workedwith the Wiggins Teape Group for 21 years.

 

***Mark Hoffman (1952)***

 

Mr. Hoffmanis President and CEO of the Office Products North America Division and joinedBuhrmann in 1999. He was appointed a Member of the Executive Board in 2002.Mr. Hoffman is an American national, born in Jackson, MI onAugust 31, 1952. He holds a Master’s Degree in Business Administrationfrom Harvard Business School. Before he joined Buhrmann, he was the Presidentand CEO of APS Holdings and held several other management functions withW.W. Grainger, TRW, Inc. and Lockheed Corporation.

 

***Floris Waller (1958)***

 

Mr. Wallerjoined Buhrmann in 1999, and was appointed a Member of the Executive Board andCFO in the same year. Mr. Waller is a Dutch national, born in Leiden, theNetherlands on December 21, 1958. He has a Master’s Degree in BusinessEconomics and a CPA Degree (both from the Erasmus University Rotterdam). Beforehe joined Buhrmann he worked with Unilever for 15 years in variousfinancial management positions. Within the Executive Board he holdsresponsibility for: Accounting & Control, Corporate Finance &Group Treasury, Corporate Tax & Pensions, Risk Management, InformationTechnology, Mergers, Acquisitions & Divestments, the Holdings,and—jointly with the CEO—Investor Relations and Internal Audit.

 

**Compensation**

 

TheRemuneration Policy for the Executive Board is determined by the SupervisoryBoard on the recommendation of the CNGC Committee and adopted by the GeneralMeeting of Shareholders. Any material amendments to the Remuneration Policymust be submitted to the General Meeting. In 2004, no changes were made to theremuneration policy, with the exception of the New Buhrmann Incentive Plan,which was approved by the General Meeting of Shareholders held onApril 29, 2004.

 

Thedetermination of the remuneration for each individual Executive Board Member isin principle a responsibility of the Supervisory Board. The Supervisory Boardhas delegated this authority to the CNGC Committee. Pursuant to this delegationof authority, and acting within the principles of the remuneration policy, theCNGC Committee sets the remuneration packages for the members of the ExecutiveBoard, including base salary, pension rights, bonus and long-term incentiveawards, grants of share options and any severance payments. The CNGC Committeemay make decisions, which reflect special circumstances and make remunerationplan alterations which will be accounted for in the next annual report. TheCNGC Committee does not retain remuneration consultants but seeks professionaladvice from external advisors as it sees fit.

 

***Remuneration policy for Members of the Executive Board***

 

Theobjective of the remuneration policy is to attract and retain qualified andexpert Executive Board members with an international outlook and to motivatethem to perform in such a way that the value of Buhrmann is enhanced.Remuneration of the Executive Board is aimed at balancing short-termoperational performance with the longer-term objective of creating sustainablevalue and growth. Levels of remuneration are reviewed annually taking accountof competitive levels of remuneration according to relevant industrycomparisons in each country environment. From time to time the CNCG Committeewill seek expert advice on the remuneration levels.

 

103

----

 

Inaddition, employment contracts and main conditions of employment for members ofthe Executive Board are annually reviewed. Currently, members of the ExecutiveBoard have been appointed for an indefinite term. Notice periods of up to sixmonths for termination of employment have been set for each Executive Boardmember.

 

***Remuneration***

 

Theremuneration for members of the Executive Board consists of a base salary,variable pay comprising an annual performance bonus, share option plan,pension, long-term incentive plan (North America only) and pre-pensionprovision (Europe only). In addition, allowances and fringe benefits similar tothose of many other employees at Buhrmann are paid. The details of the remunerationpackage are as follows:

 

***Base salary***

 

Thebase salary for members of the Executive Board is set at a market competitivelevel, using industry survey data provided by outside remuneration advisors.Where members of the Executive Board reside outside the Netherlands, benchmarksalary levels are referenced for Europe and North America.

 

***Variable pay***

 

Variablepay is an important part of the remuneration package for the Executive Board.Members of the Executive Board participate in an annual bonus plan based on theachievement of a number of targets, which reflect key drivers for valuecreation, long-term growth in shareholder value, and the development ofearnings per share.

 

Targetbonus levels for the Executive Board range from 50% to 75% of base salary. Theamount of the annual bonus is determined by the CNCG Committee based on theachievement of targets set by the CNCG Committee. For the Chief ExecutiveOfficer, Chief Financial Officer and other European based Board members, thebonus targets may be a combination of the performance of the total Group,division based targets and individual targets. The bonus of the North AmericanExecutive Board Member, Mr. Hoffman, entirely relates to the performanceof Buhrmann’s Office Products North America business and includes anoverachievement bonus range for above target performance. The CNGC Committeehas the right to change targets as a result of unforeseen circumstances, andmay also decide to grant a special bonus award for special circumstances ifjustified in the opinion of the CNCG Committee. Such measures will always be accountedfor in the annual report.

 

Inaddition to the annual bonus plan, Mr. Hoffman participates in a long-termincentive plan designed specifically for the senior management of the OfficeProducts North America Division. Under this incentive plan, which has a threeyear duration, a bonus of 2.5 times base salary can be earned annually, subjectto the achievement of specific performance conditions related to annualeconomic value creation targets. In the event of an overachievement of thetarget, the long-term incentive payment may be increased unto 3.125 times thebase salary.

 

***Share Option Plan***

 

Buhrmannoperates a share option plan, the “Buhrmann Incentive Plan”, which aims tofocus senior management on the growth of long-term sustainable value for shareholders.The Executive Board members participate in this new share option plan. Theallocation of the share options granted to the individual Executive Boardmembers is determined by the CNCG Committee, on an annual basis.

 

Theoptions have a term of seven years and vest after three years. The BuhrmannIncentive Plan up to and including 2003 did not apply performance conditions toeither the grant or the vesting of the options. The exercise price for optionrights granted is the closing price of Buhrmann Ordinary Shares on the firsttrading on which the shares are quoted ex-dividend after the Annual GeneralMeeting of Shareholders. Neither the exercise price nor other conditions inrelation to the granted options can be modified during the term of the options,except insofar as prompted by structural changes relating to the shares or theCompany in accordance with established market practice.

 

In2004, the share option plan was redesigned to include performance-basedconditions. Further details of the new Buhrmann Incentive Plan are summarizedbelow under “New Buhrmann Incentive Plan.”

 

104

----

 

Themaximum percentage of option rights that may be granted under the previousBuhrmann Incentive Plan in any year is 1.25% of the number of outstandingOrdinary Shares. This reflects the requirements of the business given ourgeographic spread (in particular the United States of America) and specifichuman resource management needs for critical business activities. The optionsgranted up to and including 2002 have a term of five years and can be exercisedonly after three years. From 2003, the options have a term of seven years.

 

Thoseentitled to options are bound by internal regulations designed to preventinsider trading.

 

***Pension and Pre-Pension provision***

 

Retirementbenefits are designed to be in line with the relevant market practice andconsistent with those provided by other multinational companies in each countryof residence. For the two Dutch Executive Board members, Mr. F.H.J.Koffrie and Mr. F.F. Waller, current pension arrangements are based onindividual defined contribution plans with a retirement age of 65, and withpremium payments (based on a table increasing relative to age) until the age of60. Pre-pension arrangements provide for retirement from the age of 60 to 62depending on agreement with the Supervisory Board. In addition, pensionarrangements include an entitlement to a pension in the event of ill-health ordisability and a spouse’s or dependant’s pension on death, on terms similar to thoseapplicable to employees participating in the Dutch Buhrmann Pension Fund.Mr. G. Dean, who is a U.K. citizen, has pension arrangements dividedbetween the United Kingdom and the Netherlands. His current pension arrangementconsists partly of the individual defined contribution plan in place for theDutch Executive Board members and partly of the participation in the definedbenefit scheme of Corporate Express U.K. Ltd., with a retirement age of61. Pre-pension arrangements are again identical to those of the Dutch membersof the Executive Board, while the pension arrangements in the event of illhealth, disability and death are a combination of terms applying to employeesparticipating in the Corporate Express UK Ltd Pension Fund, and the Dutchmembers of the Executive Board. Mr. M. Hoffman, who is a U.S. resident, iseligible to participate in the regular U.S. Corporate Express, Inc.defined contribution plan (401K) on terms similar to other employees of CorporateExpress, Inc. Participants in the 401K are eligible, at the earliest, totake their contributions at age 59.5, or at the latest, by age 70.

 

***Personal loans***

 

TheCompany does not grant personal loans or guarantees to members of the ExecutiveBoard. Since 2003, no loans have been, or will be, granted. Loans have beengranted to meet upfront Dutch income tax on share options granted up to andincluding 2002.

 

***Severance Payments***

 

Thecurrent contracts of the members of the Executive Board determine that whereemployment is terminated in the event of an acquisition of the Company or whereactual control passes into other hands (change of control), or in the case ofreorganization, termination of the Company’s activities or in other comparablecircumstances that cannot be considered as blameworthy on the part of the BoardMember concerned, a fixed severance payment will be made. In such cases,compensation will be paid by Buhrmann in the amount of three times the annualfixed salary (twice the annual fixed salary in the case of the contract ofMr. Hoffman) and the pension accumulation over the period that annualsalary is meant to compensate will continue.

 

Asregards to other situations, no fixed severance payment has been arranged withthe members of the Executive Board. Buhrmann believes that the circumstances ofthe case should be taken into account, considering relevant factors such as thereason for the termination, the age of the person in question, and the durationof employment, when determining the amount of severance payment, as a result ofwhich, in specific cases, it could exceed the compensation mentioned in theDutch Corporate Governance Code. The performance by a Board Member of hisduties will in any event be an important factor.

 

105

----

 

***Remuneration in 2004***

 

The remuneration in 2004 for members of the Executive Boardwas as follows (in thousands of euro):

 
|                 |   | **Salary** |   | **Bonus(2)** |   | **Other incentives(3)** |   | **Pension charges** |   |
|----------------------|--------|------------|--------|--------------|--------|-------------------------|--------|---------------------|--------|
| F.H.J. Koffrie       |   | €     | 561    |         | € | 252                     |   | (60                 | )%     | — |   | € | 217 |   |
| R.W.A. De  Becker(1) |   | 63         |   | —       |   | (0                      | )%     | —              |   | 19 |   |
| G. Dean              |   | 421        |   | 210          |   | (100                    | )%     | 250                 |   | 335 |   |
| M.S. Hoffman         |   | 522        |   | 449          |   | (114                    | )%     | 1,335               |   | 6 |   |
| F.F. Waller          |   | 344        |   | 172          |   | (100                    | )%     | —              |   | 125 |   |
| **Total**            |   | €     | 1,911  |         | € | 1,083                   |   |                |   | € | 1,585 |   | € | 702 |   |
|                      |        |            |        |              |        |                         |        |                     |        |  |  |  |  |  |  |

 

----

(1)                                  Mr. DeBecker left the Company as of February 29, 2004. The remuneration reportedrelates only to the period of membership of the Executive Board and is based onthe performance for the period.

 

(2)                                  Thepercentage in parenthesis represents the percentage score of the total bonusopportunity for the individual that was awarded over the respective year’sperformance and paid out in the first quarter of the following year.

 

(3)                                  Otherincentives are cash remunerations or accruals for cash remunerations such asthe long-term incentive plan for Mr. Hoffman or any special awardsgranted.

 

Remunerationis paid in euros with the exception of Mr. Hoffman, whose remuneration ispaid in U.S. dollars. Correcting for currency translation effects and period ofmembership of the Executive Board, the total salary costs in 2004 for membersof the Executive Board resulted in a total increase of about 2% compared to2003, and the total increase reflected a 1% increase for the European ExecutiveBoard members and a 5% increase for the North American Executive Board member.

 

Bonusesrelated to 2004 amounted to €1,083 thousand, and other incentives amountedto €1,585 thousand. These include a special bonus of €250 thousand toMr. Dean for the finalization of the divestment of the Paper MerchantingDivision. The bonus amount for Mr. Hoffman relates entirely to the accrualfor the long-term incentive plan for senior management of the Office ProductsNorth America division.

 

Pensioncharges of €702 thousand consist of payments made to the relevant pensionschemes and accruals for early retirement according to the regular, contractualrates. The early retirement provision for Mr. De Becker was released afterhe left the Company. For an explanation of these charges, see “—Pension andPre-Pension Provision” above. The Company has not insured the early retirementplan. Pension premiums in the compensation table represent pension premiumspaid for the defined contribution pension plans and the annual charge to netresult relating to the liability in the Company’s balance sheet regarding theearly retirement plan.

 

**ShareOwnership**

 

Of themembers of the Executive Board, the following persons held interests in thecapital stock of Buhrmann at December 31, 2004 as set forth below:

 
| ** **     | ** ** | **Ordinary Shares** | ** ** |
|----------------|------------|---------------------|------------|
| F.H.J. Koffrie |       | 50,595              |       |
| M.S. Hoffman   |       | 75,000              |       |
| F.F. Waller    |       | 3,129               |       |
|           |       | 128,724             |       |

 

Membersof the Executive Board individually and in the aggregate own less than onepercent of Ordinary Shares in Buhrmann.

 

106

----

 

**ShareOption Plan**

 

Thereis a share option plan in place, the “Buhrmann Incentive Plan,” which isdesigned as an incentive to managers working within the Group. In addition, theAnnual General Meeting of Shareholders held on April 29, 2004 adopted anew share option plan as described below under “New Buhrmann Incentive Plan.”

 

***Buhrmann Incentive Plan***

 

In2004, approximately 370 managers were invited to participate in the BuhrmannIncentive Plan. The maximum percentage of option rights that may be grantedunder the previous Option Plan in any year is 1.25% of the number ofoutstanding Ordinary Shares. This reflects the requirements of the businessgiven our geographic spread (in particular, the United States of America) andspecific human resource management needs for critical business activities.

 

Forindividual managers, the number of options granted is related to his or hercontribution to Group results. In addition, the number of options that can begranted under the plan to any individual manager is capped at the maximumnominal value (based on the number of shares to which the option right relates,multiplied by the option exercise price) which cannot exceed an amount equal totwice the base salary of the relevant individual. The options granted up to andincluding 2002 have a term of five years and can be exercised only after threeyears. From 2003, the options have a term of seven years.

 

Theexercise price for option rights is the closing price of Buhrmann’s OrdinaryShares on the first trading day on which day Buhrmann’s Ordinary Shares arequoted ex-dividend. Those entitled to options are bound by internal regulationsdesigned to prevent insider trading. Options granted are in principle hedged bypurchasing the shares required on or close to the grant date. Options may notbe hedged if the financial position of the Group gives rise to a decision notto purchase the shares required. Considerations for evaluating the financialposition are the growth prospects and its required financing, as well as itscapital structure. On the basis thereof it was decided not to purchase sharesfor this purpose in 2004, 2003 and 2002.

 

107

----

 

**On December 31, 2004, the members of theExecutive Board held option rights on 774,000 Buhrmann Ordinary Shares grantedunder the Buhrmann Incentive Plan and the new Buhrmann Incentive Plan. Thetable below sets forth the movements in the number of outstanding option rightsgranted to current members of the Executive Board.**

 
| ** **     | ** ** | **January 1, 2004** | ** ** | **Granted during the year** | ** ** | **Option exercise price (1)** | ** ** | **Fair value of grant in euro (2)** | ** ** | **Granted in 2004** | ** ** | **Exercised in 2004** | ** ** | **Outstanding December 31, 2004** | ** ** | **Expiry date** | ** ** |
|----------------|------------|--------------------------|------------|-----------------------------|------------|------------------------------------|------------|------------------------------------------|------------|---------------------|------------|-----------------------|------------|----------------------------------------|------------|-----------------|------------|
| ** **     | ** ** | ** **               | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               | ** ** | ** **          | ** ** | ** **            | ** ** | ** **                             | ** ** | ** **      | ** ** |
| F.H.J. Koffrie |       | 25,000                   |       | 1999                        |       | 15.40                              |       | 101,000                                  |       | —              |       | lapsed                |       | —                                 |       | 4/11/2004       |       |
|           |       | 40,000                   |       | 2000                        |       | 32.94                              |       | 418,000                                  |       | —              |       | —                |       | 40,000                                 |       | 5/16/2005       |       |
|           |       | 40,000                   |       | 2001                        |       | 24.52                              |       | 317,200                                  |       | —              |       | —                |       | 40,000                                 |       | 4/19/2006       |       |
|           |       | 55,000                   |       | 2002                        |       | 13.69                              |       | 348,150                                  |       | —              |       | —                |       | 55,000                                 |       | 5/5/2007        |       |
|           |       | 55,000                   |       | 2003                        |       | 2.85                               |       | 72,600                                   |       | —              |       | —                |       | 55,000                                 |       | 5/1/2010        |       |
|           |       | —                   |       | 2004                        |       | 7.79                               |       | 215,900                                  |       | 85,000              |       | —                |       | 85,000                                 |       | 5/2/2011        |       |
| ** **     | ** ** | **215,000**              | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               |       | **85,000**          |       | **—**            |       | **275,000**                            |       |            |       |
| G. Dean        |       | 20,000                   |       | 1999                        |       | 15.40                              |       | 80,800                                   |       | —              |       | lapsed                |       | —                                 |       | 4/11/2004       |       |
|           |       | 25,000                   |       | 2000                        |       | 26.35                              |       | 261,250                                  |       | —              |       | —                |       | 25,000                                 |       | 5/16/2005       |       |
|           |       | 27,500                   |       | 2001                        |       | 19.61                              |       | 218,075                                  |       | —              |       | —                |       | 27,500                                 |       | 4/19/2006       |       |
|           |       | 35,000                   |       | 2002                        |       | 13.69                              |       | 221,550                                  |       | —              |       | —                |       | 35,000                                 |       | 5/5/2007        |       |
|           |       | 35,000                   |       | 2003                        |       | 2.85                               |       | 46,200                                   |       | —              |       | —                |       | 35,000                                 |       | 5/1/2010        |       |
|           |       | —                   |       | 2004                        |       | 7.79                               |       | 106,680                                  |       | 42,000              |       | —                |       | 42,000                                 |       | 5/2/2011        |       |
| ** **     | ** ** | **142,500**              | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               |       | **42,000**          |       | **—**            |       | **164,500**                            |       |            |       |
| M.S. Hoffman   |       | 15,000                   |       | 2000                        |       | 26.35                              |       | 156,750                                  |       | —              |       | —                |       | 15,000                                 |       | 5/16/2005       |       |
|           |       | 17,500                   |       | 2001                        |       | 19.61                              |       | 138,775                                  |       | —              |       | —                |       | 17,500                                 |       | 4/19/2006       |       |
|           |       | 50,000                   |       | 2002                        |       | 13.69                              |       | 316,500                                  |       | —              |       | —                |       | 50,000                                 |       | 5/5/2007        |       |
|           |       | 50,000                   |       | 2003                        |       | 2.85                               |       | 66,000                                   |       | —              |       |                  |       | 50,000                                 |       | 5/1/2010        |       |
|           |       | —                   |       | 2004                        |       | 7.79                               |       | 152,400                                  |       | 60,000              |       | —                |       | 60,000                                 |       | 5/2/2011        |       |
| ** **     | ** ** | **132,500**              | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               |       | **60,000**          |       | **—**            |       | **192,500**                            |       |            |       |
| F.F. Waller    |       | 20,000                   |       | 2000                        |       | 32.94                              |       | 209,000                                  |       | —              |       | —                |       | 20,000                                 |       | 5/16/2005       |       |
|           |       | 20,000                   |       | 2001                        |       | 24.52                              |       | 158,600                                  |       | —              |       | —                |       | 20,000                                 |       | 4/19/2006       |       |
|           |       | 30,000                   |       | 2002                        |       | 13.69                              |       | 189,900                                  |       | —              |       | —                |       | 30,000                                 |       | 5/5/2007        |       |
|           |       | 30,000                   |       | 2003                        |       | 2.85                               |       | 39,600                                   |       | —              |       | —                |       | 30,000                                 |       | 5/1/2010        |       |
|           |       | —                   |       | 2004                        |       | 7.79                               |       | 106,680                                  |       | 42,000              |       |                  |       | 42,000                                 |       | 5/2/2011        |       |
| ** **     | ** ** | **100,000**              | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               |       | **42,000**          | ** ** | **—**            |       | **142,000**                            |       |            |       |
| **Total**      | ** ** | **590,000**              | ** ** | ** **                  | ** ** | ** **                         | ** ** | ** **                               |       | **229,000**         | ** ** | **—**            |       | **774,000**                            |       |            |       |

 

----

(1)                                  UnderDutch fiscal rules, management receiving options could under the BuhrmannIncentive Plan up to and including 2003 elect to accept a 25% higher exerciseprice. The base exercise price was set at € 7.79 in 2004, €2.85 in 2003, €13.69in 2002, €19.61 in 2001, €26.35 in 2000 and €15.40 in 1999, equalling the shareprice at close of business on the Amsterdam Stock Exchange on May 3, 2004,May 2, 2003, May 6, 2002, April 20, 2001, April 17, 2000and April 7, 1999 respectively.

 

(2)                                  Thefair value of the options is estimated by using an option price determinationmodel using assumptions at the moment of the grant. It does not reflect thecurrent market value. Details on the model and assumptions used for thecalculation are provided in the note 26 to the financial statements.

 

108

----

 

***New Buhrmann Incentive Plan***

 

At theAnnual General Shareholders’ meeting held on April 29, 2004, ourshareholders approved the adoption of a new share option plan, the “newBuhrmann Incentive Plan”. Pursuant to the new Buhrmann Incentive Plan, thenumber of options granted to eligible employees and the vesting of the optionsgranted will be dependent on the performance of the Company relative to a peergroup as measured over a three-year period. Approximately 370 managers areinvited to participate in the new Buhrmann Incentive Plan effective as from May 1,2004.

 

Indetermining options to be granted under the new Buhrmann Incentive Plan and theterms upon which they are to be granted, the performance of the Company will bemeasured by the concept of total shareholder return, or TSR. Using TSR, whichshows the total return to shareholders as a combination of share priceappreciation and dividends distributed, the performance of the Company’s sharesagainst other companies’ shares can be compared over the relevant three-yearperiod.

 

Underthe terms of the new Buhrmann Incentive Plan, the financial performance of theCompany, as measured by TSR, will be compared to the TSR of a reference (orpeer) group of twelve companies. The criteria for a company to fit within thispeer group of companies includes, among other things, that such company(i) be in the same or similar industry as Buhrmann; (ii) have acomparable business model to Buhrmann; (iii) be listed or traded on amajor stock exchange; (iv) have a minimum market capitalization; (v) bepresent in at least North America or Europe; and (vi) be considered a peerof Buhrmann by both the investor community and by Buhrmann itself.

 

Thepeer group companies for option grants under the new Buhrmann Incentive Plan in2004 are: Boise Cascade Corporation (renamed OfficeMax, Inc. after arestructuring in 2004); Office Depot, Inc.; Staples, Inc.; UnitedStationers, Inc.; W.W. Grainger, Inc.; Hagemeyer N.V.; ManutanInternational S.A.; Rexel S.A.; Genuine Parts Company; Bunzl PLC; Randstad HoldingNV; and Wesco International, Inc. The composition of the peer group may bechanged by the Supervisory Board after 2004, provided that the above listedpeer group criteria are met. In addition, where options have been granted, buthave not yet begun vesting, the Supervisory Board may change the composition ofthe peer group with respect to that grant, if a peer group company at the timeof grant no longer meets one or more of the criteria. In view of theannouncement that Rexel S.A. will be delisted in the course of 2005, theSupervisory Board has decided not to replace this company in the peer group,therefore the peer group will be reduced from twelve companies to elevencompanies. The Supervisory Board continues to regard Boise Cascade, Corp. as acompany in the peer group after its restructuring and name change toOfficeMax, Inc. Thus, the peer group under the Buhrmann Incentive Plan in2005 will consist of eleven companies, including OfficeMax, Inc. (f/k/aBoise Cascade Corporation), but excluding Rexel S.A.

 

109

----

 

TheTSR for each peer group company will be calculated over the three-year periodfollowing each annual grant of options under the New Buhrmann Incentive Plan,and each peer group company will be ranked in descending order of generated TSRto determine the relative position of the Company. After three years, thevesting of options granted under the New Buhrmann Incentive Plan will be basedupon the TSR ranking of Buhrmann relative to the applicable peer group, asfollows:

 
| **TSR ranking of Buhrmann** | ** ** | **Percentage of options granted vesting** | ** ** |
|-----------------------------|------------|-------------------------------------------|------------|
| 1                           |       | 200                                       |       |
| 2                           |       | 175                                       |       |
| 3                           |       | 150                                       |       |
| 4                           |       | 125                                       |       |
| 5                           |       | 100                                       |       |
| 6                           |       | 75                                        |       |
| 7                           |       | 50                                        |       |
| 8-13(1)                     |       | 0                                         |       |

 

----

(1)                                  Afterthe reduction of the peer group as described above, this ranking will be forplaces 8-12.

 

As ofDecember 31, 2004, Buhrmann’s relative TSR performance was ten out ofthirteen (including Rexel S.A.) under the New Buhrmann Incentive Plan.

 

Themaximum number of options authorized for the 2004 grant under the New BuhrmannIncentive Plan was 1,708,649, representing 1.25% of the total number ofOrdinary Shares outstanding as of May 3, 2004, the date of the optiongrant. The number of options vesting may be increased up to 2.5% if, as aresult of the Company’s performance relative to the peer group, more than 100%of the granted options vest. In addition, a maximum of 20% of the total numberof options granted in any one year may be granted to members of the ExecutiveBoard. The allocation of options granted under the New Buhrmann Incentive Planto individual members of the Executive Board will be determined by the CNGCCommittee.

 

110

----

 

**EMPLOYEES**

 
| ** **                                                     | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Average number  of employees                                   |       | 17,628     |       | 18,614     |       | 20,350     |       |
|                                                           |       |       |       |       |       |       |       |
| *Number  of employees per division at year end(1):*            |       |       |       |       |       |       |       |
| Office Products  North America                                 |       | 10,544     |       | 10,775     |       | 12,211     |       |
| Office Products  Europe and Australia                          |       | 6,003      |       | 5,873      |       | 6,023      |       |
| Graphic Systems                                                |       | 1,002      |       | 1,114      |       | 1,139      |       |
| Corporate  Headquarters                                        |       | 69         |       | 70         |       | 74         |       |
| **Total**                                                      | ** ** | **17,618** | **(2)**    | **17,832** | ** ** | **19,447** | ** ** |
| ** **                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Number  of employees per geographical region at year end(1):* |       |       |       |       |       |       |       |
| United States                                                  |       | 9,491      |       | 9,727      |       | 11,149     |       |
| United Kingdom                                                 |       | 512        |       | 596        |       | 685        |       |
| The Netherlands                                                |       | 1,024      |       | 1,076      |       | 1,350      |       |
| Germany                                                        |       | 1,422      |       | 1,478      |       | 1,644      |       |
| Rest of EMU  members                                           |       | 1,989      |       | 2,044      |       | 2,029      |       |
| Australia and  New Zealand                                     |       | 2,200      |       | 1,941      |       | 1,619      |       |
| Rest of the  World                                             |       | 980        |       | 972        |       | 971        |       |
| **Total**                                                      | ** ** | **17,618** | **(2)**    | **17,832** | ** ** | **19,447** | ** ** |

 

----

(1)                                  Excludingemployees of the Company’s Paper Merchanting Division which was sold witheffect from October 31, 2003.

 

(2)           Excludes 425 temporary employees.

 

**LaborRelations**

 

As ofDecember 31, 2004, less than 5% of our workforce in European countries wascovered under collective bargaining agreements. In Europe, the staff in ourdistribution centers are in general represented by trade unions. Buhrmann hasvarious local and European works councils. Pursuant to local country law, theseworks councils primarily serve an advisory role.

 

Buhrmannis also required by Dutch law to consult with the works councils in somedecision-making processes if they affect operations in the Netherlands.

 

In theUnited States, approximately 500 employees are currently covered by collectivebargaining agreements, which is equivalent to approximately 5% of the workforcein the United States. The primary union in the United States is theInternational Brotherhood of Teamsters.

 

NeitherBuhrmann nor any of its subsidiaries or affiliates has recently experiencedlabor actions or disruptions that had a materially adverse impact on itsoperations. In general, Buhrmann believes that the work climate is stablethroughout the Company.

 

111

----

 

###### **ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

######  

###### **Major Shareholders**

######  

AtDecember 31, 2004, Buhrmann NV had an authorized share capital of 610,000,000shares, divided into 250,000,000 Ordinary Shares, 54,940,000 Preference SharesA, 305,000,000 Preference Shares B and 60,000 Preference Shares C. The OrdinaryShares may, at the option of the shareholder, be bearer shares or registeredshares. The Preference Shares A and B can only be registered shares. ThePreference Shares C are registered shares, but may under certain conditions bebearer shares.

 

On December 31, 2004, the issued and paid-inshare capital was divided into 191,452,135 issued shares, consisting of138,126,528 Ordinary Shares, 53,281,979 Preference Shares A and 43,628Preference Shares C, all of which have been fully paid-up. No Preference SharesB have been issued or are otherwise outstanding.

 

At theend of February 2005, 5.16 million Ordinary Shares were held in the formof American Depositary Shares by five registered American Depositary Receiptholders.

 

All ofthe outstanding Preference Shares A representing approximately 27.8% of thetotal number of outstanding shares in Buhrmann NV at December 31, 2004 areheld in “trust” by Stichting Administratiekantoor van Preferente AandelenBuhrmann, or the Trust Office. The Trust Office has issued depositary receiptsagainst the Preference Shares A, which depositary receipts are listed on theAmsterdam Stock Exchange.

 

AtDecember 31, 2004, of the total outstanding Preference Shares C 64.3% wereheld by Apollo and 30.6% were held by Bain. The remaining 5.1% were held by twoother investors.

 

OnFebruary 22, 2005, Buhrmann reached agreement with all the holders of thePreference Shares C regarding the purchase by Buhrmann of all 43,628issued and outstanding Preference Shares C, see “—Related Party Transactions.”

 

Under the Disclosure of Major Holdings in ListedCompanies Act 1996 in the Netherlands, shareholders in listed companies arerequired to give notice to the Dutch Authority Financial Markets when theirshareholdings exceed certain thresholds based on the total amount of votingcapital stock outstanding of the listed company, the lowest of which is 5%.Because the obligation to file the notice is based on the holder’s percentageinterest of the entire outstanding voting capital stock of the listed company,rather than the holder’s percentage interest of a particular class of stock, weare not notified of, or otherwise able to accurately identify, the number ofshares held by such persons by class of stock and/or depositary receipts. Inaddition, as a matter of Dutch law, shareholders are not required to provide usregularly with updated notifications. As a result, unless and until we receivesuch notifications, we are not, nor would be likely to be, aware of anysignificant changes in the ownership of our Ordinary Shares and PreferenceShares A and C. Certain shareholders do, however, notify us of their exactshareholdings on an *ad hoc* basis.

 

Inaddition to notifications filed under the Disclosure of Major Holdings inListed Companies Act 1996, under the U.S. federal securities laws any personwho acquires, directly or indirectly, the beneficial ownership of more than 5%of our Ordinary Shares or ADSs is required to file certain reports as to suchownership with the SEC.

 

112

----

 

As far as we are aware,including from our review of available filings under the Disclosure of MajorHoldings in Listed Companies Act 1996 and the U.S. federal securities laws, aswell as the voluntary notifications received from certain shareholders, as ofDecember 31, 2004, the following persons are the only holders of more than5% of any class of our voting shares (excluding the Trust Office, which holds100% of our Preference Shares A):

 
| **Entity**                              | ** ** | **Percentage of Total Shares(1)** | ** ** |
|-----------------------------------------|------------|-----------------------------------|------------|
| AEGON NV                                |       | 5.2                               |       |
| Apollo  Investment Fund IV, L.P.(2)     |       | 11.7                              |       |
| Bain Capital,  LLC(2)                   |       | 5.6                               |       |
| Brandes  Investment Partners, LP(1)     |       | 6.4                               |       |
| Cobepa NV                               |       | 5.2                               |       |
| FMR Corp.(1)                            |       | 5.3                               |       |
| Fortis Utrecht  NV                      |       | 6.3                               |       |
| ING Groep NV                            |       | 10.0                              |       |
| Merrill Lynch  Asset Management Inc.(1) |       | 9.3                               |       |
| NIB Capital NV                          |       | 7.6                               |       |

 

----

**(1)**                                  Pursuant to the rules ofthe Disclosure of Major Holdings in Listed Companies Act 1996, percentage oftotal shares is calculated on the basis of shares held in proportion to thetotal number of outstanding shares of our capital stock; provided thatpercentage of total shares held by Brandes Investment Partners, LP, FMR Corpand Merill Lynch Asset Management Inc. is calculated pursuant to the U.S.federal securities laws and represents the percentage of total outstandingOrdinary Shares held by such person.

** **

(2)                                  Pursuantto the rules of the Disclosure of Major Holdings in Listed Companies Act 1996,the number of Ordinary Shares into which the Preference Shares C areconvertible are deemed outstanding for purposes of determining the number ofshares held by such person, but are not deemed to be otherwise outstanding forpurposes of calculating the percentage of total outstanding shares of capitalstock of the Company held by such person.

 

TheCompany’s major shareholders do not have any special voting rights, except forApollo and Bain as described in “—Related Party Transactions.”

 

We arenot aware of any corporation, foreign government or other natural or legalperson which could be deemed to directly or indirectly own or control BuhrmannNV.

 

Buhrmannbelieves that at September 30, 2004, approximately 17% of Buhrmann’sOrdinary Shares (approximately 23 million shares) were held in the UnitedStates (in either ordinary or ADR form), all of which, we believe, were held byinstitutional investors. The foregoing is based on a third-party investigationrelating to the geographical spread of Buhrmann’s Ordinary Shares. Thisinvestigation is made once a year and the latest available information is as atSeptember 30, 2004.

 

113

----

 

**RelatedParty Transactions**

 

***Holders of Preference Shares C***

 

On February 22,2005, Buhrmann reached agreement with all the holders of the PreferenceShares C regarding the purchase by Buhrmann of all 43,628 issued andoutstanding Preference Shares C for an aggregate purchase price of USD520 million in cash together with certain options to acquire OrdinaryShares of Buhrmann in certain defined circumstances (the Preference CRepurchase). The agreement has been filed as exhibit 4.3 to this Annual Report.

 

ThePreference C Repurchase is conditional on, among other things:

 

•                                          the approval of the Preference C Repurchase byan extraordinary meeting of shareholders;

 

•                                          the raising of adequate finance for the repurchaseof the Preference Shares C in a form and amount satisfactory to us; and

 

•                                          the approval of the agent security trustee under theSenior Credit Facility.

 

An Extraordinary GeneralMeeting of Shareholders was held on March 11, 2005 in which the shareholdersapproved the repurchase of the outstanding Preference Shares C, a change ofarticles of association (see Item 10 “Additional Information – Description ofShare Capital and Articles of Association”) and the issue of up to 80 millionnew Ordinary Shares. The agent security trustee under the Senior CreditFacility has approved the Preference Share C Repurchase. The amendment to theSenior Credit Facility has been filed as Exhibit 4.21 to this Annual Report.

 

OnFebruary 24, 2005 Buhrmann announced that it had successfully placed 77/8%**SeniorSubordinated Notes due 2015 (2015 Notes) with an aggregate principal amount ofUSD 150 million. The proceeds of the2015 Notes are intended to be used to finance the planned Preference CRepurchase, together with a discountedrights issue of approximately EUR 250 million and cash on hand.

 

The rights issue has beenfully underwritten by a syndicate of banks that has agreed to underwrite up to43 million shares at a minimum issue price of EUR 5.82 per share.

 

Buhrmann expects tocomplete the Preference C Repurchase on or about April 1, 2005. Shouldcompletion occur on or after April 2, 2005, interest shall accrue on the purchaseprice at 6% per annum.

 

Part of the considerationin relation to the Preference C Repurchase consists of our granting to allsellers of Preference Shares C options to acquire, in aggregate, 36,500,000 ofour Ordinary Shares at a price of € 10 per share. These options may only beexercised where on, or before December 30, 2005, either (i) we and athird party together or separately make an announcement that we and they expectto reach an agreement on the terms of a bid for all of our outstanding shares,or (ii) we and a third party enter into a non-binding letter of intent ora binding agreement in relation to a public bid on all our outstanding shares.Exercise of the option is further dependent on a bid actually being made at aprice of more than €10 per share. In the event that consideration in the offeris all or partially in shares, the share price of the consideration shares atthe close of business on the day prior to the first announcement of thesuccessful bid shall be utilized to determine whether the bid price exceeds €10per share. The options lapse if not exercised on or before December 30,2006.

 

It isnot contemplated that the option holders will be required to make any cashpayment for any Ordinary Shares to which they are entitled on exercise of theiroptions. Instead, upon exercise of the options we may determine, subject toagreement with the third party bidder, whether the difference between the offerprice under the public bid and the exercise price of the options will be paid either(i) by the bidder in cash or in shares in the capital of the bidder (or,depending on the nature of the bid, a combination of cash or shares), or(ii) by Buhrmann in cash or in our shares.

 

114

----

 

AnyOrdinary Shares acquired pursuant to an exercise of an option must be tenderedin the public bid which triggers the exercise of the options. Each optionholder has given us an irrevocable power of attorney to tender any shares soacquired on their behalf.

 

The optionsare not transferable other than to affiliates or to financial parties that haveundertaken to exercise the option and to tender any shares acquired pursuant tothe exercise of the option in the public bid.

 

Theexercise price of the option shall be adjusted in certain circumstances,including upon share splits or consolidations, cash dividends, stock dividendsand issuing shares or granting rights to shares at a discount. Should theexercise price be adjusted in response to any such events, a correspondingadjustment will be made in the number of shares in respect of which the optioncan be exercised. No adjustment in the exercise price will be made inconnection with the conversion of the guaranteed subordinated convertible bondsof December 16, 2003, due 2010, the issuance of the 2015 Notes and thecarrying out of the rights issue, stock dividends declared in the ordinarycourse in lieu of or in connection with a cash dividend, or any shares issuedin connection with our employee stock option plan.

 

Messrs. Hannanand Barnes, who are members of our Supervisory Board, have agreed to resign oncompletion of the Preference C Repurchase. See item 6 “Directors, SeniorManagement and Employees —Members of the Supervisory Board.”

 

OnOctober 28, 1999, affiliates of Apollo and affiliates of Bain purchased atotal of 35,000 Preference Shares C for an aggregate purchase price of$350 million. The Apollo group purchased 23,500 Preference Shares C for apurchase price of $235 million and the Bain group purchased 11,500Preference Shares C for a purchase price of $115 million, including 300Preference Shares C purchased by Peder Smedvig Capital AS for a purchase priceof $3 million. Pursuant to distributions of dividend in kind, the totalnumber of Preference Shares C as at December 31, 2004 is 43,628 of which28,059 Preference Shares C are held by the Apollo Group and 13,329 are held bythe Bain Group. Certain of the material rights of Apollo and Bain which existunder the Stock Purchase Agreement executed in connection with their purchaseof the Preference Shares C are summarized below.

 

***Board representation***

 

Solong as the Apollo holders and the Bain holders hold 75% of their initialinvestment, Buhrmann NV will nominate and propose to the shareholders’ meetingthe appointment to Buhrmann NV’s Supervisory Board of two people, one proposedby each of the Apollo holders and the Bain holders. If either the group ofApollo holders or the group of Bain holders hold at least 75% of their initialinvestment and the other group holds an amount of shares that is less than thispercentage, Buhrmann NV will nominate and propose to the shareholders’ meetingthe appointment to Buhrmann NV’s Supervisory Board of one person proposed bythe Apollo holders or the Bain holders, as applicable. In addition, if neitherthe Apollo holders nor the Bain holders hold 75% of their initial investment,but together the Apollo holders and the Bain holders hold 50% of their combinedinitial investment, Buhrmann NV will nominate and propose to the shareholders’meeting the appointment to Buhrmann NV’s Supervisory Board of one personproposed jointly by the Apollo holders and the Bain holders.

 

***Special covenants***

 

Solong as the Apollo holders or the Bain holders have the right to nominate andpropose to the shareholders’ meeting the appointment to Buhrmann NV’sSupervisory Board of at least one person, Buhrmann NV is required to obtain theconsent of the holders of a majority of the Preference Shares C, or theOrdinary Shares into which the Preference Shares C are convertible, held by theApollo holders or the Bain holders before it can take certain actions. Theseactions include making acquisitions and divestments for values over$350 million, declaring or paying any dividends on Ordinary Shares if theaggregate value of all dividends paid or payable by Buhrmann NV exceeds 35% ofBuhrmann NV’s consolidated net income and, subject to certain exceptions,issuing any equity securities of Buhrmann NV or its subsidiaries.

 

115

----

 

If theApollo holders or the Bain holders fail to give consent to one of these actionsduring the two years after the date the Preference Shares C are issued,Buhrmann NV has an option to redeem all, but not less than all, of the PreferenceShares C, or the Ordinary Shares into which the Preference Shares C areconvertible, subject to the following conditions:

 

•                  the option must be exercised within a stated periodof time following the date on which the proposed action is scheduled to takeplace; and

 

•                  the redemption price would result in a 20%annualized internal rate of return for the Preference Shares C if thePreference Shares C had been outstanding for two years.

 

If theApollo holders or the Bain holders fail to give consent to one of these actionsafter the first two years after the date the Preference Shares C are issued,Buhrmann NV has a similar redemption option for a price that would result in a20% annualized internal rate of return for the Preference Shares C for theperiod for which the Preference Shares C were outstanding.

 

***Standstill; lock-up***

 

Inreturn for being granted the special rights described above, the Apollo holdersand the Bain holders have agreed to certain standstill and lock-up provisions.So long as the Apollo holders and the Bain holders own Preference Shares C orOrdinary Shares of Buhrmann NV into which the Preference Shares C areconvertible, each of the Apollo holders and the Bain holders has agreed that itwill not purchase any additional equity interest in Buhrmann NV.

 

**Interestof Management in Certain Transactions**

 

Thefollowing table sets forth the total amounts outstanding of loans extended tomembers of the Executive Board as at the periods ended December 31, 2002,2003 and 2004 (in thousands of euro):

 
| ** **      | ** ** | **Principal** | ** ** | **Interest** | ** ** | **Outstanding as at December 31, 2002** | ** ** | **Repaid in 2003** | ** ** | **Outstanding as at December 1, 2003** | ** ** | **Repaid in 2004** | ** ** | **Outstanding as at December 2004** | ** ** |
|-----------------|------------|---------------|------------|--------------|------------|----------------------------------------------|------------|--------------------|------------|---------------------------------------------|------------|--------------------|------------|------------------------------------------|------------|
| F.H.J. Koffrie: |       |          |       |         |       |                                         |       |               |       |                                        |       |               |       |                                     |       |
| 1999            |       | 46            |       | 4.00         | %          | 14                                           |       | 9                  |       | 5                                           |       | 5                  |       | 0                                        |       |
| 2000            |       | 25            |       | 5.00         | %          | 13                                           |       | 5                  |       | 8                                           |       | 5                  |       | 3                                        |       |
| 2001            |       | 16            |       | 5.25         | %          | 12                                           |       | 4                  |       | 8                                           |       | 3                  |       | 5                                        |       |
| 2002            |       | 78            |       | 5.25         | %          | 72                                           |       | 16                 |       | 56                                          |       | 16                 |       | 40                                       |       |
| ** **      | ** ** | ** **    | ** ** | ** **   | ** ** | **111**                                      | ** ** | **34**             | ** ** | **77**                                      | ** ** | **29**             | ** ** | **48**                                   | ** ** |
| F.F. Waller:    |       |          |       |         |       |                                         |       |               |       |                                        |       |               |       |                                     |       |
| 2000            |       | 13            |       | 5.00         | %          | 6                                            |       | 2                  |       | 4                                           |       | 3                  |       | 1                                        |       |
| 2001            |       | 8             |       | 5.25         | %          | 6                                            |       | 2                  |       | 4                                           |       | 1                  |       | 3                                        |       |
| 2002            |       | 43            |       | 5.25         | %          | 39                                           |       | 8                  |       | 31                                          |       | 9                  |       | 22                                       |       |
| ** **      | ** ** | ** **    | ** ** | ** **   | ** ** | **51**                                       | ** ** | **12**             | ** ** | **39**                                      | ** ** | **13**             | ** ** | **26**                                   | ** ** |
| **Total**       | ** ** | ** **    | ** ** | ** **   | ** ** | **162**                                      | ** ** | **46**             | ** ** | **116**                                     | ** ** | **42**             | ** ** | **74**                                   | ** ** |

 

No newloans have been granted to members of the executive Board since 2003. Theoutstanding loans are generally repaid over a period of five years from theirdate of grant. Historically, these loans have been granted by the Companywithin the context of the Buhrmann share option plan and served to finance theupfront payment of income taxes due from the options upon the grant of the optionsunder Dutch tax law.

 

Noloans have been extended to members of the Supervisory Board.

 

116

----

 

**ITEM 8: FINANCIAL INFORMATION**

 

Our Consolidated Financial Statements are included inthe section of this annual report entitled “Item 18—Financial Statements”.

 

###### **Legal proceedings**

######  

Buhrmann is involved invarious routine legal and regulatory proceedings incidental to the conduct ofits business. Except as set forth below, Buhrmann does not believe that any of these legal or regulatoryproceedings will have a material adverse effect on its financial condition orresults of operations.

 

***Paper Merchanting Germany: Anti-trust***

 

InApril 2000, the German competition authorities (the *Bundeskartelamt* or BKA) launched an investigationagainst a number of German paper merchants, among which is Buhrmann’s formersubsidiary Deutsche Papier Vertriebs GmbH (Deutsche Papier), alleging aviolation of anti-trust rules in a number of regions in Germany.

 

OnApril 30, 2004, the BKA imposed a fine of approximately € 7.6 millionon Deutsche Papier Vertriebs GmbH and on eleven other paper merchants inGermany. The fine relates to the period between 1995 and 2000 and covers thewhole of Germany with the exception of the South. Deutsche Papier and theaccused individuals do not agree with the fine and the calculation thereof andhave appealed the fine. A third-party investigation into the alleged surplusprofit in a number of regions and a third-party investigation into thecalculation of the surplus profit used by the BKA substantiate Buhrmann’sposition that the imposed fine reflects an overestimation of any allegedsurplus profit. Buhrmann has given an indemnity to PaperlinX Limited, the buyerof the Paper Merchanting Division, of which Deutsche Papier is a part, withrespect to this case.

 

***Paper Merchanting Germany: Completion Accounts***

 

Underan agreement for the sale and purchase of the Paper Merchanting Division ofBuhrmann N.V., dated September 8, 2003, a post-completion dispute has arisenas to the valuation of a property in Germany for the purpose of inclusion inthe completion accounts. The completion accounts are the basis for the calculationof the final purchase price. The valuation difference amounts to approximately€7 million. The matter is currently pending the decision of an arbitrationaward. Once the value of the property has been fully determined, the finalsettlement for the purchase price can take place.

 

***Holdings: Agena S.A.—Béfec***

 

In1994, Buhrmann initiated arbitration proceedings against the sellers of theFrench company Agena S.A. (Agena), an acquisition made in 1991. Buhrmann’sclaim for damages was based on a misrepresentation in the acquisition balancesheet. These proceedings resulted in an arbitral award adjudicating damages inthe amount of €79 million. In 1995, proceedings were also started againstBéfec (a predecessor of PricewaterhouseCoopers, France), the accountants whohad certified the acquisition balance sheet in 1991. These proceedings wereadjourned in anticipation of the outcome of the arbitration proceedings againstthe sellers. The matter against Béfec was resumed after the arbitral award.Béfec raised a preliminary defense against the claim, which was rejected in thefirst instance. Although the defendant appealed against this judgment, it mayreasonably be anticipated that the principal matter will be permitted toproceed. Buhrmann is claiming damages in the amount of €134 million plusinterest and costs. It is estimated that a final decision may still take aconsiderable period.

 

Under U.S. GAAP, acontingent asset is disclosed when it is probable that an inflow of an economicbenefit will be realized and the amount is estimable. In practice, contingentassets are not disclosed until the amount and timing of the inflow is known tothe company (e.g., there is a firm commitment from the counter party).Accordingly, the above contingent asset would not be disclosed in accordancewith U.S. GAAP, FAS 5, given the uncertainty as to its realization andtiming of realization, if at all.

 

117

----

 

**Policy on Additions to Reserves andDividends**

 

*Reserves*

 

Buhrmann aims to add respectively charge to thereserves of the Company the statutory profit or loss for the year after distributionof the statutory dividend on the Preference Shares A and C and after deductingthe proposed dividend on Ordinary Shares. Significant developments for theCompany such as financing requirements, acquisitions, divestments, restructuringor other strategic considerations may lead to adjustments in the additions madeto the reserves.

* *

*Dividends on Ordinary Shares*

 

Buhrmann aims to propose to declare annually adividend on each Ordinary Share representing around 35% of the

consolidated net result available to holders ofOrdinary Shares divided by the number of Ordinary Shares outstanding at

year-end. In case exceptional or extraordinary itemssuch as those related to acquisitions, divestments, restructuring,

impairments or refinancing are incurred, allowance canbe made for (non-cash) elements of these charges. The dividend declared may bedistributed in cash and/or stock.

 

The following table sets out, the dividends in eurodeclared in the years indicated by Buhrmann in respect of its

Ordinary Shares for the preceding year.

 
| ** ** | ** ** | **Share** | ** ** |
|------------|------------|-----------|------------|
| 2001       |       | 0.16      |       |
| 2002 (*)   |       | 0.07      |       |
| 2003 (*)   |       | 0.07      |       |
| 2004 (*)   |       | 0.07      |       |

 

----

(*) The dividend declared in the fiscal years 2002,2003 and 2004 was paid entirely in shares. For those shareholders who expressedthe wish to receive a cash amount in lieu of shares, the Company convertedtheir stock dividends into Ordinary Shares and sold such shares on the openmarket. These shareholders then received a cash amount of €0.07 gross perOrdinary Share. A total number of 1,434,610 Ordinary Shares were issued withrespect to the dividend declared in 2004.

 

Dividend payments may be subject to Netherlandsstatutory withholding taxes.

 

**Significant Changes**

 

Except as otherwise disclosed in this annual report(for example, see Item 4 “Information on the Company – Recent developments”),there have been no significant changes in Buhrmann’s financial position sinceDecember 31, 2004.

 

118

----

 

##### **ITEM 9: THE OFFER AND LISTING**

#####  

Our Ordinary Shares are listed in Amsterdam onEuronext Amsterdam N.V. which is the principal trading market for our OrdinaryShares. Our Ordinary Shares are also listed on the New York Stock Exchange, orNYSE, trading in the form of American Depositary Shares, or ADS’s, evidenced byADR’s. Each ADS represents one Ordinary Share. We have a sponsored ADR facilitywith the Bank of New York as depositary. The ADS’s have been listed on the NYSEsince September 20, 2001.

 

The following table sets forth, for the periodsindicated, the per share high and low closing market prices of our OrdinaryShares on the Euronext Amsterdam, and of our ADS’s on the NYSE.

 
| ** **                            | ** ** | **Ordinary Shares  (in euro)** | ** ** | **ADS’s  (in dollars)** | ** ** |
|---------------------------------------|------------|--------------------------------|------------|------------------------------|------------|
|                                  |       | **High**                       | ** ** | **Low**                      | ** ** | **High** | ** ** | **Low** | ** ** |
| Fiscal Year  Ended                    |       |                           |       |                         |       |   |   |   |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| December 31,  2004                    |       | 9.15                           |       | 5.73                         |       | 11.73 |   | 7.30 |   |
| December 31,  2003                    |       | 8.03                           |       | 1.97                         |       | 9.05 |   | 2.10 |   |
| December 31,  2002                    |       | 15.83                          |       | 2.40                         |       | 13.59 |   | 2.43 |   |
| December 31,  2001                    |       | 33.00                          |       | 5.33                         |       | 11.40 |   | 5.40 |   |
| December 31,  2000                    |       | 35.00                          |       | 16.58                        |       | NA |   | NA |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| Fiscal Year  Ending December 31, 2003 |       |                           |       |                         |       |   |   |   |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| First Quarter                         |       | 5.00                           |       | 1.97                         |       | 5.42 |   | 2.10 |   |
| Second Quarter                        |       | 6.10                           |       | 2.03                         |       | 7.15 |   | 2.30 |   |
| Third Quarter                         |       | 8.03                           |       | 5.71                         |       | 8.90 |   | 4.20 |   |
| Fourth Quarter                        |       | 7.92                           |       | 6.28                         |       | 9.05 |   | 7.25 |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| Fiscal Year  Ending December 31, 2004 |       |                           |       |                         |       |   |   |   |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| First Quarter                         |       | 9.15                           |       | 6.76                         |       | 11.73 |   | 8.62 |   |
| Second Quarter                        |       | 8.29                           |       | 6.79                         |       | 10.10 |   | 8.25 |   |
| Third Quarter                         |       | 8.29                           |       | 6.02                         |       | 10.16 |   | 7.42 |   |
| Fourth Quarter                        |       | 7.22                           |       | 5.73                         |       | 9.87 |   | 7.30 |   |
|                                  |       |                           |       |                         |       |   |   |   |   |
| Calendar Month                        |       |                           |       |                         |       |   |   |   |   |
| September 2004                        |       | 6.79                           |       | 6.02                         |       | 8.30 |   | 7.42 |   |
| October 2004                          |       | 6.46                           |       | 5.83                         |       | 7.92 |   | 7.40 |   |
| November 2004                         |       | 7.22                           |       | 5.73                         |       | 9.40 |   | 7.30 |   |
| December 2004                         |       | 7.15                           |       | 6.66                         |       | 9.87 |   | 8.90 |   |
| January 2005                          |       | 8.00                           |       | 7.46                         |       | 10.55 |   | 9.92 |   |
| February 2005                         |       | 8.85                           |       | 7.96                         |       | 11.44 |   | 10.32 |   |

 

119

----

 

**ITEM 10: ADDITIONAL INFORMATION**

 

## **Descriptionof Share Capital and Articles of Association of Buhrmann NV**

## ** **

The following is a description of certain ofthe provisions of our Articles of Association, as last amended by anotarial deed dated May 6, 2004, and Dutch law. Thisdescription is only a summary and does not purport to be complete and is qualifiedin its entirety by reference to our Articles of Association filed asExhibit 1.1 to Buhrmann’s annual report on Form 20-F datedJune 21, 2004 and is incorporated by reference to this annual report onForm 20-F.

 

An Extraordinary GeneralMeeting of Shareholders was held on March 11, 2005 in which the shareholdersapproved amendments to the Articles of Association for, among others, therepurchase of the Preferences Shares C (see item 7 “Related Party Transactions-Holders of Preference Shares C”) and an increase in the authorized sharecapital to €1,080,000,000, divided into 395,000,000 Ordinary Shares, 55,000,000Preference Shares A and 450,000,000 Preference Shares B, with a nominal valueof €1.20 per share each. After their repurchase, the Preference Shares C willbe converted into an equal number of Ordinary Shares which will be held byBuhrmann as treasury stock.

 

### ***General***

 

Buhrmann was incorporated under Dutch law onJanuary 6, 1875 as a public limited liability company (*naamloze vennootschap*). Buhrmann’sArticles of Association were last amended by a notarial deed dated May 6, 2004.

 

Pursuant to Chapter II, Article 3 of theArticles of Association, the objectives of Buhrmann are the participation in,management of, financing of and rendering services to other companies orenterprises, more specifically such companies or enterprises which are activein the area of distribution of graphic and office systems, graphic paper andoffice products and, for its own account or for the account of third parties, themanufacturing, processing and trading of paper, cardboard, packing and relatedmaterials, and, generally, the carrying out of such activities which areconnected with or are conducive to the attainment of the objects as set forthabove.

 

Buhrmann has its head office at Hoogoorddreef62, (1101 BE) Amsterdam and its registered seat in Maastricht. Buhrmann isregistered with the Trade Register of the Chamber of Commerce of Amsterdamunder file number 33250021.

 

### ***ShareCapital***

### * *

Buhrmann’s authorized share capital at December31, 2004 amounted to €732,000,000, divided into 250,000,000 Ordinary Shares,54,940,000 Preference Shares A, 305,000,000 Preference Shares B and 60,000Preference Shares C, with a nominal value of €1.20 per share each. The OrdinaryShares may, at the option of the Buhrmann shareholders, be bearer shares orregistered shares. The issued bearer Ordinary Shares are represented by onesingle share certificate, the Necigef Global Certificate. The Preference SharesA and B are registered shares. The Preference Shares C are registered shares,but may under certain circumstances be converted into bearer shares.

 

On December 31, 2004, the issued share capitalwas divided into 138,126,528 Ordinary Shares, 53,281,979 Preference Shares Aand 43,628 Preference Shares C, all of which have been fully paid up. There arecurrently no Preference Shares B outstanding.

 

120

----

 

### ***ShareholderMeetings; Voting Rights***

 

The annual general meeting shall be heldannually, and not later than 6 months after the end of the financial year.  Extraordinary general meetings ofshareholders shall be held as often as the Executive Board or the SupervisoryBoard deem necessary.  Any generalmeeting of shareholders shall be held in Amsterdam.

 

General meetings of shareholders shall beconvened by the Supervisory Board or the Executive Board.  The convocation shall take place no laterthan the fifteenth day prior to the date of the meeting, and shall be effectedby means of a notice in a national daily paper and in the Official PriceList.  The notice of the meeting shallstate the requirement for admission to the meeting.

 

Each shareholder is entitled to attend ageneral meeting of shareholders in person or be represented by written proxy,address the meeting and exercise voting rights with due observance of theprovisions of the Articles of Association, provided that such shareholder is aholder of such interests on the applicable record date set by the ExecutiveBoard with respect to the meeting.

 

In order to gain admittance, holders ofregistered Ordinary Shares or depositary receipts must notify the ExecutiveBoard in writing of their intention to attend the meeting not later than theapplicable date mentioned in the notice, which date may not be later thanseventh day prior to date of the meeting. In addition, instruments of proxy with respect to Ordinary Shares ordepositary receipts must be delivered to the Executive Board not later than theapplicable date set forth in the notice, which date may not be later than thethird day prior to the meeting; with respect to Preference Shares A held by theStichting Administratiekantoor Preferente Aandelen Buhrmann (Trust Office), theinstrument of proxy must be received by the Executive Board no later than atthe signing of the attendance list prior to the commencement of themeeting.  A holder of Ordinary Shareswhich are bearer shares, will be entitled to attend upon the delivery of awritten statement, not later than seven days before the meeting, from aNecigef-participant that such person is a Necigef-beneficiary. In the case ofbearer depositary receipts, the depositary receipt certificates must bedeposited at the place and by the applicable date stated in the notice, whichdate may not be prior to the seventh day prior to the meeting.

 

Pursuant to the Articles of Association, eachshare of capital stock is entitled to one vote, so that each share ofPreference Shares A, Preference Shares B, Preference Shares C or OrdinaryShares is entitled to one vote in all matters properly brought before theshareholders of Buhrmann. Unless the Articles of Association or mandatory lawprovides otherwise, all shareholders’ resolutions require an absolute majorityof the votes.

 

***Approval of major change in identy or character of thecompany***

 

Decisions of theExecutive Board on a major change in the identity or character of the companyare submitted to the general meeting of shareholders for approval, as requiredunder Dutch law.

 

121

----

 

### ***PreferenceShares A***

### * *

On December 31, 2004, all Preference Shares Ahad been taken into administration in Stichting Administratiekantoor PreferenteAandelen Buhrmann, or Trust Office, against which depositary receipts withlimited convertibility were issued. The Trust Office was established underDutch law in May 1994, and has its registered seat in Maastricht.

 

The purpose of the Trust Office is to issue andadminister registered depositary receipts of Preference Shares A. The holdersof the depositary receipts receive all the economic benefits which attach toownership of the Preference Shares A. The depositary receipts can be exchangedfor Preference Shares A in accordance with the provisions of the Articles ofAssociation. The Articlesof Association provide that Preference Shares A may be transferred to naturalpersons only and that a transfer or issue of Preference Shares A or votingrights relating to Preference Shares A shall not be possible if such transferwould result in the acquirer acquiring more than one per cent. of the capitalissued in the form of Preference Shares A or one per cent. of the voting rightsattached to such shares. Our Articles of Association contain certain exceptionsto these transfer restrictions and the Executive Board may under certaincircumstances grant an exemption from these transfer restrictions.. The depositary receipts are listedon Euronext N.V., Amsterdam.

 

Notwithstanding the general provision in theArticles of Association which provides that each share of capital stock isentitled to one vote, an arrangement with the Trust Office exists such that thevoting rights attached to the Preference Shares A held by the Trust Office thatcan be exercised at a general meeting of shareholders is determined byreference to the value of the Prefernce Shares A in proportion to the value ofthe Ordinary Shares in the capital of Buhrmann. The voting right is calculatedon the basis of the total value of all Preference Shares A (calculated bymultiplying the number of Preference Shares A outstanding and the stock marketprice of one depositary receipt for such Preference Share A) divided by thestock market price of one Ordinary Share, both on the last trading day of themonth prior to the month in which the applicable shareholders’ meeting isconvened, capped at a maximum of one vote per Preference Share A.

 

At the request of a holder of depositaryreceipts and subject to the transfer restrictions described above and certainlimitations set out in the Articles of Association, the Trust Office will granta written proxy, with the power of substitution, to the holder to exercise thevoting rights attached to the underlying Preference Shares A. The administration conditions of the TrustOffice provide that the voting rights to be exercised by a holder of depositaryreceipts, as proxy of the Trust Office, is also related to the capital interestof the depositary receipts held by the holder of the depositary receipts inproportion to the value of the Ordinary Shares, calculated in accordance withwhat is set out above. Thevoting right that may then be exercised by the depositary receipt holder, asproxy of the Trust Office, may be exercised at his own discretion.

 

The Trust Office is charged with exercising thevoting rights attached to the Preference Shares A (except for those PreferenceShares A for which it has issued a proxy) in a manner which primarilysafeguards the interests of the holders of depositary receipts, taking intoaccount the interests of Buhrmann, its affiliates and all of its stakeholders.

 

Pursuant to an amendment of the articles ofassociation of the Trust Office effected in October 2004, the Trust Office mayno longer restrict the granting of a proxy, or exclude or revoke a proxyalready granted.

 

The board of the Stichting Administratiekantoorvan Preferente Aandelen Buhrmann comprises five members: three members A andtwo members B. The members A are appointed by the board of the Trust Office.The members B are appointed by the holders of depositary receipts representingPreference Shares A. As at December 31, 2004, these members are Messrs R.A.H.van der Meer and W.O. Wentges, who have been re-appointed in a meeting ofholders of depositary receipts held on March 25, 2003. The other members of theboard of the Trust Office are Messrs A.A. Loudon, R.W.F. van Tets and C.J.A.Reigersman. All members of the board of the Trust Office are independent ofBuhrmann as referred to in appendix X of the Listing Rules of Euronext, and asreferred to in the Dutch Corporate Governance Code.

 

122

----

 

### ***PreferenceShares B***

### * *

Buhrmannmay issue Preference Shares B, inter alia, as a (preventive) measure against ahostile acquisition of control or takeover bid. For this purpose, Buhrmann and the StichtingPreferente Aandelen Buhrmann have entered into a put and call option agreementrelating to Preference Shares B. Pursuant to this agreement, under certaincircumstances, Buhrmann has the right (and, under certain circumstances, theobligation) to issue and sell to the Stichting Preferente Aandelen Buhrmann,Preference Shares B, up to a maximum amount equal to the share capital ofBuhrmann other than in the form of Preference Shares B, minus one. Once anyPreference Shares B are issued to Stichting Preferente Aandelen Buhrmann,Buhrmann has the right to repurchase from the Preference Shares B at theirissue price plus accrued and unpaid dividends, if any. Under thesecircumstances, Stichting Preferente Aandelen Buhrmann has the right to requireBuhrmann to repurchase the Preference Shares B held by it. Stichting PreferenteAandelen Buhrmann will exercise its voting rights attached to such PreferenceShares B in accordance with its purpose. The purpose of Stichting Preferente AandelenBuhrmann is to safeguard the interests of Buhrmann and all interested partiesin Buhrmann, with respect to, among other things, the continuity and identityof these enterprises. Upon issue of Preference Shares B, only 25 percent. of the nominal value is required to be paid-up. As of December 31, 2004, no Preference Shares Bhad been issued.

 

As at December 31, 2004, the board of StichtingPreferente Aandelen Buhrmann comprises: Messrs A.L. Asscher (Chairman), J.F.van Duyne, P. Bouw, K. Vuursteen and L.J.A.M. Ligthart. The board members areall independent of Buhrmann.

 

### ***PreferenceShares C***

### * *

On October 28, 1999, an aggregate of 35,000Preference Shares C were issued to two US venture capital groups, ApolloManagement IV L.P. and Bain Capital, LLC to provide part of the financing ofthe acquisition of Corporate Express. On December 31, 2004, a total number of43,628 Preference Shares C were issued to Apollo Management IV and BainCapital. Each Preference Share C has a nominal value of €1.20 per share. Theterms of the Preference Shares C were changed substantially as a result of achange in the articles of association that was approved by the ExtraordinaryGeneral Meeting of Shareholders in October 2003.

 

On February 22,2005, Buhrmann reached agreement with all the holders of the PreferenceShares C regarding the purchase by Buhrmann of all 43,628 issued andoutstanding Preference Shares C for an aggregate purchase price of USD520 million in cash together with certain options to acquire OrdinaryShares of Buhrmann in certain defined circumstances. For further informationregarding the repurchase of Preference Shares C, see Item 7 “Related PartyTransactions - Holders of Preference Shares C”. Provided that all conditionsare fulfilled, Buhrmann expects to complete the repurchase of Preference SharesC on or about April 1, 2005.

 

#### *Conversion*

####  

The Preference Shares C are convertible, at theoption of the holders, in whole or in part, into Ordinary Shares. The baseconversion rate amounts to €13 (converted into US dollar as set forth in theArticles of Association). The Preference Shares C are subject to the usualanti-dilution protections, which can lead to an adjustment of the conversionprice in case of share issuances subject to certain exceptions as described inthe Articles of Association. In addition, the conversion price shall be reducedannually with an amount equal to 50% of the dividend distributed on OrdinaryShares. Following the dividend paid in April 2004 in respect of the financialyear 2003, each Preference Share C is convertible into a number of OrdinaryShares equal to the liquidation preference divided by €11.8968. The liquidationpreference of each Preference Share C is USD 10,000, plus accrued dividends.

 

123

----

 

#### *Ranking*

####  

The Preference Shares C have a preference withregard to dividend distributions and rights during liquidation and dissolutionin respect of all existing and future series of common and Preference Shares,provided that they rank equal to the Preference Shares A.

 

#### *Approval rights*

####  

As long as there are outstanding PreferenceShares C, Buhrmann may not repurchase or cancel Ordinary Shares and/or otherPreference Shares, except for Preference Shares B, without the prior approvalof the meeting of holders of Preference Shares C. Changes to the Articles ofAssociation that negatively affect the rights pertaining to the PreferenceShares C as well as certain other decisions such as acquisitions anddivestments with a value in excess of USD 350 million and share issues requirethe prior approval of the meeting of holders of Preference Shares C or,depending on the type of decision, of certain holders of Preference Shares C.

 

#### *Redemption*

####  

If the closing price of the Ordinary Shares isat any time at or above 125% of the then prevailing conversion price for thePreference Shares C for a period of 30 consecutive trading days, Buhrmann maycancel or repurchase all outstanding Preference Shares C. The amount perPreference Share C to be paid will be, in the event that such cancellation orrepurchase takes place (1) after the fourth anniversary but on or before thefifth anniversary of the issuance of the Preference Shares C, 105.50% of theliquidation preference; (2) after the fifth anniversary but on or before thesixth anniversary of the issuance of the Preference Shares C, 102.75% of theliquidation preference; and (3) following the sixth anniversary of the issuanceof the Preference Shares C, 100% of the liquidation preference. The liquidationpreference for each Preference Share C is USD 10,000 plus accrued dividends.

 

On the eleventh anniversary of the issue date,Buhrmann has the right, in its sole discretion, to cancel or repurchase thePreference Shares C at 100% of the liquidation preference.

 

If there is a change of control (as such termis defined in the Articles of Association) of Buhrmann or the office productsbusiness of Buhrmann in the United States, the holders of the Preference SharesC can request that Buhrmann cancel or repurchase all of the outstandingPreference Shares C at 101% of the liquidation preference.

 

124

----

 

### ***OrdinaryShares***

### * *

As ofDecember 31, 2004, Buhrmann had issued 138,126,528 Ordinary Shares.  The Ordinary Shares may, at the option of theBuhrmann shareholders, be bearer shares or registered shares.  The issued bearer Ordinary Shares arerepresented by one single share certificates, the Necigef Global Certificate.

 

### ***Dividends***

### * *

The proposed dividend for a financial year mustbe approved by the Annual General Meeting of Shareholders, which is typicallyheld in April of the following financial year, and the dividend is paid afterthis meeting. Dividend payments are only allowed to the extent that theshareholders’ equity is in excess of the sum of the paid-up capital and anyreserves required under Dutch law. Under the Articles of Association, beforethe dividend will be paid to any other class of shares, the dividend withrespect to the Preference Shares A and Preference Shares C must be paid firstfrom the profits earned in any given financial year. 

 

The annual dividend on the Preference Shares Cis equal to a percentage of the liquidation preference of such shares (which isUSD 10,000). For the year 2003, the percentage was equal to 5.5%, for the years2004 and 2005 the percentage is equal to 6%, for the years 2006, 2007 and 2008the percentage is equal to 6.5%, for the year 2009 the percentage is equal to7.5% and for the year 2010 and the following years the percentage is equal to8.5%, subject to adjustment under certain circumstances as set forth in theArticles of Association.

 

The annual dividend on the Preference Shares Cmay, at the option of Buhrmann, be distributed in cash or in the form ofadditional Preference Shares C.

 

The annual dividend on the Preference Shares Ais fixed for successive periods of eight years. For the period ending December31, 2009 the dividend is equal to €0.21 per annum. The annual dividend on thePreference Shares A is based on a percentage of the liquidation preference ofthose shares (which is €3.40355) which percentage is equal to 1.25 points abovethe arithmetic mean of the average effective yields on Dutch government bondswith terms of seven to eight years, as calculated by the Central Office for theStatistics and published in the Official Stock Exchange List of Euronext Amsterdam.

 

From the balance of the remaining profits afterthe dividend on the Preference Shares A and Preference Shares C have been paid,Buhrmann will pay a dividend on the Preference Shares B, if such PreferenceShares B have been issued, the percentage of which to be calculated over thepaid up portion of the nominal value is equal to the repurchase interest rateof the European Central Bank plus or minus a maximum of three percentagepoints, to be determined by the Executive Board and subject to the approval ofthe Supervisory Board. Theprofit remaining after payment of dividends on the Preference Shares A,Preference Shares C and (where applicable) Preference Shares B may bedistributed as a dividend to the holders of the Ordinary Shares, subject to anyallocation to reserves. The general meeting of shareholders may, at theproposal of the Executive Board which has been approved by the SupervisoryBoard, resolve that a payment of dividend on Ordinary Shares be wholly orpartly in shares.

 

In the event that for any given fiscal year thedividend payments referred to above cannot be made (in whole or in part)because there are not sufficient profits, payment of the deficiency shall bemade out of the profits from succeeding financial years. First insofar as possible *pro rata parte* on the Preference Shares A and PreferenceShares C and thereafter on the issued Preference Shares B if any are issued.

 

125

----

 

### ***Liquidation***

### * *

Upon the liquidation or dissolution of Buhrmann,any remaining balance after the payment of debts shall be distributed first tothe Preference Shares A and Preference Shares C to the extent of the sum of (1)any unpaid and accrued dividends and (2) an amount per Preference Share A andPreference Share C, equal to a yield basis per share of € 3.40355 and USD10,000, respectively.  In the event thatthe existing balance of funds is not sufficient to effect the abovedistribution to holders of Preference Shares A and Preference Shares C in full,the available balance will be distributed amongst the holder thereof on a prorata basis equal in proportion to the yield basis per share as set forth above.

 

Any balance of funds remaining after thedistribution to holders of Preference Shares A and Preference Shares C shallthen be distributed to holders of Preference Shares B, if such PreferenceShares B have been issued, to the extent of the sum of (1) any outstandingdividend payable on the Preference Shares B and (2) the nominal amount paid onthe Preference Shares B.  If theremaining balance is not sufficient for a distribution in full to the holdersof Preference Shares B, the distribution shall be effected in proportion to theamounts paid on the shares.

 

Any remaining balance after the distribution offunds to holders of Preference Shares A and Preference Shares C and to holdersof Preference Shares B shall be distributed to holders of Ordinary Shares on apro rata basis with respect to the total amount of Ordinary Shares held.

 

### ***Issueof shares; Pre-emptive Rights***

### * *

The authority to issue Ordinary Shares andPreference Shares B has partly been delegated by the General Meeting ofShareholders to the Executive Board pursuant to a resolution dated April 29,2004. The Executive Board is authorized to issue Ordinary Shares up to amaximum of 10% of the issued share capital, which percentage is extended to 20%of the issued share capital in the event the issue is related to a merger or anacquisition. The Executive Board is authorized to issue Preference Shares B upto a maximum of 100% of the issued share capital. For these purposes, issuancesof Ordinary Shares and/or Preference Shares B include the granting of rights tosubscribe for shares (including convertible debt options and warrants). Theauthority of the Executive Board to issue Ordinary Shares and Preference SharesB will terminate on October 28, 2005 unless extended by a resolution of theGeneral Meeting of Shareholders. The prior approval of the Supervisory Boardwill be required for any Executive Board resolution to issue Ordinary Sharesand/or Preference Shares B.

 

Except for (i) issuances of Ordinary Shares inexchange for non-cash consideration or (ii) issuances to employees of Buhrmannor any of its subsidiaries, or (iii) in the event of a legal merger or legalsplit-up of Buhrmann, Buhrmann shareholders have pro rata pre-emptive rights tosubscribe to new issuances of Ordinary Shares. These pre-emptive rights may,subject to the prior approval of the Supervisory Board, be restricted orexcluded by the corporate body that is authorized to issue shares.

 

At the Annual General Meeting of Shareholdersheld on April 29, 2004 the Executive Board was authorized to restrict orexclude such pre-emptive rights in the event of issuances of or granting ofrights to acquire Ordinary Shares up to October 28, 2005, subject to the priorapproval of the Supervisory Board. Buhrmann shareholders do not havepre-emptive rights in respect of Preference Shares except for Preference SharesC that are convertible into Ordinary Shares.

 

126

----

 

### ***CapitalReduction***

### * *

Upon the proposal of the Executive Board andsubject to the approval of the Supervisory Board, the general meeting ofshareholders may resolve to reduce Buhrmann’s issued share capital bycancellation of shares or by reducing the nominal value of the shares throughamendment of the Articles of Association, subject to certain statutoryprovisions and the provisions of the Articles of Association.

 

### ***ShareCertificates and Transfer***

### * *

On the occasion of the issuance of OrdinaryShares any person entitled to receive such share shall obtain a bearer OrdinaryShare unless the person entitled to such share submits a written request toBuhrmann for a registered Ordinary Share. The bearer Ordinary Shares in issueshall be represented by one single share certificate, the Necigef GlobalCertificate.

 

Buhrmann shall confer a right to a bearerOrdinary Share on a person by having Necigef enable Buhrmann to add an OrdinaryShare to the Necigef Global Certificate, and the entitled person shalldesignate a Necigef-participant that will accordingly credit him asNecigef-beneficiary in this Necigef-participant’s collective deposit ofOrdinary Shares in Buhrmann.

 

Necigef shall be irrevocably charged with themanagement of the Necigef Global Certificate and be irrevocably authorised onbehalf of the Necigef-beneficiaries to perform all acts in respect of theshares concerned, including acceptance and delivery and lending co-operation inthe crediting and debiting of the Necigef Global Certificate, without prejudiceto the provisions in article 42, paragraph 4, of the Articles of Association.

 

No individual bearer Ordinary Share shall behanded over. A Necigef-beneficiary may at any time require the conversion ofone or more bearer Ordinary Shares up to the maximum number he is entitled tointo registered Ordinary Shares. Such conversion of one or more Ordinary Sharesis only allowed to the maximum number for which he is Necigef-participant andsubject to the requirements as mentioned in the article 5 of the Articles ofAssociation.

 

A holder of registered Ordinary Shares may atany time require the conversion of such Ordinary Shares into bearer OrdinaryShares, subject to the requirements mentioned in article 5 of the Articles ofAssociation.

 

### ***Restrictionon Non-Dutch Shareholders’ Rights***

### * *

Under our Articles of Association, there are nolimitations on the rights of non-resident or foreign shareholders to hold orexercise voting rights in respect of our securities, and we are not aware ofany such restrictions under Dutch corporate law.

 

### ***Disclosureof Share Ownership***

### * *

Dutch law (the Disclosure of Major Holdings inListed Companies Act 1996) requires public disclosure to a supervisinggovernment agency and the company involved with respect to the (potential)ownership of and (potential) voting rights on listed shares when the followingthresholds are passed: 5%, 10%, 25%, 50% and 66 2/3%.

 

127

----

 

### ***AnnualAccounts and Discharge***

### * *

Within five months following the end of eachfinancial year, the Executive Board must prepare annual accounts accompanied byan annual report. This period may be extended by the general meeting ofshareholders on account of special circumstances for up to six months. Theannual accounts and annual report must, within the same period, be submitted tothe Supervisory Board, which will present a report to the general meeting ofshareholders. The annual accounts and the annual report will be available toshareholders from the date of the notice convening Buhrmann’s annual generalmeeting of shareholders. The annual accounts must be adopted by the generalmeeting of shareholders. After distribution of dividends in respect of thePreference Shares and subject to prior approval of the Supervisory Board, theExecutive Board may determine which part of the profits shall be reserved.

 

The general meeting of shareholders maydischarge the members of the Executive Board and of the Supervisory Board fromliability in respect of the exercise of their duties during the financial yearconcerned. Such discharge is subject to mandatory provisions of Dutch law,including those relating to liability of members of the supervisory boards andmanagement boards upon bankruptcy of a company. Moreover, this discharge doesnot extend to actions or omissions not disclosed in or apparent from theadopted annual accounts if these actions or omissions were concealed by thedirector concerned, while the discharging shareholders could not have knownabout these actions or omissions.

 

Followingthe amendment to our Articles of Association to be effectuated subsequent tothe completion of the repurchase of Preference Shares C, each member of theExecutive Board and each member of the Supervisory Board will be indemnified byus under our Articles of Association against any and all liabilities, claims,judgements, fines and penalties incurred by such member as a result of anycivil, criminal or administrative action, brought by any party other thanBuhrmann itself, in relation to acts or omissions in or related to his capacityas a member of the Executive Board or Supervisory Board, as applicable. Thisindemnity will exclude any claims in so far as they relate to any actual gainof personal profit, advantage or remuneration to which such member was notlegal entitled, or where such member has been adjudged to be liable on thebasis of gross negligence (*grove nalatigheid*),wilful misconduct (*opzel*) orintentional recklessness (*bewuste roekeloosheid*).

 

### ***Amendmentof the Articles of Association and Dissolution***

### * *

Pursuant to a proposal of the Executive Boardand subject to the approval of the Supervisory Board, the general meeting ofshareholders may amend the Articles of Association or decide to dissolve theCompany by absolute majority of votes cast. Any amendment to the Articles ofAssociation that adversely affects the holders of the Preference Shares C issubject to prior approval of the general meeting of the holders of PreferenceShares C, which approval must be granted with a majority of 90% of the votescast.

 

**American Depositary Shares**

 

We incorporate by reference the disclosure regardingour American Depositary Share program included in the Registration Statement onForm 8-A, as filed with the Securities and Exchange Commission on August 28,2001.

 

128

----

 

**Material Contracts**

 

In July 2002, the Buhrmann operating companiesin the United Kingdom, the Netherlands and the United States entered intovarious contracts relating to Buhrmann’s accounts receivable securitizationprogram including: (1) the Dutch Master Receivables Purchase Agreement, amendedand restated on July 18, 2002 between Buhrmann-Ubbens BV, Proost and Brandt BV,Buhrmann Silver S.A., Silver Securitisation B.V., Deutsche Trustee CompanyLimited and Buhrmann NV; (2) the US Contribution Agreement, amended andrestated on July 18, 2002 between Corporate Express Office Products, Inc.,Corporate Express of Texas, Inc., Burhmann Silver US LLC, Buhrmann NV andDeutsche Trustee Company Limited; (3) the English Originator Notice ofIntention to Make Offers to Sell, given on July 18, 2002 by Robert Horne GroupPLC, The Howard Smith Paper Group Limited and The M6 Paper Group Limited toBuhrmann Silver S.A.; (4) the Master Definitions and Framework Deed, amendedand restated July 18, 2002 between various parties in the securitizationprogram; and (5) the English Standard Terms. In2003, Buhrmann Office ProductsNederland B.V. and ASAP Software Express, Inc., entered into the accountsreceivable securitization program by executing the New Dutch OriginatorAccession Agreement and the New US Originator Accession Agreement respectively,both dated April 16, 2003. Due to the sale of the Paper Merchanting Division,Buhrmann-Ubbens BV and Proost and Brandt BV repurchased their receivables onOctober 31, 2003 through the Onward Dutch Receivable Re-Purchase Agreement.Robert Horne Group PLC, The Howard Smith Paper Group Limited and The M6 PaperGroup Limited repurchased their receivables on October 31, 2003 through theEuropean Warehouse Company Sale and Purchase Agreement. For a summary ofthe principal terms of the accounts receivable securitization program, see “AccountsReceivable Securitization Program” in Item 5 in this annual report onForm 20-F.

 

On December 10, 2002, Buhrmann NV andHeidelberg Druckmaschinen AG entered into a Distributorship Agreement whichextends Buhrmann’s right to sell and service certain Heidelberg products in theNetherlands, Belgium, Luxemburg, Italy, Greece and Spain. The agreement tookeffect as of July 1, 2003 and applies for five years. After the five yearsperiod, the agreement will continue to be in effect unless terminated by aneighteen months prior written notice by one of the parties. Thisagreement was filed as Exhibit 4.4 to Buhrmann’s annual report onForm 20-F dated June 27, 2003 and is incorporated by reference inthis annual report on Form 20-F.

 

In September 2003, Buhrmann sold its PaperMerchanting Division to PaperlinX Ltd (Melbourne Australia) for a purchaseprice of €706 million on a cash- and debt-free basis, subject to certainpurchase price adjustments. Pursuant to the agreement for the sale and purchaseof the Paper Merchanting Division, dated September 8, 2003, Buhrmann had togive representations and warranties to the buyer customary for contracts ofthat type and size as well as hold the buyer harmless for certain known andthreatened liabilities. The agreement for the sale and purchase of thePaper Merchanting Division of Buhrmann N.V. , dated September 8, 2003, has beenfiled as Exhibit 4.18 to this annual report on Form 20-F.

 

On December 23, 2003, Buhrmann entered into aSenior Facilities Agreement to replace the Senior Credit Facility entered into in1999 with a new Senior Credit Facility. The new Senior Credit Facility arrangedwith a syndicate of banks led by Deutsche Bank and ABN AMRO, consists of ‘TermLoans A’ of €120 million, ‘Term Loans B’ with tranches of €50 million and USD380 million and a working capital facility of €255 million. The new SeniorCredit Facility imposes certain restrictions on Buhrmann and certain of itssubsidiaries, including restrictions on the ability to incur additionalindebtedness. Under the new Senior Credit Facility, Buhrmann must also complywith certain financial maintenance covenants. The security provided for the newSenior Credit Facility is a pledge on assets of Buhrmann NV, all its materialexisting and future operating companies in the United States and the Netherlands.Borrowings under the new Senior Credit Facility bear interest at floating ratesrelated to LIBOR for the relevant currency for varying fixed interest periods. OnJune 28, 2004, the Term Loans B were replaced by Term Loans C with tranches of€50 million and USD 503 million. The terms and conditions remained the sameexcept for a reduction in the interest margin payable.  On March10, 2005, the Senior Credit Facility was amended in connection with therepurchase of Preference Shares C, see Item 7 “Major Shareholders andRelated Party Transactions —Related Party Transactions —Holders of PreferenceShares C”.  The Senior Credit Facility,as amended June 28, 2004, and amendments dated December 1, 2004 and March 10,2005 are filed as Exhibits 4.19, 4.20 and 4.21 to this annual report on Form20-F.

 

129

----

 

In December 2003, Buhrmann issued a €115million 7-year Subordinated Convertible Bond with listing on the AmsterdamStock Exchange. The Bond has a coupon of 2% which is payable annually on June18 and is convertible in Buhrmann Ordinary Shares at a conversion price of€8.40 per Ordinary Share. The Bond must be redeemed on or before December 18,2010. Buhrmann has the option to redeem the Bond after July 9, 2008 if theofficial closing price of Buhrmann’s Ordinary Shares has been in excess of 150%of the conversion price for 20 trading days in a period of 30 tradingdays.  The terms and conditions ofthe Bond were filed as Exhibit 2.5 to Buhrmann’s annual report onForm 20-F dated June 21, 2004 and is incorporated by reference inthis annual report on Form 20-F.

 

In June 2004, Buhrmann USInc. issued USD 150 million in aggregate principal amount of8-1/4% Senior Subordinated Notes due 2014 in a privateplacement.  These bonds are unsecured obligations of Buhrmann US Inc., andare guaranteed by Buhrmann and certain of its subsidiaries.  InSeptember 2004, Buhrmann US Inc. filed a registrationstatement on Form F-4 with the SEC for USD 150 million inaggregate principal amount of 8-1/4% Senior Subordinated Notes due 2014,the terms of which were substantially identical to the unregistered bondsissued in June.  The registration statement filed by Buhrmann USInc. was an offer to exchange all of its outstanding 8-1/4% SeniorSubordinated Notes due 2014 for the newly registered 8-1/4% SeniorSubordinated Notes due 2014.  Pursuant to this exchange offer, whichclosed in October 2004, the registered bonds were issuedto existing holders in exchange for their unregisteredbonds. The Indenture governing the Notes due 2014, dated as of July 1,2004, was filed as Exhibit 2.6 to Amendment No. 1 to RegistrationStatement of Buhrmann NV on Form F-4 dated September 7, 2004 and isincorporated by reference in this annual report on Form 20-F.

 

On February 22, 2005, Buhrmann reached agreementwith all the holders of the Preference Shares C regarding the purchase byBuhrmann of all 43,628 issued and outstanding Preference Shares C for anaggregate purchase price of USD 520 million in cash together with certainoptions to acquire Ordinary Shares of Buhrmann in certain defined circumstances.For key terms of the agreement, see Item 7 “Related Party Transactions -Holders of Preference Shares C”. The agreement has been filed as Exhibit 4.3 inthis Annual Report on Form 20-F.

 

**Exchange Controls**

There are currently no limitations, either under thelaws of the Netherlands or in the Articles of Association of Buhrmann NV, onthe rights of non-residents to hold or vote Ordinary Shares. Cashdistributions, if any, payable in euros on Ordinary Shares may be officiallytransferred from the Netherlands and converted into any other currency withoutDutch legal restrictions. However, for statistical purposes, any such paymentsand transactions which exceed € 10,000 must be reported to the Dutch CentralBank. In addition, no payments, including dividend payments, may be made tojurisdictions subject to certain sanctions, adopted by the government of theNetherlands, implementing resolutions of the Security Council of the UnitedNations or regulations of the European Union.

 

130

----

 

**Taxation**

 

The information set outbelow is only a summary of certain material US tax consequences of aninvestment in Buhrmann NV’s American Depositary Shares and Ordinary Shares andof the principle Dutch tax consequences of an investment in Ordinary Shares.

 

US and Dutch taxation maychange from time to time. Investors should consult their professional advisorsas to the tax consequences of an investment in American Depositary Shares andOrdinary Shares, including the effect of tax laws of any other jurisdiction.

 

**USFederal Income Taxation**

 

The following discussiondescribes the material US federal income tax considerations of an investment inAmerican Depositary Shares or Ordinary Shares. For purposes of this discussion,a “US Holder” means a beneficial owner of a American Depositary Share orOrdinary Share that is, for US federal income tax purposes, (i) an individualwho is a citizen or resident of the United States, (ii) a corporation, or otherentity treated as a corporation for US federal income tax purposes, created ororganized in or under the laws of the United States, any State or the Districtof Columbia, (iii) an estate the income of which is includable in gross incomefor US federal income tax purposes regardless of its source, or (iv) a trustthe administration of which is subject to the primary supervision of a court inthe United States and for which one or more US persons have the authority tocontrol all substantial decisions. If a partnership holds American DepositaryShares or Ordinary Shares, the US federal income tax treatment of a partnergenerally will depend upon the status of the partner and the activities of the partnership.Partners of partnerships holding American Depositary Shares or Ordinary Sharesshould consult their own tax advisors. Except as otherwise provided, thediscussion below deals only with US Holders who hold American Depositary Sharesor Ordinary Shares as capital assets within the meaning of Section 1221 of theInternal Revenue Code of 1986, as amended, or the Code.

 

This discussion also doesnot deal with persons who may be subject to special treatment under the USfederal income tax laws (including, without limitation, Holders other than U.S.Holders, insurance companies, tax-exempt organizations, individual retirementaccounts and other tax-deferred accounts, financial institutions,broker-dealers, corporations that own (or are deemed to own) 10% or more (byvote and value) of the stock of Buhrmann NV, persons that will hold an AmericanDepositary Share or Ordinary Share through a partnership or other pass-throughentity, an entity (and the beneficial owners thereof) that is a “conduit entity”holding an American Depositary Share or Ordinary Share as part of a “conduitfinancing arrangement” within the meaning of the Treasury Regulationspromulgated under the authority of Section 7701(l) of the Code, persons whose “functionalcurrency” is not the US dollar, individuals who are subject to Section 877 ofthe Code and persons that will hold an American Depositary Share or OrdinaryShare as a position in a “straddle,” “hedge,” “constructive sale transaction”or “conversion transaction”). This summary also does not discuss taxconsequences under state, local or foreign tax laws.

 

This summary is based onthe Code, Treasury Regulations promulgated thereunder, and judicial andadministrative interpretations thereof, all as in effect on the date hereof andall of which are subject to change, which change may be retroactive and mayaffect the tax consequences described herein. This discussion is not binding onthe IRS or the courts. No ruling has been sought or will be sought from the IRSwith respect to the positions and issues discussed herein, and there can be noassurance that the IRS will not take a different position concerning the taxconsequences of the purchase, ownership or disposition of American DepositaryShares or Ordinary Shares or that any such position would not be sustained.Investors in American Depositary Shares or Ordinary Shares should consult theirown tax advisors with regard to the application of the US federal income taxlaws to their particular situations as well as any tax consequences arisingunder the laws of any state, local or foreign taxing jurisdiction.

 

131

----

 

*AmericanDepositary Shares and Ordinary Shares*

 

This section is based inpart on representations of the depositary and the assumption that eachobligation in the deposit agreement and any related agreement will be performedin accordance with its terms. The United States Treasury has expressed concernsthat parties to whom American Depositary Shares are pre-released may be takingactions that are inconsistent with the claiming, by United States persons ofAmerican Depositary Shares, of foreign tax credits for United States federalincome tax purposes. Accordingly, the analysis of the creditability of Dutchtaxes described below, and the availability of the reduced tax rate fordividends received by certain non-corporate United States persons, could beaffected by future actions that may be taken by the United States Treasury.

 

*Ownershipof American Depositary Shares in General.*A beneficial ownerof American Depositary Shares will be treated as the beneficial owner of theOrdinary Shares represented by such American Depositary Shares for US federalincome tax purposes. Deposits and withdrawals of common stock by you inexchange for American Depositary Shares will not result in the realization ofgain or loss for U.S. federal income tax purposes.

 

*Dividendson American Depositary Shares or Ordinary Shares.*The grossamount of any distribution by Buhrmann NV of cash or property (other thancertain distributions, if any, of Ordinary Shares distributed pro rata to allshareholders of Buhrmann NV) with respect to American Depositary Shares orOrdinary Shares will be includable in income by a US Holder as dividend incomeat the time of receipt (which, for a holder of American Depositary Shares,generally will be the date of receipt by the depositary) to the extent suchdistributions are made from the current or accumulated earnings and profits ofBuhrmann NV as determined under US federal income tax principles. Such adividend will not be eligible for the dividends received deduction generallyallowed to corporate shareholders. To the extent, if any, that the amount ofany distribution by Buhrmann NV exceeds Buhrmann NV’s current and accumulatedearnings and profits as determined under US federal income tax principles, itwill be treated first as a tax-free return of the US Holder’s adjusted taxbasis in the American Depositary Shares or Ordinary Shares and thereafter ascapital gain. Notwithstanding the foregoing, Buhrmann NV does not intend tomaintain calculations of earnings and profits as determined under US federalincome tax principles.

 

For taxable yearsbeginning before January 1, 2009, dividends received by an individual areeligible for preferential rates of taxation, provided (1) certain holdingperiod requirements are satisfied, (2) either (a) our American DepositaryShares continue to be listed on the New York Stock Exchange (or other nationalsecurities exchange that is registered under section 6 of the SecuritiesExchange Act of 1934, as amended, or the Nasdaq Stock Market) or (b) we areeligible for the benefits of the United States-Netherlands income tax treaty,and (3) we are not a “passive foreign investment company”. The determination ofwhether a dividend qualifies for the preferential rates must be made at thetime the dividend is paid.

 

Includable distributionspaid in euros, including any Dutch withholding taxes, will be included in thegross income of a US Holder in a US dollar amount calculated by reference tothe exchange rate in effect on the date of receipt, regardless of whether theeuros are converted into US dollars at that time. If euros are converted intoUS dollars on the date of receipt, a US holder generally should not be requiredto recognize any foreign exchange gain or loss.

 

***Sale or Exchange of AmericanDepositary Shares or Ordinary Shares.***A US Holder generally willrecognize gain or loss on the sale or exchange of American Depositary Shares orOrdinary Shares equal to the difference between the amount realized on suchsale or exchange and the US Holder’s adjusted tax basis in the AmericanDepositary Shares or Ordinary Shares. Gain or loss recognized by a US Holder onthe sale or exchange of an American Depositary Share or Ordinary Sharegenerally will be capital gain or loss and generally will be long-term if heldmore than one year and otherwise short-term. Generally, for US Holders who areindividuals, long-term gain is subjectto tax at preferential rates, while short-term gain is taxed at the ratesapplicable to ordinary income, which, for gains recognized before January 1,2009, may be higher than the rates applicable to dividends. The distinctionbetween capital gain or loss and ordinary income or loss is also important inother contexts; for example, for purposes of the limitations on a US Holder’sability to offset capital losses against ordinary income.

 

132

----

 

*ForeignTax Credit Considerations*. For purposes of the US foreign taxcredit limitations, dividends on the American

Depositary Shares orOrdinary Shares will be foreign source income and will generally be “passiveincome” (or “financial services income” in the hands of certain persons engagedin financial businesses). Under recently enacted legislation, for taxable yearsbeginning after December 31, 2006, dividends on the American Depository Shareswill generally be “passive category income”(or “general category income” in thecase of certain persons engaged in financial business). In general, for foreigntax credit limitation purposes, gain or loss realized upon sale or exchange ofthe American Depositary Shares or Ordinary Shares by a US Holder will be USsource income or loss, as the case may be. Subject to certain complexlimitations, including holding period requirements, a US Holder will generallybe entitled to a credit against its US federal income tax liability or adeduction in computing its US federal taxable income in respect of any Dutch taxeswithheld by Buhrmann NV.

 

US Holders should consulttheir tax advisors as to the consequences of Dutch withholding taxes and theavailability of a foreign tax credit or deduction.

 

*PassiveForeign Investment Company Considerations.*The Code providesspecial anti-deferral rules regarding certain distributions received by USpersons with respect to, and sales and other dispositions, including pledges,of stock of, a “passive foreign investment company”, or PFIC. A foreigncorporation, such as Buhrmann NV, will be treated as a PFIC for any taxableyear if 75% or more of its gross income for the taxable year is passive incomeor the average percentage of its assets, by value, that produce or are held forthe production of passive income is at least 50%. Buhrmann NV believes that itwas not a PFIC for the taxable year ended December 31, 2004, and expects toconduct its affairs in such a manner so that it will not be a PFIC in theforeseeable future.

 

*Informationreporting requirements and backup withholding tax*

 

A US Holder (other thanan “exempt recipient,” including a corporation and certain other persons who,when required, demonstrate their exempt status) may be subject to backupwithholding at a rate of 28% on, and to information reporting requirements withrespect to dividends on, and to proceeds from the sale or exchange of, AmericanDepositary Shares or Ordinary Shares. In general, if a non-corporate US Holdersubject to information reporting fails to furnish a correct taxpayeridentification number or otherwise fails to comply with applicable backupwithholding requirements, backup withholding may apply. The backup withholdingtax is not an additional tax and may be credited against a US Holder’s regularUS federal income tax liability or refunded by the IRS where applicable.

 

**Netherlandstaxation of non-resident holders of Ordinary Shares**

 

This taxation summarysolely addresses the principal Dutch tax consequences of the acquisition, theownership and disposition of Ordinary Shares. It is a general summary whichdoes not discuss every aspect of taxation that may be relevant to a particularholder of Ordinary Shares under special circumstance, or who is subject tospecial treatment under applicable law. Thissummary also assumes that Buhrmann NV is organized, and that its business willbe conducted, in the manner outlined in this Annual Report. Changes in theorganizational structure or the manner in which Buhrmann NV conducts itsbusiness may invalidate this summary.

 

This summary is based onthe tax laws of the Netherlands as they are in force and in effect on the dateof this Annual Report. These laws couldchange and a change could be effective retroactively. This summary will not beupdated to reflect changes in laws and if such change occurs the information inthis summary could become invalid.

 

This is a general summaryand the tax consequences described may not apply to each holder of shares ofBuhrmann NV.

 

Any potential investorshould consult his own tax advisor for more information about the tax consequencesof acquiring, owning and disposing of shares of Buhrmann NV in particular circumstances.

 

133

----

 

We have not addressedevery potential tax consequence of an investment in Ordinary Shares under the lawsof the Netherlands.

* *

*General*

The summary of certainDutch taxes set out in this section “Netherlands taxation of non-residentholders of Ordinary Shares” only applies to a holder of Ordinary Shares who isa non-resident holder of Ordinary Shares. Wherein this summary English terms and expressions are used to refer to Dutchconcepts, the meaning to be attributed to such terms and expressions shalltherefore be the meaning to be attributed to the equivalent Dutch conceptsunder Dutch tax law.

 

A holder of OrdinaryShares is a non-resident holder, or Non-Resident Holder, of Ordinary Shares if:

• he is neither resident, nor deemedto be resident, in the Netherlands for purposes of Dutch taxation and, in thecase of an individual, has not elected to be treated as a resident of theNetherlands for Dutch income tax purposes; and

• his Ordinary Shares and income orcapital gains derived therefrom has no connection with his past, present orfuture employment, if any; and

• his Ordinary Shares do not formpart, and are not deemed to form part, of a substantial interest (aanmerkelijkbelang), in Buhrmann NV, unless such interest forms part of the assets of anenterprise.

 

Generally, if a personholds an interest in Buhrmann NV, such interest forms part or is deemed to formpart of a substantial interest in Buhrmann NV if any one or more of the followingcircumstances is present:

• he alone or, in the case of anindividual, together with his partner (partner, if any) has, directly orindirectly, the ownership of shares of Buhrmann NV representing 5% or more ofthe total issued and outstanding capital (or the issued and outstanding capitalof any class of shares) of Buhrmann NV, or rights to acquire, directly orindirectly, shares, whether or not already issued, that represent 5% or more ofthe total issued and outstanding capital (or the issued and outstanding capitalof any class of shares) of Buhrmann NV, or the ownership of profitparticipating certificates (winstbewijzen) that relate to 5% or more of theannual profit of Buhrmann NV or to 5% or more of the liquidation proceeds ofBuhrmann NV.

• his shares, profit participatingcertificates or rights to acquire shares or profit participating certificatesin Buhrmann NV have been acquired by him or are deemed to have been acquired byhim under a non-recognition Provision.

• his partner or any of his relativesby blood or by marriage in the direct line (including foster-children) or ofhis partner has a substantial interest (as described here above) in BuhrmannNV.

 

For purposes of theabove, a person who is only entitled to the benefits from shares or profitparticipating certificates (for instance a holder of a right of usufruct) isdeemed to be a holder of shares or profit participating certificates, as thecase may be, and his entitlement to benefits is considered a share or a profitparticipating certificate, as the case may be.

 

*Taxeson income and capital gains*

A Non-Resident Holder ofOrdinary Shares will not be subject to any Dutch taxes on income or capitalgains in respect of dividends distributed by Buhrmann NV (other than thedividend withholding tax described below) or in respect of any gain realized onthe disposal of Ordinary Shares, unless:

• he derives profits from anenterprise, whether as an entrepreneur (ondernemer) or pursuant to aco-entitlement to the net value of such enterprise, other than as anentrepreneur or a shareholder, in the case of an individual, or other than as aholder of securities, in other cases, which enterprise is either managed in theNetherlands or, in whole or in part, carried on through a permanentestablishment or a permanent representative in the Netherlands and his OrdinaryShares are attributable to that enterprise; or,

• (in the case of an individual) hederives benefits from Ordinary Shares that are taxable as benefits frommiscellaneous activities in the Netherlands (resultaat uit overigewerkzaamheden in Nederland).

 

134

----

 

The concept “dividendsdistributed by Buhrmann NV” as used in this section includes, but is notlimited to, the following:

• distributions in cash or in kind,deemed and constructive distributions (including, as a rule, consideration forthe repurchase of Ordinary Shares by Buhrmann NV (other than a repurchase as atemporary investment) in excess of the average capital recognized as paid-infor Dutch dividend withholding tax purposes), and repayments of capital notrecognized as paid-in for Dutch dividend withholding tax purposes;

• liquidation proceeds and proceeds ofredemption of Ordinary Shares in excess of the average capital recognized aspaid-in for Dutch dividend withholding tax purposes;

• the par value of Ordinary Sharesissued by Buhrmann NV to a holder of Ordinary Shares or an increase of the parvalue of Ordinary Shares, as the case may be, to the extent that it does notappear that a contribution, recognized for Dutch dividend withholding taxpurposes, has been made or will be made; and

• partial repayment of capital,recognized as paid-in for Dutch dividend withholding tax purposes, if and tothe extent that there are net profits (zuivere winst), unless (a) the generalmeeting of shareholders of Buhrmann NV has resolved in advance to make suchrepayment and (b) the par value of the shares concerned has been reduced by anequal amount by way of an amendment to the articles of association of BuhrmannNV.

 

A Non-Resident Holder ofOrdinary Shares may, inter alia, derive benefits from Ordinary Shares that aretaxable as benefits from miscellaneous activities in the Netherlands in thefollowing circumstances:

• if his investment activities gobeyond the activities of an active portfolio investor, for instance in the caseof the use of insider knowledge (voorkennis) or comparable forms of specialknowledge; or

• if he makes Ordinary Sharesavailable or is deemed to make Ordinary Shares available, legally or in fact,directly or indirectly, to a connected person (verbonden persoon) as describedin articles 3.91 and 3.92 of the Dutch Income Tax Act 2001;

if such activities areperformed or deemed to be performed in the Netherlands.

 

*Dividendwithholding tax*

Dividends distributed byBuhrmann NV to a Non-Resident Holder of Ordinary Shares are generally subjectto a withholding tax imposed by the Netherlands at a rate of 25%. See thesub-section “Taxes on income and capital gains” for a description of theconcept “dividends distributed by Buhrmann NV”.

 

If a double tax treaty isin effect between The Netherlands and the country of residence of a Non-Resident holder of Ordinary Shares, such holder may be eligible for a full orpartial relief from the Dutch dividend withholding tax, provided that suchrelief is timely and duly claimed. Pursuant to domestic rules to avoid dividendstripping, dividend withholding tax relief will only be available to thebeneficial owner (uiteindelijk gerechtigde) of dividends distributed byBuhrmann NV. The Dutch tax authorities have taken the position that thisbeneficial ownership test can also be applied to deny relief from Dutch dividendwithholding tax under double tax treaties and the tax Arrangement for theKingdom of the Netherlands(Belastingregeling voor het Koninkrijk).

 

Aholder of shares who receives proceeds therefrom shall *not*be recognised as the beneficial owner of such proceeds if, in connection withthe receipt of the proceeds, it has given a consideration, in the framework ofa composite transaction including, without limitation, the mere acquisition ofone or more dividend coupons or the creation of short-term rights of enjoymentof shares (kortlopende genotsrechten op aandelen), whereas it may be presumedthat (i) such proceeds in whole or in part, directly or indirectly, inure to aperson who would not have been entitled to an exemption from, or who would havebeen entitled to a smaller reduction or refund of, or credit for, dividendwithholding tax than the actual recipient of the proceeds; and (ii) such personacquires or retains, directly or indirectly, an interest in shares or similarinstruments, comparable to its interest in shares or prior to the time thecomposite transaction was first initiated.

 

135

----

 

Under the convention ofDecember 18, 1992, between the Kingdom of the Netherlands and the United Statesof America for the Avoidance of Double Taxation and the prevention of FiscalEvasion with respect to Taxes on Income (U.S./NL Income Tax Treaty), the Dutchdividend withholding tax rate on dividends paid by Buhrmann NV on OrdinaryShares held by a Non-Resident Holder of Ordinary Shares who is resident in theUnited States and who is entitled to the benefits of the U.S./NL Income TaxTreaty will generally be reduced to 15%. The U.S./NL Income Tax Treaty providesfor a complete exemption for dividends received by exempt pension trusts andexempt organizations, as defined therein. Except in the case of exempt organizations,the reduced dividend withholding tax rate under the U.S./NL Income Tax Treatymay be available at source, upon payment of a dividend in respect of suchOrdinary Shares, provided that the holder thereof or, if applicable, the payingagent, has supplied Buhrmann NV with the appropriate Dutch tax forms in accordancewith the Dutch implementation regulations under the U.S./NL Income Tax Treaty.If such forms are not duly and timely provided, Buhrmann NV generally will berequired to withhold the dividend withholding tax at the Dutch statutory rateof 25%. In such case, a Non-Resident Holder of Ordinary Shares who is residentin the United States and who is entitled to the benefits of the U.S./NL IncomeTax Treaty may obtain a refund of the difference between the amount withheldand the amount that the Netherlands was entitled to levy in accordance with theU.S./NL Income Tax Treaty by filing the appropriate forms with the Dutch tax authoritieswithin the term set therefore.

 

*Reduction*

If Buhrmann NV hasreceived a profit distribution from a foreign entity, or a repatriation offoreign branch profit, that is exempt from Dutch corporate income tax and thathas been subject to a foreign withholding tax of at least 5%, Buhrmann NV maybe entitled to a reduction of the amount of Dutch dividend withholding taxwithheld that must be paid over to the Dutch tax authorities in respect ofdividends distributed by Buhrmann NV.

 

Non-Resident Holders ofOrdinary Shares are urged to consult their tax advisors regarding the generalcreditability or deductibility of Dutch dividend withholding tax and, inparticular, the impact to such investors of Buhrmann NV’s potential ability toreceive a reduction as meant in the previous paragraph.

 

*Giftand inheritance taxes*

A person who acquiresOrdinary Shares as a gift (in form or in substance) or who acquires or isdeemed to acquire Ordinary Shares on the death of an individual, will not besubject to Dutch gift tax or to Dutch inheritance tax, as the case may be,unless:

• the donor is or the deceased wasresident or deemed to be resident in the Netherlands for purposes of gift or inheritancetax, as the case may be; or

• the Ordinary Shares are or wereattributable to an enterprise or part of an enterprise that the donor or thedeceased carried on through a permanent establishment or a permanentrepresentative in the Netherlands at the time of the gift or of the death ofthe deceased; or

• the donor makes a gift of OrdinaryShares, then becomes a resident or deemed resident of the Netherlands, and diesas a resident or deemed resident of the Netherlands within 180 days after thedate of the gift.

 

*Capitaltax*

Buhrmann NV is subject toDutch capital tax at a rate of 0.55% on any contribution received in respect ofOrdinary Shares, unless an exemption applies.

 

*Othertaxes and duties*

No Dutch registrationtax, transfer tax, stamp duty or any other similar documentary tax or duty,other than court fees, will be payable in the Netherlands by a Non- ResidentHolder of Ordinary Shares in respect of or in connection with the subscription,issue, placement, allotment or delivery of Ordinary Shares.

 

136

----

 

**Documentson Display**

 

Copies of the annualreports on Form 20-F of Buhrmann NV and documents referred to within this Form20-F are available for inspection upon request at the Buhrmann Corporate Centreat Hoogoorddreef 62, 1101 BE Amsterdam ZO, the Netherlands (tel. +31-20-651 1111) and the SEC’s public reference room located at 450 Fifth Street, NW,Washington DC, 20549. In addition, Buhrmann’s SEC filings are also availablethrough the SEC’s website www.sec.gov.

 

137

----

 

**ITEM 11:QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Buhrmannis exposed to financial market risks, including adverse changes in interestrates and currency exchange rates and availability of short-term liquidity. Ourfinancial policies are designed to mitigate these risks by restricting theimpact of interest and currency movements on our financial position whilesafeguarding an adequate liquidity profile.

 

Thefinancing policy aims to maintain a capital structure which enables us toachieve our Group strategic objectives and daily operational needs. The degreeof flexibility of the capital structure, including appropriate access tocapital markets, the financing of working capital fluctuations and the costs offinancing (optimal weighted average cost of capital) are factors taken intoconsideration. With respect to the level of debt financing, Buhrmann focuses oncash interest cover (operating result before depreciation of tangible fixedassets and software and before amortization and impairment of goodwill andexceptional items over cash interest) and the relationship between borrowingsand total enterprise value (market value based leverage, which is calculated byusing the market capitalization of equity and the nominal value of interest-bearingdebt as the total enterprise value). The objective is to restrict the fourquarterly rolling cash interest coverage to a minimum of three times and themarket-value based gearing (net interest-bearing debt over total enterprise value)over time to a maximum of 50%. In addition, consideration is given to thedevelopment of specific capital ratios, of which the leverage ratio (netinterest-bearing debt over operating result before depreciation of tangiblefixed assets and software and before amortization and impairment of goodwilland exceptional items) is the most relevant. Actual cash interest cover atDecember 31, 2004 was 4.8 (2003: 2.2), which is above our minimumtarget level of 3. Market value-based gearing stands at 31% (2003: 36%), whilethe leverage ratio is 2.4 (2003: 2.5). Both the debt reduction and therefinancing carried out in 2004 had a positive effect on the financial ratios.

 

Ourinterest policy is designed to restrict the short-term impact of fluctuationsin interest rates while keeping the interest burden as low as possible.Interest hedging instruments are used to adjust the fixed interest or floatinginterest nature of the financing towards the required profile. We currently aimto have around 60% of the interest rate fixed, given the present, improved,level of interest cover. Actual fixed interest was 63% at December 31,2004.

 

Externalinterest-bearing debt after currency hedging is distributed primarily among ourmain currencies (i.e., U.S. dollar and euro) on the basis of anticipatedoperating profit before amortization and impairment of goodwill and excludingexceptional items. The remaining translation risk is not covered. AtDecember 31, 2004, the actual split of the external debt (after currencyhedges) is 81% in U.S. dollar, 13% in euro and 6% in other currencies.

 

Regardingcurrency risk exposure on trading transactions, it is the policy to cover theserisks on a transaction basis as much as possible to protect the operationalmargins in local currency terms. Currency forward contracts with terms up toone year are also used to cover these risks. The occurrence of these exposuresis relatively low as most purchases and sales are conducted in localcurrencies.

 

Financialinstruments such as currency and interest swaps are used only to hedge againstfinancial market risks, rather than for speculative purposes. Financialinstruments are primarily dealt with third parties by Buhrmann NV, BuhrmannUS, Inc. and Buhrmann Europcenter NV. These entities also act as the mainfinancing companies for the Group. In addition, an accounts receivablesecuritization program is being operated using Buhrmann Silver SA and BuhrmannSilver US LLC. Details on the various components of the capital structure,including liquidity aspects, are provided in the notes to the consolidatedfinancial statements included elsewhere in this Annual Report.

 

Ourtreasury function does not operate under an own profit objective but it pursuesbenefits of scale and efficiency as well as provides in-house services in thearea of financial logistics. Cash and third-party debt is concentrated in themain financing companies to ensure maximum efficiency in meeting changingbusiness needs, while local operations are largely financed by a mix of equityand long-term inter-company loans denominated in local currencies.

 

The table below providesinformation about Buhrmann’s debt obligations as of December 31, 2004.This table provides information about the cash flows, fair value, weightedaverage interest rate, maturity and contract terms of Buhrmann’s debt whichincludes both variable and fixed rate debt. Foreign currencies have beentranslated at the applicable euro rates at December 31, 2004. For cash,accounts receivable, other short-term assets, accounts payable, accruedliabilities and other short-term liabilities, the carrying value of thesefinancial instruments approximates their fair value owing to the short-termmaturities of these assets and liabilities.

 

138

----

 
| ** **                         | ** ** | **2005**          | ** ** | **2006**   | ** ** | **2007**   | ** ** | **2008**   | ** ** | **>2008** | ** ** | **Total**  | ** ** | **Fair  Value** | ** ** |
|------------------------------------|------------|-------------------|------------|------------|------------|------------|------------|------------|------------|--------------|------------|------------|------------|-----------------|------------|
| ** **                         | ** ** | **(in millions)** | ** ** |
| **Fixed  rate debt:**              |       |              |       |       |       |       |       |       |       |         |       |       |       |            |       |
| 2014 Notes                         |       |              |       |       |       |       |       |       |       | 110          |       | 110        |       | 112             |       |
| Interest rate                      |       |              |       |       |       |       |       |       |       | 8.25         | %          |       |       |            |       |
| Subordinated  Convertible Bonds    |       |              |       |       |       |       |       |       |       | 115          |       | 115        |       | 125             |       |
| Interest rate                      |       |              |       |       |       |       |       |       |       | 2.00         | %          |       |       |            |       |
| Other                              |       |              |       |       |       |       |       |       |       | 2            |       | 2          |       | 2               |       |
| **Total  fixed rate debt**         | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **€**   | **227**    | ** ** | **€** | **227**         | ** ** | **€** | **239** | ** ** |
| ** **                         |       |              |       |       |       |       |       |       |       |         |       |       |       |            |       |
| **Variable  rate debt:**           |       |              |       |       |       |       |       |       |       |         |       |       |       |            |       |
| Account receivables securitization |       |              |       |       |       | 74         |       |       |       |         |       | 74         |       |            |       |
| Term Loan A                        |       | 16                |       | 16         |       | 26         |       | 26         |       | 27           |       | 112        |       |            |       |
| Term Loans C                       |       | 4                 |       | 4          |       | 4          |       | 4          |       | 400          |       | 417        |       |            |       |
| Overdrafts &  Others           |       | 19                |       | 12         |       | —     |       | —     |       | —       |       | 31         |       |            |       |
| **Total  variable rate debt**      | ** ** | **€**        | **39**     | ** ** | **€** | **32**     | ** ** | **€** | **104**    | ** **   | **€** | **31**     | ** ** | **€**      | **427**    | ** ** | **€** | **634** |   |   |   |
| ** **                         | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **   | ** ** | ** ** |       |            |       |
| **Total  debt**                    | ** ** | **€**        | **39**     | ** ** | **€** | **32**     | ** ** | **€** | **104**    | ** **   | **€** | **31**     | ** ** | **€**      | **654**    | ** ** | **€** | **861** |   |   |   |
|                                    |            |                   |            |            |            |            |            |            |            |              |            |            |            |                 |            |  |  |  |  |  |  |  |

 

Thefair values of Buhrmann’s fixed rate loans have been estimated based onapplicable market interest rates available to Buhrmann for instruments of asimilar nature and maturity. The fair value of variable rate debt approximatesthe carrying value.

 

***Interest rate risks***

 

Buhrmann’spolicy is to incur a certain minimum level of fixed rate debt in relation tothe interest cover. Interest rate swaps are used to adjust the interest profileof the loans towards the desired position, in order to achieve the hedging asper policy. Buhrmann currently aims to have around 60% of the interest ratefixed, given the present level of interest cover. The actual fixed percent was63% at December 31, 2004.

 

Ouraverage blended effective interest rate (including margin, currency and hedgingeffects) was approximately 6.8% in 2004.

 

139

----

 

***Buhrmann’s Interest Rate Swap contracts at December 31,2004***

 
| **Maturity** | ** ** | **Notional amount(1)** | ** ** | **Average interest rate in%(2)** | ** ** | **Fair value**    | ** ** |
|--------------|------------|------------------------|------------|---------------------------------------|------------|-------------------|------------|
| ** **   | ** ** | **(in millions)**      | ** ** | ** **                            | ** ** | **(in millions)** | ** ** |
| < 1 year  |       | 128                    |       | 2.33                                  |       | 0                 |       |
| < 2 years |       | 37                     |       | 2.74                                  |       | 0                 |       |
| < 3 years |       | 128                    |       | 4.27                                  |       | (2                | )          |
| < 5 years |       | 128                    |       | 4.71                                  |       | (3                | )          |
| **Total**    | ** ** | **€**             | **422**    | ** **                            | ** ** | ** **        | **€** | **(5** | **)** |
|              |            |                        |            |                                       |            |                   |            |  |  |

----

(1)                                  The notional amount of these interestrates swaps are denominated in U.S. dollars and have been translated at anassumed exchange rate of €1.00=$1.3621. This was the exchange rate used forcurrency translation purposes in the Company’s consolidated balance sheet forthe year ended December 31, 2004.

 

(2)                                  Pursuantto these swaps, Buhrmann pays the fixed interest rates indicated in the tableand receives floating rates based on 3-month LIBOR.

 

***Currency rate risks***

 

Buhrmann’soperations are conducted by entities in many countries and, accordingly,Buhrmann’s results of operations are subject to currency translation risk andcurrency transaction risk. Currency instruments are used to hedge againstexchange rate risks resulting from business activities and financingarrangements in foreign currencies.

 

Currencyforward contracts with terms up to one year are used to cover exchange raterisks resulting from business activities. The policy is to cover these risks.Given the volatility of currency exchange rates, there can be no assurance thatBuhrmann will be able to effectively manage its currency transaction risks orthat any volatility in currency exchanges rates will not have a materialadverse effect on Buhrmann’s financial conditions or results of operations.

 

Buhrmann generally attempts to cover a portion of itscurrency translation risk by financing its operations in subsidiaries throughinternal debt denominated in local currencies. In general, the remainingtranslation risk is not covered. This is based on the assumption that theinvestments in subsidiaries are long-term investments. However, this risk ismonitored and reviewed periodically and if this risk is deemed to be too high,Buhrmann will consider hedges against this risk wherever possible. The economiccurrency risk is limited, as operating companies generally operate on localmarkets with local competitors.

 

***Buhrmann’s forward foreign exchange and currency swapcontracts at December 31, 2004***

 
| **Contract**                    | ** ** | **Maturity**      | ** ** | **Weighted average contractual exchange rate** | ** ** | **Notional amount** | ** ** | **Fair value** | ** ** |
|---------------------------------|------------|-------------------|------------|-----------------------------------------------------|------------|---------------------|------------|----------------|------------|
| ** **                      | ** ** | **(in millions)** | ** ** |
| Buy €/sell  Swedish Kronor |       | < 1 year       |       | 8.98                                                |       | 39                  |       | 0              |       |
| Buy €/sell USD             |       | < 1 year       |       | 1.36                                                |       | 109                 |       | 0              |       |
| Buy €/sell GBP             |       | < 1 year       |       | 0.71                                                |       | 10                  |       | 0              |       |
| **Total**                       | ** ** | ** **        | ** ** | ** **                                          | ** ** | **158**             | ** ** | **0**          | ** ** |

 

Theestimated fair value of the outstanding currency and interest swap contractsindicates how much would be paid or received in exchange for termination of thecontracts without further commitments as per the balance sheet date.

 

140

----

 

**ITEM 12: DESCRIPTION OF SECURITIESOTHER THAN EQUITY SECURITIES**

Not applicable.

 

**ITEM 13: DEFAULTS, DIVIDENDARREARAGES AND DELINQUENCIES**

None.

 

141

----

 

**ITEM 14: MATERIAL MODIFICATIONS TOTHE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

On March 25, 2003, a meeting of holders of depositaryreceipts of Preference Shares A was held. At this meeting certain changes tothe Administration Conditions governing the administration of the PreferenceShares A were made so that the holders of depositary receipts of PreferenceShares A are now entitled, subject to certain limitations, to vote theunderlying Preference Shares A at shareholders’ meetings. In addition, thenumber of votes attached to the Preference Shares A are now based on the stockmarket price of the depositary receipts in relation to the stock market priceof the Ordinary Shares.  In October 2004,the Articles of Association and Administration Conditions have been amended inaccordance with the Dutch Corporate Governance Code. The holders of depositaryreceipts are now entitled to vote the underlying Preference Shares A withoutlimitations. Furthermore, holders of depositary receipts that (on their own orjointly) represent more than 10% of the number of depositary receipts issued,have the right to call a meeting of depositary receipt holders.

 

See Item 10 “Additional Information—Articles ofAssociation of Buhrmann NV—Preference Shares A” for a more detailed descriptionof the voting rights of the Preference Shares A.

 

There have been no other material modifications to therights of security holders since January 1, 2004.

 

142

----

 

**ITEM 15: CONTROLS AND PROCEDURES**

 

The Company maintains disclosure controls andprocedures that are designed to ensure that information required to bedisclosed in the Company’s Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms, and that such information is accumulated and communicated to theCompany’s management, including its Chief Executive Officer and Chief FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, and in this connection management necessarily wasrequired to apply its judgment in evaluating the cost-benefit relationship ofpossible controls and procedures.

 

As of the end of the period covered by this annualreport, the Company carried out an evaluation, under the supervision and withthe participation of the Company’s management, including the Company’s ChiefExecutive Officer and the Company’s Chief Financial Officer, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures. Based on the foregoing, the Company’s Chief Executive Officerand Chief Financial Officer concluded that the Company’s disclosure controlsand procedures were effective at the reasonable assurance level.

 

During the period covered by this Annual Report onForm 20-F, there have been no changes in the Company’s internal controls overfinancial reporting that have materially affected , or are reasonably likely tomaterially affect,  the Company’sinternal controls over financial reporting.

 

143

----

 

**ITEM 16A: AUDIT COMMITTEE FINANCIALEXPERT**

 

Our Supervisory Board has determined that each memberof the Audit Committee (messrs A.G. Jacobs, G.H. Smit and J. Peelen) is anaudit committee financial expert.

 

**ITEM 16B: CODE OF ETHICS**

 

Buhrmann has a code of ethics (Business Principles andCode of Ethics) which applies to all employees of Buhrmann worldwide, includingBuhrmann’s chief executive officer, chief financial officer, principalaccounting officer and other persons performing similar functions. We amendedour Business Principles and Code of Ethics on February 27, 2003 and February26, 2004 in order to reflect SEC rules adopted under U.S. Sarbanes-Oxley Act of2002 and to reflect amendments by the New York Stock Exchange to its corporategovernance rules for listed companies. In 2003, no waivers were granted withrespect to our Business Principles and Code of Ethics.

 

A copyof our code of ethics has been filed as Exhibit 11.1 to Buhrmann’s annualreport on Form 20-F dated June 21, 2004 and is incorporated byreference in this annual report on Form 20-F.  A copy of our code of ethics is alsoavailable, along with the Company’s remaining corporate governance policies, onour website at www.buhrmann.com.

 

**ITEM 16C: PRINCIPAL ACCOUNTANT FEESAND SERVICES**

 

In 2004 and 2003, Buhrmann paid toPricewaterhouseCoopers Accountants N.V., our principal accountant, thefollowing fees (in millions of euro):

 
| ** **          | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit fees          |       | 4.5      |       | 4.7      |       |
| Audit-related  fees |       | 1.6      |       | 1.5      |       |
| Tax fees            |       | 0.1      |       | 0.2      |       |
| All other fees      |       | 0.2      |       | 0.8      |       |
| **Total  fees**     | ** ** | **6.4**  | ** ** | **7.2**  | ** ** |

 

Audit-related fees in 2004 mainly relate to the issueof the 2014 Notes, the implementation of IFRS and services regarding compliancewith the rules relating to internal controls over financial reporting asadopted by the SEC under the Sarbanes-Oxley Act.  Audit-related fees in 2003 mainly relate toservices in connection with the divestment of the Paper Merchanting Division,the issue of the Subordinated Convertible Bond and the accounts receivablesecuritization program.

 

Tax fees relate to tax compliance services.

 

All other fees mainly relate to advisory services inconnection with rules relating to internal controls over financial reporting asadopted by the SEC under the Sarbanes-Oxley Act.

 

144

----

 

**Policy regarding External AuditorIndepence and Services**

 

Buhrmann has established a policy addressing theindependence of its external auditors and the provision of services by itsexternal auditors. Pursuant to the Buhrmann Policy regarding External AuditorIndependence and Services, the Company’s external auditors may only providecertain permissible audit services, audit-related services and non-auditservices that have been pre-approved by the Audit Committee (except as otherwiseset forth below). The Audit Committee annually reviews the list of permissiblepre-approved services and may add or subtract services from the list from timeto time.

 

The following lists certain of the permissible pre-approvedaudit services, audit-related services and non-audit services as setforth in the Buhrmann Policy regarding External Auditor Independence andServices:

 

Permissible audit services include:

•statutory audits or financial audits for subsidiaries or affiliates of theCompany, including issuing the audit opinion for group reporting purposes andon the statutory financial statements; and

•issuing the audit opinion relating to the financial statements contained in theCompany’s annual report on Form 20-F, and other services associated with SECregistration statements, periodic reports and other documents filed with theSEC.

 

Permissible audit-related services include:

• duediligence work;

• audits ondivestments and acquisitions; and

• advice onaccounting policies.

 

Permissible non-audit services include:

• riskmanagement advisory services (such as assessment and testing of securitycontrols);

• treasuryadvisory services; and

• tax planningand tax consultation services.

 

These non-audit services require the pre-approval ofthe Audit Committee unless:

• theaggregate amount of all such services provided constitutes no more than€250,000 in any fiscal year;

• suchservices were not recognized by the Company at the time of the engagement to benon-audit services; and

•such services are promptly brought to the attention of the Audit Committee andapproved by the Audit Committee prior to the completion of the audit.

 

The foregoing description is qualified in its entiretyby reference to the Buhrmann Policy regarding External Auditor Independence andServices, a copy of which is available on our website.

 

In 2004, all audit fees, audit-related fees and taxfees originating from PricewaterhouseCoopers Accountants N.V. were pre-approvedby the Audit Committee in accordance with the pre-approval policy.  The non-audit fees originating fromPricewaterhouseCoopers Accountants N.V., included in all other fees in thetable above, were not pre-approved as the aggregate amount of these serviceswas less than € 250,000 in 2004.

 

145

----

 

**ITEM 17: FINANCIAL STATEMENTS**

 

Not applicable.

 

146

----

 

**ITEM18: FINANCIAL STATEMENTS**

 
|                                                                                                                                   |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|
| Report  of Independent Registered Public Accounting Firm                                                                               |   |
| Consolidated  Financial Statements:                                                                                                    |   |
| Consolidated  Statements of Income for the years ended December 31, 2004,  December 31, 2003 and December 31, 2002      |   |
| Consolidated  Balance Sheets as of December 31, 2004 and December 31, 2003                                                   |   |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2004,  December 31, 2003 and December 31, 2002  |   |
| Consolidated  Statement of Group Equity for the years ended December 31, 2004,  December 31, 2003 and December 31, 2002 |   |
| Notes  to Consolidated Financial Statements                                                                                            |   |
| Guarantor information                                                                                                                  |   |

 

F-1

----

 

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directorsand to the Shareholders of Buhrmann N.V.

 

In ouropinion the accompanying consolidated balance sheets and the relatedconsolidated statements of income, of cash flows and of group equity presentfairly, in all material respects, the financial position of Buhrmann N.V. andits subsidiaries at December 31, 2004 and 2003 and the results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2004 in conformity with accounting principles generallyaccepted in the Netherlands. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits. We conducted our audits ofthese statements in accordance with auditing standards generally accepted inthe Netherlands and with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform our audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

Accountingprinciples generally accepted in the Netherlands vary in certain significantrespects from accounting principles generally accepted in the United States ofAmerica. Information relating to the nature and effect of such differences ispresented in Note 34 to the consolidated financial statements.

 

PricewaterhouseCoopersAccountants N.V.

 

Amsterdam, theNetherlands,

 

February 22, 2005, exceptfor Note 33,

for which the date isMarch 11, 2005

 

F-2

----

 

**Buhrmann N.V.**

**ConsolidatedStatements of Income**

**forthe years ended December 31, 2004, 2003 and 2002**

 
| ** **                                                                | ** ** | **2004**                                           | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                | ** ** | **(In millions of €, except per share data)** | ** ** |
| **Net  sales**                                                            | ** ** | **5,539**                                          | ** ** | **8,053**  | ** ** | **9,948**  | ** ** |
| Costs of trade  goods sold                                                |       | (3,884                                             | )          | (5,933     | )          | (7,392     | )          |
| Other costs of  sales                                                     |       | (179                                               | )          | (261       | )          | (303       | )          |
| Exceptional  costs of sales (Note 4)                                 |       | —                                             |       | (5         | )          | —     |       |
| **Total  costs of sales**                                                 | ** ** | **(4,063**                                         | **)**      | **(6,199** | **)**      | **(7,695** | **)**      |
| **Added  value**                                                          | ** ** | **1,476**                                          | ** ** | **1,854**  | ** ** | **2,253**  | ** ** |
| Labor costs  (Note 5)                                                |       | (889                                               | )          | (1,137     | )          | (1,330     | )          |
| Other operating  costs (Note 6)                                      |       | (292                                               | )          | (393       | )          | (467       | )          |
| Exceptional  operating results (Note 7)                              |       | (5                                                 | )          | 56         |       | —     |       |
| Depreciation of  tangible fixed assets and internally used software       |       | (84                                                | )          | (104       | )          | (114       | )          |
| Amortization of  goodwill                                                 |       | (45                                                | )          | (52        | )          | (70        | )          |
| Impairment of  goodwill (Note 15)                                    |       | —                                             |       | (53        | )          | (573       | )          |
| **Total  operating costs**                                                | ** ** | **(1,315**                                         | **)**      | **(1,683** | **)**      | **(2,554** | **)**      |
| **Operating  result**                                                     | ** ** | **161**                                            | ** ** | **171**    | ** ** | **(301**   | **)**      |
| Net financing  costs                                                      |       | (68                                                | )          | (161       | )          | (199       | )          |
| Exceptional  financing costs                                              |       | (35                                                | )          | (96        | )          | —     |       |
| **Total  financing costs (Note 8)**                                  | ** ** | **(103**                                           | **)**      | **(257**   | **)**      | **(199**   | **)**      |
| **Result  from operations before taxes**                                  | ** ** | **58**                                             | ** ** | **(86**    | **)**      | **(500**   | **)**      |
| Taxes on result  from operations                                          |       | 13                                                 |       | (8         | )          | (18        | )          |
| Exceptional tax  results                                                  |       | 20                                                 |       | 76         |       | —     |       |
| **Total  taxes (Note 10)**                                           | ** ** | **33**                                             | ** ** | **68**     | ** ** | **(18**    | **)**      |
| Other financial  results                                                  |       | —                                             |       | 1          |       | 16         |       |
| Exceptional  other financial results                                      |       | 6                                                  |       | (103       | )          | —     |       |
| **Total  and other financial results (Note 9)**                      | ** ** | **6**                                              | ** ** | **(102**   | **)**      | **16**     | ** ** |
| Minority  interests                                                       |       | (17                                                | )          | (14        | )          | (12        | )          |
| Exceptional  minority interests                                           |       | —                                             |       | 2          |       | —     |       |
| **Total  minority interests (Note 11)**                              | ** ** | **(17**                                            | **)**      | **(12**    | **)**      | **(12**    | **)**      |
| **Net  result from operations**                                           | ** ** | **80**                                             | ** ** | **(132**   | **)**      | **(514**   | **)**      |
| **Extraordinary  result (after tax) (Note 12)**                      | ** ** | **—**                                         | ** ** | **—** | ** ** | **(74**    | **)**      |
| **Net  result**                                                           | ** ** | **80**                                             | ** ** | **(132**   | **)**      | **(588**   | **)**      |
| ** **                                                                | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Net  result per Ordinary Share basic and fully diluted (Note 14)** | ** ** | **0.32**                                           | ** ** | **(1.23**  | **)**      | **(4.70**  | **)**      |

 

The accompanying notes are an integral part of these ConsolidatedFinancial Statements

 

F-3

----

 

**Buhrmann N.V.**

**ConsolidatedBalance Sheets as of December 31, 2004 and 2003**

**(beforeappropriation of net result)**

 
| ** **                                                    | ** ** | **December 31**                  | ** ** |
|---------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                    | ** ** | **2004**                         | ** ** | **2003** | ** ** |
| ** **                                                    | ** ** | **(In millions of €)** | ** ** |
| **ASSETS**                                                    | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **Fixed  assets**                                             |       |                             |       |   |   |
| Intangible fixed  assets (Note 15)                            |       | 1,403                            |       | 1,543 |   |
| Tangible fixed  assets (Note 16)                              |       | 190                              |       | 208 |   |
| Financial fixed  assets (Note 17)                             |       | 384                              |       | 421 |   |
| ** **                                                    | ** ** | **1,977**                        | ** ** | **2,172** |   |
| **Current  assets**                                           |       |                             |       |   |   |
| Inventories of  trade goods                                   |       | 422                              |       | 423 |   |
| Accounts  receivable (Note 18)                                |       | 731                              |       | 736 |   |
| Other  receivables (Note 18)                                  |       | 197                              |       | 201 |   |
| Cash and  deposits                                            |       | 154                              |       | 145 |   |
| ** **                                                    | ** ** | **1,504**                        | ** ** | **1,505** |   |
| **Total  assets**                                             | ** ** | **3,481**                        | ** ** | **3,677** | ** ** |
| ** **                                                    | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **GROUP  EQUITY, PROVISIONS AND LIABILITIES**                 |       |                             |       |   |   |
| **Group  equity**                                             |       |                             |       |   |   |
| Ordinary Shares  (Note21)                                     |       | 166                              |       | 164 |   |
| Preference  Shares (Note 21)                                  |       | 64                               |       | 64 |   |
| Additional paid  in capital (Note 21)                         |       | 2,080                            |       | 2,055 |   |
| Retained  earnings                                            |       | (961                             | )          | (705 | ) |
| Treasury shares                                               |       | (10                              | )          | (10 | ) |
| Undistributed  net result                                     |       | 80                               |       | (132 | ) |
| Minority  interests                                           |       | 55                               |       | 48 |   |
| ** **                                                    | ** ** | **1,474**                        | ** ** | **1,484** |   |
| **Provisions**                                                |       |                             |       |   |   |
| Pensions (Note  22)                                           |       | 16                               |       | 18 |   |
| Deferred taxes  (Note 22)                                     |       | 109                              |       | 177 |   |
| Other (Note 22)                                               |       | 74                               |       | 79 |   |
| ** **                                                    | ** ** | **199**                          | ** ** | **274** |   |
| **Long-term  liabilities**                                    |       |                             |       |   |   |
| Subordinated  loans (Note 24)                                 |       | 225                              |       | 392 |   |
| Other loans  (Note 24)                                        |       | 597                              |       | 557 |   |
| ** **                                                    | ** ** | **822**                          | ** ** | **949** |   |
| **Current  liabilities**                                      |       |                             |       |   |   |
| Loans                                                         |       | 33                               |       | 28 |   |
| Bank overdrafts                                               |       | 6                                |       | 5 |   |
| Accounts payable                                              |       | 663                              |       | 644 |   |
| Other  liabilities (Note 25)                                  |       | 284                              |       | 293 |   |
| ** **                                                    | ** ** | **986**                          | ** ** | **970** |   |
| **Total  group equity, provisions and liabilities**           | ** ** | **3,481**                        | ** ** | **3,677** | ** ** |
| ** **                                                    | ** ** | ** **                       | ** ** | ** ** | ** ** |
| Working capital  (Note 19)                                    |       | 419                              |       | 456 |   |
| Capital employed  (Note 20)                                   |       | 2,012                            |       | 2,207 |   |
| Interest-bearing  debt (Note 27)                              |       | 707                              |       | 836 |   |
| Guarantee  capital (Note 28)                                  |       | 1,699                            |       | 1,876 |   |
| Commitments not  included in the balance sheet (Note 29) |       | 451                              |       | 524 |   |

 

The accompanying notes are an integral part of these ConsolidatedFinancial Statements

 

F-4

----

 

**Buhrmann N.V.**

**ConsolidatedStatements of Cash Flows**

**forthe years ended December 31 2004, 2003 and 2002**

 
| ** **                                                             | ** **   | **2004**                    | ** **   | **2003**   | ** **   | **2002**   | ** **   |
|------------------------------------------------------------------------|--------------|-----------------------------|--------------|------------|--------------|------------|--------------|
| ** **                                                             | ** **   | **(In millions of €)** | ** **   |
| **Cash  flow from operating activities**                               |         |                        |         |       |         |       |         |
| Operating result                                                       |         | 161                         |         | 171        |         | (301       | )            |
| *Adjustments  for:*                                                    |         |                        |         |       |         |       |         |
| Depreciation of  tangible fixed assets and software                    |         | 84                          |         | 104        |         | 114        |         |
| Amortization of  goodwill                                              |         | 45                          |         | 52         |         | 70         |         |
| Impairment of  goodwill                                                |         | —                      |         | 53         |         | 573        |         |
| Addition  to/(release of) provisions                                   |         | 7                           |         | —     |         | 1          |         |
| *(Increase)/decrease  in working capital:*                             |         |                        |         |       |         |       |         |
| (Increase)/decrease  inventories                                       |         | (17                         | )            | 1          |         | 11         |         |
| (Increase)/decrease  accounts receivable                               |         | (19                         | )            | 109        |         | 195        |         |
| Increase/(decrease)  accounts payable                                  |         | 50                          |         | (43        | )            | (172       | )            |
| (Increase)/decrease  other receivables and liabilities                 |         | 22                          |         | 14         |         | 18         |         |
| Net (increase)/decrease  in working capital                            |         | 36                          |         | 81         |         | 52         |         |
| ***Cash  flow from operations***                                       | *** *** | ***333***                   | *** *** | ***461***  | *** *** | ***509***  | *** *** |
| *Other  operational payments:*                                         |         |                        |         |       |         |       |         |
| Interest paid                                                          |         | (62                         | )            | (134       | )            | (184       | )            |
| Other financial  income                                                |         | —                      |         | 18         |         | —     |         |
| Profit taxes  paid                                                     |         | (22                         | )            | (22        | )            | (16        | )            |
| Payments charged  to provisions (see Note 22)                     |         | (26                         | )            | (51        | )            | (51        | )            |
|                                                                   |         | (110                        | )            | (189       | )            | (251       | )            |
| **Net  cash provided by operating activities (A)**                | ** **   | **223**                     | ** **   | **272**    | ** **   | **258**    | ** **   |
| **Cash  flow from investing activities**                               |         |                        |         |       |         |       |         |
| Net investments  in tangible fixed assets and internally used software |         | (59                         | )            | (79        | )            | (107       | )            |
| Acquisitions                                                           |         | (6                          | )            | (10        | )            | (9         | )            |
| Investments in  financial fixed assets                                 |         | (4                          | )            | —     |         | —     |         |
| Payments related  to integration of acquisitions                       |         | (3                          | )            | (8         | )            | (90        | )            |
| Divestments  including transaction expenses                            |         | (10                         | )            | 641        |         | 68         |         |
| **Net  cash provided by (used in) investing activities (B)**      | ** **   | **(82**                     | **)**        | **544**    | ** **   | **(138**   | **)**        |
| **Available  cash flow (A+B)**                                    | ** **   | **141**                     | ** **   | **816**    | ** **   | **120**    | ** **   |
| **Cash  flow from financing activities**                               |         |                        |         |       |         |       |         |
| Dividend  payments (see Note 21)                                  |         | (11                         | )            | (9         | )            | (25        | )            |
| Payment to  minority shareholders                                      |         | (8                          | )            | (7         | )            | (5         | )            |
| Paid financing  fees and tender premiums                               |         | (39                         | )            | (25        | )            | (16        | )            |
| Settlement of  interest rate swaps                                     |         | —                      |         | (40        | )            | —     |         |
| Net repayment of  long-term debt                                       |         | (69                         | )            | (600       | )            | (162       | )            |
| **Net  cash provided by (used in) financing activities (C)**      | ** **   | **(127**                    | **)**        | **(681**   | **)**        | **(208**   | **)**        |
| **Net  cash flow (A+B+C)**                                        | ** **   | **14**                      | ** **   | **135**    | ** **   | **(88**    | **)**        |
| ** **                                                             | ** **   | ** **                  | ** **   | ** ** | ** **   | ** ** | ** **   |
| **Net  increase in liquid funds**                                      |         |                        |         |       |         |       |         |
| Liquid funds at  year-end:                                             |         |                        |         |       |         |       |         |
| Cash and  deposits                                                     |         | 154                         |         | 145        |         | 37         |         |
| Short-term  borrowings with credit institutions                        |         | (6                          | )            | (5         | )            | (26        | )            |
|                                                                   |         | 148                         |         | 140        |         | 11         |         |
| Minus liquid  funds at beginning of year:                              |         |                        |         |       |         |       |         |
| Cash and  deposits                                                     |         | 145                         |         | 37         |         | 99         |         |
| Short-term  borrowings with credit institutions                        |         | (5                          | )            | (26        | )            | —     |         |
| Translation  differences                                               |         | (6                          | )            | (6         | )            | —     |         |
|                                                                   |         | 134                         |         | 5          |         | 99         |         |
| **Net  increase in liquid funds**                                      | ** **   | **14**                      | ** **   | **135**    | ** **   | **(88**    | **)**        |

 

The accompanying notes are an integral part of these ConsolidatedFinancial Statements

 

F-5

----

 

**Buhrmann N.V.**

**ConsolidatedStatements of Group Equity**

**forthe years ended December 31, 2004, 2003 and 2002**

 
| ** **                                                       | ** **             | ** **                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | **Issued and  Paid-In Capital** | ** ** | **Additional  paid in capital** | ** ** | **Retained  earnings** | ** ** | **Treasury  Shares** | ** ** | **Undistributed  net result** | ** ** | **Mintority  Interest in group companies** | ** ** | **Total Group  Equity** | ** ** |
|------------------------------------------------------------------|------------------------|----------------------------------------------------------------------|------------|------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|------------------------|------------|----------------------|------------|-------------------------------|------------|--------------------------------------------|------------|-------------------------|------------|
| ** **                                                       | ** **             | ** **                                                           |
| **Ordinary  Shares**                                             | **Preference  Shares** |
| **Issued**                                                       | ** **             | **Treasury**                                                         | **A**      | ** ** | **C**      |
| ** **                                                       | ** **             | **(In  millions of €, except number of shares (in thousands))** | ** ** |
| December 31, 2001                                                |                   | 131,835                                                              |       | (509       | )          | 53,282     |       | 37                              |       | 221                             |       | 1,993                  |       | 389                  |       | (10                           | )          | 41                                         |       | 37                      |       | 2,671 |   |
| Reclassification  additional paid-in capital Preference Shares C |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | 42                     |       | (42                  | )          | —                        |       | —                                     |       | —                  |       | — |   |
| Dividend Ordinary  Shares for 2001                               |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       |                 |       | —                        |       | (10                                        | )          | —                  |       | (10 | ) |
| Profit  appropriation 2001                                       |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | 31                   |       | —                        |       | (31                                        | )          | —                  |       | — |   |
| Issued shares                                                    |                   | —                                                               |       | —     |       | —     |       | —                          |       | 1                               |       | (1                     | )          | —               |       | —                        |       | —                                     |       | —                  |       | — |   |
| Issued shares for  stock dividend                                |                   | 793                                                                  |       | (6         | )          | —     |       | 2                               |       | —                          |       | —                 |       | —               |       | —                        |       | —                                     |       | —                  |       | — |   |
| Dividend payments  to third parties                              |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       |                                       |       | (5                      | )          | (5 | ) |
| Result 2002                                                      |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | (588                                       | )          | —                  |       | (588 | ) |
| Dividend  Preference Shares A for 2002                           |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (11                  | )          | —                        |       | —                                     |       | —                  |       | (11 | ) |
| Dividend  Preference Shares C for 2002                           |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (21                  | )          | —                        |       | —                                     |       | —                  |       | (21 | ) |
| Preference Shares  C to be issued                                |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | 21                   |       | —                        |       | —                                     |       | —                  |       | 21 |   |
| Minority share                                                   |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | —                                     |       | 12                      |       | 12 |   |
| Translation  differences (net of taxes)                          |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (255                 | )          | —                        |       | —                                     |       | (3                      | )          | (258 | ) |
| December 31, 2002                                                |                   | 132,628                                                              |       | (515       | )          | 53,282     |       | 39                              |       | 222                             |       | 2,034                  |       | 112                  |       | (10                           | )          | (588                                       | )          | 41                      |       | 1,811 |   |
| Dividend Ordinary  Shares for 2002                               |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (4                   | )          | —                        |       |                                       |       | —                  |       | (4 | ) |
| Profit  appropriation 2002                                       |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (588                 | )          | —                        |       | 588                                        |       | —                  |       | — |   |
| Issued shares for  stock dividend                                |                   | 4,064                                                                |       | (11        | )          | —     |       | 2                               |       | 6                               |       | —                 |       | —               |       | —                        |       | —                                     |       | —                  |       | 6 |   |
| Consolidation/deconsolidation                                    |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | —                                     |       | (2                      | )          | (2 | ) |
| Dividend payments  to third parties                              |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       |                                       |       | (7                      | )          | (7 | ) |
| Result 2003                                                      |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | (132                                       | )          | —                  |       | (132 | ) |
| Dividend  Preference Shares C issued for 2002                    |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | 21                     |       | (21                  | )          | —                        |       | —                                     |       | —                  |       | — |   |
| Dividend Preference  Shares A for 2003                           |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (11                  | )          | —                        |       | —                                     |       | —                  |       | (11 | ) |
| Dividend  Preference Shares C for 2003                           |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (22                  | )          | —                        |       | —                                     |       | —                  |       | (22 | ) |
| Preference Shares  C to be issued                                |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | 22                   |       | —                        |       | —                                     |       | —                  |       | 22 |   |
| Minority share                                                   |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | —                                     |       | 12                      |       | 12 |   |
| Translation  differences (net of taxes)                          |                   | —                                                               |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | (193                 | )          | —                        |       | —                                     |       | 4                       |       | (189 | ) |
| December 31, 2003                                                |                   | 136,692                                                              |       | (526       | )          | 53,282     |       | 41                              |       | 228                             |       | 2,055                  |       | (705                 | )          | (10                           | )          | (132                                       | )          | 48                      |       | 1,484 |   |

 

F-6

----

 
| ** **                                    | ** ** | ** **           | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | **Issued and  Paid-In Capital** | ** ** | **Additional  paid in capital** | ** ** | **Retained  earnings** | ** ** | **Treasury  Shares** | ** ** | **Undistributed  net result** | ** ** | **Mintority  Interest in group companies** | ** ** | **Total  Group  Equity** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|------------------------|------------|------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|------------------------|------------|----------------------|------------|-------------------------------|------------|--------------------------------------------|------------|--------------------------|------------|
| ** **                                    | ** ** | ** **           | ** ** | ** **             | ** ** |
| ** **                                    | ** ** | **Ordinary  Shares** | ** ** | **Preference  Shares** |
| ** **                                    | ** ** | **Issued**           | ** ** | **Treasury**           | ** ** | **A**      | ** ** | **C**      |
|                                          |       |                 |       |                   |       |       |       |       |       |                            |       |                            |       |                   |       |                 |       |                          |       |                                       |       |                     |       |
| Dividend Ordinary  Shares for 2003            |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | (4                     | )          | —               |       |                          |       | —                                     |       | (4                       | )          |
| Profit  appropriation 2003                    |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | (132                   | )          | —               |       | 132                           |       | —                                     |       | —                   |       |
| Issued shares for  stock dividend             |       | 1,435                |       | (5                     | )          | —     |       | 2          |       | 2                               |       | 3                               |       | —                 |       | —               |       | —                        |       | —                                     |       | 5                        |       |
| Dividend payments  to third parties           |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       |                          |       | (8                                         | )          | (8                       | )          |
| Result 2004                                   |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | 80                            |       | —                                     |       | 80                       |       |
| Dividend  Preference Shares C issued for 2003 |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | 22                              |       | (22                    | )          | —               |       | —                        |       | —                                     |       | —                   |       |
| Dividend  Preference Shares A for 2004        |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | (11                    | )          | —               |       | —                        |       | —                                     |       | (11                      | )          |
| Dividend  Preference Shares C for 2004        |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | (26                    | )          | —               |       | —                        |       | —                                     |       | (26                      | )          |
| Preference Shares  C to be issued             |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | 26                     |       | —               |       | —                        |       | —                                     |       | 26                       |       |
| Minority share                                |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | —                 |       | —               |       | —                        |       | 17                                         |       | 17                       |       |
| Translation  differences (net of taxes)       |       | —               |       | —                 |       | —     |       | —     |       | —                          |       | —                          |       | (87                    | )          | —               |       | —                        |       | (2                                         | )          | (89                      | )          |
| December 31, 2004                             |       | 138,127              |       | (531                   | )          | 53,282     |       | 43         |       | 230                             |       | 2,080                           |       | (961                   | )          | (10                  | )          | 80                            |       | 55                                         |       | 1,474                    |       |

 

Dividendon cumulative preference shares A of €11 million and C of €26 millionfor 2004 are included in group equity considering their cumulative nature.

 

The accompanying notes are an integral part of these ConsolidatedFinancial Statements

 

F-7

----

 

**BuhrmannN.V.Notes to Consolidated Financial Statements**

 

**1.****                                      Business**

 

BuhrmannN.V. and its subsidiaries (the “Company” or “Buhrmann”), headquartered in theNetherlands, are engaged in supplying office products and office furniture directlyto end users. The Company also supplies and maintains pre-press systems,printing presses and folding, cutting and binding machines directly to endusers.

 

Witheffect from October 31, 2003, the Company completed the sale of its PaperMerchanting Division to PaperlinX Limited. The Paper Merchanting Division was adistributor of paper and related products to the graphic, office and displaymarkets, mainly in Europe.

 

Afterthis sale, Buhrmann continues as a focused leader in business services and distributionin the office products markets. Divestments are further described inNote 3.

 

Afterthe sale of the Paper Merchanting Division, the Company has activities in theNetherlands, United States, United Kingdom, Germany, Italy, France, Australia,Canada, Austria, Belgium, Greece, Hungary, Ireland, Luxembourg, New Zealand,Poland, Spain and Sweden.

 

**2.****                                      Summary ofsignificant accounting policies**

 

**Basisof presentation**

 

Theaccompanying Consolidated Financial Statements are presented in € and are basedon the historical cost convention prepared in accordance with accountingprinciples generally accepted in the Netherlands (“Dutch GAAP”) and comply withthe financial reporting requirements included in Title 9, Book 2 of theNetherlands Civil Code.

 

Thesestandards vary in certain significant respects from accounting principlesgenerally accepted in the United States of America (“US GAAP”). Informationrelating to the nature and effect of such differences as they relate to theCompany is presented in Note 34.

 

TheseConsolidated Financial Statements differ in certain respects from theConsolidated Financial Statements and disclosures included in the Buhrmann N.V.Annual Report 2004 furnished to Buhrmann’s shareholders. The parent companybalance sheet and income statement and related disclosures are not included inthese Consolidated Financial Statements. Also, additional footnote disclosureshave been added in order for these Consolidated Financial Statements to complywith US GAAP and the requirements of the US Securities and Exchange Commission.

 

As ageneral principle, an asset is recognized in the Consolidated Balance Sheetwhen it is probable that the future economic benefits will flow to the Companyand the asset can be measured reliably. A liability is recognized in theConsolidated Balance Sheet when it is probable that an outflow of resourceswill result from the settlement of a present obligation, and the amount atwhich the settlement will take place can be measured reliably. If the criteriafor recognition are no longer met, the assets and liabilities are derecognized.Unless otherwise stated in the following Notes, assets and liabilities areshown at face value. Where necessary, the assets have been reduced to reflectpermanent diminutions in value.

 

Buhrmann’saccounting policies and estimates for 2004 did not change compared to thepolicies and estimates applied for 2003.

 

F-8

----

 

In2003, the following accounting policies and estimates changed compared to 2002:

 

•                  Exceptionalitems—In accordance with the new Guideline for Annual Reporting onextraordinary and exceptional items applicable in the Netherlands, the notionof exceptional results was introduced (comparative figures of previous yearshave not been adjusted).

 

•                  Revenuerecognition—Following the release of the new Guideline for Annual Reporting onrevenue recognition applicable in the Netherlands as of January 1, 2003,equipment sales in the Graphic Systems Division are recognized afterinstallation instead of at delivery.

 

•                  Asof December 31, 2003, internally used software is presented as anintangible fixed asset. The depreciation of internally used software isincluded in “Depreciation of tangible fixed assets and internally used software”in the Consolidated Statements of Income. This change has been implemented inthe figures retrospectively.

 

**Useof estimates**

 

TheConsolidated Financial Statements include amounts that are based on management’sbest estimate and judgments particularly in the areas of intangible fixedassets, specifically for goodwill impairment, other receivables in respect ofrebates from suppliers, provisions for legal proceedings, provisions forpensions, provisions for restructuring and integration, taxation in respect ofdeferred taxes and currency translation and exchange differences on loans andcurrency swaps. Estimates are mainly based on past experience and are evaluatedon an on-going basis. Actual results could differ from these estimates.

 

**Consolidationpolicies**

 

The consolidationof Buhrmann includes Buhrmann N.V. and the companies in which it can exert acontrolling influence on the commercial and financial policy (group companies).These companies are fully consolidated.

 

Companiesin which Buhrmann can exert significant, but not a controlling influence on thecommercial and financial policies are not consolidated but recorded in theConsolidated Balance Sheet at net equity value according to Buhrmann’saccounting policies (associated companies). Investments in companies in whichBuhrmann is unable to exert significant influence are valued at cost or lowerlong-term market value. All balances and transactions between group companieshave been eliminated in the consolidation. Minority interests in groupcompanies are disclosed separately in the Consolidated Statement of Income andin the Consolidated Balance Sheet.

 

In theconsolidation, assets and liabilities of group companies whose local currencyis not the €, are translated into euros at the rates prevailing at the BalanceSheet date. Income Statements of these group companies are translated intoeuros at the average rates for the reporting period. The resulting translationdifferences are recorded directly in Group equity. The rates used fortranslation are listed under “Foreign currencies”.

 

Theresults and cash flows of group companies acquired by the Group are included asof the date control is obtained. This also applies to the results of associatedcompanies. When group companies and associated companies are acquired, thedifference between the acquisition price and the net equity at fair value ofthe acquired company is recorded as goodwill and is amortized over the expectedeconomic life with a maximum of forty years.

 

Fromthe date the control of a group company or associated company has ceased, forexample due to divestment, the difference between the realizable value and thenet equity value, including the book value of capitalized goodwill, is recordedin the income statement. Divested group companies are consolidated until themoment control has ceased.

 

F-9

----

 

**Presentation**

 

TheConsolidated Statements of Income are presented in an extended format that ismore detailed than the models prescribed by the Guidelines for Annual Reportingapplicable in the Netherlands. Figures are often presented before exceptionalitems and where applicable before amortization and impairment of goodwill.These figures are regarded by Buhrmann as key performance indicators increasingthe transparency of the reporting.

 

Startingin 2004, in the Consolidated Financial Statements prepayments for software areincluded in intangible fixed assets. Until 2004, these prepayments wereincluded in the tangible fixed assets. This reclassification only affectstangible and intangible fixed assets (for 2004 €13 million and for 2003€25 million). The comparable figures have been adjusted likewise.

 

**ForeignCurrencies**

 

Accountsreceivable, cash and deposits and liabilities denominated in a currency otherthan the local currency are translated into the local currency at the ratesprevailing at the balance sheet date, unless these are reflected in currencyforward contracts. In such cases, valuation occurs using a currency forwardrate. The resulting translation differences are included in income. Translationand exchange differences, net of related taxation, arising from long-term loansto group companies that have the nature of permanent investment, are recordeddirectly in Group equity. Translation and exchange differences on loansextended by and swaps entered into with third parties which are designated as,and effective as, economic hedges of net investments (equity investments orpermanently invested loans) in a Group company or associated company are alsorecorded directly in Group equity.

 

Thefollowing translation rates against the € have been used (main currenciesonly):

 
| **Currency per 1 €** | ** ** | **December 31, 2004** | ** ** | **Average 2004** | ** ** | **December 31, 2003** | ** ** | **Average 2003** | ** ** | **December 31, 2002** | ** ** | **Average 2002** | ** ** |
|---------------------------|------------|-----------------------|------------|------------------|------------|-----------------------|------------|------------------|------------|-----------------------|------------|------------------|------------|
| AUD                       |       | 1.7459                |       | 1.6891           |       | 1.6802                |       | 1.7384           |       | 1.8556                |       | 1.7365           |       |
| CAD                       |       | 1.6416                |       | 1.6169           |       | 1.6234                |       | 1.5821           |       | 1.6550                |       | 1.4828           |       |
| GBP                       |       | 0.7051                |       | 0.6785           |       | 0.7048                |       | 0.6918           |       | 0.6505                |       | 0.6287           |       |
| USD                       |       | 1.3621                |       | 1.2434           |       | 1.2630                |       | 1.1307           |       | 1.0487                |       | 0.9448           |       |

 

**Policiesfor the Consolidated Statements of Income**

 

**Netsales**

 

Netsales represent the invoiced value of deliveries and services to third parties,less discounts, commissions to agents and sales tax.

 

TheCompany had the following divisions: Office Products North America, OfficeProducts Europe, Office Products Australia, Graphic Systems and, until its saleas of October 31, 2003, Paper Merchanting. For reporting purposes, theOffice Products Europe Division and Office Products Australia Division arecombined.

 

Salesin the Office Products Divisions (such as office supplies, furniture,consumable computer products) are in general recognized at the point ofdelivery, as Buhrmann has no future performance obligations.

 

In theGraphic Systems Division, sales of machines are recognized after installationas of January 1, 2003. Sales of supplies and spare parts are in generalrecognized at the point of delivery.

 

Thesales in the former Paper Merchanting Division are comprised of paper toprinters, publishers and the office market. The sales of these products arerecognized at the point of delivery to the customer in accordance with theshipping terms.

 

In allDivisions, sales of services are recognized in the period in which the servicesare rendered.

 

F-10

----

 

**Costsof trade goods sold**

 

Costsof trade goods sold represent the purchase price of trade goods sold, includingduties, insurance and in-bound transportation costs less catalog contributions(net of related costs). Rebates from suppliers are based on volume and specificvendor programs and are deducted from the purchase price of trade goods.Catalog contributions (net of related costs) are recognized as a reduction ofcosts of trade goods sold in the period for which the catalog is in use.

 

**Othercosts of sales**

 

Othercosts of sales mainly comprise out-bound, third-party delivery expenses as wellas expenses relating to doubtful accounts receivable, obsolete inventories andtemporary personnel.

 

**Addedvalue**

 

Addedvalue is arrived at by subtracting costs of trade goods sold and other costs ofsales from net sales.

 

**Advertisingcosts**

 

Advertisingcosts are expensed as incurred.

 

**Researchand development**

 

Costsof research are expensed as incurred and included in labor and other operatingcosts. Costs of research are insignificant. Costs of development, whichpredominantly relates to internally used software, are capitalized and afterbeing put into use, amortized over the expected life of the asset.

 

**Exceptionalresults**

 

Duringthe course of a year, certain events take place that may be viewed as part ofthe company’s normal business operations. These events however, have uniquecharacteristics that set them apart from the company’s standard day-to-dayoperations. These events may be infrequent and of a size that reporting them asexceptional items provides the opportunity to give a more operationallyoriented view on the results of the business. Other events, such asrestructurings are so large and impact the Company’s operations and coststructure significantly, that reporting them as exceptional items aims toclarify the effect of these decisions on the results of operations. Theseevents have been separately disclosed as exceptional results as ofJanuary 1, 2003. In the periods prior to January 1, 2003, this typeof results were reported as extraordinary.

 

**Otherfinancial results**

 

Theseinclude:

 

•                  Theproportional share in the result of associated companies determined inaccordance with Buhrmann’s accounting policies;

 

•                  Dividendsreceived from investments in other companies, and

 

•                  Resulton the sale of companies.

 

F-11

----

 

**Taxation**

 

Theamount of tax included in the Consolidated Statements of Income is based onpre-tax reported income and calculated at current local tax rates, taking intoaccount permanent differences and the likelihood of realization of deferred taxassets and liabilities.

 

Deferredtax assets and liabilities are provided for temporary differences in thevaluation of assets and liabilities for reporting and fiscal purposes and forloss carry-forwards. Deferred taxes are stated at nominal value and aredetermined using the local tax rates at which the deferred taxes will likely besettled. Within tax groups, where the exercise periods permit and is legallyenforceable, deferred tax assets and liabilities are netted. Resulting deferredtax assets are recognized in the consolidated balance sheet under “Financialfixed assets”, insofar as realization is more likely than not. Therealizability is dependent upon the generation of future taxable income.Resulting deferred tax liabilities are included under “Provisions”.

 

Nowithholding taxes are provided for the undistributed earnings of foreignsubsidiaries on the basis that these amounts are permanently reinvested inthese subsidiaries.

 

**Policiesfor the Consolidated Balance Sheet**

 

**Intangiblefixed assets**

 

Goodwillpaid after December 31, 1996 and costs of the development of internallyused software are recorded under this heading.

 

Goodwillis amortized over the expected economic life of goodwill with a maximum offorty years. Prior to January 1, 1997 goodwill was written off directly toGroup equity.

 

Costsof development of internally used software are capitalized and, after being putinto use, amortized over the expected life (between 3-5 years). Softwareis valued at purchase price less the relevant linear depreciation over itsexpected average economic life.

 

TheCompany performs at least annually a goodwill impairment test to determine if awrite-off for permanent diminution in value needs to be recorded. Under theimpairment test, the fair value is calculated for the relevant entity carryingthe goodwill based on discounted expected future cash flows. The fair value iscompared to the book value of the entity, including allocated goodwill. In casethe fair value is below the book value, the difference is charged to income asan impairment. The cash flows are for this purpose discounted at a ratecommensurate with the risk involved.

 

**Tangiblefixed assets**

 

Tangiblefixed assets are valued at purchase price less the relevant linear depreciationover its expected average economic life. Repairs and maintenance costs areexpensed as incurred.

 

Thedepreciation rates per year are as follows:

 
| Land                   |   | Not depreciated |   |
|------------------------|--------|-----------------|--------|
| Buildings              |   | 3-7%            |   |
| Plant and  equipment   |   | 5-10%           |   |
| Other fixed  equipment |   | 10-33%          |   |

 

TheCompany periodically evaluates the carrying value of tangible fixed assets andinternally used software when events and circumstances warrant such a review.The carrying value of a tangible fixed asset and internally used software isconsidered impaired when the estimated discounted cash flows from such an assetis less than its carrying value. In that event a loss is recognized based onthe amount by which the carrying value exceeds the discounted cash flow valueof the tangible fixed asset and internally used software. The cash flows arefor this purpose discounted at a rate commensurate with the risk involved.

 

F-12

----

 

**Financialfixed assets**

 

This itemincludes:

 

•                  Participations,which consist of investments in associated companies and other companies.

 

•                  Long-termreceivables from participations.

 

•                  Costsrelated to long-term financing. These costs are capitalized and amortized basedon repayment of the related loans.

 

•                  Deferredtaxes insofar as they are long-term in nature (see Taxation).

 

**Financialinstruments**

 

Carryingamounts of the Company’s cash and deposits, participations, accountsreceivable, accounts payable, other receivables, other liabilities and bankoverdrafts approximate fair value due to their short-term maturities.Information about the fair value of the Company’s long-term loans is includedin Note 24.

 

Gainsand losses on derivative financial instruments, including forward foreignexchange, currency and interest swaps, that meet the criteria for hedgeaccounting, including those on terminated contracts, are deferred and includedin income in the same period that the hedged transaction is realized. Realizedgains and losses and unrealized losses on derivative financial instrumentswhich do not meet the criteria for hedge accounting treatment are included inincome. Any differences between amounts paid or received on interest rate swapsare recognized as adjustments to interest expense of the hedged obligationduring the life of the swap. In the event that the hedged transactionterminates, the deferred gains or losses on the associated derivative arerecorded in the Consolidated Statement of Income. Information about theestimated fair value of the Company’s derivative financial instruments isincluded in Note 24. The estimated fair value of derivative financialinstruments is determined using quoted market prices or market pricing models.

 

**Creditrisks**

 

TheCompany’s customer base is spread over many industries and sectors,includinggovernment institutions, and most of these customers are large corporations orinstitutions. No individual customer represents 10% or more of the Company’stotal sales or trade accounts receivable balance in any year.

 

Managementbelieves it has adequately provided for the collection risk in the Company’saccounts receivable, by recording an allowance for doubtful accounts, whichreduces such amounts to their net realizable value, taking into consideration thatthe accounts receivable are to a certain extent insured.

 

TheCompany has deposited its cash and deposits with and has obtained its loansfrom reputable financial institutions with high-quality credit ratings. TheCompany believes that the risk of non-performance by any of these institutionsis remote.

 

**Inventories**

 

Inventoriesof trade goods are valued at average historic cost which includes the purchaseprice, net of volume related rebates and cash discounts received fromsuppliers, duties, insurance and in-bound transportation costs. Overhead costsrelated to inventories are not significant and are not included in historiccost. If the market value of trade goods is lower than the historic cost,valuation takes place at market value. A provision for obsolescence is recordedif deemed necessary.

 

**Accountsreceivable**

 

Accountsreceivable are stated at face value less a provision for doubtful receivables,if deemed necessary.

 

F-13

----

 

**Otherreceivables**

 

Otherreceivables are stated at the lower of face value or recoverable amount andincludes amongst others supplier rebates and catalog contributions.

 

**Cashand deposits**

 

TheCompany considers all highly liquid instruments with an original maturity ofthree months or less to be cash and deposits.

 

**Provisions**

 

Aprovision is recognized when the Company has a present obligation to transfereconomic benefits as a result of past events, it is probable that such atransfer will be required to settle the obligation and a reliable estimate ofthe amount of the obligation can be made. The amount recognized is the bestestimate of the cost required to settle the present obligation at the balancesheet date. A present obligation exists when the company has little or no discretionto avoid incurring the expenditure.

 

Theprovision for pension mainly relates to unfunded defined benefit plansdetermined at actuarial value. Most defined benefit plans are funded with planassets segregated in separate trusts to which the Company makes contributions.For these funded plans, provisions are only recorded if additionalcontributions are to be made in the future to meet local minimum fundingrequirements as defined by local law and for the present value of past-servicepremiums falling due in the future. The exact amount of these provisionsdepends on the funding level and the specific financing arrangements with thetrusts.

 

Theprovision for deferred taxes is stated at face value of the estimated netliability (see Taxation).

 

Otherprovisions include accruals for integrations and reorganizations followingacquisitions, divestments and restructuring of businesses as well as provisionsfor product warranties.

 

**Policiesfor the Consolidated Statements of Cash Flows**

 

TheConsolidated Statements of Cash Flows are derived from the ConsolidatedStatements of Income and other changes between the opening and closing balancesheets in local currencies, translated into euros at average exchange rates.This is the indirect method.

 

Thechanges in provisions include movements in provisions for doubtful accountsreceivable and obsolete inventories.

 

Cashflows resulting from exceptional items are accounted for by their nature ascash flows from operating, investing or financing activities.

 

Thenet cash flow is recorded net of the effects of acquisitions and divestments onliquid funds or short-term debt to credit institutions.

 

F-14

----

 

**3.****                                      SignificantAcquisitions and Divestments**

 

All ofthe Company’s major acquisitions were accounted for as purchases with theresults of operations of the acquired companies included in the ConsolidatedStatements of Income and Consolidated Statements of Cash Flows from the date ofacquisition. As of January 1, 1997, goodwill is no longer written offdirectly to Group equity but capitalized and amortized over a straight-linebasis with a maximum of forty years.

 

In2004, 2003 and 2002 a number of small acquisitions were made, mainly in theOffice Products Australia Division, for which a total amount of €6 million was paid in 2004 and €10 million in both 2002 and 2003. Theacquisitions resulted in goodwill of €6 million in both 2004 and in 2003and €15 million in 2002.

 

InApril 2003, Buhrmann sold DocVision B.V. which is active in mailroom,copy/print services and archives management, for a cash consideration of€8 million on a debt free basis.

 

Witheffect from October 31, 2003, Buhrmann completed the sale of its PaperMerchanting Division to PaperlinX Limited. The initial consideration for thesale was €706 million. As the sale was made on a debt-free and cash-freebasis, the initial consideration was reduced by €6 million. Under theterms of the final purchase agreement, there were certain agreed purchase priceadjustments mainly related to the net equity value of the Paper MerchantingDivision, pensions and restructuring. These purchase price adjustments resultedin a further reduction of the purchase price of €63 million. In addition,a provision for warranties was recorded in 2003 as Buhrmann has indemnifiedPaperlinX for certain existing claims as at October 31, 2003. The finalamounts arising from these adjustments are subject to final agreement withPaperlinX and might change. In 2003, a total book loss of €112 million onthis sale was recognized which is summarized in the table below (in millions of€):

 
| Initial  consideration                                                                              |       | 706      |       |
|-----------------------------------------------------------------------------------------------------|------------|----------|------------|
| less:                                                                                               |       |     |       |
| Net debt and  cash adjustment                                                                       |       | (6       | )          |
| Other purchase  price adjustments                                                                   |       | (63      | )          |
| **Net**                                                                                             | ** ** | **637**  | ** ** |
| Net equity value  Paper Merchanting Division as at October 31, 2003 Shareholders’ equity (net) |       | 625      |       |
| Goodwill                                                                                            |       | 97       |       |
| Net debt and  cash                                                                                  |       | (6       | )          |
| ** **                                                                                          |       | **716**  |       |
| Book result                                                                                         |       | (79      | )          |
| Transaction fees                                                                                    |       | (15      | )          |
| Warranties                                                                                          |       | (18      | )          |
| **Total  result (loss)**                                                                            | ** ** | **(112** | **)**      |

 

F-15

----

 

Themajor balance sheet classes included in assets and liabilities of the PaperMerchanting Division as of October 31, 2003 were as follows:

 
| ** **                                   | ** ** | **October 31,  2003** | ** ** |
|----------------------------------------------|------------|----------------------------|------------|
| Intangible fixed assets (excluding goodwill) |       | 15                         |       |
| Tangible fixed  assets                       |       | 156                        |       |
| Financial fixed  assets                      |       | 12                         |       |
| Total fixed  assets                          |       | 183                        |       |
|                                         |       |                       |       |
| Inventories                                  |       | 213                        |       |
| Receivables                                  |       | 642                        |       |
| Cash                                         |       | 19                         |       |
| Total current  assets                        |       | 874                        |       |
| ** **                                   | ** ** | ** **                 | ** ** |
| **Total  assets**                            | ** ** | **1,057**                  | ** ** |
|                                         |       |                       |       |
| Provisions                                   |       | 25                         |       |
| Current  liabilities                         |       | 407                        |       |
| **Total  provisions and liabilities**        | ** ** | **432**                    | ** ** |
| ** **                                   | ** ** | ** **                 | ** ** |
| **Shareholders’  equity (net)**         | ** ** | **625**                    | ** ** |

 

UnderDutch GAAP, the results and cash flows from a discontinued operation areincluded in operating results and cash flows until the date the operations areactually sold. Under US GAAP, the results and cash flows from discontinuedoperations are presented separately from continuing operations whereby theConsolidated Statements of Income and Consolidated Statements of Cash Flows forprevious years are restated for discontinuance of an operation. The PaperMerchanting Division qualifies as a discontinued operation under US GAAP.

 

F-16

----

 

Thefollowing table shows the Consolidated Statements of Income for the years endedDecember 31, 2003 and 2002 as if the Paper Merchanting Division andrelated holding companies would have been presented as a discontinuedoperation. Taxes have been allocated to discontinued operations as if thecompanies were separated into separate financial entities. Net financing costsallocated to discontinued operations is the interest based on net intercompanydebt. Amounts are in millions of euro.

 
| ** **                                                          | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Net  sales**                                                      | ** ** | **5,787**  | ** ** | **6,960**  | ** ** |
| Costs of trade  goods sold                                          |       | (4,096     | )          | (4,953     | )          |
| Other costs of  sales                                               |       | (191       | )          | (215       | )          |
| Exceptional  costs of sales                                         |       | (5         | )          | —     |       |
| **Total  costs of sales**                                           | ** ** | **(4,292** | **)**      | **(5,168** | **)**      |
| **Added  value**                                                    | ** ** | **1,495**  | ** ** | **1,792**  | ** ** |
| Labor costs                                                         |       | (938       | )          | (1,087     | )          |
| Other operating  costs                                              |       | (300       | )          | (346       | )          |
| Exceptional  operating results                                      |       | 48         |       | —     |       |
| Depreciation of  tangible fixed assets and internally used software |       | (87        | )          | (93        | )          |
| Amortization of  goodwill                                           |       | (49        | )          | (67        | )          |
| Impairment of  goodwill                                             |       | (53        | )          | (547       | )          |
| **Total  operating costs**                                          | ** ** | **(1,379** | **)**      | **(2,140** | **)**      |
| **Operating  result**                                               | ** ** | **116**    | ** ** | **(348**   | **)**      |
| Net financing  costs                                                |       | (135       | )          | (154       | )          |
| Exceptional  financing costs                                        |       | (96        | )          | —     |       |
| **Total  financing costs**                                          | ** ** | **(231**   | **)**      | **(154**   | **)**      |
| **Result  from continuing operations before taxes**                 | ** ** | **(115**   | **)**      | **(502**   | **)**      |
| Taxes on result  from continuing operations                         |       | 6          |       | (5         | )          |
| Exceptional tax  results of continuing operations                   |       | 76         |       | —     |       |
| **Total  taxes**                                                    | ** ** | **82**     | ** ** | **(5**     | **)**      |
| Other financial  results                                            |       | 1          |       | 13         |       |
| Exceptional  other financial results                                |       | 9          |       | —     |       |
| **Other  financial results**                                        | ** ** | **10**     | ** ** | **13**     | ** ** |
| Minority  interests                                                 |       | (14        | )          | (12        | )          |
| Exceptional  minority interests                                     |       | 2          |       | —     |       |
| **Total  minority interests**                                       | ** ** | **(12**    | **)**      | **(12**    | **)**      |
| **Net  result from continuing operations**                          | ** ** | **(35**    | **)**      | **(506**   | **)**      |
| **Extraordinary  result from continuing operations**                | ** ** | **—** | ** ** | **(41**    | **)**      |
| **Discontinued  operations (including result on disposal)**         | ** ** | **(97**    | **)**      | **(41**    | **)**      |
| **Net  result**                                                     | ** ** | **(132**   | **)**      | **(588**   | **)**      |

 

F-17

----

 

**Notesto the Consolidated Statements of Income**

(In millions of, € unlessstated otherwise)

 

**4.****                                      Exceptional costsof sales**

 

In2003, the timing of the recognition of catalog income for the Office ProductsAustralia Division has been brought fully in line with Buhrmann’s accountingpolicy. This harmonization resulted in an exceptional charge of €5 million in2003.

 

**5.****                                      Labor Costs**

 
| ** **                                               | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|----------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Wages and  salaries                                      |       | (721       | )          | (919       | )          | (1,072     | )          |
| Social security  contributions                           |       | (114       | )          | (155       | )          | (188       | )          |
| Pension schemes                                          |       | (24        | )          | (35        | )          | (29        | )          |
| Other                                                    |       | (30        | )          | (28        | )          | (41        | )          |
| **Total**                                                | ** ** | **(889**   | **)**      | **(1,137** | **)**      | **(1,330** | **)**      |
| ** **                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Number  of employees at year end**                     | ** ** | **17,618** | ** ** | **17,832** | ** ** | **24,858** | ** ** |
| **Average  number of employees per division**            |       |       |       |       |       |       |       |
| Office Products  North America                           |       | 10,551     |       | 11,463     |       | 13,000     |       |
| Office Products  Europe and Australia                    |       | 5,940      |       | 5,947      |       | 6,124      |       |
| Graphic Systems                                          |       | 1,067      |       | 1,132      |       | 1,153      |       |
| Corporate                                                |       | 70         |       | 72         |       | 73         |       |
| **Sub-total  excluding Paper Merchanting**               | ** ** | **17,628** | ** ** | **18,614** | ** ** | **20,350** | ** ** |
| Paper  Merchanting                                       |       | —     |       | 4,453      |       | 5,634      |       |
| **Total  Group**                                         | ** ** | **17,628** | ** ** | **23,067** | ** ** | **25,984** | ** ** |
| ** **                                               |       |       |       |       |       |       |       |
| **Average  number of employees per geographical region** |       |       |       |       |       |       |       |
| United States                                            |       | 9,505      |       | 10,711     |       | 12,285     |       |
| The Netherlands                                          |       | 1,050      |       | 2,039      |       | 2,444      |       |
| Germany                                                  |       | 1,444      |       | 2,217      |       | 2,527      |       |
| United Kingdom                                           |       | 539        |       | 1,852      |       | 2,333      |       |
| Rest of European  Union                                  |       | 2,033      |       | 3,034      |       | 3,187      |       |
| Australia and  New Zealand                               |       | 2,089      |       | 1,793      |       | 1,507      |       |
| Rest of the  World                                       |       | 968        |       | 1,421      |       | 1,701      |       |
| **Total**                                                | ** ** | **17,628** | ** ** | **23,067** | ** ** | **25,984** | ** ** |

 

**6.****                                      Other operatingcosts**

 
| ** **                  | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|
| Rent and  maintenance costs |       | (92      | )          | (121     | )          | (140     | )          |
| General  management costs   |       | (136     | )          | (177     | )          | (209     | )          |
| Other operating  costs      |       | (64      | )          | (95      | )          | (118     | )          |
| **Total**                   | ** ** | **(292** | **)**      | **(393** | **)**      | **(467** | **)**      |

 

F-18

----

 

**7.****                                      Exceptionaloperating results**

 
| ** **                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002**   | ** ** |
|------------------------------|------------|----------|------------|----------|------------|------------|------------|
| Indemnity  payments received |       | —   |       | 58       |       | —     |       |
| Other                        |       | (5       | )          | (2       | )          | —     |       |
| **Total**                    | ** ** | **(5**   | **)**      | **56**   | ** ** | **—** | ** ** |

 

**Indemnitypayments:**

 

Buhrmannwas involved in an arbitration case initiated in 1994 against the Frenchcompany Ipfo Bail S.A. (formerly named Locafrance S.A.). The claim related tothe acquisition by the Buhrmann Group from Ipfo Bail S.A. of all of the sharesin the capital of the French company Agena S.A. in 1991. The claim was based onmisrepresentation of the financial position of that company in the closingbalance sheet at the time of the acquisition. In 2003, an indemnity payment of€79 million was awarded to Buhrmann as the outcome of this arbitration case.After deduction of costs, this resulted in an exceptional operating profit of€58 million.

 

**Other:**

 

In2004, exceptional results included a provision for restructuring activities inOffice Products Europe (primarily reorganization of the copier activities inGermany and rightsizing of the Benelux Office Products business).

 

Theexceptional loss in 2003 of €2 million is the result of a reassessment of the2002 restructuring charge for lease commitments of vacant properties in theOffice Products North America Division (€6 million), additional restructuringcharges in the Office Products Europe Division (€3 million) and theGraphic Systems Division (€1 million). These charges were partly offset by areassessment of restructuring commitments for the former Paper MerchantingDivision related to revised numbers of redundancies and a continuation of theusage of property which were included in the 2002 restructuring charge (€8 million).

 

**8.****                                      Total financingcosts**

 
| ** **                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Net  financing costs:**                    |       |     |       |     |       |     |       |
| Interest costs                               |       | (65      | )          | (144     | )          | (182     | )          |
| Amortization of  capitalized financing costs |       | (5       | )          | (14      | )          | (22      | )          |
| Foreign exchange  differences                |       | 2        |       | (3       | )          | 5        |       |
| ** **                                   | ** ** | **(68**  | **)**      | **(161** | **)**      | **(199** | **)**      |

 

**Exceptionalfinancing costs:**

 
| ** **                               | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Impairment  capitalized financing fees   |       | (4         | )          | (53        | )          | —     |       |
| Tender premium                           |       | (27        | )          | —     |       | —     |       |
| Financing  results pensions              |       | (4         | )          | —     |       | —     |       |
| Refinancing  related advisory fees       |       | —     |       | (5         | )          | —     |       |
| Exchange rate  differences               |       | —     |       | 2          |       | —     |       |
| Costs of  interest rate swap settlements |       | —     |       | (40        | )          | —     |       |
| ** **                               | ** ** | **(35**    | **)**      | **(96**    | **)**      | **—** |       |
| ** **                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total  financing costs:**              | ** ** | **(103**   | **)**      | **(257**   | **)**      | **(199**   | **)**      |

 

 

Theexceptional financing costs in 2004 primarily relate to the refinancing (seeNote 24) and in 2003 to the early redemption of debt and the refinancingfollowing the sale of the Paper Merchandising Division.

 

F-19

----

 

Also in 2004, anexceptional financing costs of €4 million was recorded related to the write-downof financing results recorded in the past on pension plans of our U.S. FormsManagement business.

 

**9.****                                      Total otherfinancial results**

 
| ** **                           | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Other financial  results             |       | —   |       | 1        |       | 16       |       |
| Exceptional  other financial results |       | 6        |       | (103     | )          | —   |       |
| **Total  other financial results**   | ** ** | **6**    | ** ** | **(102** | ** ** | **16**   | ** ** |

 

Exceptionalother financial results in 2004 include an income from the (partial) release ofcontractual provisions related to divested companies (such as the PaperMerchanting Division) as well as write-offs of some small investments that werevalued at cost to lower fair value.

 

Exeptionalother financial results in 2003 includes the book loss on the sale of the PaperMerchanting Division of €112 million (see Note 3), the book profit on the saleof DocVision B.V. of €7 million and a gain of €2 million due to a release ofprovisions related to other divestments which were no longer needed.

 

Otherfinancial results in 2002 comprise the share in the result of a 25%participation of the former Paper Merchanting Division of €3 million and therelease of €13 million of a provision for uncollectability of loan notes. Theloan notes were early redeemed in 2002.

 

**10.****                               Income taxes**

 

Buhrmann’sinternational operations are subject to income taxes of different jurisdictionswith varying statutory tax rates.

 

Buhrmann’seffective tax rate was negative 8.9% in 2004 compared to a positive 12.5% in2003 and a positive 12.2% in 2002. The effective tax rate is determined basedon the ratio of taxes on result from operations to the amount of result fromoperations before exceptional and extraordinary results and before, as theseitems are predominantly exempted from taxes, amortization and impairment ofgoodwill. For reporting purposes, total tax as per Consolidated Statement ofIncome has been allocated between the Netherlands and abroad.

 

In2004, the tax benefit on result of operations is mainly due to the release oftax provisions of €8 million as a result of finalized tax audits and therecognition of additional deferred tax assets for, among others, our Belgiumbusiness.

 

In2004, an exceptional tax benefit of €20 million was recorded whichprimarily relates to the refinancing of the USD 350 million 12 1¤4%Notes (2009 Notes) for € 14 million and the fiscal finalization of thedivestment of the Paper Merchanting Division for €6 million.

 

In2003, exceptional (non-cash) tax benefits of €76 million were recorded.Following the receipt of the aforementioned indemnity payment (seeNote 7), a tax benefit of €30 million was recognized resulting fromthe release of a valuation allowance regarding the former Information SystemsDivision (France). The transaction structure for the sale of the Paper MerchantingDivision and the subsequent debt reduction resulted in a €8 million taxbenefit. The refinancing of Buhrmann led to a further impairment of capitalizedfinancing fees resulting in the recognition of a tax asset of €11 million.Improved outlook on future taxable results triggered the release of a valuationallowance of €15 million. Tax provisions related to the acquisitions ofboth Corporate Express in 1999 and USOP in 2001 were released to an amount of€10 million.

 

F-20

----

 

Thesplit of result before amortization and impairment of goodwill and beforeexceptional and extraordinary results is as follows:

 
| ** **                                                                 | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|----------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Result from  operations before taxes                                       |       | 58         |       | (86        | )          | (500       | )          |
| Exceptional cost  of sales                                                 |       | —     |       | 5          |       | —     |       |
| Exceptional  operating result                                              |       | 5          |       | (56        | )          | —     |       |
| Amortization of  goodwill                                                  |       | 45         |       | 52         |       | 70         |       |
| Impairment of  goodwill                                                    |       | —     |       | 53         |       | 573        |       |
| Exceptional  financing costs                                               |       | 35         |       | 96         |       | —     |       |
|                                                                       |       | 143        |       | 64         |       | 143        |       |
|                                                                       |       |       |       |       |       |       |       |
| Ordinary  operations:                                                      |       |       |       |       |       |       |       |
| The Netherlands                                                            |       | 50         |       | 57         |       | 86         |       |
| Foreign                                                                    |       | 93         |       | 7          |       | 57         |       |
|                                                                       |       | 143        |       | 64         |       | 143        |       |
|                                                                       |       |       |       |       |       |       |       |
| Exceptional  result in 2004 and 2003 and extraordinary result in 2002:     |       |       |       |       |       |       |       |
| The Netherlands                                                            |       | (2         | )          | 38         |       | 5          |       |
| Foreign                                                                    |       | (38        | )          | (83        | )          | (108       | )          |
|                                                                       |       | (40        | )          | (45        | )          | (103       | )          |
| ** **                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total  result before amortization and impairment of goodwill and taxes** | ** ** | **103**    | ** ** | **19**     | ** ** | **40**     | ** ** |

 

Theallocation of taxes as per Consolidated Statement of Income is as follows:

 
| ** **                                                             | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Ordinary  operations:                                                  |       |       |       |       |       |       |       |
| The Netherlands                                                        |       | 29         |       | (14        | )          | (16        | )          |
| Foreign                                                                |       | (16        | )          | 6          |       | (2         | )          |
|                                                                   |       | 13         |       | (8         | )          | (18        | )          |
|                                                                   |       |       |       |       |       |       |       |
| Exceptional  result in 2004 and 2003 and extraordinary result in 2002: |       |       |       |       |       |       |       |
| The Netherlands                                                        |       | —     |       | 22         |       | 1          |       |
| Foreign                                                                |       | 20         |       | 54         |       | 28         |       |
|                                                                   |       | 20         |       | 76         |       | 29         |       |
| ** **                                                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total  taxes**                                                       | ** ** | **33**     | ** ** | **68**     | ** ** | **11**     | ** ** |

 

Areconciliation from Buhrmann’s Dutch statutory tax rate to its weighted averagestatutory tax rate and effective tax rate is as follows:

 
| ** **                                                               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Statutory tax  rate in the Netherlands                                   |       | 34.5     | %          | 34.5     | %          | 34.5     | %          |
| Tax rate  differential resulting from geographical mix                   |       | (3.9     | )%         | (6.6     | )%         | (8.9     | )%         |
| Weighted average  statutory tax rate                                     |       | 30.6     | %          | 27.9     | %          | 25.6     | %          |
| Changes in  deferred tax assets and allowances                           |       | (24.8    | )%         | (3.6     | )%         | (5.3     | )%         |
| Other (including  exempt income, non-deductible expenses and incentives) |       | (14.7    | )%         | (11.8    | )%         | (8.1     | )%         |
| Effective tax  rate                                                      |       | (8.9     | )%         | 12.5     | %          | 12.2     | %          |

 

In anumber of countries, tax loss carry-forwards (€150 million atDecember 31, 2004) are kept which have not been valued, due to thespecific circumstances under which they can be utilized.

 

F-21

----

 

**11.****                               Total minority interest**

 

Minorityinterests mainly represent the 48.5% share of third parties in the result ofCorporate Express Australia Ltd. The exceptional result in 2003 is theadjustment of the recognition of catalog contributions in the Office ProductsAustralia Division to fully comply with Buhrmann accounting policies (seeNote 4).

 

**12.****                               Extraordinary result(after tax)**

 

Extraordinaryincome in 2002 was €10 million which consists of a release of a provisionfor warranties relating to divested companies which were settled in 2002.Extraordinary expense in 2002 was €113 million which includes a charge of€111 million relating to both restructuring measures of €60 millionand non cash write-offs on IT and distribution infrastructure of€51 million. A tax benefit of €29 million related to these chargeswas taken into account.

 

F-22

----

 

**13.****                     Remunerationand loans Members of the Executive Board and Supervisory Board**

 

**Remuneration policy Members of the ExecutiveBoard**

 

The remuneration policy for the Executive Board is determined by theSupervisory Board on the recommendation of the Compensation, Nominating andCorporate Governance Committee (“CNCG Committee”). The remuneration policy wasadopted in the Annual General Meeting of Shareholders held on April 29,2004. Any material amendments to the policy shall be submitted to the GeneralMeeting of Shareholders. In the reporting year, no changes were made to theremuneration policy, with the exception of the new Share Option Plan, which wasapproved by the General Meeting of Shareholders held on April 29, 2004.

 

Determination of the remuneration for each individual Executive BoardMember is in principle a responsibility of the Supervisory Board. TheSupervisory Board has delegated this authority to the CNCG Committee. Pursuantto this delegation of authority, and acting within the principles of theremuneration policy, the CNCG Committee determines the remuneration packagesfor the Members of the Executive Board, including base salary, pension rights,bonus and long-term incentive awards, grants of share options and any severancepayments. The CNCG Committee may make decisions which reflect specialcircumstances and make remuneration alterations which will be explained in thenext annual report. The CNCG Committee does not retain remuneration consultantsbut seeks professional advice from external advisors as it sees fit.

 

The objective of the remuneration policy for Members of the ExecutiveBoard is to attract and retain qualified and expert Executive Board Memberswith an international outlook and motivate them to perform in such a way thatthe value of Buhrmann is enhanced. Remuneration of the Executive Board is aimedat balancing short-term operational performance with the longer-term objectiveof creating sustainable value and growth. Levels of remuneration are reviewedannually taking account of competitive levels of remuneration according torelevant industry comparisons in each country environment. From time to timethe CNCG Committee will seek expert advice on remuneration levels.

 

In addition, employment contracts and main conditions of employment forMembers of the Executive Board are annually reviewed. Currently, Members of theExecutive Board have been appointed for an indefinite term. Notice periods ofup to six months for termination of employment have been set for each ExecutiveBoard Member.

 

The remuneration for Members of the Executive Board consists of a basesalary, variable pay comprising an annual performance bonus, share option plan,pension, long-term incentive plan (North America only) and pre-pensionprovision (Europe only). In addition, allowances and fringe benefits similar tothose of many other employees at Buhrmann are paid. The details of theremuneration package are as follows:

 

***Base salary:***

 

The base salary for Members of the Executive Board is set at a marketcompetitive level, using industry survey data provided by outside remunerationadvisors. Where a Member of the Executive Board resides outside theNetherlands, benchmark salary levels are referenced for Europe or NorthAmerica.

 

***Variable pay:***

 

Variable pay is an important part of the remuneration package for theExecutive Board. Members of the Executive Board participate in an annual bonusplan based on the achievement of a number of targets, which reflect key driversfor value creation, long-term growth in shareholder value and the developmentof earnings per share.

 

F-23

----

 

Target bonus levels for the Executive Board range from 50% to 75% ofbase salary. The amount of the annual bonus is determined by the CNCG Committeebased on the achievement of targets set by the CNCG Committee. For the ChiefExecutive Officer, Chief Financial Officer and other European based BoardMembers, the bonus targets may be a combination of the performance of the totalGroup, division based targets and individual targets. The bonus of the NorthAmerican based Executive Board member entirely relates to the performance ofBuhrmann’s Office Products North America business and includes anoverachievement bonus range for above-target performance. The CNCG Committeehas the right to change targets as a result of unforeseen circumstances and itmay also decide to grant a special award for special circumstances if such isjustified in the opinion of the CNCG Committee. Such measures will be accountedfor in the annual report.

 

In addition to the annual bonus plan, Mr Hoffman participates in along-term incentive plan designed specifically for the senior management of theOffice Products North America Division. Under this incentive plan, which has athree year duration, a bonus of 2.5 times base salary can be earned annuallysubject to the achievement of specific performance conditions related to annualeconomic value creation targets. In the event of an overachievement of thetarget, the long-term incentive payment may be increased to up to 3.125 timesbase salary.

 

***Share Option Plan:***

 

Buhrmann operates a share option plan, the “Buhrmann Incentive Plan”,which aims to focus senior management on the growth of long-term sustainablevalue for shareholders. The Executive Board Members participate in this plan.The allocation of the share options granted to the individual Executive BoardMembers is determined by the CNCG Committee, on an annual basis. At the AnnualGeneral Shareholders’ meeting held on April 29, 2004, shareholdersapproved the adoption of a new share option plan. Pursuant to this “newBuhrmann Incentive Plan”, the number of options granted is dependent on theperformance of the Company relative to a peer group as measured over athree-year period up to the vesting date. For details about the “BuhrmannIncentive Plan” and the “new Buhrmann Incentive Plan”, see Note 26.

 

***Pension andPre-Pension provision:***

 

Retirement benefits are designed to be in line with the relevant marketpractice and consistent with those provided by other multinational companies ineach country of residence. For the two Dutch Executive Board Members,Mr. F.H.J. Koffrie and Mr. F.F. Waller, current pension arrangementsare based on individual defined contribution plans with a retirement age of 65,and with premium payments (based on a table increasing relative to age) untilthe age of 60. Pre-pension arrangements provide for retirement from the age of60 to 62 dependent on agreement with the Supervisory Board. In addition,pension arrangements include an entitlement to a pension in the event ofill-health or disability and a spouse’s or dependant’s pension on death, onterms similar to those applicable to employees participating in the DutchBuhrmann Pension Fund. Mr. G. Dean, who is a U.K. citizen, has pensionarrangements divided between the U.K. and the Netherlands. His current pensionarrangement consists partly of the individual defined contribution plan inplace for the Dutch Executive Board Members and partly of a participation inthe defined benefit scheme of Corporate Express U.K. Ltd., with aretirement age of 61. Pre-pension arrangements are again identical to those ofthe Dutch Members of the Executive Board, while the pension arrangements in theevent of ill health, disability and death are a combination of terms applyingto employees participating in the Corporate Express UK Ltd Pension Fundand the Dutch Members of the Executive Board. Mr. M. Hoffman, who is aU.S. resident, is eligible to participate in the regular U.S. CorporateExpress, Inc. defined contribution plan (401K) on terms similar to otheremployees of Corporate Express, Inc. Participants are eligible, at theearliest, to take their contributions at age 59.5, or latest age 70.

 

**Personal Loans**

 

The Company does not grant personal loans or guarantees to Members ofthe Executive Board. Since 2003 no loans have been granted. Outstanding loanshave been granted to meet upfront Dutch income tax on share options granted upto and including 2002.

 

F-24

----

 

**Severance Payments**

 

The current contracts of the Members of the Executive Board determinethat where employment is terminated in the event of an acquisition of theCompany or where actual control passes into other hands (“change of control”),or in the case of reorganisation, termination of the Company’s activities or inother comparable circumstances that cannot be considered as blameworthyfunction fulfilment on the part of the Board Member concerned, a fixed severancepayment will be made. In such cases, compensation will be paid by Buhrmann tothe amount of three times the annual fixed salary (twice the annual fixedsalary in the case of the contract of Mr. M.S. Hoffman) and the pensionaccumulation over the period of three, respectively two years (in the case ofthe contract with Mr. Hoffman), will continue.

 

As regards to other situations, no fixed severance payment has beenarranged with the Members of the Executive Board. Buhrmann believes that thecircumstances of the case should be taken into account, considering relevantfactors such as the reason for the termination, the age of the person inquestion, and the duration of employment, when determining the amount ofseverance payment, as a result of which, in specific cases, it could exceed thecompensation mentioned in the Dutch Corporate Governance Code. The performanceby a Board Member of his duties will in any event be an important factor.

 

**Remuneration Members of the Executive Boardin 2004 (in thousands of****€):**

 
| ** **        | ** ** | **Salary** | ** ** | **Bonus**** | ** ** | **Other** | ** ** | **Pension** | ** ** |
|-------------------|------------|------------|------------|-------------|------------|-----------|------------|-------------|------------|
| **incentives***** |
| ** **        | ** ** | **2004**   | ** ** | **2003**    | ** ** | **2004**  | ** ** | **2003**    | ** ** | **2004** | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
| F.H.J. Koffrie    |       | 561        |       | 555         |       | 252       |       | (60         | )%         | — |   | (0 | )% | — |   | — |   | 217 |   | 220 |   |
| R.W.A. de Becker* |       | 63         |       | 375         |       | —    |       | (0          | )%         | — |   | (0 | )% | — |   | — |   | 19 |   | 439 |   |
| G. Dean           |       | 421        |       | 417         |       | 210       |       | (100        | )%         | — |   | (0 | )% | 250 |   | 375 |   | 335 |   | 282 |   |
| M.S. Hoffman      |       | 522        |       | 548         |       | 449       |       | (114        | )%         | 220 |   | (54 | )% | 1,335 |   | 1,182 |   | 6 |   | 6 |   |
| F.F. Waller       |       | 344        |       | 340         |       | 172       |       | (100        | )%         | — |   | (0 | )% | — |   | 68 |   | 125 |   | 119 |   |
| **Total**         | ** ** | **1,911**  | ** ** | **2,235**   | ** ** | **1,083** | ** ** | ** **  | ** ** | **220** | ** ** | ** ** | ** ** | **1,585** | ** ** | **1,625** | ** ** | **702** | ** ** | **1,066** | ** ** |

 

----

*                                         Mr. DeBecker left the Company as of February 29, 2004. The remuneration reportedrelates only to the period of Membership of the Executive Board and is based onthe performance for the period.

 

**                                  Thepercentage in parenthesis represents the percentage score of the total bonusopportunity for the individual that was awarded over the respective year’sperformance paid out in the first quarter of the following year.

 

***                           Otherincentives are cash remunerations or accruals for cash remunerations such asthe long-term incentive plan for Mr. Hoffman or any special awardsgranted.

 

Remuneration is paid in euros with exception of the remuneration of MrHoffman whose remuneration is paid in US dollars. Correcting for currencytranslation effects and period of membership of the Executive Board theannualized increase of the total salary costs was about 2% compared to 2003.The total increase reflected a 1% increase for the European Executive Boardmembers and a 5% increase for the North American Executive Board member.

 

Bonuses related to 2004 amounted to € 1,083 thousand. The otherincentives amount to € 1,585 thousand. These include a special bonus of €250 thousand to Mr. Dean for the finalization of the divestment ofthe Paper Merchanting Division. The amount for Mr. Hoffman relatesentirely to the accrual for the North American Long-term Incentive Plan.

 

Pension charges of € 702 thousand consist of payments made to therelevant pension schemes and accruals for early retirement according to theregular, contractual rates. The early retirement provision for Mr. DeBecker was released after he left the Company. For an explanation of thesecharges please refer to the paragraph “Pension and Pre-Pension provision”above. The Company has not insured the early retirement plan.

 

F-25

----

 

**Share options for Members of the ExecutiveBoard**

 

On December 31, 2004, the Members of the Executive Board heldoption rights on 774,000 Buhrmann Ordinary Shares granted under the BuhrmannIncentive Plan and the new Buhrmann Incentive Plan.

 

The table below sets forth the movements in the number of outstandingoption rights granted to current Members of the Executive Board.

 
| ** **     | ** ** | **January  1,  2004** | ** ** | **Granted  during  the  year(1)** | ** ** | **Option  exercise  price** | ** ** | **Fair  value  of grant  in €(2)** | ** ** | **Granted in  2004** | ** ** | **Exercised  in 2004** | ** ** | **Expired  in  2004** | ** ** | **Outstanding  Dec 31,  2004** | ** ** | **Expiry date** | ** ** |
|----------------|------------|-----------------------|------------|-----------------------------------|------------|-----------------------------|------------|-----------------------------------------|------------|----------------------|------------|------------------------|------------|-----------------------|------------|--------------------------------|------------|-----------------|------------|
| F.H.J. Koffrie |       | 25,000                |       | 1999                              |       | 15.40                       |       | 101,000                                 |       | —               |       | —                 |       | (25,000               | )          | —                         |       | 11.04.2004      |       |
|           |       | 40,000                |       | 2000                              |       | 32.94                       |       | 418,000                                 |       | —               |       | —                 |       | —                |       | 40,000                         |       | 16.05.2005      |       |
|           |       | 40,000                |       | 2001                              |       | 24.52                       |       | 317,200                                 |       | —               |       | —                 |       | —                |       | 40,000                         |       | 19.04.2006      |       |
|           |       | 55,000                |       | 2002                              |       | 13.69                       |       | 348,150                                 |       | —               |       | —                 |       | —                |       | 55,000                         |       | 05.05.2007      |       |
|           |       | 55,000                |       | 2003                              |       | 2.85                        |       | 72,600                                  |       | —               |       | —                 |       | —                |       | 55,000                         |       | 01.05.2010      |       |
|           |       | —                |       | 2004                              |       | 7.79                        |       | 215,900                                 |       | 85,000               |       | —                 |       | —                |       | 85,000                         |       | 02.05.2011      |       |
| ** **     | ** ** | **215,000**           | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                              | ** ** | **85,000**           | ** ** | **—**             | ** ** | **(25,000**           | **)**      | **275,000**                    |       |            |       |
| G. Dean        |       | 20,000                |       | 1999                              |       | 15.40                       |       | 80,800                                  |       | —               |       | —                 |       | (20,000               | )          | —                         |       | 11.04.2004      |       |
|           |       | 25,000                |       | 2000                              |       | 26.35                       |       | 261,250                                 |       | —               |       | —                 |       | —                |       | 25,000                         |       | 16.05.2005      |       |
|           |       | 27,500                |       | 2001                              |       | 19.61                       |       | 218,075                                 |       | —               |       | —                 |       | —                |       | 27,500                         |       | 19.04.2006      |       |
|           |       | 35,000                |       | 2002                              |       | 13.69                       |       | 221,550                                 |       | —               |       | —                 |       | —                |       | 35,000                         |       | 05.05.2007      |       |
|           |       | 35,000                |       | 2003                              |       | 2.85                        |       | 46,200                                  |       | —               |       | —                 |       | —                |       | 35,000                         |       | 01.05.2010      |       |
|           |       | —                |       | 2004                              |       | 7.79                        |       | 106,680                                 |       | 42,000               |       | —                 |       | —                |       | 42,000                         |       | 02.05.2011      |       |
| ** **     | ** ** | **142,500**           | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                              | ** ** | **42,000**           | ** ** | **—**             | ** ** | **(20,000**           | **)**      | **164,500**                    |       |            |       |
| M.S. Hoffman   |       | 15,000                |       | 2000                              |       | 26.35                       |       | 156,750                                 |       | —               |       | —                 |       | —                |       | 15,000                         |       | 16.05.2005      |       |
|           |       | 17,500                |       | 2001                              |       | 19.61                       |       | 138,775                                 |       | —               |       | —                 |       | —                |       | 17,500                         |       | 19.04.2006      |       |
|           |       | 50,000                |       | 2002                              |       | 13.69                       |       | 316,500                                 |       | —               |       | —                 |       | —                |       | 50,000                         |       | 05.05.2007      |       |
|           |       | 50,000                |       | 2003                              |       | 2.85                        |       | 66,000                                  |       | —               |       | —                 |       | —                |       | 50,000                         |       | 01.05.2010      |       |
|           |       | —                |       | 2004                              |       | 7.79                        |       | 152,400                                 |       | 60,000               |       | —                 |       | —                |       | 60,000                         |       | 02.05.2011      |       |
| ** **     | ** ** | **132,500**           | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                              | ** ** | **60,000**           | ** ** | **—**             | ** ** | **—**            | ** ** | **192,500**                    |       |            |       |
| F.F. Waller    |       | 20,000                |       | 2000                              |       | 32.94                       |       | 209,000                                 |       | —               |       | —                 |       | —                |       | 20,000                         |       | 16.05.2005      |       |
|           |       | 20,000                |       | 2001                              |       | 24.52                       |       | 158,600                                 |       | —               |       | —                 |       | —                |       | 20,000                         |       | 19.04.2006      |       |
|           |       | 30,000                |       | 2002                              |       | 13.69                       |       | 189,900                                 |       | —               |       | —                 |       | —                |       | 30,000                         |       | 05.05.2007      |       |
|           |       | 30,000                |       | 2003                              |       | 2.85                        |       | 39,600                                  |       | —               |       | —                 |       | —                |       | 30,000                         |       | 01.05.2010      |       |
|           |       | —                |       | 2004                              |       | 7.79                        |       | 106,680                                 |       | 42,000               |       | —                 |       | —                |       | 42,000                         |       | 02.05.2011      |       |
| ** **     | ** ** | **100,000**           | ** ** | ** **                        |       |                        |       |                                    |       | **42,000**           |       | —                 |       | —                |       | 142,000                        |       |            |       |
| **Total**      | ** ** | **590,000**           | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                              | ** ** | **229,000**          | ** ** | **—**             | ** ** | **(45,000**           | **)**      | **774,000**                    |       |            |       |

 

----

(1)                                  UnderDutch fiscal rules, management receiving options could under the BuhrmannIncentive Plan up to and including 2003 elect to accept a 25% higher exerciseprice. The base exercise price was set at €7.79 in 2004, €2.85 in 2003, €13.69in 2002, €19.61 in 2001, €26.35 in 2000 and € 15.40 in 1999, equalling theshare price at close of business on the Amsterdam Stock Exchange on May 3,2004, May 2, 2003, May 6, 2002, April 20, 2001 and April 17,2000 respectively.

 

(2)                                  Thefair value is calculated using the Black & Scholes option pricedetermination model as explained in Note 26. It does not reflect the marketvalue.

 

F-26

----

 

# **Loans to Members of the ExecutiveBoard**

#  

At the end of 2004, loans totaling €74 thousand were outstandingto Members of the Executive Board (2003: €116 thousand). No new loans havebeen granted to Members of the executive Board since 2002. The outstandingloans are generally repaid over a period of five years from their date ofgrant. Historically, these loans have been granted by the Company within thecontext of the Buhrmann Share Option Plan and served to finance the upfrontpayment of income taxes due from the optionees upon the grant of the optionsunder Dutch tax law. Specification (in thousands of €):

 

 
| ** **            | ** **            | **Principal** | ** ** | **Interest** | ** ** | **Outstanding as at** | ** ** | **Repaid in** | ** ** | **Outstanding as at** | ** ** |
|-----------------------|-----------------------|---------------|------------|--------------|------------|-----------------------|------------|---------------|------------|-----------------------|------------|
| **December 31,** | **December 31,** |
| **2003**              | **2004**              | **2004**      |
| **F.H.J.  Koffrie:**  |                  |          |       |         |       |                  |       |          |       |                  |       |
| 1999                  |                  | 46            |       | 4.00         | %          | 5                     |       | 5             |       |                  |       |
| 2000                  |                  | 25            |       | 5.00         | %          | 8                     |       | 5             |       | 3                     |       |
| 2001                  |                  | 16            |       | 5.25         | %          | 8                     |       | 3             |       | 5                     |       |
| 2002                  |                  | 78            |       | 5.25         | %          | 56                    |       | 16            |       | 40                    |       |
|                  |                  |          |       |         |       | 77                    |       | 29            |       | 48                    |       |
|                  |                  |          |       |         |       |                  |       |          |       |                  |       |
| **F.F.  Waller:**     |                  |          |       |         |       |                  |       |          |       |                  |       |
| 2000                  |                  | 13            |       | 5.00         | %          | 4                     |       | 3             |       | 1                     |       |
| 2001                  |                  | 8             |       | 5.25         | %          | 4                     |       | 1             |       | 3                     |       |
| 2002                  |                  | 43            |       | 5.25         | %          | 31                    |       | 9             |       | 22                    |       |
|                  |                  |          |       |         |       | 39                    |       | 13            |       | 26                    |       |
|                  |                  |          |       |         |       |                  |       |          |       |                  |       |
| **Total**             | ** **            | ** **    | ** ** | ** **   | ** ** | **116**               | ** ** | **42**        | ** ** | **74**                |       |

 

**Ownership of Securities by Members of theExecutive Board**

 

Of the Members of the Executive Board, the following persons heldshares in Buhrmann at December 31, 2004 as set forth below:

 

 
| ** **     | ** ** | **Ordinary  Shares** | ** ** |
|----------------|------------|----------------------|------------|
| F.H.J. Koffrie |       | 50,595               |       |
| M.S. Hoffman   |       | 75,000               |       |
| F.F. Waller    |       | 3,129                |       |
| ** **     |       | **128,724**          |       |

 

Members of the Executive Board individually and in the aggregate ownless than one percent of Ordinary Shares and (depositary receipts of)Preference Shares A in Buhrmann.

 

F-27

----

 

**Remuneration of Members of the SupervisoryBoard**

 

The General Meeting of Shareholders determines the remuneration for theSupervisory Board Members. The remuneration for a Supervisory Board Member doesnot depend on the Company’s results.

 

Remuneration to Members of the Supervisory Board in 2004 amounted toapproximately €270,000 and may be specified as follows (in thousands of €):

 
| ** **        | ** ** | **2004**   | ** ** |
|-------------------|------------|------------|------------|
| P.C. Van den Hoek |       | €     | 65.6       | (1)(2) |
| A.G. Jacobs       |       | 55.6       | (1)(2)     |
| R.C. Gay(3)       |       | 9.3        |       |
| J.J. Hannan       |       | 28.0       |       |
| S.W. Barnes(4)    |       | 18.6       |       |
| J. Peelen         |       | 32.6       | (2)        |
| G.H. Smit         |       | 30.3       | (2)        |
| R. Zwartendijk    |       | 30.3       | (2)        |
| **Total**         | ** ** | **€** | **270.3**  | ** ** |

 

----

(1)                                  Includingremuneration received as a Member of the Supervisory Board of BuhrmannNederland Holding B.V.

 

(2)                                  Includingremuneration received as a Member of the Audit Committee and/or theCompensation, Nominating and Corporate Governance Committee, as applicable.

 

(3)                                  Mr. Gay retiredfrom the Supervisory Board on April 29, 2004.

 

(4)                                  Mr. Barnes wasappointed as a Member of the Supervisory Board on April 29, 2004.

 

**Ownership of Securities by Members of theSupervisory Board**

 

Of the Members of the Supervisory Board, only the following personsheld Ordinary Shares and depositary receipts of Preference Shares A in Buhrmannat December 31, 2004 as set forth below:

 

 
| ** **        | ** ** | **Ordinary  Shares** | ** ** | **Depositary  receipts of  Preference  Shares A** | ** ** |
|-------------------|------------|----------------------|------------|--------------------------------------------------------|------------|
| P.C. van den Hoek |       | 31,364               |       | —                                                 |       |
| A.G. Jacobs       |       | 954                  |       | 411                                                    |       |
| ** **        | ** ** | **32,318**           | ** ** | **411**                                                |       |

 

Mr. Van den Hoek transferred the discretionary management of hissecurities portfolio to an independent third-party.

 

The Members of the Supervisory Board held no option rights to Buhrmannshares during 2004 and as at December 31, 2004.

 

F-28

----

 

**14.****                     Earnings pershare**

 

Basic earnings per share are computed by dividing result afterdeduction of dividend on Preference Shares by the weighted average number ofOrdinary Shares outstanding for the periods under review. Dividends paid toholders of Preference Shares A and C of €37 million in 2004,€33 million in 2003 and €32 million in 2002 were deducted for theyears presented. Fully diluted earnings per share assume that any dilutiveconvertible securities were converted at the beginning of each year and all optionsoutstanding at the end of the year were exercized, insofar as the averagemarketprice was higher than the average exercise price during the financialyear.

 

The computation of basic and fully diluted earnings per Ordinary Shareis as follows (in millions of €, unless otherwise indicated):

 
| ** **                                                            | ** ** | ** **                                                                                                                                                                            | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Computation basic earnings per share**                              |       |                                                                                                                                                                                  |       |     |       |     |       |
| Net result                                                            |       | 80                                                                                                                                                                                    |       | (132     | )          | (588     | )          |
| Less dividends on Preference Shares A and C                           |       | (37                                                                                                                                                                                   | )          | (33      | )          | (32      | )          |
| C—                                                               |       | Net result after deduction of dividend on Preference Shares                                                                                                                           |       | 43       |       | (165     | )          | (620     | )          |
|                                                                  |       | Exceptional result                                                                                                                                                                    |       | 14       |       | 70       |       | —   |       |
|                                                                  |       | Extraordinary result                                                                                                                                                                  |       | —   |       | —   |       | 74       |       |
| B—                                                               |       | Net result before exceptional and extraordinary results after  deduction of dividend on Preference Shares                                                                             |       | 57       |       | (95      | )          | (546     | )          |
|                                                                  |       | Amortization and impairment of goodwill                                                                                                                                               |       | 45       |       | 105      |       | 643      |       |
| A—                                                               |       | Net result before exceptional and extraordinary results and before  amortization and impairment of goodwill after deduction of dividend on  Preference Shares                         |       | 103      |       | 10       |       | 97       |       |
| Weighted average number of Ordinary Shares outstanding (in thousands) |       | 137,059                                                                                                                                                                               |       | 134,653  |       | 131,818  |       |
| **Basic earnings per share (in €)**                              |       |                                                                                                                                                                                  |       |     |       |     |       |
| A—                                                               |       | Net result before exceptional and extraordinary results and before  amortization and impairment of goodwill                                                                           |       | 0.75     |       | 0.08     |       | 0.74     |       |
| B—                                                               |       | Net result before exceptional and extraordinary results after  amortization and impairment of goodwill                                                                                |       | 0.42     |       | (0.70    | )          | (4.14    | )          |
| C—                                                               |       | Net result including exceptional and extraordinary results and after  amortization and impairment of goodwill                                                                         |       | 0.32     |       | (1.23    | )          | (4.70    | )          |
| **Computation fully diluted earnings per share**                      |       |                                                                                                                                                                                  |       |     |       |     |       |
| Net result                                                            |       | 80                                                                                                                                                                                    |       | (132     | )          | (588     | )          |
| Add-back: interest Subordinated Convertible Bond                      |       | 2                                                                                                                                                                                     |       | 2        |       | —   |       |
| Less: dividend on Preference Shares A                                 |       | (11                                                                                                                                                                                   | )          | (11      | )          | (11      | )          |
| C—                                                               |       | Net result after deduction of dividend on Preference Shares after  assuming dilution                                                                                                  |       | 71       |       | (141     | )          | (599     | )          |
|                                                                  |       | Exceptional result                                                                                                                                                                    |       | 14       |       | 70       |       | —   |       |
|                                                                  |       | Extraordinary result                                                                                                                                                                  |       | —   |       | —   |       | 74       |       |
| B—                                                               |       | Net result before exceptional and extraordinary results after  deduction of dividend on Preference Shares after assuming dilution                                                     |       | 85       |       | (71      | )          | (525     | )          |
|                                                                  |       | Amortization and impairment of goodwill                                                                                                                                               |       | 45       |       | 105      |       | 643      |       |
| A—                                                               |       | Net result before exceptional and extraordinary results and before  amortization and impairment of goodwill after deduction of dividend on Preference  Shares after assuming dilution |       | 130      |       | 34       |       | 118      |       |

 

F-29

----

 
| ** **                                                                                                 | ** ** | ** **                                                                                                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Computation weighted average number of  Ordinary Shares outstanding on fully diluted basis (in thousands): |       |                                                                                                          |       |     |       |     |       |
| Weighted average number of Ordinary Shares outstanding                                                     |       | 137,059                                                                                                       |       | 134,653  |       | 131,818  |       |
| Conversion of Subordinated Convertible Bond(1)                                                             |       | 13,669                                                                                                        |       | 13,669   |       | —   |       |
| Conversion of Preference Shares C(2)                                                                       |       | 37,868                                                                                                        |       | 35,658   |       | 23,157   |       |
| Exercise of Share Option Rights(3)                                                                         |       | 854                                                                                                           |       | 651      |       | 0        |       |
|                                                                                                       |       |                                                                                                          |       | 189,450  |       | 184,630  |       | 154,975  |       |
| **Fully diluted earnings per share* (in €)**                                                          |       |                                                                                                          |       |     |       |     |       |
| A—                                                                                                    |       | Net result before exceptional and extraordinary results and before  amortization and impairment of goodwill   |       | 0.69     |       | 0.08     |       | 0.74     |       |
| B—                                                                                                    |       | Net result before exceptional and extraordinary results after  amortization and impairment of goodwill        |       | 0.42     |       | (0.70    | )          | (4.14    | )          |
| C—                                                                                                    |       | Net result including exceptional and extraordinary results and after  amortization and impairment of goodwill |       | 0.32     |       | (1.23    | )          | (4.70    | )          |

 
| *          |       | A mathematical calculation of the fully  diluted earnings per share would be as follows (in €):          |       |
|------------|------------|---------------------------------------------------------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                                                                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| A—    |       | Net result before exceptional and extraordinary results and before  amortization and impairment of goodwill   |       | 0.69 |   | 0.19 |   | 0.76 |   |
| B—    |       | Net result before exceptional and extraordinary results after  amortization and impairment of goodwill        |       | 0.45 |   | (0.38 | ) | (3.39 | ) |
| C—    |       | Net result including exceptional and extraordinary results and after  amortization and impairment of goodwill |       | 0.38 |   | (0.76 | ) | (3.87 | ) |

 

When fully diluted earnings per share figures are higher than basicearnings per share, fully diluted earnings per share are adjusted downwards tobasic earnings per share.

 

**(1)****                                 SubordinatedConvertible Bond**

 

A 7-year Subordinated Convertible Bond loan with listing at theEuronext Exchange in Amsterdam was issued in December 2003 for the amountof € 114,819,000, with a coupon of 2%. The bonds are convertible in BuhrmannOrdinary Shares at a conversion price of €8.40 per share which would result inthe issuance of 13,669 (in thousands) Ordinary Shares.

 

**(2)****                                 PreferenceShares C**

 

The dilution resulting from conversion of the Preference Shares C iscalculated on the basis of the statutory conversion price taking into accountthe dividend on these shares over the last financial year. The conversion priceamounted to €11.8968 at the end of 2004 (2003 €11.9318). The number of OrdinaryShares to be issued at conversion is calculated by dividing the paid-in valueof USD 10,000 per share by the conversion price on the basis of the fixedexchange rate €=USD 1.02547. At year-end 2004, 43,628 Preference Shares C(2003 year-end 41,396) were outstanding entitled to a dividend of 2,568new Preference Shares C or a cash dividend of 6%. In 2005 the Company announcedto pay the cash dividend for an amount of €21 million (US$ 26 million).

 

F-30

----

 

**(3)           ShareOption Rights**

 

The calculation is based on the assumption that the proceeds resultingfrom the exercise of options are used to acquire Ordinary Shares on the stockmarket. In case the market price is higher than the exercise price, dilutionoccurs. In case the exercise price is higher than the market price, no dilutionoccurs. At December 31, 2004 the following calculation was made:

 
| Options in the money: options granted per  2004 at an average exercise price of |   | €    | 2.87      |   | A          |   |
|---------------------------------------------------------------------------------|--------|-----------|-----------|--------|------------|--------|
| Average market price Ordinary Share  Buhrmann in 2004                           |   | €    | 7.24      |   | B          |   |
| Number of options granted in 2003  outstanding at December 31, 2004        |   | 1,414,700 |      | C      |       |
| Theoretical proceeds from exercise of  options                                  |   | €    | 4,063,578 |   | D=C ́A |   |
| Theoretical purchase treasury stock at  average market price                    |   | 561,139   |      | E=D/B  |       |
| Theoretical increase in outstanding  Ordinary Shares                            |   | 853,561   |      | F=C-E  |       |

 

F-31

----

 

**Notes to the Consolidated Balance Sheets**

**(in millions of €, unless stated otherwise)**

 

**15.****                     Intangiblefixed assets**

 

The changes in intangible fixed assets are asfollows:

 
| ** **                            | ** ** | **Total**  | ** ** | **Goodwill** | ** ** | **Internally used** | ** ** | **Prepayments** | ** ** |
|---------------------------------------|------------|------------|------------|--------------|------------|---------------------|------------|-----------------|------------|
| **Software**                          |
| ** **                            | ** ** | ** ** | ** ** | ** **   | ** ** | ** **          | ** ** | ** **      | ** ** |
| Balance as of December 31, 2003: |       |       |       |         |       |                |       |            |       |
| Cost                                  |       | 2,484      |       | 2,137        |       | 322                 |       | 25              |       |
| Accumulated amortization              |       | (442       | )          | (238         | )          | (204                | )          | —          |       |
| Accumulated impairment                |       | (499       | )          | (499         | )          | —              |       | —          |       |
| **Book  value**                       | ** ** | **1,543**  | ** ** | **1,400**    | ** ** | **118**             | ** ** | **25**          | ** ** |
| ** **                            | ** ** | ** ** | ** ** | ** **   | ** ** | ** **          | ** ** | ** **      | ** ** |
| Net investment                        |       | 37         |       | 6            |       | 31                  |       | —          |       |
| Put into use                          |       | —     |       | —       |       | 11                  |       | (11             | )          |
| Amortization                          |       | (91        | )          | (45          | )          | (46                 | )          | —          |       |
| Translation differences               |       | (86        | )          | (79          | )          | (6                  | )          | (1              | )          |
| **Total  changes**                    | ** ** | **(140**   | **)**      | **(118**     | **)**      | **(10**             | **)**      | **(12**         | **)**      |
| ** **                            | ** ** | ** ** | ** ** | ** **   | ** ** | ** **          | ** ** | ** **      | ** ** |
| Balance as of December 31, 2004: |       |       |       |         |       |                |       |            |       |
| Cost                                  |       | 2,315      |       | 2,027        |       | 275                 |       | 13              |       |
| Accumulated amortization              |       | (436       | )          | (269         | )          | (167                | )          | —          |       |
| Accumulated impairment                |       | (476       | )          | (476         | )          | —              |       | —          |       |
| **Book  value**                       | ** ** | **1,403**  | ** ** | **1,282**    | ** ** | **108**             | ** ** | **13**          | ** ** |

 

The goodwill paid for companies acquired is (generally) amortized overa period of 40 years. The assessment of the economic life is based on theconsideration that a permanent advantage is being realized. This is based onthe following characteristics of the business:

 

•                  The high entry to acquire a major position in therelevant markets. This is explained by a combination of high customer loyalty,the extensiveness of the distribution network, relatively complex informationtechnology required and the substantial benefits of scale in purchasing;

 

•                  The relatively low investment required tosubsequently maintain established market positions;

 

•                  The large number of suppliers and customers, none ofwhom individually has a major impact on the relevant entity (cash generatingunit).

 

At least annually a goodwill impairment test is performed to determineif an impairment for permanent diminution in value needs to be recorded. Underthe impairment test, the fair value of the cash generating unit that containsthe goodwill is calculated based on estimated discounted future cash flows,which is compared to the book value of the cash generating, including goodwill.

 

In 2004, the calculated fair value was in excess of the book value. Anorganic decline of sales leading to a reduced level of profitability for ourOffice Products Europe Division caused a reduction in the calculated fair valueof that business in 2003. Since this fair value was lower than the book value,an impairment of goodwill of € 53 million for Office Products EuropeDivision was recognized in 2003.

 

Amortization cost of goodwill was €52 million in 2003 and €70 million in 2002 and amortization cost of internally used software was€49 million in 2003 and €45 million in 2002.

 

F-32

----

 

**16.****                     Tangiblefixed assets**

 

The movements in tangible fixed assets are as follows:

 
| ** **                            | ** ** | **Total**  | ** ** | **Land and  buildings** | ** ** | **Machinery and  equipment** | ** ** | **Other  equipment** | ** ** |
|---------------------------------------|------------|------------|------------|-------------------------|------------|------------------------------|------------|----------------------|------------|
| Balance as of December 31, 2003: |       |       |       |                    |       |                         |       |                 |       |
| Cost                                  |       | 476        |       | 173                     |       | 189                          |       | 114                  |       |
| Accumulated depreciation              |       | (268       | )          | (66                     | )          | (119                         | )          | (83                  | )          |
| **Book  value**                       | ** ** | **208**    | ** ** | **107**                 | ** ** | **70**                       | ** ** | **31**               | ** ** |
| ** **                            | ** ** | ** ** | ** ** | ** **              | ** ** | ** **                   | ** ** | ** **           | ** ** |
| Net investments                       |       | 28         |       | 5                       |       | 14                           |       | 9                    |       |
| Depreciation                          |       | (38        | )          | (9                      | )          | (17                          | )          | (12                  | )          |
| Reclassification                      |       | —     |       | 1                       |       | (1                           | )          | —               |       |
| Translation differences               |       | (8         | )          | (5                      | )          | (2                           | )          | (1                   | )          |
| **Total  changes**                    | ** ** | **(18**    | **)**      | **(8**                  | **)**      | **(6**                       | **)**      | **(4**               | **)**      |
| ** **                            | ** ** | ** ** | ** ** | ** **              | ** ** | ** **                   | ** ** | ** **           | ** ** |
| Balance as of December 31, 2004: |       |       |       |                    |       |                         |       |                 |       |
| Cost                                  |       | 452        |       | 168                     |       | 180                          |       | 104                  |       |
| Accumulated depreciation              |       | (262       | )          | (69                     | )          | (116                         | )          | (77                  | )          |
| **Book  value**                       | ** ** | **190**    | ** ** | **99**                  | ** ** | **64**                       | ** ** | **27**               | ** ** |

 

Depreciation cost was €56 million in 2003 and €69 million in2002.

 

**17.****                     Financialfixed assets**

 

The movements in financial fixed assets are as follows:

 
| ** **                             | ** ** | **Total** | ** ** | **Participations** | ** ** | **Financial  receivables** | ** ** | **Capitalized  financing costs** | ** ** | **Deferred  taxes** | ** ** |
|----------------------------------------|------------|-----------|------------|--------------------|------------|----------------------------|------------|----------------------------------|------------|---------------------|------------|
| *Book  value December 31, 2003*   |       | 421       |       | 6                  |       | 19                         |       | 30                               |       | 366                 |       |
| Other financial results                |       | (5        | )          | (1                 | )          | (4                         | )          | —                           |       | —              |       |
| Investments/capitalized costs          |       | 11        |       | —             |       | 4                          |       | 7                                |       | —              |       |
| Transfers deferred tax liabilities     |       | (33       | )          | —             |       | —                     |       | —                           |       | (33                 | )          |
| Transfer to short-term                 |       | 1         |       | —             |       | —                     |       | —                           |       | 1                   |       |
| Amortization of financing costs        |       | (5        | )          | —             |       | —                     |       | (5                               | )          | —              |       |
| Impairment of financing costs          |       | (4        | )          | —             |       | —                     |       | (4                               | )          | —              |       |
| Additions charged to result            |       | 26        |       | —             |       | —                     |       | —                           |       | 26                  |       |
| Translation differences                |       | (28       | )          | —             |       | (1                         | )          | (2                               | )          | (25                 | )          |
| **Book  value December 31, 2004** | ** ** | **384**   | ** ** | **5**              | ** ** | **18**                     | ** ** | **26**                           | ** ** | **335**             | ** ** |

 

Financial receivables relate to various claims and receivablesresulting from acquisitions and divestments with a long-term nature.

 

Financing fees are the capitalized costs related to the issuance andcontractual efforts for the various components of the debt. The capitalizedfinancing fees are amortized over the duration of the related debt instrument.

 

Deferred tax assets are detailed in Note 23.

 

F-33

----

 

**18.****                     Receivables**

 
| ** **                     | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|--------------------------------|------------|----------------------------|------------|----------------------------|------------|
| *Accounts  receivable*         |       |                       |       | 731                        |       |   |   | 736 |   |
| *Other  receivables*           |       |                       |       |                       |       |   |   |   |   |
| Accrued income                 |       | 112                        |       |                       |       | 126 |   |   |   |
| Financial receivables          |       | 22                         |       |                       |       | 18 |   |   |   |
| Other receivables and accruals |       | 63                         |       |                       |       | 57 |   |   |   |
|                           |       |                       |       | 197                        |       |   |   | 201 |   |
| **Total  receivables**         | ** ** | ** **                 | ** ** | **928**                    | ** ** | ** ** | ** ** | **937** | ** ** |

 

Of the total receivables of €928 million, an amount of€5 million will mature after more than one year (2003: €1 million).

 

As per December 31, 2004, accounts receivable of €239 millionwere pledged under the accounts receivable securitization program. Thesereceivables and borrowings related to this program are included in theConsolidated Balance Sheet (see Note 24).

 

Accrued income consists mainly of supplier rebates and catalogcontributions.

 

Financial receivables relate to accruals for interest and profit tax.

 

Other receivables and accruals include among others prepayments forlabor costs and other operating costs (such as rent and insurance premiums).

 

The movements in the allowance for doubtful accounts receivable areshown in Note 36.

 

**19.****                     WorkingCapital**

 
| ** **                               | ** ** | **December 31,** | ** ** |
|------------------------------------------|------------|-----------------------|------------|
| ** **                               | ** ** | **2004**              | ** ** | **2003** | ** ** |
| Inventories                              |       | 422                   |       | 423 |   |
| Accounts receivable                      |       | 731                   |       | 736 |   |
| Accrued income (Note 18)                 |       | 112                   |       | 126 |   |
| Other receivables and accruals (Note 18) |       | 63                    |       | 57 |   |
| Accounts payable                         |       | (663                  | )          | (644 | ) |
| Other payables and accruals (Note 25)    |       | (246                  | )          | (243 | ) |
| ** **                               | ** ** | **419**               | ** ** | **456** |   |

 

**20.****                     CapitalEmployed**

 
| ** **                                        | ** ** | **December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **2004**              | ** ** | **2003** | ** ** |
| Tangible fixed assets                             |       | 190                   |       | 208 |   |
| Internally used software (including  prepayments) |       | 121                   |       | 143 |   |
| Working capital                                   |       | 419                   |       | 456 |   |
| Capital employed before goodwill                  |       | 730                   |       | 807 |   |
| Goodwill                                          |       | 1,282                 |       | 1,400 |   |
| **Total  capital employed including goodwill**    | ** ** | **2,012**             | ** ** | **2,207** | ** ** |

 

F-34

----

 

**21.****                     Issued andPaid in Capital and Additional Paid-in Capital**

 

Buhrmann had an authorized share capital at December 31, 2004 of610,000,000 shares, divided into 250,000,000 Ordinary Shares, 54,940,000Preference Shares A, 305,000,000 Preference Shares B and 60,000 PreferenceShares C. The Ordinary Shares may, at the option of the shareholder, be bearershares or registered shares. The Preference Shares A and B can only beregistered shares. The Preference Shares C are registered shares, but may undercertain conditions be bearer shares. Each share has a nominal value of € 1.20.

 

At December 31, 2004, the issued and paid-in share capital wasdivided into 191,452,135 issued shares, consisting of 138,126,528 OrdinaryShares, 53,281,979 Preference Shares A and 43,628 Preference Shares C, all ofwhich have been fully paid-up. No Preference Shares B have been issued or areotherwise outstanding.

 

At December 31, 2004, a total number of 531,364 Ordinary Shareswere held in deposit in connection with the Share Option Plan (seeNote 26). The carrying amount was €10 million at December 31,2004 which is the value at which the shares were purchased.

 

Issued and paid-in capital and additional paid in capital can bespecified as follows:

 

*As of December 31, 2004*

 
| ** **          | ** ** | **Issued and  paid-in capital** | ** ** | **Additional  paid-in capital** | ** ** |
|---------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Ordinary Shares     |       | 166                             |       | 1,546                           |       |
| Preference Shares A |       | 64                              |       | 117                             |       |
| Preference Shares C |       | 0                               |       | 417                             |       |
|                |       | 230                             |       | 2,080                           |       |

 

*As of December 31, 2003*

 
| ** **          | ** ** | **Issued and  paid-in capital** | ** ** | **Additional  paid-in capital** | ** ** |
|---------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Ordinary Shares     |       | 164                             |       | 1,543                           |       |
| Preference Shares A |       | 64                              |       | 117                             |       |
| Preference Shares C |       | 0                               |       | 395                             |       |
| ** **          | ** ** | **228**                         | ** ** | **2,055**                       |       |

 

*As of December 31, 2002*

 
| ** **          | ** ** | **Issued and  paid-in capital** | ** ** | **Additional  paid-in capital** | ** ** |
|---------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Ordinary Shares     |       | 158                             |       | 1,543                           |       |
| Preference Shares A |       | 64                              |       | 117                             |       |
| Preference Shares C |       | 0                               |       | 374                             |       |
| ** **          | ** ** | **222**                         | ** ** | **2,034**                       |       |

 

The additional paid-in capital for commercial and tax purposes isalmost equal. The additional paid-in capital resulting from Preference Shares Aand C can only be paid to the holders of these shares.

 

F-35

----

 

***Voting rights***

 

The annual general meeting shall be held annually, and not later than6 months after the end of the financial year. Extraordinary generalmeetings of shareholders shall be held as often as the Executive Board or theSupervisory Board deem necessary. Any general meeting of shareholders shall beheld in Amsterdam.

 

Pursuant to the Articles of Association, each share of capital stock isentitled to one vote, so that each share of Preference Shares A, PreferenceShares B, Preference Shares C or Ordinary Shares is entitled to one vote in allmatters properly brought before the shareholders of Buhrmann. Unless theArticles of Association or mandatory law provides otherwise, all shareholders’resolutions require an absolute majority of the votes.

 

***Preference Shares A***

 

On December 31, 2004, all Preference Shares A had been taken intoadministration in Stichting Administratiekantoor Preferente Aandelen Buhrmann,or Trust Office, against which depositary receipts with limited convertibilitywere issued. The Trust Office was established under Dutch law in May 1994,and has its registered seat in Maastricht.

 

The purpose of the Trust Office is to issue and administer registereddepositary receipts of Preference Shares A. The holders of the depositaryreceipts receive all the economic benefits which attach to ownership of thePreference Shares A. The depositary receipts can be exchanged for PreferenceShares A in accordance with the provisions of the Articles of Association.The Articles of Association provide that Preference Shares A may be transferredto natural persons only and that a transfer or issue of Preference Shares A orvoting rights relating to Preference Shares A shall not be possible if suchtransfer would result in the acquirer acquiring more than one per cent. of thecapital issued in the form of Preference Shares A or one per cent. of the votingrights attached to such shares. Our Articles of Association contain certainexceptions to these transfer restrictions and the Executive Board may undercertain circumstances grant an exemption from these transfer restrictions. Thedepositary receipts are listed on Euronext N.V., Amsterdam.

 

Notwithstanding the general provision in the Articles of Associationwhich provides that each share of capital stock is entitled to one vote, anarrangement with the Trust Office exists such that the voting rights attachedto the Preference Shares A held by the Trust Office that can be exercised at ageneral meeting of shareholders is determined by reference to the value of thePreference Shares A in proportion to the value of the Ordinary Shares in thecapital of Buhrmann. The voting right is calculated on the basis of the totalvalue of all Preference Shares A (calculated by multiplying the number ofPreference Shares A outstanding and the stock market price of one depositaryreceipt for such Preference Share A) divided by the stock market price ofone Ordinary Share, both on the last trading day of the month prior to themonth in which the applicable shareholders’ meeting is convened, capped at amaximum of one vote per Preference Share A.

 

At the request of a holder of depositary receipts and subject to thetransfer restrictions described above and certain limitations set out in theArticles of Association, the Trust Office will grant a written proxy, with thepower of substitution, to the holder to exercise the voting rights attached tothe underlying Preference Shares A. The administration conditions of the TrustOffice provide that the voting rights to be exercised by a holder of depositaryreceipts, as proxy of the Trust Office, is also related to the capital interestof the depositary receipts held by the holder of the depositary receipts inproportion to the value of the Ordinary Shares, calculated in accordance withwhat is set out above. The voting right that may then be exercised by thedepositary receipt holder, as proxy of the Trust Office, may be exercized thevoting right attached to the Preference Shares A at his own discretion.

 

The Trust Office is charged with exercising the voting rights attachedto the Preference Shares A (except for those Preference Shares A for which ithas issued a proxy) in a manner which primarily safeguards the interests of theholders of depositary receipts, taking into account the interests of Buhrmann,its affiliates and all of its stakeholders.

 

Pursuant to an amendment of the articles of association of the TrustOffice effected in October 2004, the Trust Office may no longer restrictthe granting of a proxy, or exclude or revoke a proxy already granted.

 

The Preference Shares A are non-redeemable and earn cumulativedividends.

 

F-36

----

 

***Preference Shares B***

 

Buhrmann may issue Preference Shares B, inter alia, as a (preventive)measure against a hostile acquisition of control or takeover bid. For thispurpose, Buhrmann and the Stichting Preferente Aandelen Buhrmann have enteredinto a put and call option agreement relating to Preference Shares B.Pursuant to this agreement, under certain circumstances, Buhrmann has the right(and, under certain circumstances, the obligation) to issue and sell to theStichting Preferente Aandelen Buhrmann, Preference Shares B, up to amaximum amount equal to the share capital of Buhrmann other than in the form ofPreference Shares B, minus one. Once any Preference Shares B are issued toStichting Preferente Aandelen Buhrmann, Buhrmann has the right to repurchasefrom Stichting Preferente Aandelen Buhrmann such Preference Shares B at theirissue price plus accrued and unpaid dividends, if any. Under thesecircumstances, Stichting Preferente Aandelen Buhrmann has the right to requireBuhrmann to repurchase the Preference Shares B held by it. Stichting PreferenteAandelen Buhrmann will exercise its voting rights attached to such PreferenceShares B in accordance with its purpose. The purpose of Stichting PreferenteAandelen Buhrmann is to safeguard the interests of Buhrmann, the enterpriseconnected therewith and all interested parties in Buhrmann, with respect to,among other things, the continuity and identity of these enterprises. Uponissue of Preference Shares B, only 25 per cent of the nominal value is requiredto be paid-up. As of December 31, 2004, no Preference Shares B had beenissued.

 

***Preference Shares C***

 

On October 28, 1999, an aggregate of 35,000 Preference Shares Cwere issued to two US venture capital groups, Apollo Management IV L.P. andBain Capital, LLC to provide part of the financing of the acquisition ofCorporate Express. As of December 31, 2004, a total number of 43,628Preference Shares C were issued to Apollo Management IV and Bain Capital. EachPreference Share C has a nominal value of €1.20 per share. The terms ofthe Preference Shares C were changed substantially as a result of a changein the Articles of Association that was approved by the Extraordinary GeneralMeeting of Shareholders in October 2003.

 

*Conversion*

 

The Preference Shares C are convertible, at the option of the holders,in whole or in part, into Ordinary Shares. The base conversion rate amounts to€13 (converted into US dollar as set forth in the Articles of Association). ThePreference Shares C are subject to the usual anti-dilution protections, whichcan lead to an adjustment of the conversion price in case of share issuancessubject to certain exceptions as described in the Articles of Association. Inaddition, the conversion price shall be reduced annually with an amount equalto 50% of the dividend distributed on Ordinary Shares. Following the dividendpaid in April 2004 in respect of the financial year 2003, each PreferenceShare C is convertible into a number of Ordinary Shares equal to theliquidation preference divided by €11.8968. The liquidation preference of eachPreference Share C is USD 10,000, plus accrued dividends.

 

*Ranking*

 

The Preference Shares C have a preference with regard to dividenddistributions and rights during liquidation and dissolution in respect of allexisting and future series of common and preference shares, provided that theyrank equal to the Preference Shares A.

 

F-37

----

 

*Approval rights*

 

As long as there are outstanding Preference Shares C, Buhrmann may notrepurchase or cancel Ordinary Shares and/or other Preference Shares, except forPreference Shares B, without the prior approval of the meeting of holders ofPreference Shares C. Changes to the Articles of Association that negativelyaffect the rights pertaining to the Preference Shares C as well as certainother decisions such as acquisitions and divestments with a value in excess ofUSD 350 million and share issues require the prior approval of the meetingof holders of Preference Shares C or, depending on the type of decision, ofcertain holders of Preference Shares C. Furthermore, holders of PreferenceShares C, under certain conditions, have the right to nominate a member of theSupervisory Board. For a description of this right please refer to the Reportof the Supervisory Board.

 

*Redemption*

 

If the closing price of the Ordinary Shares is at any time at or above125% of the then prevailing conversion price for the Preference Shares C for aperiod of 30 consecutive trading days, Buhrmann may cancel or repurchase alloutstanding Preference Shares C. The amount per Preference Share C to be paidwill be, in the event that such cancellation or repurchase takes place(1) after the fourth anniversary but on or before the fifth anniversary ofthe issuance of the Preference Shares C, 105.50% of the liquidation preference;(2) after the fifth anniversary but on or before the sixth anniversary ofthe issuance of the Preference Shares C, 102.75% of the liquidation preference;and (3) following the sixth anniversary of the issuance of the PreferenceShares C, 100% of the liquidation preference. The liquidation preference foreach Preference Share C is USD 10,000 plus accrued dividends.

 

On the eleventh anniversary of the issue date, Buhrmann has the right,in its sole discretion, to cancel or repurchase the Preference Shares C at 100%of the liquidation preference.

 

If there is a change of control (as such term is defined in theArticles of Association) of Buhrmann or the office products business ofBuhrmann in the United States, the holders of the Preference Shares C canrequest that Buhrmann cancel or repurchase all of the outstanding PreferenceShares C at 101% of the liquidation preference.

 

***Dividends***

 

The proposed dividend for a financial year must be approved by theAnnual General Meeting of Shareholders, which is typically held in April ofthe following financial year, and the dividend is paid after this meeting.Dividend payments are only allowed to the extent that the shareholders’ equityis in excess of the sum of the paid-up capital and any reserves required underDutch law. Under the Articles of Association, before the dividend will be paidto any other class of shares, the dividend with respect to the PreferenceShares A and Preference Shares C must be paid first from the profits earned inany given financial year.

 

The annual dividend on the Preference Shares C is equal to a percentageof the liquidation preference of such shares (which is USD 10,000). For theyear 2003, the percentage was equal to 5.5%, for the years 2004 and 2005 thepercentage is equal to 6%, for the years 2006, 2007 and 2008 the percentage isequal to 6.5%, for the year 2009 the percentage is equal to 7.5% and for theyear 2010 and the following years the percentage is equal to 8.5%, subject toadjustment under certain circumstances as set forth in the Articles ofAssociation.

 

The annual dividend on the Preference Shares C may, at the option ofBuhrmann, be distributed in cash or in the form of additional Preference SharesC.

 

The annual dividend on the Preference Shares A is fixed for successiveperiods of eight years. For the period ending December 31, 2009 thedividend is equal to €0.21 per annum. The annual dividend on the PreferenceShares A is based on a percentage of the liquidation preference of those shares(which is €3.40355) which percentage is equal to 1.25 points above thearithmetic mean of the average effective yields on Dutch government bonds withterms of seven to eight years, as calculated by the Central Office for theStatistics and published in the Official Stock Exchange List of EuronextAmsterdam.

 

F-38

----

 

From the balance of the remaining profits after the dividend on thePreference Shares A and Preference Shares C have been paid, Buhrmann will pay adividend on the Preference Shares B, if such Preference Shares B have beenissued, the percentage of which to be calculated over the paid up portion ofthe nominal value is equal to the repurchase interest rate of the EuropeanCentral Bank plus or minus a maximum of three percentage points, to bedetermined by the Executive Board and subject to the approval of theSupervisory Board. The profit remaining after payment of dividends on thePreference Shares A, Preference Shares C and (where applicable) PreferenceShares B may be distributed as a dividend to the holders of the OrdinaryShares, subject to any allocation to reserves. The general meeting ofshareholders may, at the proposal of the Executive Board which has beenapproved by the Supervisory Board, resolve that a payment of dividend onOrdinary Shares be wholly or partly in shares.

 

In the event that for any given fiscal year the dividend paymentsreferred to above cannot be made (in whole or in part) because there are notsufficient profits, payment of the deficiency shall be made out of the profitsfrom succeeding financial years. First insofar as possible *pro rata parte* on the Preference Shares Aand Preference Shares C and thereafter on the issued Preference Shares B if anyare issued.

 

**22.****                     Provisions**

 

The movements in provisions are as follows:

 
| ** **                             | ** ** | ** ** | ** ** | ** **          | ** ** | ** **   | ** ** | **Other provisions**               | ** ** |
|----------------------------------------|------------|------------|------------|---------------------|------------|--------------|------------|------------------------------------|------------|
| ** **                             | ** ** | **Total**  | ** ** | **Deferred  taxes** | ** ** | **Pensions** | ** ** | **Integration  and restructuring** | ** ** | **Other** | ** ** |
| *Position  at December 31, 2003:* |       |       |       |                |       |         |       |                               |       |   |   |
| **Long-term**                          | ** ** | **274**    | ** ** | **177**             | ** ** | **18**       | ** ** | **11**                             | ** ** | **68** | ** ** |
| Short-term                             |       | 52         |       | —              |       | —       |       | 31                                 |       | 21 |   |
| Total provision                        |       | 326        |       | 177                 |       | 18           |       | 42                                 |       | 89 |   |
|                                   |       |       |       |                |       |         |       |                               |       |   |   |
| Payments                               |       | (40        | )          | —              |       | (3           | )          | (29                                | )          | (8 | ) |
| Additions charged to result            |       | 18         |       | —              |       | 2            |       | 8                                  |       | 8 |   |
| Releases to result                     |       | (40        | )          | (29                 | )          | —       |       | —                             |       | (11 | ) |
| Transfer deferred tax assets           |       | (33        | )          | (33                 | )          | —       |       | —                             |       | — |   |
| Translation differences                |       | (7         | )          | (6                  | )          | —       |       | —                             |       | (1 | ) |
| **Total  changes**                     | ** ** | **(103**   | **)**      | **(68**             | **)**      | **(1**       | **)**      | **(21**                            | **)**      | **(13** | **)** |
| ** **                             | ** ** | ** ** | ** ** | ** **          | ** ** | ** **   | ** ** | ** **                         | ** ** | ** ** | ** ** |
| Position at December 31, 2004:    |       |       |       |                |       |         |       |                               |       |   |   |
| **Long-term**                          | ** ** | **199**    | ** ** | **109**             | ** ** | **16**       | ** ** | **12**                             | ** ** | **62** | ** ** |
| Short-term                             |       | 24         |       | —              |       | 1            |       | 9                                  |       | 14 |   |
| **Total  provision**                   | ** ** | **223**    | ** ** | **109**             | ** ** | **17**       | ** ** | **21**                             | ** ** | **76** | ** ** |

 

The long-term balance at December 31 reflects amounts payableafter more than one year. Amounts payable within one year are recorded ascurrent liabilities.

 

Deferred taxes are detailed in Note 23.

 

The provision for pensions at December 31, 2004 and 2003 primarilyrelates to obligations regarding unfunded defined benefit plans. In theNetherlands and the United Kingdom, these defined benefit plans are funded withplan assets segregated in separate trusts to which the Company makescontributions. In case these (non-consolidated) trusts require additionalcontributions due to local statutory minimum funding requirements, a provisionis recorded. Premiums and other contributions paid to these trusts are includedin labor costs.

 

F-39

----

 

Provisions for integration and restructuring mainly relate to the costsaving restructuring measures in the Office Products operations in NorthAmerica and Europe. During 2004, €17 million was spent. The additionsamounted to €8 million and related mainly to restructuring activities andvacant properties in the Office Products Europe Division.

 

Other provisions include primarily warranties regarding productliability, indemnifications with respect to divested businesses and variousother contractual risks.

 

**23.****                     Deferredtaxes**

 

The components of deferred tax assets and deferred tax liabilities areas follows:

 
| ** **                                         | ** ** | **December 31** | ** ** |
|----------------------------------------------------|------------|----------------------|------------|
| ** **                                         | ** ** | **2004**             | ** ** | **2003** | ** ** |
| Loss carry-forwards                                |       | 1,108                |       | 1,078 |   |
| *Deferred  tax assets*                             |       |                 |       |   |   |
| Tax loss carry-forwards                            |       | 424                  |       | 420 |   |
| Temporary differences                              |       | 63                   |       | 57 |   |
| Nominal deferred tax asset                         |       | 487                  |       | 477 |   |
| Valuation allowances                               |       | (152                 | )          | (111 | ) |
| Deferred tax asset (under Financial Fixed  Assets) |       | 335                  |       | 366 |   |
|                                               |       |                 |       |   |   |
| *Deferred  tax liabilities*                        |       |                 |       |   |   |
| Fixed assets                                       |       | (73                  | )          | (115 | ) |
| Other                                              |       | (36                  | )          | (62 | ) |
| Deferred liabilities (under Provisions)            |       | (109                 | )          | (177 | ) |

 

Buhrmann has operating loss carry-forwards at December 31, 2004 ofapproximately €1,108 million (2003: €1,078 million). Expiration isapproximately as follows:

 
| 2005 to 2018              |   | 138   |   |
|---------------------------|--------|-------|--------|
| 2019 to 2022              |   | 214   |   |
| Beyond 2022 and unlimited |   | 756   |   |
|                      |   | 1,108 |   |

 

F-40

----

 

**24.****                     Long-term liabilities**

 
| ** **                              | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2004**              | ** ** | **2003** | ** ** |
| ** **                              | ** ** | **Total**             | ** ** | **>5 years** | ** ** | **Total** | ** ** | **>5 years** | ** ** |
| Subordinated loans:                     |       |                  |       |   |   |   |   |   |   |
| Convertible Bond                        |       | 115                   |       | 115 |   | 115 |   | 115 |   |
| High Yield Bonds                        |       | 110                   |       | 110 |   | 277 |   | 277 |   |
| ** **                              | ** ** | **225**               | ** ** | **225** | ** ** | **392** | ** ** | **392** |   |
| Other loans:                            |       |                  |       |   |   |   |   |   |   |
| Term Loans A                            |       | 96                    |       | — |   | 112 |   | 27 |   |
| Term Loans B                            |       | —                |       | — |   | 347 |   | 333 |   |
| Term Loans C                            |       | 413                   |       | 396 |   | — |   | — |   |
| Revolver                                |       | —                |       | — |   | — |   | — |   |
| Securitized Notes                       |       | 74                    |       | — |   | 79 |   | — |   |
| Other                                   |       | 14                    |       | — |   | 19 |   | 3 |   |
| ** **                              | ** ** | **597**               | ** ** | **396** | ** ** | **557** | ** ** | **363** |   |
| **Total  Subordinated and other loans** | ** ** | **822**               | ** ** | **621** | ** ** | **949** | ** ** | **755** | ** ** |

 

**Convertible Bond**

 

A 7-year Subordinated Convertible Bond Loan with listing at theAmsterdam Stock Exchange was issued in 2003 for the amount of€115 million, with a coupon of 2% payable annually on June 18. Thebonds are convertible into Buhrmann Ordinary Shares at a conversion price of€8.40 per share. This loan must be redeemed on or before December 18,2010. Buhrmann has the option to redeem the loan after July 9, 2008 if theofficial closing price of Buhrmann’s Ordinary Shares has been in excess of 150%of the conversion price for 20 trading days in a period of 30 trading days. TheConvertible Bonds were issued at par. The market value of the Convertible Bondat December 31, 2004 amounted to €125 million.

 

**High Yield Bonds**

 

A 10-year, Subordinated Bond Loan was issued in 2004 for the amount ofUSD 150 million (2014 Notes), with a coupon of  8 1/4%,payable semi-annually. This loan must be redeemed on July 1, 2014. At anytime before July 1, 2007, Buhrmann can choose to redeem up to 35% of thisloan at a redemption price of 108.25% of the principal amount, with proceedsraised in one or more equity offerings made by Buhrmann, as long as certainconditions are met. Thereafter, the whole loan, or part of it, can be redeemedat contractual rates above par (starting per July 1, 2009 at 104.125%,decreasing annually). The market value of the High Yield Bond at December 31,2004 amounted to USD 152 million (€112 million).

 

In July 2004, Buhrmann made a succesfull tender offer for its USD350 million Subordinated Bond Loan which was issued in 1999 (2009 Notes).A premium of €27 million was paid to holders who tendered their bonds. Thebonds that were not tendered were early redeemed in November 2004 atcontractual rates.

 

**Senior Credit Facility (Term loan A, TermLoans B, Term Loans C and Revolver)**

 

The Senior Credit Facility was arranged in 2003 and funded on December 31,2003. The Senior Credit Facility consisted of a Term Loan A of€120 million and Term Loans B with tranches of €50 million and USD380 million plus a working capital facility of €255 million(Revolver). The collateral provided for the Senior Credit Facility is a pledgeon assets of Buhrmann N.V., including all its material existing and futureoperating companies in the United States and the Netherlands. Borrowings underthe Senior Credit Facility bear interest at floating rates related to LIBOR forthe relevant currency for varying fixed interest periods. The interest ratemargins vary with the leverage ratio (pricing grid). The initial margin forboth the Revolver and the Term Loan A is 2.50% and for the Term Loans B 2.75%.The Revolver carries a fee of 0.75% for the undrawn balance. The documentationof the Senior Credit Facility allows for an increase in the Revolver as well asincreases in term loans subject to meeting certain conditions such as a maximumleverage ratio. This gives the Company the opportunity to raise funds forrefinancing other components of the capital structure such as the High Yield Bond.

 

F-41

----

 

In July 2004, the Term Loans B were converted into Term Loans C.At the same time, the Term Loans C were increased by USD 125 million andthe initial interest rate margin was decreased to 2.50%. Currently, the SeniorCredit Facility consists of the Term Loan A of €112 million, the TermLoans C with tranches of €50 million and USD 500 million and theRevolver of €255 million. At December 31, 2004 the applicable marginswere 2.25% and 2.50% for the Term Loans A and C, respectively.

 

The interest rates in effect at December 31, 2004 and 2003 were asfollows:

 
| ** **         | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Term loan A € |       | 4.412    | %          | 4.750    | %          |
| Term loan B € |       | —   |       | 5.000    | %          |
| Term loan C € |       | 4.660    | %          | —   |       |
| Term loan B USD    |       | —   |       | 3.908    | %          |
| Term loan C USD    |       | 4.940    | %          | —   |       |

 

The market value of the new Senior Credit Facility is primarilydetermined by credit status. Interest rate developments have a limitedinfluence since these loans have a floating interest. Although these loans arenot traded publicly, indication of market values can be obtained through theagent. The market value at December 31, 2004 approximated the book value.

 

The new Senior Credit Facility is subject to a variety of conditions asis customary for these types of facilities and the financial position ofBuhrmann. For example, specific minimum or maximum financial ratios (“covenants’)must be met such as:

 
| Interest coverage ratio: |   | EBITDA/Interest expense                      |
|--------------------------|--------|----------------------------------------------|
| Fixed charge ratio:      |   | EBITDA + rent + lease expenses/Fixed charges |
| Leverage ratio:          |   | Indebtedness/EBITDA                          |

 

The definitions of certain accounting numbers for covenant calculationpurposes (for example: operating result before depreciation of tangible fixedassets and internally used software and before amortization and impairment ofgoodwill (EBITDA) as well as exceptional items and indebtedness) may differfrom figures as published in these Consolidated Financial Statements due tospecific contractual arrangements. Also, income statement items used incovenants are calculated on a rolling twelve monthly basis. More detailedinformation on the covenant levels is available on the website of Buhrmann. Theactual covenant ratios at December 31, 2004 comply with the thresholdratios as per loan covenants.

 

**Securitized Notes**

 

The Company has an Accounts Receivable Securitization Program underwhich funds are raised by pledging accounts receivable from subsidiaries in theNetherlands and the USA as security for short-term and medium-term borrowings.The accounts receivable are sold to Buhrmann Silver SA and Buhrmann Silver USLLC, which in turn pledge the accounts receivable to third-party dedicatedentities as security for short-term borrowings in the form of Short Term Notesand Medium Term Notes. At December 31, 2004, accounts receivables of€239 million were pledged under this program. The program delivers fundingat attractive rates and at the same time diversifies sources of capital andincreases financial flexibility. Both receivables and borrowings related tothis program are included in the Consolidated Balance Sheet.

 

The Short Term Notes are issued in USD, reflecting the currency of thepledged receivables. The amount of Short Term Notes outstanding against thereceivables pledged, fluctuates as a result of liquidity requirements, advancerates calculated and invoices outstanding. No Short Term Notes were outstandingduring 2004. To ensure availability of re-financing for the Notes, a back-upliquidity facility has been arranged.

 

F-42

----

 

In July 2002, Medium Term Notes in USD and GBP were issued. As aconsequence of the sale of the Paper Merchanting Division, the collateral forthe Notes denominated in GBP in the form of receivables denominated in GBPgenerated by Paper Merchanting companies in the UK, no longer existed. At December 31,2004, USD 100 million of Medium Term Notes were outstanding. The averageinterest margin including issuers cost, is approximately 0.5% over LIBOR at December 31,2004 and 2003.

 

The market value of the Medium Term Notes approximates their book valueas the Notes bear variable interest and due to their relatively shortmaturities.

 

**Breakdown of long-term debt by currency**

 
| ** **                                               | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------|------------|-----------------------|------------|
| ** **                                               | ** ** | **2004**              | ** ** | **2003** | ** ** |
| As issued:                                               |       |                  |       |   |   |
| €                                                   |       | 265                   |       | 280 |   |
| USD                                                      |       | 555                   |       | 666 |   |
| Other                                                    |       | 2                     |       | 3 |   |
| ** **                                               | ** ** | **822**               | ** ** | **949** |   |
| ** **                                               | ** ** | ** **            | ** ** | ** ** |   |
| After hedging with forward exchange and  currency swaps: | ** ** | ** **            | ** ** | ** ** |   |
| €                                                   |       | 107                   |       | 225 |   |
| USD                                                      |       | 664                   |       | 693 |   |
| Other                                                    |       | 51                    |       | 31 |   |
| ** **                                               | ** ** | **822**               | ** ** | **949** |   |

 

Buhrmann aims to incur its debt by currency after hedges approximatelyin proportion to the forecasted split of operating result before depreciationof tangible fixed assets and internally used software and before amortizationand impairment of goodwill and before exceptional results over the majorcurrencies. Forward foreign exchange and currency swaps are used to adjust thecurrency profile of the loans issued towards the desired position in order toachieve the hedging as per policy.

 

**Buhrmann’s forward foreign exchange andcurrency swap contracts at December 31, 2004**

 
| **Contract**        | ** ** | **Maturity** | ** ** | **Weighted average  Contractual  exchange rate** | ** ** | **Notional  amount** | ** ** | **Fair  Value** | ** ** |
|---------------------|------------|--------------|------------|--------------------------------------------------|------------|----------------------|------------|-----------------|------------|
| Buy €/sell SEK |       | <1 year   |       | 8.98                                             |       | 39                   |       | 0               |       |
| Buy €/sell USD |       | <1 year   |       | 1.36                                             |       | 109                  |       | 0               |       |
| Buy €/sell GBP |       | <1 year   |       | 0.71                                             |       | 10                   |       | 0               |       |
| ** **          | ** ** | ** **   | ** ** | ** **                                       | ** ** | **158**              | ** ** | **0**           |       |

 

The total fair value at December 31, 2003 of the forward foreignexchange and currency swap contracts was less than €1 million negative.

 

**Breakdown of long-term debt by interestprofile**

 
| ** **                        | ** ** | **December 31, 2004** | ** ** |
|-----------------------------------|------------|----------------------------|------------|
| ** **                        | ** ** | **Fixed**                  | ** ** | **%** | ** ** | **Floating** | ** ** | **%** | ** ** |
| Subordinated Loans                |       | 225                        |       | 28 |   | — |   | — |   |
| Private loans and bank overdrafts |       | 2                          |       | 0 |   | 595 |   | 72 |   |
|                              |       | 227                        |       | 28 |   | 595 |   | 72 |   |
| Interest swaps >1 year         |       | 294                        |       |   |   | (294 | ) |   |   |
| **Total**                         | ** ** | **521**                    |       | 63 | ** ** | **301** |   | 37 |   |

 

Buhrmann aims to incur a certain minimum level of fixed rate debt inrelation to the interest cover. Interest rate swaps are used to adjust theinterest profile of the loans towards the desired position in order to achievethe hedging as per policy.

 

F-43

----

 

**Buhrmann’s Interest Rate Swap (IRS) contractsat December 31, 2004**

 

IRS in USD; Buhrmann pays fixed and receives 3 month LIBOR:

 
| **Maturity** | ** ** | **Notional  amount** | ** ** | **Average interest  rate in %** | ** ** | **Fair value** | ** ** |
|--------------|------------|----------------------|------------|---------------------------------|------------|----------------|------------|
| <1 year   |       | 128                  |       | 2.33                            |       | 0              |       |
| <2 years  |       | 37                   |       | 2.74                            |       | 0              |       |
| <3 years  |       | 128                  |       | 4.27                            |       | (2             | )          |
| <5 years  |       | 128                  |       | 4.27                            |       | (3             | )          |
| **Total**    | ** ** | **422**              | ** ** | **3.68**                        | ** ** | **(5**         | **)**      |

 

The total fair value at December 31, 2003 of the interest rateswap contracts was €10 million negative.

 

The estimated fair value of the outstanding currency and interest swapcontracts indicates how much would be paid or received in exchange fortermination of the contracts without further commitments as per the balancesheet date, and is included in the tables above.

 

**Effective interest rate**

 

The average blended effective interest rate, including margin, was 6.8%in 2004 and 9.1% in 2003.

 

**Repayment schedule for long-term debt**

 
| ** ** | ** ** | **Year**        | ** ** | **Term  Loans A** | ** ** | **Term  Loans C** | ** ** | **Other** | ** ** | **Total  Redemption** | ** ** |
|------------|------------|-----------------|------------|-------------------|------------|-------------------|------------|-----------|------------|-----------------------|------------|
| Short-term |       | 2005            |       | 16                |       | 4                 |       | 19        |       | 39                    |       |
|       |       |            |       |              |       |              |       |      |       |                  |       |
| Long-term  |       | 2006            |       | 16                |       | 4                 |       | 12        |       | 32                    |       |
|       |       | 2007            |       | 26                |       | 4                 |       | 74        |       | 104                   |       |
|       |       | 2008            |       | 26                |       | 4                 |       | —    |       | 31                    |       |
|       |       | 2009            |       | 27                |       | 4                 |       | 2         |       | 34                    |       |
|       |       | 2010            |       | —            |       | 396               |       | 115       |       | 511                   |       |
|       |       | 2011 and beyond |       | —            |       | —            |       | 110       |       | 110                   |       |
|       |       |            |       | 96                |       | 413               |       | 312       |       | 822                   |       |
|       |       |            |       |              |       |              |       |      |       |                  |       |
| **Total**  | ** ** | ** **      | ** ** | **112**           | ** ** | **417**           | ** ** | **331**   | ** ** | **861**               |       |

 

The installments in 2005 of €20 million for both Term Loans A andC fall due in March, June, September and December. Other includes the HighYield Bond, Revolver and Medium-term Securitized Notes. There were noShort-term Securitized Notes outstanding at December 31, 2004. The averageremaining term of long-term debt is approximately 5.7 years.

 

F-44

----

 

**25.****                     Other liabilities**

 
| ** **                                                                 | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                 | ** ** | **2004**              | ** ** | **2003** | ** ** |
| Taxes and social security contributions                                    |       | 57                    |       | 59 |   |
| Employee benefits other than pensions                                      |       | 88                    |       | 77 |   |
| Advance payments on orders                                                 |       | 16                    |       | 10 |   |
| Short-term provisions                                                      |       | 15                    |       | 21 |   |
| Other accrued liabilities                                                  |       | 70                    |       | 76 |   |
|                                                                       |       | 246                   |       | 243 |   |
| Short-term provisions acquisition and  restructuring related (see Note 22) |       | 9                     |       | 31 |   |
| Financial payables and accruals                                            |       | 18                    |       | 8 |   |
| Dividend Preference Shares A                                               |       | 11                    |       | 11 |   |
| **Total**                                                                  | ** ** | **284**               | ** ** | **293** | ** ** |

 

Financial payables and accruals mainly includes interest.

 

**26.****                     Share Option Plan**

 

There is a share option plan in place, the “Buhrmann Incentive Plan,”which is designed as an incentive to managers working within the Group. Inaddition, the Annual General Meeting of Shareholders held on April 29,2004 adopted a new share option plan as described below under “New BuhrmannIncentive Plan.”

 

**Buhrmann Incentive Plan**

 

The maximum percentage of option rights that may be granted under thisPlan in any year is 1.25% of the number of outstanding Ordinary Shares. Thisreflects the requirements of the business given our geographic spread (inparticular, the United States of America) and specific human resourcemanagement needs for critical business activities.

 

The options granted up to and including 2002 have a term of five yearsand can be exercised only after three years. From 2003, the options have a termof seven years. The Buhrmann Incentive Plan (up to and including 2003) did notapply performance conditions to either the grant or the vesting of options.

 

F-45

----

 

**New Buhrmann Incentive Plan**

 

At the Annual General Shareholders’ meeting held on April 29,2004, shareholders approved the adoption of a new share option plan. Pursuantto this new Buhrmann Incentive Plan, the number of options granted is dependenton the performance of the Company relative to a peer group as measured over athree-year period up to the vesting date. Approximately 370 managers have beeninvited to participate in the new Buhrmann Incentive Plan effective as from May 1,2004.

 

The performance of the Company will be measured by the concept of totalshareholder return, or TSR. Using TSR, which shows the total return toshareholders as a combination of share price appreciation and dividendsdistributed, the performance of the Company’s shares against other companies’shares can be compared over the relevant (three-year) period.

 

The financial performance of the Company, as measured by TSR will becompared to the TSR of a peer group of up to twelve companies. The criteria fora company to fit within this peer group of companies includes, among otherthings, that such company (i) be in the same or similar industry asBuhrmann; (ii) have a comparable business model to Buhrmann; (iii) belisted or traded on a major stock exchange; (iv) have a minimum marketcapitalization; (v) be present in at least North America or Europe; and(vi) be considered a peer of Buhrmann by both the investor community andby Buhrmann itself.

 

The peer group companies for option grants under the new BuhrmannIncentive Plan in 2004 are: Boise Cascade Corp. (after a restructuring in 2004,renamed: OfficeMax, Inc.); Office Depot, Inc.; Staples, Inc.;United Stationers, Inc.; W.W. Grainger, Inc.; Hagemeyer N.V.; ManutanInternational S.A.; Rexel S.A.; Genuine Parts Company; Bunzl PLC; RandstadHolding NV and Wesco International, Inc. The composition of the peer groupmay be changed by the Supervisory Board after 2004, provided that the abovelisted peer group criteria are met. In addition, where options have been granted,but have not yet begun vesting, the Supervisory Board may change thecomposition of the peer group with respect to that grant, if a peer groupcompany at the time of grant no longer meets one or more of the criteria. Inthis respect it is noted that in view of the announcement that Rexel S.A. willbe delisted in the course of 2005, the Supervisory Board has decided not toreplace this company in the peer group, which will therefore effectively bereduced to 11 companies. The Supervisory Board continues to regard BoiseCascade, Corp. as a company in the peer group after its restructuring and namechange to OfficeMax, Inc. Thus, the peer group for the options to begranted under the Buhrmann Incentive Plan in 2005 will consist of elevencompanies, including OfficeMax, Inc., but excluding Rexel S.A.

 

The TSR for each peer group company will be calculated over thethree-year period following each annual grant of options under the new BuhrmannIncentive Plan, and each peer group company will be ranked in descending orderof generated TSR to determine the relative position of Buhrmann. After threeyears the vesting of options granted under the new Buhrmann Incentive Plan willbe based upon the TSR ranking of Buhrmann relative to the applicable peergroup, as follows:

 
| **TSR ranking of Buhrmann** | ** ** | **% of options granted vesting** | ** ** |
|-----------------------------|------------|----------------------------------|------------|
| 1                           |       | 200                              |       |
| 2                           |       | 175                              |       |
| 3                           |       | 150                              |       |
| 4                           |       | 125                              |       |
| 5                           |       | 100                              |       |
| 6                           |       | 75                               |       |
| 7                           |       | 50                               |       |
| 8-13*                       |       | 0                                |       |

 

----

*                                         Thiswill be 8-12 after the reduction of the peer group to eleven companies asdescribed above.

 

The provisional ranking of Buhrmann for the 2004 grant as at December 31,2004 was number ten out of thirteen.

 

F-46

----

 

The maximum number of options authorized for the 2004 grant under thenew Buhrmann Incentive Plan was 1,708,649, representing 1.25% of the totalnumber of Ordinary Shares outstanding as of 3 May 2004, the date of theoption grant. The number of options vesting may be increased up to 2.5% if, asa result of the Company’s performance relative to the peer group, more than100% of the granted options vest. In addition, a maximum of 20% of the totalnumber of options granted in any one year may be granted to Members of theExecutive Board. The allocation of options granted under the new BuhrmannIncentive Plan to individual Members of the Executive Board will be determinedby the CNCG Committee.

 

The exercise price for option rights is the closing price of Buhrmann’sOrdinary Shares on the first trading day on which day Buhrmann’s OrdinaryShares are quoted ex-dividend. Those entitled to options are bound by internalregulations designed to prevent insider trading. Options granted are inprinciple hedged by purchasing the shares required on or close to the grantdate. Options may not be hedged if the financial position of the Group givesrise to a decision not to purchase the shares required. Considerations forevaluating the financial position are the growth prospects and its requiredfinancing, as well as its capital structure. On the basis thereof it was decidednot to purchase shares for this purpose in 2004, 2003 and 2002.

 

The fair value of the option rights was estimated on the basis of theBlack & Scholes option price determination model, based on thefollowing assumptions:

 
| ** **                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Expected dividend yield         |       | 2.3      | %          | 2.3      | %          | 2.3      | %          |
| Expected share price volatility |       | 63.5     | %          | 65       | %          | 65       | %          |
| Risk-free interest rate         |       | 4.0      | %          | 4.5      | %          | 4.5      | %          |
| Expected term                   |       | 5 years  |       | 4 years  |       | 4 years  |       |

 

The pro-forma remuneration cost of all the option rights assigned tomanagement is €6 million for 2004 (€5 million for 2003 and€6 million for 2002). Due to the performance hurdle introduced in 2004,the Black & Scholes’ value is discounted for the probability ofgranting the option rights, assuming a one-period approach (discount factoramounts to 33%). The annual remuneration cost is calculated by taking the fairvalue of the options granted over the last three years spread evenly over theblocked exercise period (vesting) of three years. The fair value of the optionrights is estimated by using expected dividend yield and share price volatilitybased on historic track records at the date of granting the options. Thesevalues do not constitute the market value. The assumptions were usedexclusively for this calculation and do not necessarily provide an indicationof expectations of management regarding developments in the future.

 

F-47

----

 

Specified statement of all options outstanding (including option rightsheld by the Members of the Executive Board)

 
| ** **                               | ** ** | **Number of outstanding  option rights** | ** ** | **Average  exercise price  in €** | ** ** | **Term**  | ** ** | **Fair value in €**** | ** ** |
|------------------------------------------|------------|------------------------------------------|------------|----------------------------------------|------------|-----------|------------|----------------------------|------------|
| Granted in 1999 (690,000):               |       |                                     |       |                                   |       |      |       |                       |       | 2.8 million |   |
| Balance at the end of 2003               |       | 416,500                                  |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (416,500                                 | )          |                                   |       |      |       |                       |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | —                                 |       | *—   |       | —                     |       |   |   |
| Granted in 2000 (1,141,021):             |       |                                     |       |                                   |       |      |       |                       |       | 11.9 million |   |
| Balance at the end of 2003               |       | 819,138                                  |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (32,489                                  | )          |                                   |       |      |       |                       |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | 786,649                                |       | *27.48    |       | 2005                       |       |   |   |
| Granted in 2001 (1,263,200):             |       |                                     |       |                                   |       |      |       |                       |       | 10.0 million |   |
| Balance at the end of 2003               |       | 968,528                                  |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (47,255                                  | )          |                                   |       |      |       |                       |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | 921,273                                |       | *20.09    |       | 2006                       |       |   |   |
| Granted in 2002 (1,563,928):             |       |                                     |       |                                   |       |      |       |                       |       | 9.9 million |   |
| Balance at the end of 2003               |       | 1,375,465                                |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (51,872                                  | )          |                                   |       |      |       |                       |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | 1,323,593                              |       | *13.76    |       | 2007                       |       |   |   |
| Granted in 2003 (1,575,000):             |       |                                     |       |                                   |       |      |       |                       |       | 2.1 million |   |
| Balance at the end of 2003               |       | 1,467,067                                |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (52,367                                  | )          |                                   |       |      |       |                       |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | 1,414,700                              |       | *2.87     |       | 2010                       |       |   |   |
| Granted in 2004 (1,708,649):             |       |                                     |       |                                   |       |      |       |                       |       | 4.4 million |   |
| Granted in May 2004                      |       | 1,708,649                                |       |                                   |       |      |       |                       |       |   |   |
| Lapsed in 2004                           |       | (100,623                                 | )          |                                   |       |      |       | ** **                 |       |   |   |
| Outstanding at the end of 2004           |       |                                     |       | 1,608,026                              |       | *7.79     |       | 2011                       |       |   |   |
| **Total outstanding at the end of 2004** | ** ** | ** **                               | ** ** | **6,054,241**                          | ** ** | **12.38** | ** ** | ** **                 | ** ** | ** ** | ** ** |

 

----

*                                         UnderDutch fiscal rules, management receiving options could under the BuhrmannIncentive Plan up to and including 2003 elect to accept a 25% higher exerciseprice. The base exercise price was set at €7.79 in 2004, €2.85 in 2003, €13.69in 2002, €19.61 in 2001 and €26.35 in 2000, equalling the share price at closeof business on the Amsterdam Stock Exchange on May 3, 2004, May 2,2003, May 6, 2002, April 20, 2001 and April 17, 2000respectively.

 

**                                  Thefair value is calculated using the Black & Scholes option pricedetermination model.

 

The Company granted interest-bearing loans to the Dutch optionees up toand including 2002 to finance their upfront tax obligations resulting from theoptions granted and which are due at the date of grant. The loans of Members ofthe Executive Board extended within this context are listed in Note 13. Asof 2003, these loans have not been and will no longer be granted.

 

F-48

----

 

**27.****                     Interest-bearing debt**

 
| ** **                     | ** ** | **December 31,** | ** ** |
|--------------------------------|------------|-----------------------|------------|
| ** **                     | ** ** | **2004**              | ** ** | **2003** | ** ** |
| Long-term liabilities:         |       |                  |       |   |   |
| Subordinated Convertible Bonds |       | 115                   |       | 115 |   |
| Subordinated High Yield Bonds  |       | 110                   |       | 277 |   |
| Other loans                    |       | 597                   |       | 557 |   |
| Current liabilities:           |       |                  |       |   |   |
| Loans                          |       | 33                    |       | 28 |   |
| Credit institutions            |       | 6                     |       | 5 |   |
| Cash and deposits              |       | (154                  | )          | (145 | ) |
|                           |       | 707                   |       | 836 |   |

 

Movements schedule interest-bearing debt:

 
| ** **                                                     | ** ** | **2004**   | ** ** | **2003** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|----------|------------|
| Interest-bearing debt at the beginning of  the financial year  |       |       |       | 836      |       |   |   | 1,735 |   |
| Decrease due to cash flow from operational  activities         |       |       |       | (223     | )          |   |   | (272 | ) |
| Increase/decrease due to cash flow from  investment activities |       |       |       | 82       |       |   |   | (544 | ) |
| Other:                                                         |       |       |       |     |       |   |   |   |   |
| Dividend payments                                              |       | 11         |       |     |       | 9 |   |   |   |
| Payments for interest rate swap settlements                    |       | —     |       |     |       | 40 |   |   |   |
| Paid financing fees and tender premiums                        |       | 39         |       |     |       | 25 |   |   |   |
| Payments to minority shareholders                              |       | 8          |       |     |       | 7 |   |   |   |
|                                                           |       |       |       | 58       |       |   |   | 81 |   |
| Translation differences                                        |       |       |       | (46      | )          |   |   | (164 | ) |
| **Interest-bearing  debt at the end of the financial year**    | ** ** | ** ** | ** ** | **707**  | ** ** | ** ** | ** ** | **836** | ** ** |

 

**28.****                     Guarantee Capital**

 
| ** **         | ** ** | **December 31,** | ** ** |
|--------------------|------------|-----------------------|------------|
| ** **         | ** ** | **2004**              | ** ** | **2003** | ** ** |
| Group equity       |       | 1,474                 |       | 1,484 |   |
| Subordinated Loans |       | 225                   |       | 392 |   |
| **Total**          | ** ** | **1,699**             | ** ** | **1,876** | ** ** |

 

F-49

----

 

**29.****                     Commitments not included in theBalance Sheet**

 
| ** **                                  | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|---------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| *Rental  and operational lease commitments* |       |                       |       |                       |       |   |   |   |   |
| These are due as follows:                   |       |                       |       |                       |       |   |   |   |   |
| Within 1 year                               |       | 75                         |       |                       |       | 85 |   |   |   |
| After 1 year but within 5 years             |       | 191                        |       |                       |       | 216 |   |   |   |
| After 5 years                               |       | 122                        |       |                       |       | 135 |   |   |   |
|                                        |       |                       |       | 388                        |       |   |   | 436 |   |
| *Repurchase  guarantees*                    |       |                       |       |                       |       |   |   |   |   |
| These lapse as follows:                     |       |                       |       |                       |       |   |   |   |   |
| Within 1 year                               |       | 16                         |       |                       |       | 20 |   |   |   |
| After 1 year but within 5 years             |       | 30                         |       |                       |       | 40 |   |   |   |
| After 5 years                               |       | 6                          |       |                       |       | 4 |   |   |   |
|                                        |       |                       |       | 52                         |       |   |   | 64 |   |
| *Other*                                     |       |                       |       |                       |       |   |   |   |   |
| These lapse as follows:                     |       |                       |       |                       |       |   |   |   |   |
| Within 1 year                               |       | 9                          |       |                       |       | 22 |   |   |   |
| After 1 year but within 5 years             |       | 2                          |       |                       |       | 2 |   |   |   |
|                                        |       |                       |       | 11                         |       |   |   | 24 |   |
| **Total  commitments**                      | ** ** | ** **                 | ** ** | **451**                    | ** ** | ** ** | ** ** | **524** | ** ** |

 

Rent and operational lease commitments of €388 million in total atDecember 31, 2004 are primarily related to distribution facilities andoffices that the Company leases under non-cancelable operating leases. Theamounts are the nominal value of future lease payments netted for sub-leaseincome.

 

Repurchase guarantees of €52 million in total at December 31,2004 mainly relate to repurchase guarantees concerning graphic machines sold tocustomers and financed by external financing companies. Should the customer bedeclared in default, the respective financing company has a right of recourseagainst Buhrmann, which, in general, will be lower than market value. Theamount included in the table is the maximum exposure under these guarantees.

 

Other commitments not included in the balance sheet include investmentcommitments relating to expenditure on projects, such as the development of ITsystems.

 

In addition, the Company had certain contingent liabilities,commitments and guarantees which are not included in the table above and whichare discussed below.

 

Buhrmann’s operating companies in Europe offer a variety of definedbenefit plans, in addition to Government schemes, as part of the remunerationpackage. In countries like the Netherlands and the United Kingdom, the definedbenefit plans are separated from Buhrmann in pension funds to which Buhrmannmakes contributions. For its employees in the United States, Buhrmann sponsorsseveral defined contribution plans and a defined benefit plan with a relativelysmall number of participants. Depending on specific financing arrangements andfunding levels, Buhrmann may incur liabilities for certain deficits whichamounted to €10 million at December 31, 2004. No provisions wererecorded in the balance sheet at December 31, 2004 in connection with thisliability.

 

Buhrmann has entered into a number of forward foreign exchange andcurrency swap contracts and interest rate swap contracts which had an estimatednegative fair value of €5 million at December 31, 2004. The estimatedfair value of the outstanding forward foreign exchange and currency swapcontracts and interest rate swap contracts indicates how much Buhrmann wouldhave to pay as per the balance sheet date in exchange for termination of thesecontracts without further commitments.

 

F-50

----

 

Buhrmann has issued certain performance guarantees, usually in the formof standby letters of credit, to an estimated maximum amount of €4 millionat December 31, 2004. The major part of these guarantees expire latest on September 1,2007.

 

Buhrmann has issued guarantees of the indebtedness of a third-party toa maximum amount of €3 million at December 31, 2004.

 

**30.****                     Legal proceedings**

 

Buhrmann is involved in various routine legal proceedings incidental tothe conduct of its business. Buhrmann does not believe that any of these legalor regulatory proceedings will have a material adverse effect on its financialcondition, results of operations or cash flows other than the proceedingsdisclosed below.

 

**Paper Merchanting Germany: Anti-trust**

 

In April 2000, the German competition authorities (theBundeskartellamt or “BKA”) launched an investigation against a number of Germanpaper merchants, among which is Buhrmann’s former subsidiary Deutsche PapierVertriebs GmbH, alleging a violation of anti-trust rules in Germany in a numberof regions. On April 30, 2004 the BKA imposed a fine of €7.6 millionon Deutsche Papier Vertriebs GmbH and eleven other paper merchants in Germany.The fine relates to the period between 1995 and 2000 and covers the whole ofGermany with the exception of the South. Deutsche Papier and the accusedindividuals do not agree with the fine and the calculation thereof and haveappealed against this fine. A third-party investigation into the allegedsurplus profit in a number of regions and a third-party investigation into thecalculation of the surplus profit used by the BKA substantiated Buhrmann’sposition that the fine reflects an overestimation of any assumed possiblesurplus profit. Buhrmann has given an indemnity to PaperlinX Limited, the buyerof the Paper Merchanting Division, of which Deutsche Papier is a part, withrespect to this case.

 

**Paper Merchanting Germany: completionaccounts**

 

Under the Agreement for the Sale and Purchase of the Paper MerchantingDivision of Buhrmann N.V. dated September 8, 2003 a post-completiondispute has arisen as to the valuation of a property in Germany for the purposeof inclusion in the completion accounts. The completion accounts are the basisfor the calculation of the final purchase price. The valuation differenceamounts to € 7 million. The matter is currently pending the decision of anarbitral award. Once the value of the property has been determined, finalsettlement of the purchase price can take place.

 

**Holdings: Agena S.A.—Béfec**

 

In 1994 Buhrmann issued arbitration proceedings against the sellers ofthe French company Agena S.A., an acquisition made in 1991. Buhrmann’s claimfor damages was based on a misrepresentation of the financial position of thecompany in the acquisition balance sheet. These proceedings resulted in anarbitral award adjudicating damages to the amount of € 79 million receivedin 2003. In 1995 proceedings had also started against Béfec (a predecessor ofPricewaterhouseCoopers, France), the accountants who in 1991 had certified theacquisition balance sheet. These proceedings were adjourned in anticipation ofthe outcome of the arbitration proceedings against sellers. The matter againstBéfec was resumed after the arbitral award. Béfec raised preliminary defenceagainst the claim which was rejected in the first instance. Although thedefendant appealed against this judgment it may reasonably be anticipated thatthe principal matter will be permitted. Buhrmann is claiming damages to theamount of € 134 million plus interests and costs. It is estimated that afinal decision may still take a considerable period.

 

Under U.S. GAAP, a contingent asset is disclosed when it is probablethat an inflow of an economic benefit will be realized and the amount isestimable. In practice, contingent assets are not disclosed until the amountand timing of the inflow is known to the company (e.g., there is a firmcommitment from the counter party). Accordingly, the above contingent assetwould not be disclosed in accordance with U.S. GAAP, FAS 5, given theuncertainty as to its realization and timing of realization, if at all.

 

F-51

----

 

**31.****                     Segment Information**

 

As of December 31, 2004, the Buhrmann Group consist of fourdivisions. The Office Products North America Division, Office Products EuropeDivision and Office Products Australia Division supply office products andoffice furniture to large and medium-sized companies. The Office ProductsEurope Division and Office Products Australia Division are combined forreporting purposes. The Graphic Systems Division supplies pre-press systems,printing presses, folding, cutting and binding machines in six Europeancountries and also provides service and maintenance for its customers. ThePaper Merchanting Division sold paper to printers, publishers and the officemarket until it was sold with effect from October 31, 2003.

 

Corporate items are not allocated to the Divisions and include costsincurred by the Corporate Head Office as well as costs and assets relating togeographical holding companies.

 

**Operating segments 2004**

 
| ** **                                                          | ** ** | **Office  Products  North  America** | ** ** | **Office  Products  Europe/  Australia** | ** ** | **Graphic  Systems** | ** ** | **Corporate  items** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------|------------|----------------------|------------|----------------------|------------|------------|------------|
| ** **                                                          | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** **           | ** ** | ** **           | ** ** | ** ** | ** ** |
| Net sales                                                           |       | 3,628                                |       | 1,500                                    |       | 411                  |       | —               |       | 5,539      |       |
| Added value                                                         |       | 961                                  |       | 420                                      |       | 95                   |       | —               |       | 1,476      |       |
| Depreciation of tangible fixed assets and  internally used software |       | (60                                  | )          | (20                                      | )          | (4                   | )          | —               |       | (84        | )          |
| Operating result before amortization and  impairment of goodwill    |       | 171                                  |       | 53                                       |       | —               |       | (18                  | )          | 206        |       |
| Amortization of goodwill                                            |       | (33                                  | )          | (6                                       | )          | —               |       | (6                   | )          | (45        | )          |
| Operating result                                                    |       | 138                                  |       | 47                                       |       | —               |       | (24                  | )          | 161        |       |
| Exceptional operating results                                       |       | —                               |       | (5                                       | )          | —               |       | —               |       | (5         | )          |
| Goodwill                                                            |       | 914                                  |       | 194                                      |       | 3                    |       | 171                  |       | 1,282      |       |
| Total assets                                                        |       | 2,356                                |       | 613                                      |       | 211                  |       | 301                  |       | 3,481      |       |
| Total liabilities                                                   |       | 693                                  |       | 275                                      |       | 114                  |       | 925                  |       | 2,007      |       |
| Capital employed before goodwill                                    |       | 505                                  |       | 149                                      |       | 85                   |       | (9                   | )          | 730        |       |
| Capital expenditure                                                 |       | 44                                   |       | 11                                       |       | 4                    |       | —               |       | 59         |       |

 

**Operating segments 2003**

 
| ** **                                                          | ** ** | **Office  Products  North  America** | ** ** | **Office  Products  Europe/  Australia** | ** ** | **Graphic  Systems** | ** ** | **Corporate  items** | ** ** | **Sub  total** | ** ** | **Paper  Merchanting** | ** ** | **Total  Group** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------|------------|----------------------|------------|----------------------|------------|----------------|------------|------------------------|------------|------------------|------------|
| ** **                                                          | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** **           | ** ** | ** **           | ** ** | ** **     | ** ** | ** **             | ** ** | ** **       | ** ** |
| Net sales                                                           |       | 3,939                                |       | 1,479                                    |       | 369                  |       | —               |       | 5,787          |       | 2,266                  |       | 8,053            |       |
| Added value                                                         |       | 1,018                                |       | 392                                      |       | 85                   |       | —               |       | 1,495          |       | 359                    |       | 1,854            |       |
| Depreciation of tangible fixed assets and  internally used software |       | (63                                  | )          | (20                                      | )          | (4                   | )          | —               |       | (87            | )          | (17                    | )          | (104             | )          |
| Operating result before amortization and  impairment of goodwill    |       | 152                                  |       | 38                                       |       | (13                  | )          | 42                   |       | 219            |       | 57                     |       | 276              |       |
| Amortization and impairment of goodwill                             |       | (37                                  | )          | (61                                      | )          | —               |       | (5                   | )          | (103           | )          | (2                     | )          | (105             | )          |
| Operating result                                                    |       | 115                                  |       | (23                                      | )          | (13                  | )          | 37                   |       | 116            |       | 55                     |       | 171              |       |
| Exceptional operating results                                       |       | (7                                   | )          | (7                                       | )          | (1                   | )          | 58                   |       | 43             |       | 8                      |       | 51               |       |
| Goodwill                                                            |       | 1,017                                |       | 197                                      |       | 3                    |       | 183                  |       | 1,400          |       | —                 |       | 1,400            |       |
| Total assets                                                        |       | 2,494                                |       | 619                                      |       | 219                  |       | 345                  |       | 3,677          |       | —                 |       | 3,677            |       |
| Total liabilities                                                   |       | 597                                  |       | 266                                      |       | 113                  |       | 1,217                |       | 2,193          |       | —                 |       | 2,193            |       |
| Capital employed before goodwill                                    |       | 553                                  |       | 162                                      |       | 108                  |       | (16                  | )          | 807            |       | —                 |       | 807              |       |
| Capital expenditure                                                 |       | 40                                   |       | 22                                       |       | 6                    |       | —               |       | 68             |       | 11                     |       | 79               |       |

 

F-52

----

 

**Operating segments 2002**

 
| ** **                                                          | ** ** | **Office  Products  North  America** | ** ** | **Office  Products  Europe/  Australia** | ** ** | **Graphic  Systems** | ** ** | **Corporate  items** | ** ** | **Sub  total** | ** ** | **Paper  Merchanting** | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------|------------|----------------------|------------|----------------------|------------|----------------|------------|------------------------|------------|------------|------------|
| ** **                                                          | ** ** | ** **                           | ** ** | ** **                               | ** ** | ** **           | ** ** | ** **           | ** ** | ** **     | ** ** | ** **             | ** ** | ** ** | ** ** |
| Net sales                                                           |       | 4,931                                |       | 1,540                                    |       | 489                  |       | —               |       | 6,960          |       | 2,988                  |       | 9,948      |       |
| Added value                                                         |       | 1,261                                |       | 413                                      |       | 118                  |       | —               |       | 1,792          |       | 461                    |       | 2,253      |       |
| Depreciation of tangible fixed assets and  internally used software |       | (69                                  | )          | (20                                      | )          | (4                   | )          | —               |       | (93            | )          | (21                    | )          | (114       | )          |
| Operating result before amortization and  impairment of goodwill    |       | 197                                  |       | 64                                       |       | 23                   |       | (16                  | )          | 268            |       | 74                     |       | 342        |       |
| Amortization and impairment of goodwill                             |       | (470                                 | )          | (139                                     | )          | —               |       | (4                   | )          | (613           | )          | (30                    | )          | (643       | )          |
| Operating result                                                    |       | (273                                 | )          | (75                                      | )          | 23                   |       | (20                  | )          | (345           | )          | 44                     |       | (301       | )          |
| Goodwill                                                            |       | 1,262                                |       | 249                                      |       | 3                    |       | 172                  |       | 1,686          |       | 102                    |       | 1,788      |       |
| Total assets                                                        |       | 3,088                                |       | 695                                      |       | 240                  |       | 231                  |       | 4,254          |       | 1,155                  |       | 5,409      |       |
| Total liabilities                                                   |       | 775                                  |       | 288                                      |       | 130                  |       | 1,963                |       | 3,156          |       | 442                    |       | 3,598      |       |
| Capital employed before goodwill                                    |       | 731                                  |       | 193                                      |       | 116                  |       | 1                    |       | 1,041          |       | 654                    |       | 1,695      |       |
| Capital expenditure                                                 |       | 62                                   |       | 21                                       |       | 5                    |       | —               |       | 88             |       | 19                     |       | 107        |       |

 

F-53

----

 

**32.****                     Enterprise wide disclosures**

 
| ** **                                                                 | ** ** | **United  States** | ** ** | **The  Netherlands****(incl.  Corporate)** | ** ** | **Germany** | ** ** | **United  Kingdom** | ** ** | **Rest of  European  Union  members** | ** ** | **Australia/  New  Zealand** | ** ** | **Rest of  the  world** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------|------------|--------------------|------------|--------------------------------------------|------------|-------------|------------|---------------------|------------|---------------------------------------|------------|------------------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                 | ** ** | ** **         | ** ** | ** **                                 | ** ** | ** **  | ** ** | ** **          | ** ** | ** **                            | ** ** | ** **                   | ** ** | ** **              | ** ** | ** ** | ** ** |
| **Sales by  country of destination**                                       |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 3,268              |       | 281                                        |       | 321         |       | 148                 |       | 710                                   |       | 589                          |       | 222                     |       | 5,539      |       |
| Year ended December 31, 2003                                          |       | 3,667              |       | 772                                        |       | 701         |       | 884                 |       | 1,188                                 |       | 496                          |       | 345                     |       | 8,053      |       |
| Year ended December 31, 2002                                          |       | 4,665              |       | 961                                        |       | 817         |       | 1,251               |       | 1,458                                 |       | 419                          |       | 377                     |       | 9,948      |       |
| **Depreciation  of tangible fixed assets and internally used software**    |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | (58                | )          | (5                                         | )          | (4          | )          | (3                  | )          | (7                                    | )          | (5                           | )          | (2                      | )          | (84        | )          |
| Year ended December 31, 2003                                          |       | (61                | )          | (11                                        | )          | (8          | )          | (7                  | )          | (10                                   | )          | (4                           | )          | (3                      | )          | (104       | )          |
| Year ended December 31, 2002                                          |       | (67                | )          | (12                                        | )          | (8          | )          | (7                  | )          | (11                                   | )          | (3                           | )          | (6                      | )          | (114       | )          |
| **Operating  result**                                                      |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 116                |       | (14                                        | )          | (10         | )          | 0                   |       | 6                                     |       | 48                           |       | 15                      |       | 161        |       |
| Year ended December 31, 2003                                          |       | 96                 |       | —                                     |       | (10         | )          | 22                  |       | 12                                    |       | 31                           |       | 20                      |       | 171        |       |
| Year ended December 31, 2002                                          |       | (296               | )          | 33                                         |       | (15         | )          | 28                  |       | (101                                  | )          | 33                           |       | 17                      |       | (301       | )          |
| **Net  investments in tangible fixed assets and internally used software** |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 42                 |       | 3                                          |       | 1           |       | 1                   |       | 5                                     |       | 5                            |       | 2                       |       | 59         |       |
| Year ended December 31, 2003                                          |       | 38                 |       | 13                                         |       | 2           |       | 5                   |       | 11                                    |       | 7                            |       | 3                       |       | 79         |       |
| Year ended December 31, 2002                                          |       | 63                 |       | 17                                         |       | 2           |       | 5                   |       | 9                                     |       | 8                            |       | 3                       |       | 107        |       |
| **Long  lived assets***                                                    |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 1,095              |       | 23                                         |       | 7           |       | 10                  |       | 175                                   |       | 246                          |       | 37                      |       | 1,593      |       |
| Year ended December 31, 2003                                          |       | 1,227              |       | 27                                         |       | 10          |       | 12                  |       | 180                                   |       | 257                          |       | 38                      |       | 1,751      |       |
| **Capital  employed before goodwill**                                      |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 455                |       | 19                                         |       | 26          |       | 10                  |       | 125                                   |       | 54                           |       | 41                      |       | 730        |       |
| Year ended December 31, 2003                                          |       | 508                |       | 31                                         |       | 43          |       | 9                   |       | 137                                   |       | 42                           |       | 37                      |       | 807        |       |
| **Total  assets**                                                          |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 2,235              |       | 98                                         |       | 69          |       | 45                  |       | 567                                   |       | 379                          |       | 88                      |       | 3,481      |       |
| Year ended December 31, 2003                                          |       | 2,421              |       | 153                                        |       | 80          |       | 39                  |       | 528                                   |       | 375                          |       | 81                      |       | 3,677      |       |
| **Total  liabilities**                                                     |       |               |       |                                       |       |        |       |                |       |                                  |       |                         |       |                    |       |       |       |
| Year ended December 31, 2004                                          |       | 1,295              |       | 288                                        |       | 55          |       | 43                  |       | 213                                   |       | 87                           |       | 26                      |       | 2,007      |       |
| Year ended December 31, 2003                                          |       | 1,444              |       | 314                                        |       | 46          |       | 42                  |       | 238                                   |       | 87                           |       | 22                      |       | 2,193      |       |

 

----

*                                         long-livedassets include tangible and intangible fixed assets

 

F-54

----

 

**33. Subsequent Events**

 

***Repurchase Preference Shares C***

 

On February 22, 2005, Buhrmann reachedagreement with all the holders of the Preference Shares C regarding thepurchase by Buhrmann of all 43,628 issued and outstanding Preference Shares Cfor an aggregate purchase price of $520 million in cash together with certainoptions to acquire Ordinary Shares of Buhrmann in certain definedcircumstances. The repurchase of the Preference Shares C is conditional on,among other things:

 

• the approval of the repurchase of PreferenceShares C by an extraordinary meeting of shareholders;

• the raising of adequate finance for therepurchase of the Preference Shares C in a form and amount satisfactory to us; and

• the approval of the agent security trusteeunder the Senior Credit Facility.

 

An Extraordinary General Meeting ofShareholders was held on March 11, 2005 in which the shareholders approved therepurchase of the outstanding Preference Shares C, a change of Articles ofAssociation and the issue of up to 80 million new Ordinary Shares.  The agent security trustee under the SeniorCredit Facility has approved the repurchase of Preference Share C. Buhrmannexpects that all other conditions to the repurchase of Preference Shares C willbe satisfiedon or aroundApril 1, 2005.

 

***Placement of 77/8% Senior Subordinated Notes due2015***

 

On March 2, 2005 Buhrmann received proceedsof the 77/8% Senior Subordinated Notes due 2015 (2015Notes) with an aggregate principal amount of $150 million. The proceeds of the2015 Notes are intended to be used to finance the planned repurchase of thePreference Shares C, together with a discounted rights issue of approximately €250 million and cash on hand. The proceeds ofthe 2015 Notes are being placed in escrow pending the completion of therepurchase transaction, which is expected to occur in early April 2005. The2015 Notes have been issued at a price of 99.151% of the par value. Theeffective yield on the 2015 Notes is 8%.

 

F-55

----

 

**34.****                               Summaryof differences between generally accepted accounting principles in theNetherlands and generally accepted accounting principles in the United Statesand related disclosures**

 

Buhrmann’s Consolidated Financial Statements have been prepared inaccordance with generally accepted accounting principles in the Netherlands(Dutch GAAP), which vary in certain significant respects from accountingprinciples generally accepted in the United States of America (US GAAP). Thetables below give the effect that application of US GAAP would have on netresult and group equity (in millions of €).

 
| ** **                                                                                | ** **                                                | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-------------------------------------------------------------------------------------------|-----------------------------------------------------------|----------|------------|----------|------------|----------|------------|
| **Net  result under Dutch GAAP**                                                          | ** **                                                | **80**   | ** ** | **(132** | **)**      | **(588** | **)**      |
| a)                                                                                        | Goodwill  amortization                                    |     | 45         |     | 52         |     | 70         |   |
| a)                                                                                        | Goodwill  impairment                                      |     | —     |     | 4          |     | (439       | ) |
| b)                                                                                        | Intangible  fixed assets amortization                     |     | (5         | )        | (6         | )        | (6         | ) |
| c)                                                                                        | Restructuring  and integration provisions                 |     | —     |     | (26        | )        | 7          |   |
| d)                                                                                        | Derivatives                                               |     | —     |     | 7          |     | (7         | ) |
| e)                                                                                        | Pensions                                                  |     | 18         |     | 8          |     | 27         |   |
| f)                                                                                        | Financing  fees                                           |     | 2          |     | (12        | )        | 3          |   |
| g)                                                                                        | Revenue  recognition                                      |     | 1          |     | 12         |     | 1          |   |
| h)                                                                                        | Catalog  contributions                                    |     | 1          |     | 5          |     | —     |   |
| i)                                                                                        | Sale Paper  Merchanting Division                          |     | —     |     | (132       | )        | —     |   |
| j)                                                                                        | Deferred  lease                                           |     | (4         | )        | —     |     | (2         | ) |
| l)                                                                                        | Deferred  taxes                                           |     | (30        | )        | (88        | )        | (7         | ) |
| **Net result under US GAAP before cumulative  effect of change in accounting principles** |                                                      | **108**  | ** ** | **(308** | **)**      | **(941** | **)**      |
| Cumulative  effect of change in accounting principle for:                                 |                                                      |     |       |     |       |     |       |
| h)                                                                                        | Catalog  contributions (net of €19 million tax gain) |     | —     |     | (29        | )        | —     |   |
| **Net  result under US GAAP**                                                             |                                                      | **108**  | ** ** | **(337** | **)**      | **(941** | **)**      |

 
| ** **                         | ** **                                               | **December 31,** | ** ** |
|------------------------------------|----------------------------------------------------------|------------------|------------|
| ** **                         | ** **                                               | **2004**         | ** ** | **2003** | ** ** |
| **Group  equity under Dutch GAAP** | ** **                                               | **1,474**        | ** ** | **1,484** | ** ** |
| a)                                 | Goodwill                                                 |             | (117       | ) | (175 | ) |
| b)                                 | Intangible fixed assets                                  |             | 65         |   | 75 |   |
| c)                                 | Restructuring and integration provisions                 |             | —     |   | 1 |   |
| d)                                 | Derivatives—Accumulated Other Comprehensive  Income |             | (3         | ) | (8 | ) |
| d)                                 | Derivatives                                              |             | (2         | ) | (2 | ) |
| e)                                 | Pensions                                                 |             | 205        |   | 187 |   |
| e)                                 | Pensions—Accumulated Other Comprehensive  Income    |             | (18        | ) | (9 | ) |
| f)                                 | Financing fees                                           |             | (7         | ) | (9 | ) |
| g)                                 | Revenue recognition                                      |             | (27        | ) | (29 | ) |
| h)                                 | Catalog contributions                                    |             | (32        | ) | (36 | ) |
| j)                                 | Deferred lease                                           |             | (5         | ) | (2 | ) |
| k)                                 | Other                                                    |             | (1         | ) | (1 | ) |
| l)                                 | Deferred taxes                                           |             | (2         | ) | 28 |   |
| **Group equity under US GAAP**     | ** **                                               | **1,530**        | ** ** | **1,504** | ** ** |

 

The differences between Dutch GAAP and US GAAP as indicated in thetables are explained below, including related disclosures required under USGAAP.

 

F-56

----

 

**a)****                                      Goodwill**

 

This item consists of the following:

 

i)                                         Foracquisitions occurring prior to January 1, 1997, goodwill was directlywritten off to Group equity under Dutch GAAP. Under US GAAP this goodwill iscapitalized and amortized over the estimated useful life of forty years untilDecember 31, 2001.

 

ii)                                      Buhrmannrepurchased the outstanding public 30% minority share of its former USsubsidiary, BT Office Products Inc. in October 1998. Under Dutch GAAPthis transaction was accounted for as a repurchase of Group equity and wasshown as a movement in Group equity. Under US GAAP, the accounting treatment isto consider the surplus paid over fair value of net assets as goodwill.

 

iii)                                   OnNovember 1, 1999, Buhrmann purchased all the outstanding shares ofCorporate Express Inc. Certain fair value adjustments, includingprovisions for restructuring and integration, which were made for Dutch GAAPpurposes, did not qualify for US GAAP. This led to a lower amount of goodwillunder US GAAP. In addition, for US GAAP purposes only, certain intangibleassets (the workforce, Corporate Express brandname and internally usedsoftware) were valued and recognized separately from goodwill, see pointb) below. Under Dutch GAAP these intangible assets are included ingoodwill. Furthermore deferred taxes on certain of the above-mentioned fairvalue adjustments and certain valuation allowances on deferred tax assets thatdid not qualify for US GAAP resulted in differences in goodwill under US GAAPcompared to Dutch GAAP.

 

iv)                                  Withthe Samas and USOP acquisitions in April and May 2001, some provisions forredundancy payments for employees were recorded and included in goodwill underDutch GAAP whereas under US GAAP these payments were expensed over the periodthese employees worked for Buhrmann.

 

The net effect of the items mentioned above was a higher amount ofgoodwill under US GAAP which was amortized over its estimated useful life offorty years until December 31, 2001. The book value of this goodwill was€168 million at December 31, 2001. As of January 1, 2002, goodwillis no longer amortized under US GAAP. Amortization of goodwill recorded underDutch GAAP of €45 million in 2004, €52 million in 2003 and€70 million in 2002 has been reversed under US GAAP.

 

Under US GAAP, the Company reviews goodwill for impairment inaccordance with SFAS No. 142 “Goodwill and Other Intangible Assets”, whichrequires a two-step process to analyze whether or not goodwill has beenimpaired.

 

Step one is to test for potential impairment, and requires that thefair value of the reporting unit be compared to its book value includinggoodwill. The fair value of the reporting unit is calculated based ondiscounted future cash flows and residual values as under Dutch GAAP. If thefair value is higher than the book value, no impairment is recognized. If thefair value is lower than the book value, a second step is performed. The secondstep is to measure the amount of impairment loss, if any, and requires thatassets and liabilities, including unrecognized intangible assets such as brandnames and customer and supplier relationships, be assigned fair values in ahypothetical purchase price allocation to determine the implied fair value ofgoodwill. This fair value is then compared to the carrying value of goodwill.If the implied fair value is lower than the carrying value, an impairment mustbe recorded for the difference.

 

The adoption of SFAS No. 142 as of January 1, 2002, did notresult in an initial impairment of goodwill. A reduced level of profitabilityin 2002 and reduced visibility concerning future performance resulting in ahigher cost of capital, caused a decline in the calculated fair value of ourbusinesses which resulted in an impairment of goodwill of €573 millionunder Dutch GAAP at December 31, 2002. Under US GAAP the impairment was€439 million higher compared to Dutch GAAP. This was predominantly aresult of the higher amount of goodwill previously capitalized under US GAAP,as explained above, for €248 million and the valuation of unrecognizedintangible assets (brandnames and customer and supplier contracts) for€124 million. The amount of goodwill impairment at December 31, 2002under US GAAP for the Office Products North America Division was€648 million, for the Office Products Europe Division €266 millionand for the former Paper Merchanting Division €98 million.

 

F-57

----

 

The annual impairment test on goodwill at December 31, 2003resulted in an impairment of €53 million under Dutch GAAP and€49 million under US GAAP for the Office Products Europe Division. Thelower impairment under US GAAP is mainly due to a lower carrying value ofgoodwill under US GAAP of this Division.

 

The annual impairment test on goodwill at December 31, 2004 didnot result in an impairment under Dutch GAAP or US GAAP.

 

In connection with the sale of the Paper Merchanting Division in 2003,an amount of €104 million of capitalized goodwill was written-off under USGAAP. This write-off is included in the result on the sale of the PaperMerchanting Division in the reconciliation of net result. Under Dutch GAAP,this goodwill was directly written-off from Group equity before January 1,1997.

 

In 2004, 2003 and 2002 translation adjustments of €13 million,€48 million and €44 million on these goodwill items were recorded assome of these goodwill items are denominated in US dollars

 

In 2003 and 2002 additions to goodwill of €3 million and €15 million recorded under Dutch GAAP were either classified as intangiblefixed assets or did not qualify under US GAAP.

 

The net effect at December 31, 2004 of the items mentioned abovewas a lower amount of goodwill under US GAAP of €117 million.

 

The movements in goodwill under US GAAP were as follows (in millions of€):

 
| ** **                        | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** |
|-----------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| *Book value at beginning of year* |       | 1,225     |       | 1,616     |       | 2,852     |       |
| Investments                       |       | 6         |       | 4         |       | 22        |       |
| Divestments                       |       | —    |       | (201      | )          | —    |       |
| Impairment                        |       | —    |       | (49       | )          | (1,012    | )          |
| Release provisions (net of tax)   |       | —    |       | (6        | )          | —    |       |
| Translation differences           |       | (66       | )          | (139      | )          | (246      | )          |
| **Book value at end of year**     | ** ** | **1,165** | ** ** | **1,225** | ** ** | **1,616** | ** ** |
|                              |       |      |       |      |       |      |       |
| Accumulated cost                  |       | 2,120     |       | 2,226     |       | 2,872     |       |
| Accumulated amortization          |       | (168      | )          | (177      | )          | (244      | )          |
| Accumulated impairment            |       | (787      | )          | (824      | )          | (1,012    | )          |
| **Book value at end of year**     | ** ** | **1,165** | ** ** | **1,225** | ** ** | **1,616** | ** ** |

 

**b)****                                      Intangiblefixed assets**

 

With the acquisition of Corporate Express in October 1999, certainintangible assets were valued and recognized separately from goodwill under USGAAP. These include the workforce (USD 10 million), the CorporateExpress brandname (USD 75 million) and internally used software(USD 20 million). Under SFAS No. 142, the workforce no longermet the criteria for separate recognition and the book value thereof was reclassifiedto goodwill at January 1, 2002. The Corporate Express brandname andinternally used software are amortized over their estimated useful lives of 40and 7 years, respectively.

 

The book value of the Corporate Express brandname at December 31,2004 was USD 66 million and at December 31, 2003 was USD68 million. The accumulated amortization at December 31, 2004 was USD9 million and at December 31, 2003 was USD 7 million. Theamortization expense was USD 2 million in each of 2004, 2003 and 2002 andwill be USD 2 million in each of the next 5 years.

 

F-58

----

 

The book value of the internally used software at December 31,2004 was USD 5 million and at December 31, 2003 was USD8 million. The accumulated amortization at December 31, 2004 wasUSD 15 million and at December 31, 2003 was USD 12 million.The amortization expense was USD 3 million in each of 2004, 2003 and2002 and will be USD 3 million in 2005 and USD 2 million in 2006.

 

Also included under “Intangible fixed assets”, are amounts allocated tocustomer relationships of companies acquired in 2003 and 2002 of€7 million and €10 million, respectively, which are classified asintangible fixed assets under US GAAP and goodwill under Dutch GAAP. Under USGAAP these amounts are amortized over a period of ten years. The book valueunder US GAAP was €13 million at December 31, 2004 and€15 million at December 31, 2003. The accumulated amortization was€4 million at December 31, 2004 and €2 million atDecember 31, 2003. The amortization expense under US GAAP was €2 millionin 2004 and €1 million in 2003 and 2002 and will be €2 million ineach of the next 5 years.

 

**(c)****                                  Restructuringand integration provisions**

 

Following the acquisition of Corporate Express in October 1999 andsubsequent integration, the Company’s office product activities in the US andEurope underwent a restructuring. As explained in item a) Goodwill above,at the time of acquisition, some restructuring and integration provisions wererecorded and included in goodwill under Dutch GAAP that did not qualify underUS GAAP. As a consequence, some restructuring and integration payments in theyears after the acquisition were expensed under US GAAP whereas under DutchGAAP these payments were deducted from the provisions. In 2002 payments of €9 millionwere expensed. In 2003, no payments were expensed and the unused portion of€9 million of these provisions was reversed against goodwill as it becameclear that no more payments were going to be made.

 

This item also includes redundancy payments to former USOP employees of€2 million in 2002 which were expensed under US GAAP and for which underDutch GAAP provisions were recorded at the time of acquisition in 2001 as partof goodwill.

 

In addition, in 2001 and 2002, the Company introduced additionalrestructuring plans for its office products operations in North America andEurope as well as its former papermerchanting operations in Europe. As ofJanuary 1, 2001 Dutch GAAP was substantially similar to US GAAP withregard to recording provisions for restructuring plans except that Dutch GAAPrequired the plan to be communicated by the publication date of the FinancialStatements and under US GAAP the plan had to be communicated by the balancesheet date. As of January 1, 2003 under US GAAP a provision for a costassociated with an exit or disposal activity can only be recognized in theperiod in which the liability is incurred and should be measured at fair value.Under Dutch GAAP an accrual of €45 million was recorded in 2001 inconnection with these restructuring plans (for the continuing and discontinuedoperations) of which €10 million did not qualify for US GAAP forrecognition in 2001 and was expensed under US GAAP in 2002. In 2002, Buhrmannaccrued €60 million under Dutch GAAP for additional restructuring plansand €51 million for non-cash write-offs on IT, distribution infrastructureand some other assets. Under US GAAP, €28 million of this accrual, mainlyrelated to the restructuring plans, did not qualify for recognition in 2002 andas a consequence was expensed in 2003.

 

Furthermore, adjustments of €2 million to the 2002 restructuringplans which were recorded under Dutch GAAP in 2003 were under US GAAP alreadyrecorded in 2002. In addition, at the end of 2003, a reassessment was made ofthe accruals for the 2002 restructuring plans which resulted in an additionalaccrual of €6 million in the Office Products North America Division(mainly as a result of a reassessment of lease obligations for vacantproperties offset by reduced redundancy costs and continuing usage ofproperties), of €3 million in the Office Products Europe Division (mainlyfor an additional reduction in the workforce of 135 employees) and of€1 million in the Graphic Systems Division, both under Dutch GAAP and US GAAP.

 

F-59

----

 

The movements in the restructuring provisions in 2004 under US GAAPwere as follows (in millions of €):

 
| ** **                       | ** ** | **Employee  costs**         | ** ** | **Write-down  of assets** | ** ** | **Lease  termination  and other  closing  costs** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-----------------------------|------------|---------------------------|------------|---------------------------------------------------|------------|-----------|------------|
| ** **                       | ** ** | **(in millions of €)** | ** ** |
| Balance at  December 31, 2003    | ** ** | 15                          |       | —                    |       | 8                                                 |       | 23        |       |
| Set-up/finalization              | ** ** | 1                           |       | —                    |       | 7                                                 |       | 8         |       |
| Cash utilization                 |       | (6                          | )          | —                    |       | (9                                                | )          | (15       | )          |
| Reclassification                 |       | —                      |       | —                    |       | 3                                                 |       | 3         |       |
| Currency translation             |       | (1                          | )          | —                    |       | —                                            |       | (1        | )          |
| **Balance at December 31, 2004** | ** ** | **9**                       | ** ** | **—**                | ** ** | **9**                                             | ** ** | **18**    | ** ** |

 

The movements in the integration provisions in 2004 under US GAAP wereas follows (in millions of €) :

 
| ** **                       | ** ** | **Employee  costs**         | ** ** | **Write-down  of assets** | ** ** | **Lease  termination  and other  closing  costs** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-----------------------------|------------|---------------------------|------------|---------------------------------------------------|------------|-----------|------------|
| ** **                       | ** ** | **(in millions of €)** | ** ** |
| Balance at December 31, 2003     |       | 3                           |       | 2                         |       | 6                                                 |       | 11        |       |
| Cash utilization                 |       | —                      |       | —                    |       | (2                                                | )          | (2        | )          |
| Transfer to assets               |       |                        |       | (2                        | )          | —                                            |       | (2        | )          |
| Reclassification                 |       | (3                          | )          | —                    |       | (1                                                | )          | (4        | )          |
| **Balance at December 31, 2004** | ** ** | **—**                  | ** ** | **—**                | ** ** | **3**                                             | ** ** | **3**     | ** ** |

 

**(d)****                                  Derivatives**

 

This item relates to interest rate swaps which under US GAAP are valuedat fair value. The interest rate swaps were entered into to hedge variable ratedebt to fixed rate. Currency swaps are also valued at fair value under US GAAPbased on forward rates whereas the valuation under Dutch GAAP is based on spotrates. The valuation of the currency swaps under US GAAP approximates thevaluation under Dutch GAAP and therefore no reconciling item was recorded in2004, 2003 or 2002.

 

In 2004, there was a gain of €3 million due to hedgeineffectiveness on interest rate swaps for which hedge accounting was appliedand a €3 million loss on swaps for which no hedge accounting was applied.

 

The €7 million gain under US GAAP in 2003 consists of a gain of€3 million due to hedge ineffectiveness on interest rate swaps for whichhedge accounting was applied, a gain of €1 million on interest rate swapsfor which no hedge accounting was applied and also a gain of € 3 millionfor the difference between Dutch GAAP and US GAAP in the cost of settlement ofinterest rate swaps (see Note 8). Under US GAAP, certain of these settledinterest rate swaps had already been recorded at their fair value in previousyears, with changes in the fair value recorded in net results because hedgeaccounting was not applied. Under Dutch GAAP, these interest rate swaps werenot adjusted for changes in the fair value, as a result of which the loss onsettlement was higher under Dutch GAAP than under US GAAP.

 

In 2002, the €7 million loss under US GAAP consists of a loss of€5 million due to hedge ineffectiveness on interest rate swaps for whichhedge accounting was applied and a loss of €2 million on interest rateswaps for which no hedge accounting was applied.

 

F-60

----

 

The amount of €3 million negative in Accumulated OtherComprehensive Income at December 31, 2004 and €8 million negative atDecember 31, 2003 is the fair value of interest rate swaps for which hedgeaccounting is applied as they are designated as cash flow hedges as definedunder SFAS No. 133 “Accounting for Derivative Instruments and HedgingActivities”. The reduction of Group Equity under US GAAP of € 2 million atDecember 31, 2004 and December 31, 2003 is the fair value of theinterest rate swaps for which no hedge accounting was applied. In 2004, a gainof €5 million was recorded as an addition to Other Comprehensive Incomerelating to interest rate swaps for which hedge accounting is applied. In 2003,a gain of €60 million was recorded as an addition to Other ComprehensiveIncome of which €36 million relates to settlement of interest rate swaps.In 2002, an amount of € 16 million was recorded as a reduction to OtherComprehensive Income. The amount of €3 million negative recorded inAccumulated Other Comprehensive Income at December 31, 2004 will affectearnings when the variable rate interest for the periods being hedged affectearnings. An amount of €1 million is expected to be reclassified to earningsin 2005.

 

All amounts stated above are before taxes.

 

**(e)****                                  Pension**

 

Buhrmann sponsors pension plans in accordance with legal requirementsand local customs. Substantially all of Buhrmann’s employees in Europe arecovered by defined benefit plans. For most of its employees in the UnitedStates, Canada and Australia, Buhrmann sponsors defined contribution plans. Inaddition, Buhrmann has some, relatively small, defined benefit plans in theUnited States of which the benefits were frozen as of January 1, 1998.

 

The benefits are in general based on years of service and averagesalary.

 

The defined benefit plans in the Netherlands and some foreign definedbenefit plans are funded with plan assets which have been segregated andrestricted in trusts. Contributions are made by Buhrmann, as necessary, toprovide assets sufficient to meet benefit obligations in accordance with, amongothers, legal requirements and financing agreements with these trusts. Whendefined benefit plans are unfunded, Buhrmann recognizes a provision for thebenefit obligation.

 

In 2003, curtailment or settlement of a number of defined benefit plansoccurred mainly in the United Kingdom and the Netherlands in connection withthe sale of the Paper Merchanting Division.

 

With regard to the defined benefit plans, US GAAP requiresre-adjustment of the significant actuarial assumptions annually to reflectcurrent market and economic conditions. Additionally, only those accumulatedgains or losses arising in the plan from a difference between the actualexperience of the plan and the actuarial assumptions made, falling outside tenpercent of the greater of the projected benefit obligation or the market valueof the assets, are being amortized. The excess of plan assets over projectedbenefit obligation, as of January 1, 1989, the transition date, isrecognized as a part of periodic pension costs on a prospective basis.

 

This method significantly differs from the accounting under Dutch GAAP,whereby contributions paid for defined benefit plans are expensed when incurredand provisions are recorded for past-service premiums falling due in thefuture, at their present value, as well as additional contributions to be madein the future to meet local minimum funding requirements.

 

F-61

----

 

Information required to be disclosed in accordance with US GAAP for theDutch and foreign defined benefit plans is set forth below (in millions of €,unless stated otherwise). This information includes the funded and unfundeddefined benefit plans of the continuing and discontinued operations.

 
| ** **                                        | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total**  | ** ** |
|---------------------------------------------------|------------|-----------------|------------|-------------------|------------|------------|------------|
| ** **                                        | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2002**   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|                                              |       |            |       |              |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net periodic pension cost**                     | ** ** | ** **      | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Service cost                                      |       | (8              | )          | (10               | )          | (7         | )          | (2 | ) | (4 | ) | (7 | ) | (10 | ) | (14 | ) | (14 | ) |
| Interest cost                                     |       | (32             | )          | (31               | )          | (32        | )          | (4 | ) | (9 | ) | (9 | ) | (36 | ) | (40 | ) | (41 | ) |
| Expected return on plan assets                    |       | 47              |       | 45                |       | 54         |       | 3 |   | 6 |   | 6 |   | 50 |   | 51 |   | 60 |   |
| Settlement/curtailment gain                       |       | —          |       | 3                 |       | 1          |       | — |   | 2 |   | — |   | 6 |   | 5 |   | 1 |   |
| Net amortization and deferral and other  expenses |       | 6               |       | 3                 |       | 4          |       | (1 | ) | (4 | ) | (2 | ) | (1 | ) | (1 | ) | 2 |   |
| Net periodic pension costs under US GAAP          | ** ** | **13**          | ** ** | **10**            | ** ** | **20**     | ** ** | **(4** | **)** | **(9** | **)** | **(12** | **)** | **9** | ** ** | **1** | ** ** | **8** | ** ** |

 

In 2003, Buhrmann recognized €5 million in pretax settlement andcurtailment gains under US GAAP in connection with the sale of the PaperMerchanting Division. This gain was €7 million under Dutch GAAP. Thedifference is included in sale of the Paper Merchanting Division in thereconciliation of net result as discussed under item i) below.

 

Costs related to defined contributions plans were €17 million in2004, €20 million in 2003 and €18 million in 2002.

 
| ** **                                      | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total**  | ** ** |
|-------------------------------------------------|------------|-----------------|------------|-------------------|------------|------------|------------|
| ** **                                      | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**   | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                            |       |            |       |              |       |       |       |   |   |   |   |   |   |
| **Change in projected benefit obligation**      | ** ** | ** **      | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit obligation at beginning of year         |       | (578            | )          | (569              | )          | (38        | )          | (187 | ) | (616 | ) | (756 | ) |
| Service cost                                    |       | (8              | )          | (10               | )          | (2         | )          | (5 | ) | (10 | ) | (15 | ) |
| Interest cost                                   |       | (32             | )          | (31               | )          | (4         | )          | (9 | ) | (36 | ) | (40 | ) |
| Plan participant’s contributions           |       | —          |       | (1                | )          | —     |       | (2 | ) | — |   | (3 | ) |
| Actuarial gain/(loss)                           |       | (47             | )          | (5                | )          | (28        | )          | (2 | ) | (75 | ) | (7 | ) |
| Benefits paid                                   |       | 31              |       | 28                |       | 4          |       | 4 |   | 35 |   | 32 |   |
| Curtailment/settlenment                         |       | —          |       | 10                |       | —     |       | 153 |   | — |   | 163 |   |
| Currency translation adjustments                |       |            |       | —            |       | 1          |       | — |   | 1 |   |   |   |
| Other                                           |       | —          |       | —            |       | (8         | )          | 10 |   | (8 | ) | 10 |   |
| **Projected benefit obligation at end of year** | ** ** | **(634**        | **)**      | **(578**          | **)**      | **(75**    | **)**      | **(38** | **)** | **(709** | **)** | **(616** | **)** |

 
| ** **                                      | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|-----------------|------------|-------------------|------------|-----------|------------|
| ** **                                      | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**  | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                            |       |            |       |              |       |      |       |   |   |   |   |   |   |
| **Change in plan assets**                       |       |            |       |              |       |      |       |   |   |   |   |   |   |
| Fair value of plan assets at beginning of  year |       | 688             |       | 640               |       | 27        |       | 107 |   | 715 |   | 747 |   |
| Actual return on plan assets                    |       | 68              |       | 70                |       | 3         |       | 9 |   | 71 |   | 79 |   |
| Employer’s contribution                    |       | 3               |       | 5                 |       | 4         |       | 6 |   | 7 |   | 11 |   |
| Plan participants’ contributions           |       | —          |       | 1                 |       | —    |       | 2 |   | — |   | 3 |   |
| Actuarial gain/(loss)                           |       | —          |       | —            |       | 13        |       | — |   | 13 |   | — |   |
| Benefits paid                                   |       | (31             | )          | (28               | )          | (3        | )          | (4 | ) | (34 | ) | (32 | ) |
| Curtailment/settlement                          |       | —          |       | —            |       | —    |       | (85 | ) | — |   | (85 | ) |
| Currency translation adjustments                |       | —          |       | —            |       | (1        | )          | — |   | (1 | ) |   |   |
| Other                                           |       | 6               |       | —            |       | —    |       | (8 | ) | 6 |   | (8 | ) |
| **Fair value of plan assets at end of year**    | ** ** | **734**         | ** ** | **688**           | ** ** | **43**    | ** ** | **27** | ** ** | **777** | ** ** | **715** | ** ** |

 

F-62

----

 
| ** **                             | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total** | ** ** |
|----------------------------------------|------------|-----------------|------------|-------------------|------------|-----------|------------|
| ** **                             | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**  | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                   |       |            |       |              |       |      |       |   |   |   |   |   |   |
| **Funded Status**                      | ** ** | 100             |       | 110               |       | (32       | )          | (11 | ) | 68 |   | 99 |   |
| Unrecognized prior service cost        |       | —          |       | (1                | )          | —    |       | — |   | — |   | (1 | ) |
| Unrecognized net actuarial (gain)/loss |       | 102             |       | 79                |       | 25        |       | 13 |   | 127 |   | 92 |   |
| Other pension arrangements             |       | (5              | )          | (6                | )          | —    |       | (13 | ) | (5 | ) | (19 | ) |
| **Prepaid/(accrued) benefit cost**     | ** ** | **197**         | ** ** | **187**           | ** ** | **(7**    | **)**      | **(16** | **)** | **190** | ** ** | **171** | ** ** |

 
| ** **                                      | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total** | ** ** |
|-------------------------------------------------|------------|-----------------|------------|-------------------|------------|-----------|------------|
| ** **                                      | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**  | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                            |       |            |       |              |       |      |       |   |   |   |   |   |   |
| **Additional minimum liability at end of year** |       | —          |       | —            |       | 18        |       | 9 |   | 18 |   | 9 |   |
| Intangible asset                                |       | —          |       | —            |       | —    |       | — |   | — |   | — |   |
| **Reduction to equity**                         | ** ** | **—**      | ** ** | **—**        | ** ** | **18**    | ** ** | **9** | ** ** | **18** | ** ** | **9** | ** ** |

 

Under US GAAP, Buhrmann recorded a minimum pension liability for theactuarial present value of accumulated benefits that exceeded plan assets. Theaccrued additional minimum pension liability at December 31, 2004 and 2003was €18 million and €9 million, respectively.

 
| ** **                                         | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total** | ** ** |
|----------------------------------------------------|------------|-----------------|------------|-------------------|------------|-----------|------------|
| ** **                                         | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**  | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                               |       |            |       |              |       |      |       |   |   |   |   |   |   |
| **Accumulated benefit obligation at end of  year** | ** ** | **619**         | ** ** | **559**           | ** ** | **67**    | ** ** | **36** | ** ** | **686** | ** ** | **595** | ** ** |

 
| ** **                                                             | ** ** | **Dutch plans** | ** ** | **Foreign plans** | ** ** | **Total**  | ** ** |
|------------------------------------------------------------------------|------------|-----------------|------------|-------------------|------------|------------|------------|
| ** **                                                             | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2004**   | ** ** | **2003** | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                                   |       |            |       |              |       |       |       |   |   |   |   |   |   |
| **Projected benefit obligation exceeds fair  value of plan assets:**   | ** ** | ** **      | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit obligation                                                     |       | (2              | )          | (1                | )          | (75        | )          | (38 | ) | (77 | ) | (39 | ) |
| Plan assets                                                            |       |            |       | —            |       | 43         |       | 27 |   | 43 |   | 27 |   |
| **Accumulated benefit obligation exceeds fair  value of plan assets:** | ** ** | ** **      | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit obligation                                                     |       | (2              | )          | (1                | )          | (67        | )          | (36 | ) | (69 | ) | (37 | ) |
| Plan assets                                                            |       | —          |       | —            |       | 43         |       | 27 |   | 43 |   | 27 |   |

 

The pension benefits expected to be paid in each of the next five yearsand in the aggregate for the five years thereafter are as follows (in millionsof €):

 
| ** ** | ** ** | **Dutch  plans** | ** ** | **Foreign  plans** | ** ** | **Total** | ** ** |
|------------|------------|------------------|------------|--------------------|------------|-----------|------------|
| 2005       |       | 33               |       | 2                  |       | 35        |       |
| 2006       |       | 32               |       | 2                  |       | 34        |       |
| 2007       |       | 32               |       | 2                  |       | 34        |       |
| 2008       |       | 33               |       | 3                  |       | 36        |       |
| 2009       |       | 34               |       | 3                  |       | 37        |       |
| 2010-2014  |       | 179              |       | 15                 |       | 194       |       |

 

F-63

----

 

**33.****                               Summaryof differences between generally accepted accounting principles in theNetherlands and generally accepted accounting principles in the United Statesand related disclosures**

 

The weighted average asset allocation of the funded defined benefit plansat December 31, 2004 and 2003 and target allocation for the year 2005 areas follows:

 
| ** **                            | ** ** | **Dutch plans**  | ** ** | **Foreign plans**    | ** ** |
|---------------------------------------|------------|------------------|------------|----------------------|------------|
| ** **                            | ** ** | **Target  2005** | ** ** | **Allocation  2004** | ** ** | **Allocation  2003** | ** ** | **Target  2005** | ** ** | **Allocation  2004** | ** ** | **Allocation  2003** | ** ** |
| Asset category:                       |       |             |       |                 |       |   |   |   |   |   |   |   |   |
| Equity Securities                     |       | 30               | %          | 33                   | %          | 28 | % | 70 | % | 71 | % | 74 | % |
| Debt Securities                       |       | 60               | %          | 58                   | %          | 61 | % | 2 | % | 2 | % | — |   |
| Real Estate                           |       | 10               | %          | 9                    | %          | 11 | % |   |   | — |   | — |   |
| Cash                                  |       | —           |       | —               |       | — |   | — |   | 1 | % | — |   |
| Other (including insurance contracts) |       | —           |       | —               |       | — |   | 28 | % | 26 | % | 26 | % |

 

The assumptions used to measure net periodic pension cost were asfollows:

 
| ** **                     | ** ** | **Dutch plans** | ** ** | **Foreign Plans** | ** ** |
|--------------------------------|------------|-----------------|------------|-------------------|------------|
| ** **                     | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2002** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| Discount rate                  |       | 5.5             | %          | 5.5               | %          | 5.5 | % | 5.7 | % | 5.9 | % | 5.6 | % |
| Expected return on plan assets |       | 7.0             | %          | 7.0               | %          | 7.0 | % | 7.8 | % | 8.4 | % | 6.8 | % |
| Rate of compensation increase  |       | 3.0             | %          | 3.0               | %          | 3.0 | % | 3.5 | % | 3.4 | % | 3.5 | % |
| Increase of state pension      |       | 2.0             | %          | 2.0               | %          | 2.0 | % | 2.5 | % | 2.4 | % | 2.4 | % |
| Pension increases              |       | 2.0             | %          | 2.0               | %          | 2.0 | % | 2.5 | % | 2.4 | % | 2.4 | % |

 

The assumptions used to measure the projected benefit obligation wereas follows:

 
| ** **                    | ** ** | **Dutch plans** | ** ** | **Foreign Plans** | ** ** |
|-------------------------------|------------|-----------------|------------|-------------------|------------|
| ** **                    | ** ** | **2004**        | ** ** | **2003**          | ** ** | **2002** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| Discount rate                 |       | 4.9             | %          | 5.5               | %          | 5.5 | % | 5.4 | % | 5.9 | % | 5.6 | % |
| Rate of compensation increase |       | 3.0             | %          | 3.0               | %          | 3.0 | % | 3.4 | % | 3.4 | % | 3.5 | % |
| Increase of state pension     |       | 2.0             | %          | 2.0               | %          | 2.0 | % | 2.3 | % | 2.4 | % | 2.4 | % |
| Pension increases             |       | 2.0             | %          | 2.0               | %          | 2.0 | % | 2.3 | % | 2.4 | % | 2.4 | % |

 

In estimating expected return on plan assets, appropriate considerationis taken into account of historical performance for the major asset classesheld or anticipated to be held by the applicable pension funds and of currentforecasts of future rates of return for those asset classes.

 

The goal of the Dutch pension trust’s investment policies is to reachan optimum between maximum return on plan assets, minimum and stablecontributions to the plan, to grant a full indexation of the benefits and tomaintain a sufficient funding level. Investments in debt securities are onlymade when they bear fixed interest. The policy is to hedge 50% of the currencyrisks related to investments in equity securities and in real estate which aredenominated in other currencies than the €. Currency risks related toinvestments in debt securities in currencies other than the € are in principlecompletely hedged.

 

Derivatives are only used to minimize financial market risk exposuressuch as currency risks. No speculative positions are entered into.

 

F-64

----

 

**(f)****                                    Financingfees**

 

This item relates to a difference in amortization and impairmentmethods used under Dutch GAAP and US GAAP.

 

When repayments of long-term debt are made, a portion of the relatedfees may need to be written off so that the amount of unamortized fees iscommensurate with the amount of debt remaining. Additionally, fees may betreated differently due to differences in Dutch GAAP and US GAAP treatment ofrefinancing transactions. In 2002, a write-off of capitalized financing feesrelating to the Term Loans under the Senior Credit Facility entered into in1999 was recorded which was €3 million lower under US GAAP. In 2003,certain fees relating to the new Senior Credit Facility entered into in 2003amounting to €12 million are capitalized under Dutch GAAP, but they aretreated as costs to extinguish the loans under the old Senior Credit Facilityunder US GAAP and therefore expensed. Additionally, the impairment of the financingfees in 2003 relating to the Revolver under the old Senior Credit Facility was€3 million lower under US GAAP whereas the impairment of the financingfees related to the Term Loans under the old Senior Credit Facility was€3 million higher under US GAAP. The net impact of these differences is alower amount of capitalized financing fees under US GAAP of €9 million atDecember 31, 2003.

 

In 2004, there was a €2 million lower amortization charge under USGAAP which is the net effect of lower capitalized financing fees andamortization on the basis of effective constant yield under US GAAP compared tolinear amortization under Dutch GAAP. The net effect of the items mentionedabove was a lower amount of capitalized financing fees under US GAAP of€7 million at December 31, 2004.

 

**(g)****                                 Revenuerecognition**

 

As of January 1, 2003, this item relates primarily to sales ofgraphic machines sold to customers and financed by external financing companiesand for which repurchase guarantees exist. Should the customer be declared indefault, the respective financing company has a right of recourse againstBuhrmann. Under US GAAP, Buhrmann recognizes revenue from these types of salesonly when the right of recourse has ended, which is generally 5 years fromthe date of sale.

 

Before January 1, 2003, this item also included differences in therecognition of sales of graphic machines without repurchase commitments becauseunder Dutch GAAP these sales were in general recognized at delivery and underUS GAAP after installation of the machines and/or after completion of allperformance obligations. As of January 1, 2003, also under Dutch GAAPthese sales are recognized after installation of the machines and/or aftercompletion of all performance obligations.

 

**(h)****                                 Catalogcontributions**

 

As of January 1, 2003, for US GAAP purposes only, Buhrmann adoptedEmerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by aReseller for Cash Consideration Received from a Vendor”. This guidanceprimarily affects our accounting for catalog contributions received fromvendors. Before January 1, 2003, catalog contributions were recognized asincome over the life of the related catalog both under US GAAP and Dutch GAAPand there was no relationship with inventories. Under EITF No. 02-16,there is a presumption that amounts received from vendors should be considereda reduction of inventory costs. This presumption can be overcome if certainrestrictive provisions are met. For US GAAP purposes only, Buhrmann adopted apolicy of considering all catalog contributions to be a reduction of inventorycost because the administrative cost of tracking the related expenses ofproducing the catalog, to determine whether Buhrmann meets the restrictiveconditions required by Issue No. 02-16, would exceed the benefit.

 

The adoption of EITF No. 02-16 resulted in a reduction ofinventory and an accrual for catalog contributions received in advance,predominantly in the Office Products North America Division, under US GAAPcompared to Dutch GAAP. To record the initial amount at January 1, 2003 ofcatalog contributions as a reduction of inventory and the accrual for catalogcontributions received in advance, Buhrmann recorded a cumulative effectadjustment under US GAAP of €48 million (€29 million after tax). Theimpact of the new accounting method decreased cost of goods sold in 2004 underUS GAAP by €1 million and decreased cost of goods sold in 2003 by€5 million under US GAAP.

 

F-65

----

 

**(i)****                                    SalePaper Merchanting Division**

 

The loss on the sale of the Paper Merchanting Division in 2003 ishigher under US GAAP mainly due to the write-off of €104 million ofcapitalized goodwill under US GAAP which was written-off directly from Groupequity under Dutch GAAP prior to January 1, 1997. The recognition under USGAAP of translation adjustments relating to the Paper Merchanting Divisionwhich were recorded directly in Group equity in previous years, resulted in aloss of €26 million net of taxes. Furthermore, the effect of this sale onthe curtailment of pensions resulted in an additional loss of € 2 millionunder US GAAP.

 

**(j)****                                    Deferredlease**

 

This item relates to lease of distribution facilities, equipment andoffices under operating leases. Under US GAAP, these lease payments arerecognized as an expense on a straight-line basis whereas under Dutch GAAPlease payments were usually expensed when incurred.

 

**(k)****                                Other**

 

This category of reconciling items is other, individually insignificant,US GAAP adjustments related to subsidiaries of the Company.

 

**(l)****                                    Deferredtaxes**

 

Under Dutch GAAP, the Company recorded valuation allowances on deferredtax assets for operating loss carry-forwards. Under US GAAP, of these valuationallowances, €29 million at December 31, 2004 and €57 million atDecember 31, 2003 did not qualify. The effect on net result under US GAAPwas a loss of €29 million in 2004, €77 million in 2003, of which€1 million is recorded as part of the result on the sale of the PaperMerchanting Division, and €4 million in 2002.

 

The loss of €77 million in 2003 is mainly due to a reduction ofoperating loss carry-forwards due to a profit on an intercompany transaction.As a result, valuation allowances on deferred tax assets for operating losscarry-forwards which were recorded under Dutch GAAP in previous years were nolonger deemed necessary. As these valuation allowances were not recorded underUS GAAP, a tax expense of €85 million was recorded under US GAAP in 2003.

 

Furthermore, deferred taxes on US GAAP adjustments negatively affectedGroup equity under US GAAP in the amount of €31 million atDecember 31, 2004 and €29 million at December 31, 2003. Theeffect on net result under US GAAP was a loss of €1 million in 2004 and again of €2 million in 2003 which includes a gain of €10 million in2003 recorded as part of the result on the sale of the Paper MerchantingDivision. In addition, in 2004, an income tax expense of €1 related to thevaluation of derivatives and an income tax gain of €2 million related tothe valuation of pensions was recorded directly in Group equity as part ofAccumulated Other Comprehensive Income. In 2002, the effect on net result ofdeferred taxes on US GAAP adjustments was a loss of €3 million.

 

F-66

----

 

The components of deferred tax under US GAAP are as follows (inmillions of €):

 
| ** **                  | ** **   | **December 31** | ** **   |
|-----------------------------|--------------|----------------------|--------------|
| ** **                  | ** **   | **2004**             | ** **   | **2003** | ** ** |
| Deferred tax assets:        |         |                 |         |   |   |
| Derivatives                 |         | 2                    |         | 4 |   |
| Catalog contributions       |         | 12                   |         | 14 |   |
| Tax loss carry-forwards     |         | 424                  |         | 420 |   |
| Other                       |         | 77                   |         | 73 |   |
| Nominal deferred tax asset  |         | 515                  |         | 511 |   |
| Valuation allowances        |         | (123                 | )            | (55 | ) |
| **Deferred tax asset**      | ** **   | **392**              | ** **   | **456** | ** ** |
| ** **                  | ** **   | ** **           | ** **   | ** ** | ** ** |
| *Current*                   | * *     | *63*                 | * *     | *32* | * * |
| *Non current*               | * *     | *329*                | * *     | *424* | * * |
| ***Deferred tax asset***    | *** *** | *392*                | * *     | *456* | * * |
| *** ***                | *** *** | *** ***         | *** *** | *** *** | *** *** |
| Deferred tax liabilities:   |         |                 |         |   |   |
| Fixed assets                |         | (73                  | )            | (115 | ) |
| Pension                     |         | (59                  | )            | (62 | ) |
| Other                       |         | (36                  | )            | (62 | ) |
| **Deferred liabilities**    | ** **   | **(168**             | **)**        | **(239** | **)** |
| ** **                  | ** **   | ** **           | ** **   | ** ** | ** ** |
| *Current*                   | * *     | *(4*                 | *)*          | *(9* | *)* |
| *Non current*               | * *     | *(164*               | *)*          | *(230* | *)* |
| ***Deferred  liabilities*** | *** *** | *(168*               | *)*          | *(239* | *)* |

 

Total tax income or (expense) under US GAAP for the continuing anddiscontinued operations is as follows (in millions of €):

 
| ** **                                                                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                         |       |     |       |     |       |     |       |
| Current                                                                                      |       | (23      | )          | (17      | )          | (18      | )          |
|                                                                                         |       |     |       |     |       |     |       |
| Deferred:                                                                                    |       |     |       |     |       |     |       |
| Benefits operating loss carry-forwards                                                       |       | 37       |       | (15      | )          | (8       | )          |
| Adjustments to deferred taxes for enacted  changes in tax laws or a change in the tax status |       | 6        |       | 0        |       | (3       | )          |
| Adjustments in the valuation allowances due  to change in judgment about realizability       |       | (16      | )          | 3        |       | 29       |       |
| All other deferred tax items                                                                 |       | (1       | )          | 28       |       | 4        |       |
| Total deferred                                                                               |       | 26       |       | 16       |       | 22       |       |
|                                                                                         |       |     |       |     |       |     |       |
| Total income taxes                                                                           |       | 3        |       | (1       | )          | 4        |       |

 

F-67

----

 

**Additional US GAAP disclosures**

 

**Operating result, result from operations anddiscontinued operations under US GAAP presentation**

 

Under Dutch GAAP, the results and cash flows from a discontinuedoperation are included in the results and cash flows from continuing operationsuntil the date the operations are actually sold. Under US GAAP, the results andcash flows from discontinued operations are presented separately fromcontinuing operations whereby the Consolidated Statements of Income andConsolidated Statements of Cash Flows for previous years are restated fordiscontinuance of an operation. The Paper Merchanting Division, which was soldwith effect from October 31, 2003, qualifies as a discontinued operation.

 

The extent to which the reconciling items between Dutch GAAP and USGAAP relate to the Paper Merchanting Division is summarized below (in millionsof €):

 

***Impact on net result***

 
| ** **                               | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|
| Goodwill amortization                    |       | 2        |       | 4        |       |
| Goodwill impairment                      |       | —   |       | (72      | )          |
| Restructuring and integration provisions |       | (17      | )          | 17       |       |
| Pensions                                 |       | (3       | )          | (2       | )          |
| Sale Paper Merchanting Division          |       | (132     | )          | —   |       |
| Deferred taxes                           |       | 1        |       | 1        |       |
| **Total**                                | ** ** | **(149** | **)**      | **(52**  | **)**      |

 

In 2002, under Dutch GAAP, certain non-recurring items were classifiedas extraordinary income or expenses. The income statement presented in the USGAAP format would result in a reclassification of these extraordinary items tooperating result or result from operations, as these items are neither unusualnor infrequent according to the US GAAP definition.

 

Operating result, result from continuing operations, result fromdiscontinued operations, result on disposal of discontinued operations and netresult under US GAAP are as follows (in millions of €):

 
| ** **                                                             | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                   |       |     |       |     |       |     |       |
| Operating result                                                       |       | 213      |       | 182      |       | (718     | )          |
|                                                                   |       |     |       |     |       |     |       |
| Result from continuing operations                                      |       | 104      |       | (59      | )          | (849     | )          |
| Result from discontinued operations                                    |       | —   |       | 1        |       | (92      | )          |
| Result on sale of discontinued operations                              |       | 4        |       | (250     | )          | —   |       |
| Net result before cumulative effect of  change in accounting principle |       | 108      |       | (308     | )          | (941     | )          |
| Cumulative effect of change in accounting  principle                   |       | —   |       | (29      | )          | —   |       |
| Net result                                                             |       | 108      |       | (337     | )          | (941     | )          |

 

Result from discontinued operations and result on the sale ofdiscontinued operations in the table above only includes the Paper MerchantingDivision. The result on the sale of discontinued operations in 2004 includes a€ 4 million gain due to the release of the provision for warranties whichwas recorded in 2003 as part of the result on the sale of the Paper MerchantingDivision. Under Dutch GAAP this amount is recorded as part of net result fromoperations.

 

Result from discontinued operations includes an income tax loss of €15 million in 2003 and €11 million in 2002.

 

F-68

----

 

The result on the sale of the Paper Merchanting Division under US GAAPrecorded in 2003 is summarized as follows (in millions of €):

 
| Initial consideration                                                |       | 706        |       |
|----------------------------------------------------------------------|------------|------------|------------|
| less:                                                                |       |       |       |
| Net debt and cash adjustment                                         |       | (6         | )          |
| Other purchase price adjustments                                     |       | (63        | )          |
| **Net**                                                              | ** ** | **637**    | ** ** |
| ** **                                                           | ** ** | ** ** | ** ** |
| Net equity value Paper Merchanting Division  as at October 31, 2003: |       |       |       |
| Shareholders’ equity (net)                                      |       | 633        |       |
| Goodwill                                                             |       | 201        |       |
| Net debt and cash                                                    |       | (6         | )          |
|                                                                 |       | **828**    |       |
|                                                                 |       |       |       |
| Book result                                                          |       | (191       | )          |
| Realized translation adjustments, net of  taxes                      |       | (26        | )          |
| Transaction fees                                                     |       | (15        | )          |
| Warranties                                                           |       | (18        | )          |
| **Total result (loss)**                                              | ** ** | **(250**   | **)**      |

 

Liabilities of discontinued operations and other divested companies tobe retained by the Company as of December 31, 2004 amounted to€21 million (2003: €35 million) which is included in the Company’sConsolidated Balance Sheet.

 

F-69

----

 

**Consolidated Statement of Cash Flows under USGAAP presentation**

 

As permitted under Dutch GAAP, changes in liquid funds (cash anddeposits) include changes in bank overdrafts. Under US GAAP changes in bankoverdrafts should be included in financing activities.

 

Under US GAAP, costs related to the integration of group companies areexpensed as incurred and are classified within operating activities, whereasunder Dutch GAAP, payments for these costs are included within investingactivities.

 

The following cash flow disclosures are provided to quantify thesignificant differences between the Consolidated Statement of Cash Flows aspresented under Dutch GAAP and cash flow statements that would be requiredunder US GAAP (in millions of €):

 
| ** **                                                                             | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net result                                                                             |       | 108      |       | (337     | )          | (941     | )          |
| Adjustments to reconcile net result to cash  flows from operating activities:          |       |     |       |     |       |     |       |
| Cumulative effect of change in accounting  principle                                   |       | —   |       | 48       |       | —   |       |
| Result on disposal of discontinued  operations                                         |       | (4       | )          | 244      |       | —   |       |
| Minority interests                                                                     |       | 17       |       | 12       |       | 12       |       |
| Result from participations and other  financial results                                |       | (2       | )          | (10      | )          | (16      | )          |
| Non-cash tax expense (income)                                                          |       | (26      | )          | (21      | )          | (20      | )          |
| Non-cash financing costs                                                               |       | 40       |       | 128      |       | 19       |       |
| Depreciation, amortization and impairment                                              |       | 89       |       | 159      |       | 1,131    |       |
| Addition to/(release of) provisions                                                    |       | 8        |       | 26       |       | 96       |       |
| Accrued pension costs                                                                  |       | (19      | )          | (8       | )          | (27      | )          |
| Decrease in working capital (see below)                                                |       | 38       |       | 65       |       | 55       |       |
| Payments related to integration of  acquisitions and restructuring                     |       | (33      | )          | (50      | )          | (134     | )          |
| Other financial income                                                                 |       | —   |       | 18       |       | —   |       |
| Other payments and receivables                                                         |       | 4        |       | (9       | )          | (7       | )          |
| Net cash provided by operating activities  from continuing and discontinued operations |       | 220      |       | 265      |       | 168      |       |
| Net cash provided by (used in) investing  activities                                   |       | (79      | )          | 552      |       | (48      | )          |
| Net cash used in financing activities (see  below)                                     |       | (126     | )          | (685     | )          | (182     | )          |
| (Decrease)/increase in cash and deposits                                               |       | 15       |       | 132      |       | (62      | )          |
|                                                                                   |       |     |       |     |       |     |       |
| *Decrease in working capital:*                                                         |       |     |       |     |       |     |       |
| (Increase)/decrease inventories                                                        |       | (17      | )          | 1        |       | 13       |       |
| (Increase)/decrease accounts receivable                                                |       | (19      | )          | 109      |       | 195      |       |
| Increase/(decrease) accounts payable                                                   |       | 50       |       | (43      | )          | (172     | )          |
| (Increase)/decrease other receivables and  liabilities                                 |       | 24       |       | (2       | )          | 19       |       |
|                                                                                   |       | 38       |       | 65       |       | 55       |       |

 

F-70

----

 

Net cash used in investing activities:

 

Proceeds from the sale of tangible fixed assets and internally usedsoftware were insignificant in the years ended December 31, 2004, 2003 and2002.

 
| ** **                                                                  | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net cash provided by financing activities  (in millions of €):         |       |     |       |     |       |     |       |
| Dividend payments                                                           |       | (11      | )          | (9       | )          | (25      | )          |
| Payment to minority shareholders                                            |       | (8       | )          | (7       | )          | (5       | )          |
| Paid financing fees and tender premiums                                     |       | (39      | )          | (25      | )          | (16      | )          |
| Settlement of interest rate swaps                                           |       | —   |       | (40      | )          | —   |       |
| Proceeds from issuance of Subordinated  Convertible Bond                    |       | —   |       | 114      |       | —   |       |
| Proceeds from issuance of 2014 Notes                                        |       | 116      |       | —   |       | —   |       |
| Drawn long-term debt                                                        |       | —   |       | 440      |       | —   |       |
| Repayment of long-term debt                                                 |       | (184     | )          | (1,158   | )          | (136     | )          |
|                                                                        |       | (126     | )          | (685     | )          | (182     | )          |
| * *                                                                    |       |     |       |     |       |     |       |
| *Non-cash investing activities (in millions  of €):*                   |       |     |       |     |       |     |       |
| Net assets and liabilities disposed of in  sale of a discontinued operation |       | —   |       | 625      |       | —   |       |
|                                                                        |       |     |       |     |       |     |       |
| *Supplemental cash flow information (in  millions of €):*              |       |     |       |     |       |     |       |
| Interest paid                                                               |       | 62       |       | 134      |       | 184      |       |
|                                                                        |       |     |       |     |       |     |       |
| Profit tax paid                                                             |       | 22       |       | 22       |       | 16       |       |

 

**Earnings per share under US GAAP**

 

Basic earnings per share are computed by dividing result afterdeduction of dividend on Preference Shares by the weighted average number ofOrdinary Shares outstanding for the periods under review. Dividends paid toholders of Preference Shares A and C of €37 million, €33 million and€32 million in 2004, 2003 and 2002 respectively, were deducted for theyears presented. Fully diluted earnings per share assume that any dilutiveconvertible securities were converted at the beginning of each year and alloptions outstanding at the end of the year were exercised, insofar as the averagemarket price was higher than the exercise price during the financial year.

 

F-71

----

 

The computation of basic and fully diluted earnings per Ordinary Shareunder US GAAP is as follows (in millions of €, unless otherwise indicated):

 
| ** **                                                                                                               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Computation basic earnings per share**                                                                                 |       |     |       |     |       |     |       |
| Net result                                                                                                               |       | 108      |       | (337     | )          | (941     | )          |
| Less dividends on Preference Shares A and C                                                                              |       | (37      | )          | (33      | )          | (32      | )          |
| Net result after deduction of dividend on  Preference Shares                                                             |       | 71       |       | (370     | )          | (973     | )          |
| Cumulative effect of change in accounting  principle                                                                     |       | —   |       | 29       |       | —   |       |
| Net result before cumulative effect of  change in accounting principle after deduction of dividend on Preference  Shares |       | 71       |       | (341     | )          | (973     | )          |
| Discontinued operations                                                                                                  |       | (4       | )          | 249      |       | 92       |       |
| Result from continuing operations after  deduction of dividend on Preference Shares                                      |       | 67       |       | (92      | )          | (881     | )          |
|                                                                                                                     |       |     |       |     |       |     |       |
| Weighted average number of Ordinary Shares  outstanding (in thousands)                                                   |       | 137,059  |       | 134,653  |       | 131,818  |       |
|                                                                                                                     |       |     |       |     |       |     |       |
| **Basic earnings per share (in euro)**                                                                                   |       |     |       |     |       |     |       |
| Result from continuing operations                                                                                        |       | 0.49     |       | (0.68    | )          | (6.68    | )          |
| Discontinued operations                                                                                                  |       | 0.03     |       | (1.85    | )          | (0.71    | )          |
| Net result before cumulative effect of  change in accounting principle                                                   |       | 0.52     |       | (2.53    | )          | (7.38    | )          |
| Cumulative effect of change in accounting  principle                                                                     |       | —   |       | (0.22    | )          | —   |       |
| Net result                                                                                                               |       | 0.52     |       | (2.75    | )          | (7.38    | )          |
|                                                                                                                     |       |     |       |     |       |     |       |
| **Computation fully diluted earnings per  share**                                                                        |       |     |       |     |       |     |       |
| Net result                                                                                                               |       | 108      |       |     |       |     |       |
| Add-back: interest Subordinated Convertible  Bond                                                                        |       | 2        |       |     |       |     |       |
| Less dividends on Preference Shares A and C                                                                              |       | (37      | )          |     |       |     |       |
| Net result after deduction of dividend on  Preference Shares                                                             |       | 73       |       |     |       |     |       |
| Cumulative effect of change in accounting  principle                                                                     |       | —   |       |     |       |     |       |
| Net result before cumulative effect of  change in accounting principle after deduction of dividend on Preference  Shares |       | 73       |       |     |       |     |       |
| Discontinued operations                                                                                                  |       | (4       | )          |     |       |     |       |
| Result from continuing operations after  deduction of dividend on Preference Shares                                      |       | 69       |       |     |       |     |       |
|                                                                                                                     |       |     |       |     |       |     |       |
| Weighted average number of Ordinary Shares  outstanding on fully diluted basis (in thousands)                            |       | 151,582  |       |     |       |     |       |
|                                                                                                                     |       |     |       |     |       |     |       |
| **Fully diluted earnings per share (in euro)**                                                                           |       |     |       |     |       |     |       |
| Result from continuing operations                                                                                        |       | 0.45     |       |     |       |     |       |
| Discontinued operations                                                                                                  |       | 0.03     |       |     |       |     |       |
| Net result before cumulative effect of  change in accounting principle                                                   |       | 0.48     |       |     |       |     |       |
| Net result                                                                                                               |       | 0.48     |       |     |       |     |       |

 
| ** **                                                                                                 |   | **2004** |   |   |   |   |   |
|------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|--------|--------|--------|
| Computation weighted average number of  Ordinary Shares outstanding on fully diluted basis (in thousands): |   |     |   |   |   |   |   |
| Weighted average number of Ordinary Shares  outstanding                                                    |   | 137,059  |   |   |   |   |   |
| Conversion of Subordinated Convertible Bond                                                                |   | 13,669   |   |   |   |   |   |
| Conversion of Preference Shares C                                                                          |   | —   |   |   |   |   |   |
| Exercise of Share Option Rights                                                                            |   | 854      |   |   |   |   |   |
|                                                                                                       |   | 151,582  |   |   |   |   |   |

 

F-72

----

 

In 2003 and 2002, basic and fully diluted earnings per share are equalas the conversion of the Subordinated Convertible Bond, the Preference Shares Cand the option rights exercisable would have an anti-dilutive effect onearnings per Ordinary Share. In 2004, the conversion of Preference Shares Cwould have an anti-dilutive effect.

 

The number of Ordinary Shares that would arise after conversion of theSubordinated Convertible Bond was 13.7 million at December 31, 2004and December 31, 2003 (see Note 14). The annual interest on theSubordinated Convertible Bond is €2 million before and after tax.

 

The number of Ordinary Shares that would arise after conversion of thePreference shares C at December 31, 2004, 2003 and 2002 was37.9 million, 35.7 million and 23.2 million respectively. Thedividend on Preference Shares C was €26 million, €22 million and €21 million for 2004, 2003 and 2002 respectively (see Note 14).

 

The number of Ordinary Shares that would arise after exercise of theoption rights at December 31, 2004 and 2003 was 0.9 million and0.7 million respectively (see Note 14) and none at December 31,2002.

 

**Stock Options**

 

Buhrmann operates a Share Option Plan, the “Buhrmann Incentive Plan”.The options have a term of seven years and vest after three years. The BuhrmannIncentive Plan up to and including 2003 did not apply performance conditions toeither the grant or the vesting of the options. The exercise price for optionrights granted is the closing price of Buhrmann ordinary shares on the first tradingon which the shares are quoted ex-dividend after the Annual General Meeting ofShareholders. Neither the exercise price nor other conditions in relation tothe granted options can be modified during the term of the options, exceptinsofar as prompted by structural changes relating to the shares or the Companyin accordance with established market practice.

 

At the Annual General Shareholders’ meeting held on April 29,2004, shareholders approved the adoption of a new share option plan. Pursuantto this New Buhrmann Incentive Plan, the number of options granted to eligibleemployees and the vesting of the options granted will be dependent on theperformance of the Company relative to a peer group as measured over athree-year period. The maximum number of options authorized for the 2004 grantunder the New Buhrmann Incentive Plan was 1,708,649, representing 1.25% of thetotal number of Ordinary Shares outstanding as of May 3, 2004, the date ofthe option grant. The number of options vesting may be increased up to 2.5% if,as a result of the Company’s performance relative to the peer group, more than100% of the granted options vest.

 

For details about Buhrmann Share Option Plan, see Note 26 of theConsolidated Financial Statements.

 

Below are additional disclosures required under US GAAP.

 

F-73

----

 

The movements in the outstanding number of options and weighted averageexercise price are shown in the table below. Each option gives right to oneBuhrmann Ordinary Share.

 
| ** **                        | ** ** | **Buhrmann Incentive Plan** | ** ** | **New Buhrmann Incentive Plan**                            | ** ** |
|-----------------------------------|------------|-----------------------------|------------|------------------------------------------------------------|------------|
| ** **                        | ** ** | **Number of options**       | ** ** | **Weighted average  exercise price per  option in €** | ** ** | **Number of options** | ** ** | **Weighted average  exercise price per  option in €** | ** ** |
| **Balance  at December 31, 2001** | ** ** | **2,876,910**               | ** ** | **21.44**                                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Options granted                   |       | 1,563,928                   |       | 13.75                                                      |       |   |   |   |   |
| Options exercised                 |       | —                      |       | —                                                     |       |   |   |   |   |
| Options expired                   |       | (191,650                    | )          | 16.74                                                      |       |   |   |   |   |
| Options forfeited                 |       | (313,077                    | )          | 19.20                                                      |       |   |   |   |   |
| **Balance at December 31, 2002**  | ** ** | **3,936,111**               | ** ** | **18.79**                                                  |       |   |   |   |   |
| Options granted                   |       | 1,575,000                   |       | 2.87                                                       |       |   |   |   |   |
| Options exercised                 |       | —                      |       | —                                                     |       |   |   |   |   |
| Options expired                   |       | —                      |       | —                                                     |       |   |   |   |   |
| Options forfeited                 |       | (464,413                    | )          | 14.93                                                      |       |   |   |   |   |
| **Balance at December 31, 2003**  | ** ** | **5,046,698**               | ** ** | **14.18**                                                  |       |   |   |   |   |
| Options granted                   |       | —                      |       |                                                       |       | 1,708,649 |   | 7.79 |   |
| Options exercised                 |       |                        |       |                                                       |       | — |   | — |   |
| Options expired                   |       | (416,500                    | )          | 15.61                                                      |       | — |   | — |   |
| Options forfeited                 |       | (183,983                    | )          | 14.36                                                      |       | (100,623 | ) | 7.79 |   |
| **Balance at December 31, 2004**  | ** ** | **4,446,215**               | ** ** | **14.04**                                                  | ** ** | **1,608,026** | ** ** | **7.79** | ** ** |

 

The total of options exercisable at the end of the year are:

 
| ** ** | ** ** | **Buhrmann Incentive Plan** | ** ** |
|------------|------------|-----------------------------|------------|
| ** ** | ** ** | **Number of options**       | ** ** | **Weighted average  exercise price per  option in €** | ** ** |
| 2002       |       | 459,500                     |       | 15.61 |   |
| 2003       |       | 1,235,638                   |       | 23.45 |   |
| 2004       |       | 1,707,922                   |       | 23.50 |   |

 

F-74

----

 

The weighted average fair values and weighted average exercise pricesper option at the date of grant for the options outstanding at December 31are as follows (in €):

 
| ** **                                                                                                                            | ** ** | ** ** | ** ** | **New Buhrmann  Incentive Plan  2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------------------------------|------------|
| **Buhrmann Incentive Plan**                                                                                                           |
| **2004**                                                                                                                              | ** ** | **2003**   | ** ** | **2002**                               |
| Weighted average fair value of options  granted with exercise prices equal to the market value of the share at the  date of grant     |       | 5.63       |       | 5.51                                   |       | 7.35 |   | 2.54 |   |
| Weighted average exercise price of options  granted with exercise prices equal to the market value of the share at the  date of grant |       | 13.26      |       | 13.48                                  |       | 18.12 |   | 7.79 |   |
| Weighted average fair value of options  granted with exercise prices above the market value of the share at the date  of grant        |       | 8.19       |       | 7.89                                   |       | 8.65 |   | — |   |
| Weighted average exercise price of options  granted with exercise prices above the market value of the share at the date  of grant    |       | 25.36      |       | 24.91                                  |       | 27.42 |   | — |   |

 

The following table summarizes information about options outstanding atDecember 31, 2004:

 
| ** **                        | ** ** | **Options outstanding** | ** ** | **Options exercisable**                                        | ** ** |
|-----------------------------------|------------|-------------------------|------------|----------------------------------------------------------------|------------|
| ** **                        | ** ** | **Number  of  options** | ** ** | **Weighted  average  remaining  contractual  life (in years)** | ** ** | **Weighted  average  exercise price  per option in €** | ** ** | **Number  of  options** | ** ** | **Weighted  average  remaining  contractual  life (in years)** | ** ** | **Weighted  average  exercise price  per option in €** | ** ** |
| Range of exercise price in € |       |                    |       |                                                           |       |   |   |   |   |   |   |   |   |
| 2.85-3.80                         |       | 1,414,700               |       | 5.34                                                           |       | 2.87 |   | — |   | — |   | — |   |
| 13.69-19.61                       |       | 2,153,866               |       | 1.94                                                           |       | 16.02 |   | 830,273 |   | 1.30 |   | 19.61 |   |
| 24.52-32.94                       |       | 877,649                 |       | 0.40                                                           |       | 27.17 |   | 877,649 |   | 0.40 |   | 27.17 |   |
| **Total**                         | ** ** | **4,446,215**           | ** ** | **2.72**                                                       | ** ** | **14.04** | ** ** | **1,707,922** | ** ** | **0.84** | ** ** | **23.50** | ** ** |

 

At December 31, 2004, a total number of 1,608,026 options wereoutstanding under the New Buhrmann Incentive Plan at an exercise price of €7.79and a remaining contractual life of 6.34 years, none of which wereexercisable at that date.

 

If the Company had elected to recognize compensation expense based onthe fair value of all stock options at grant date in accordance withSFAS 123, “Accounting for Stock Based Compensation”, compensation expenseof € 5 million for the year ended December 31, 2004, €5 millionfor the year ended December 31, 2003 and €6 million for the yearended December 31, 2002 would have been recorded. For assumptions used incalculating fair values, see Note 26.

 

Net result would have been reduced to the pro forma amounts indicatedbelow:

 
| ** **                                    | ** ** | **2004**                                            | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|----------|------------|----------|------------|
| ** **                                    | ** ** | **(in millions of €, except per  share data)** | ** ** |
| **US GAAP net result:**                       |       |                                                |       |     |       |     |       |
| As reported                                   |       | 108                                                 |       | (337     | )          | (941     | )          |
| Pro forma                                     |       | 103                                                 |       | (342     | )          | (947     | )          |
| **US GAAP basic earnings per share:**         |       |                                                |       |     |       |     |       |
| As reported                                   |       | 0.52                                                |       | (2.75    | )          | (7.38    | )          |
| Pro forma                                     |       | 0.48                                                |       | (2.79    | )          | (7.43    | )          |
| **US GAAP fully diluted earnings per share:** |       |                                                |       |     |       |     |       |
| As reported                                   |       | 0.48                                                |       | (2.75    | )          | (7.38    | )          |
| Pro forma                                     |       | 0.45                                                |       | (2.79    | )          | (7.43    | )          |

 

F-75

----

 

**Consolidated Statements of ComprehensiveIncome**

 

The calculation of Comprehensive Income is as follows (in millions of€) :

 
| ** **                                             | ** ** | **2004**   | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|--------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net result US GAAP                                     |       | 108        |       | (337       | )          | (941       | )          |
| Other comprehensive income net of tax:                 |       |       |       |       |       |       |       |
| Foreign currency translation adjustments               |       | (76        | )          | (130       | )          | (246       | )          |
| Unrealized gains and losses on derivative  instruments |       | 4          |       | 37         |       | (11        | )          |
| Minimum pension liability                              |       | (7         | )          | 29         |       | (35        | )          |
| **Comprehensive Income (Loss)**                        | ** ** | **29**     | ** ** | **(401**   | **)**      | **(1,233** | **)**      |

 

Foreign currency translation adjustments do not include tax in 2004 (in2003 a gain of €9 million and in 2002 a gain of €25 million). Unrealizedgains and losses on derivative instruments includes a tax expense of€1 million in 2004 (in 2003 a tax expense of €23 million and in 2002a tax benefit of €5 million). Minimum pension liability in 2004 includes atax benefit of €2 million (in 2003 a tax expense of €11 million andin 2002 a tax benefit of €16 million).

 

The balance of Accumulated Other Comprehensive Income (after tax) is asfollows (in millions of €):

 
| ** **                        | ** ** | **Total** | ** ** | **Foreign currency  translation  adjustments** | ** ** | **Unrealized gains  and losses on  derivative  instruments** | ** ** | **Minimum pension  liability** | ** ** |
|-----------------------------------|------------|-----------|------------|------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------|------------|
| Balance at December 31, 2001      |       | 80        |       | 111                                            |       | (31                                                          | )          | —                         |       |
| Other Comprehensive Income (loss) |       | (292      | )          | (246                                           | )          | (11                                                          | )          | (35                            | )          |
| Balance at December 31, 2002      |       | (212      | )          | (135                                           | )          | (42                                                          | )          | (35                            | )          |
| Other Comprehensive Income (loss) |       | (63       | )          | (129                                           | )          | 37                                                           |       | 29                             |       |
| Balance at December 31, 2003      |       | (275      | )          | (264                                           | )          | (5                                                           | )          | (6                             | )          |
| Other Comprehensive Income (loss) |       | (79       | )          | (76                                            | )          | 4                                                            |       | (7                             | )          |
| Balance at December 31, 2004      |       | (354      | )          | (340                                           | )          | (1                                                           | )          | (13                            | )          |

 

The Accumulated Other Comprehensive Income at December 31, 2004 isnet of €26 million taxes on foreign currency translation adjustments,€1 million taxes on unrealized gains and losses on derivative instrumentsand €5 million taxes on minimum pension liability.

 

F-76

----

 

***Group equity***

 

The movements in group equity under US GAAP are as follows (in millionsof €) :

 
| ** **                                | ** ** | **Year ended December 31** | ** ** |
|-------------------------------------------|------------|----------------------------|------------|
| ** **                                | ** ** | **2004**                   | ** ** | **2003** | ** ** | **2002** | ** ** |
| **Group equity beginning of the year**    | ** ** | **1,504**                  | ** ** | **1,910** | ** ** | **3,157** | ** ** |
| Dividend Ordinary Shares                  |       | (4                         | )          | (4 | ) | (10 | ) |
| Share issue                               |       | 5                          |       | 6 |   | — |   |
| Net result under US GAAP                  |       | 108                        |       | (337 | ) | (941 | ) |
| Dividend Preference Shares A              |       | (11                        | )          | (11 | ) | (11 | ) |
| Consolidation/deconsolidation             |       | —                     |       | (2 | ) | — |   |
| Dividend payment to third parties         |       | (8                         | )          | (7 | ) | (5 | ) |
| Minority share in net result              |       | 17                         |       | 12 |   | 12 |   |
| Minority share in translation adjustments |       | (2                         | )          | — |   | — |   |
| Other comprehensive income (loss)         |       | (79                        | )          | (63 | ) | (292 | ) |
| **Group equity end of the year**          | ** ** | **1,530**                  | ** ** | **1,504** | ** ** | **1,910** | ** ** |

 

Under Dutch GAAP, the disclosure threshold for contingent assets issubstantially lower than under U.S. GAAP. Under U.S. GAAP, contingentassets are disclosed when it is probable that an inflow of economic benefitswill be realized and the amounts are estimable. In practice, contingent assetsare not disclosed until the amount and timing of the inflow is known to theenterprise (e.g., there is a firm commitment from the counter party).Accordingly, the contingent asset related to the proceedings againstPricewaterhouseCoopers, France disclosed in Note 30, would not bedisclosed under U.S. GAAP given the uncertainty as to its realization andtiming of realization, if at all.

 

***Operating leasecommitments***

 

The Company leases certain distribution facilities, equipment andoffices under non-cancelable operating leases. Future minimum lease paymentsunder all non-cancelable operating leases at December 31, 2004 are asfollows (in millions of €):

 
| **Year  ended December 31,** | ** ** | ** ** | ** ** |
|------------------------------|------------|------------|------------|
| 2004                         |       | 76         |       |
| 2005                         |       | 62         |       |
| 2006                         |       | 52         |       |
| 2007                         |       | 43         |       |
| 2008                         |       | 33         |       |
| Thereafter                   |       | 122        |       |
| Total                        |       | 388        |       |

 

Certain of these distribution facilities and offices are subleased bythe Company. Income to be received from these subleases is deducted from theamounts in the table above. Lease expenses for non-cancelable operating leasesfor distribution facilities, equipment and offices charged to the incomestatement for the continuing and discontinued operations during the periodsended December 31, 2004, 2003 and 2002 were €89 million, €111 million and €126 million respectively. Income from subleases was€1million, €3 million and €4 million respectively for the years endedDecember 31, 2004, 2003 and 2002.

 

F-77

----

 

***Advertising costs***

 

Advertising costs (net) of the continuing and discontinued operationsduring the years ended December 31, 2004, 2003 and 2002 were€10 million, €14 million and €18 million respectively.

 

***Provision forproduct warranties***

 

The provision for product warranties relates to potential liabilitiesin the event products delivered or services rendered do not meet the agreedqualities, in those cases that the guarantee period has not expired yet. Theadditions charged to result only relate to warranties issued during 2004 andare calculated as a percentage of net sales. This percentage is based on pastexperience.

 

The movements in this provision for the continuing and discontinuedoperations were as follows (in millions of €):

 
| Balance at December 31, 2003 |   | 3  |   |
|------------------------------|--------|----|--------|
| Payments                     |   | (2 | )      |
| Additions                    |   | 2  |   |
| Balance at December 31, 2004 |   | 3  |   |

 

F-78

----

 

***Variable InterestEntities***

 

FASB Interpretation No. 46 (FIN 46)  “Consolidation ofVariable Interest Entities” requires certain disclosures of variable interestentities and, as of January 1, 2003, the consolidation of certain of thesevariable interest entities.

 

Buhrmann has determined that at December 31, 2004 it had a variableinterest in Silver Securitisation B.V., Silver Funding Ltd and RheingoldSecuritisation Ltd which facilitate the accounts receivable securitizationprogram described below. Aside from the accounts receivable and liabilities inconnection with the accounts receivable securitization program that areincluded in Buhrmann’s Consolidated Balance Sheet, these entities do not haveother significant assets or liabilities. Buhrmann has also determined that atDecember 31, 2004 it had a variable interest in Faison Inc. whichsells office products mainly to government institutions in the United States.The consolidation of this entity would not have had a material impact on netresult or Group equity under US GAAP.

 

The transactions relating to the accounts receivable securitizationprogram are as follows:

 

The Buhrmann operating companies in the Netherlands and the UnitedStates that sell their accounts receivable into Buhrmann’s securitizationprogram are called the Originators. The Dutch Originators sell their receivableson a true sale basis to the European Receivables Warehouse: Buhrmann Silver SA.Buhrmann Silver SA (a wholly owned Buhrmann subsidiary) sells the receivablesonward to the European Master Purchaser Silver Securitisation BV. SilverSecuritisation BV is a separate company of which the shares are held by aStichting (Dutch Foundation) which is controlled by a board independent fromBuhrmann. Silver Securitisation BV holds the European receivables and issuesBuhrmann Notes with the receivables as security to the investors in theseNotes. Investors in the Notes are Rheingold no 11 Ltd (a Jersey companysponsored by Deutsche Bank AG) as MTN Initial Buhrmann Note Purchaser andSilver Funding Ltd as issuer of the Medium Term Notes (MTN issuer). Theshares of Silver Funding are held by the Silver Funding Charitable Trust whichis controlled by a board that is independent from Buhrmann.

 

In the United States the US Originators sell their receivables to theUS Master Purchaser: Buhrmann Silver US LLC, which is a partnership with the USOriginators as partners. The US Master Purchaser issues Buhrmann US Notes toboth the Initial Buhrmann Notes Purchaser and the MTN Issuer. The US MasterPurchaser and the European Master Purchaser have issued a cross guarantee on theirrespective receivables.

 

With the Buhrmann Notes and Buhrmann US Notes as collateral, Rheingoldno 11 Ltd and Silver Funding Ltd raise funds in the market. Rheingoldno 11 issues Commercial Paper (Short Term Notes) through the CP IssuerRheingold Securitisation Ltd. Silver Funding Ltd has issued MediumTerm Notes, which are listed on the Luxembourg Stock Exchange, in US dollarsand euro. As the euro denominated notes have the US dollar pool as theirprimary collateral, the Notes outstanding in euro have been swapped to USdollar until the maturity of the Notes.

 

Buhrmann Stafdiensten BV (a Dutch Buhrmann company) services theprogram.

 

F-79

----

 

The receivables sold by the Originators to Buhrmann Silver SA andBuhrmann Silver US LLC are included in Buhrmann’s Consolidated Balance Sheet,both under Dutch GAAP and US GAAP. Also the Buhrmann Notes issued by SilverSecuritisation BV and the Buhrmann US Notes issued by Buhrmann Silver US LLCare included in Buhrmann’s Consolidated Balance Sheet, both under Dutch GAAPand US GAAP.

 

**35.****                               Newaccounting pronouncements**

 

**IFRS**

 

From January 1, 2005, all European publicly listed companies arerequired to report on the basis of International Financial Reporting Standards(IFRS). Buhrmann started preparing for the transition in 2003, aiming to beginexternal reporting on the basis of IFRS from the 2005 reporting periodsonwards. Within the limits of the IFRS framework we strive towards convergencewith our US GAAP reporting. There may be substantial differences between theresults of operations, cash flows and financial condition Buhrmann reportsunder Dutch GAAP from the equivalent data Buhrmann would report under IFRS.Some of the accounting standards under IFRS, including their practicalimplementation, are not yet fully finalized but we expect that theclassification as debt of our Preference Shares A and Preference Shares C underIFRS, which are classified as part of shareholders’ equity under Dutch GAAP,will have a material impact.

 

**US GAAP**

 

In November 2004, the FASB issued SFAS No. 151, “InventoryCosts—An Amendment of ARB No. 43, Chapter 4”. SFAS No. 151 amends theguidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify thatabnormal amounts of idle facility expense, freight, handling costs, and wastedmaterial (spoilage) must be recognized as current-period charges regardless ofwhether they meet the criterion of “so abnormal” as stated in ARB No. 43.Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 is effective for fiscal yearsbeginning after June 15, 2005. Buhrmann is currently reviewing the impactthat adoption of SFAS No. 151 will have on its consolidated results ofoperations, financial position and cash flows.

 

In December 2004, the FASB issued SFAS No. 123 (revised2004), “Share-Based Payments”, which revises SFAS No. 123, “Accounting forStock-Based Compensation”, and supercedes APB Opinion No. 25, “Accountingfor Stock Issued to Employees”. SFAS No. 123 (revised 2004) requires allshare-based payments to employees, including grants of employee stock options,to be recognized in the financial statements based on their fair values,beginning with the first interim or annual period after June 15, 2005,with early adoption encouraged. The pro forma disclosures previously permittedunder SFAS No. 123, are no longer an alternative to financial statementrecognition. Buhrmann intends to adopt this revised standard fromJanuary 1, 2005. Buhrmann is currently reviewing the impact that adoptionof SFAS No. 123 (revised 2004) will have on its consolidated results ofoperations, financial position and cash flows. Buhrmann has not yet determinedwhether adoption of SFAS No. 123 will result in amounts that are similarto the pro forma disclosures in Note 34.

 

In December 2004, the FASB issued SFAS No. 153, “Exchanges ofNonmonetary Assets—An Amendment of APB Opinion No. 29”. SFAS No. 153eliminates the exception from fair value measurement for nonmonetary exchangesof similar productive assets in paragraph 21(b) of APB OpinionNo. 29, “Accounting for Nonmonetary Transactions,” and replaces it with anexception for exchanges that do not have commercial substance. SFASNo. 153 specifies that a nonmonetary exchange has commercial substance ifthe future cash flows of the entity are expected to change significantly as aresult of the exchange. SFAS No. 153 is effective for the fiscal periodsbeginning after June 15, 2005. Buhrmann is currently reviewing the impactthat adoption of SFAS No. 153 will have on its consolidated results ofoperations, financial position and cash flows but expects that it will not havea material impact.

 

F-80

----

 

**36.****                               Valuationand Qualifying accounts**

 
| ** **                                 | ** ** | **Balance at  the beginning  of the period** | ** ** | **Charges to  costs and  expenses** | ** ** | **Utilization/  release** | ** ** | **Deconsolidation** | ** ** | **Charges to  other  accounts *** | ** ** | **Balance at  the end of  the period** | ** ** |
|--------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------|------------|---------------------------|------------|---------------------|------------|-----------------------------------|------------|----------------------------------------|------------|
| ** **                                 | ** ** | **(in millions of €)**                  | ** ** |
| **Year ended December 31, 2004**           |       |                                         |       |                                |       |                      |       |                |       |                              |       |                                   |       |
| Allowance for doubtful accounts receivable |       | 30                                           |       | 1                                   |       | (8                        | )          | —              |       | —                            |       | 23                                     |       |
| Inventory obsolescence reserve             |       | 41                                           |       | 10                                  |       | (13                       | )          | —              |       | (1                                | )          | 37                                     |       |
| **Year ended December 31, 2003**           |       |                                         |       |                                |       |                      |       |                |       |                              |       |                                   |       |
| Allowance for doubtful accounts receivable |       | 51                                           |       | 10                                  |       | (9                        | )          | (19                 | )          | (3                                | )          | 30                                     |       |
| Inventory obsolescence reserve             |       | 51                                           |       | 10                                  |       | (12                       | )          | (7                  | )          | (1                                | )          | 41                                     |       |
| **Year ended December 31, 2002**           |       |                                         |       |                                |       |                      |       |                |       |                              |       |                                   |       |
| Allowance for doubtful accounts receivable |       | 58                                           |       | 29                                  |       | (31                       | )          | —              |       | (5                                | )          | 51                                     |       |
| Inventory obsolescence reserve             |       | 56                                           |       | 13                                  |       | (14                       | )          | —              |       | (4                                | )          | 51                                     |       |

 

----

*                                         Includeseffect of acquisitions and disposals and foreign currency translationadjustments

 

F-81

----

 

**37.****                               SupplementalGuarantor Information**

 

As part of the Senior Credit Facility and Indenture related to theSenior Subordinated Notes, Buhrmann N.V. and certain subsidiaries of BuhrmannN.V. act as guarantors. Presented below is consolidated information forBuhrmann US Inc., the issuer of the debt, Buhrmann N.V., the parentguarantor of the debt, the guarantor subsidiaries of Buhrmann N.V. (listedbelow), and the non-guarantor subsidiaries of Buhrmann N.V. All of thesubsidiary guarantors are wholly owned subsidiaries of Buhrmann N.V. Pursuantto the Senior Credit Facility and the Indenture related to the SeniorSubordinated Notes, Buhrmann N.V. and their subsidiary guarantors jointly,severally, fully and unconditionally guarantee Buhrmann US Inc.’s debtsecurities.

 

Most reconciling items from Dutch GAAP to US GAAP as detailed inNote 34 are related to the operating activities of the guarantors. The USGAAP adjustment to the guarantor column would increase net result for the year2004 by €42 million and would reduce non-guarantor net result by€14 million (2003: reduction of €42 million and €134 millionrespectively and 2002: reduction of €167 million and € 186 millionrespectively). The US GAAP adjustment would increase the guarantor equity atDecember 31, 2004 by €4 million and would increase non-guarantorequity by €52 million (2003: decrease of € 52 million and increase of€72 million respectively).

 

GUARANTOR SUBSIDIARIES as of December, 31 2004

 

**a)****                                      UnitedStates**

 

ASAP Software Express, Inc.

BTOP USA Corp.

BTOPI Holding (U.S.)

Buhrmann Swaps, Inc.

Corporate Express Document & Print Management Inc.

Corporate Express Office Products, Inc.

Corporate Express Philadelphia Real Estate, Inc.

Corporate Express Promotional Marketing, Inc.

Corporate Express of Texas, Inc.

Corporate Express, Inc.

License Technologies Group, Inc.

 

**b)****                                      TheNetherlands**

 

Buhrmann Financieringen B.V. (f/k/a KNP BT Financieringen B.V.)

Buhrmann Fined B.V. (f/k/a Finbelco B.V.)

Buhrmann II B.V. (f/k/a KNP BT II B.V.)

Buhrmann International B.V.

Buhrmann Nederland B.V.

Buhrmann Nederland Holding B.V. (f/k/a Scadisbel B.V.)

Tetterode-Nederland B.V.

Veenman B.V. (f/k/a Corporate Express Document Automatisering B.V.)

Buhrmann Office Products Nederland B.V. (f/k/a Corporate ExpressBenelux B.V.)

 

**c)****                                      Belgium**

 

Buhrmann Europcenter N.V.

 

**d)****                                      Luxemburg**

 

Buhrmann Luxembourg S.A.R.L.

 

F-82

----

 

**Buhrmann N.V. Consolidated Statement ofIncome December 31, 2004**

 
| ** **                                          | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Issuer of debt**                                  | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                          | ** ** | **In millions of €** | ** ** |
| **Net sales**                                       | ** ** | **—**                | ** ** | **—**                        | ** ** | **3,549**        | ** ** | **1,990**  | ** ** | ** ** |   | **5,539** |   |
| Costs of trade goods sold                           |       | —                    |       | —                            |       | (2,482           | )          | (1,402     | )          |   |   | (3,884 | ) |
| Other costs of sales                                |       | —                    |       | —                            |       | (98              | )          | (81        | )          |   |   | (179 | ) |
| **Total costs of sales**                            | ** ** | **—**                | ** ** | **—**                        | ** ** | **(2,580**       | **)**      | **(1,483** | **)**      | ** ** |   | **(4,063** | **)** |
| **Added value**                                     | ** ** | **—**                | ** ** | **—**                        | ** ** | **969**          | ** ** | **507**    | ** ** | ** ** |   | **1,476** |   |
| Labor costs                                         |       | —                    |       | —                            |       | (574             | )          | (315       | )          |   |   | (889 | ) |
| Other operating costs                               |       | (1                        | )          | —                            |       | (171             | )          | (120       | )          |   |   | (292 | ) |
| Exceptional operating results                       |       | —                    |       | —                            |       | (1               | )          | (4         | )          |   |   | (5 | ) |
| Depreciation of tangible fixed assets and  software |       | —                    |       | —                            |       | (63              | )          | (21        | )          |   |   | (84 | ) |
| Amortization of goodwill                            |       | —                    |       | —                            |       | (43              | )          | (2         | )          |   |   | (45 | ) |
| **Total operating costs**                           | ** ** | **(1**                    | **)**      | **—**                        | ** ** | **(852**         | **)**      | **(462**   | **)**      | ** ** |   | **(1,315** | **)** |
| **Operating result**                                | ** ** | **(1**                    | **)**      | ** **                        | ** ** | **117**          | ** ** | **45**     |       |   |   | **161** |   |
| Net financing costs                                 |       | 114                       |       | 26                                |       | (223             | )          | 15         |       |   |   | (68 | ) |
| Exceptional financing costs                         |       | (31                       | )          | —                            |       | (4               | )          | —     |       |   |   | (35 | ) |
| **Result from operations before taxes**             | ** ** | **82**                    | ** ** | **26**                            | ** ** | **(110**         | **)**      | **60**     | ** ** | ** ** |   | **58** |   |
| Taxes on result from operations                     |       | (43                       | )          | (18                               | )          | 45               |       | 29         |       |   |   | 13 |   |
| Exceptional tax results                             |       | 12                        |       | —                            |       | 1                |       | 7          |       |   |   | 20 |   |
| Other financial results                             |       | —                    |       | —                            |       | —           |       | —     |       |   |   | — |   |
| Exceptional other financial results                 |       | —                    |       | 3                                 |       | (1               | )          | 4          |       |   |   | 6 |   |
| Results from subsidiaries                           |       | (103                      | )          | 69                                |       | —           |       | —     |       | 34 |   |   |   |
| Minority interests                                  |       |                      |       |                              |       |             |       | (17        | )          |   |   | (17 | ) |
| **Net result from operations**                      | ** ** | **(52**                   | **)**      | **80**                            | ** ** | **(65**          | **)**      | **83**     | ** ** | **34** | ** ** | **80** | ** ** |
| **Net result**                                      | ** ** | **(52**                   | **)**      | **80**                            | ** ** | **(65**          | **)**      | **83**     | ** ** | **34** | ** ** | **80** | ** ** |

 

F-83

----

 

**Buhrmann N.V. Consolidated Statement ofIncome December 31, 2003**

 
| ** **                                          | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Issuer of debt**                                  | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                          | ** ** | **In millions of €** | ** ** |
| **Net sales**                                       | ** ** | ** **                | ** ** | ** **                        | ** ** | **3,882**        | ** ** | **4,171**  | ** ** |   |   | **8,053** |   |
| Costs of trade goods sold                           |       |                      |       |                              |       | (2,742           | )          | (3,191     | )          |   |   | (5,933 | ) |
| Other costs of sales                                |       |                      |       |                              |       | (100             | )          | (161       | )          |   |   | (261 | ) |
| Exceptional costs of sales                          |       |                      |       |                              |       |             |       | (5         | )          |   |   | (5 | ) |
| **Total costs of sales**                            | ** ** | ** **                | ** ** | ** **                        | ** ** | **(2,842**       | **)**      | **(3,357** | **)**      |   |   | **(6,199** | **)** |
| **Added value**                                     | ** ** | ** **                | ** ** | ** **                        | ** ** | **1,040**        | ** ** | **814**    | ** ** |   |   | **1,854** |   |
| Labor costs                                         |       |                      |       |                              |       | (634             | )          | (503       | )          |   |   | (1,137 | ) |
| Other operating costs                               |       | (1                        | )          |                              |       | (184             | )          | (208       | )          |   |   | (393 | ) |
| Exceptional operating results                       |       |                      |       |                              |       | 51               |       | 5          |       |   |   | 56 |   |
| Depreciation of tangible fixed assets and  software |       |                      |       |                              |       | (65              | )          | (39        | )          |   |   | (104 | ) |
| Amortization of goodwill                            |       |                      |       |                              |       | (47              | )          | (5         | )          |   |   | (52 | ) |
| Impairment of goodwill                              |       |                      |       |                              |       | (53              | )          | —     |       |   |   | (53 | ) |
| **Total operating costs**                           | ** ** | **(1**                    | **)**      | ** **                        | ** ** | **(932**         | **)**      | **(750**   | **)**      |   |   | **(1,683** | **)** |
| **Operating result**                                | ** ** | **(1**                    | **)**      | ** **                        | ** ** | **108**          | ** ** | **64**     | ** ** |   |   | **171** |   |
| Net financing costs                                 |       | 135                       |       | 26                                |       | (296             | )          | (26        | )          |   |   | (161 | ) |
| Exceptional financing costs                         |       | (67                       | )          | 2                                 |       | (31              | )          | —     |       |   |   | (96 | ) |
| **Result from operations before taxes**             | ** ** | **67**                    | ** ** | **28**                            | ** ** | **(219**         | **)**      | **38**     | ** ** | ** ** |   | **(86** | **)** |
| Taxes on result from operations                     |       | (52                       | )          | (13                               | )          | 92               |       | (35        | )          |   |   | (8 | ) |
| Exceptional tax results                             |       | 26                        |       | (3                                | )          | 40               |       | 13         |       |   |   | 76 |   |
| Other financial results                             |       |                      |       |                              |       |             |       | 1          |       |   |   | 1 |   |
| Exceptional other financial results                 |       | —                    |       | (32                               | )          | (84              | )          | 13         |       |   |   | (103 | ) |
| Results from subsidiaries                           |       | (136                      | )          | (112                              | )          | —           |       | —     |       | 248 |   | — |   |
| Minority interests                                  |       |                      |       |                              |       |             |       | (14        | )          |   |   | (14 | ) |
| Exceptional minority interests                      |       |                      |       |                              |       |             |       | 2          |       |   |   | 2 |   |
| **Net result from operations**                      | ** ** | **(95**                   | **)**      | **(132**                          | **)**      | **(171**         | **)**      | **18**     | ** ** | **248** | ** ** | **(132** | **)** |
| **Net result**                                      | ** ** | **(95**                   | **)**      | **(132**                          | **)**      | **(171**         | **)**      | **18**     | ** ** | **248** | ** ** | **(132** | **)** |

 

F-84

----

 

**Buhrmann N.V. Consolidated Statement of IncomeDecember 31, 2002**

 
| ** **                                          | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total**  | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|------------|------------|
| **Issuer of debt**                                  | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                          | ** ** | **In millions of €** | ** ** |
| **Net sales**                                       |       |                      |       |                              | ** ** | **4,893**        | ** ** | **5,055**  |       |   | ** ** | **9,948** | ** ** |
| Costs of trade goods sold                           |       |                      |       |                              |       | (3,470           | )          | (3,922     | )          |   |   | (7,392 | ) |
| Other costs of sales                                |       |                      |       |                              |       | (138             | )          | (165       | )          |   |   | (303 | ) |
| **Total costs of sales**                            |       |                      |       |                              | ** ** | **(3,608**       | **)**      | **(4,087** | **)**      |   | ** ** | **(7,695** | **)** |
| **Added value**                                     |       |                      |       |                              | ** ** | **1,285**        | ** ** | **968**    |       |   | ** ** | **2,253** | ** ** |
| Labor costs                                         |       |                      |       |                              |       | (790             | )          | (540       | )          |   |   | (1,330 | ) |
| Other operating costs                               |       | (1                        | )          |                              |       | (225             | )          | (241       | )          |   |   | (467 | ) |
| Depreciation of tangible fixed assets and  software |       |                      |       |                              |       | (71              | )          | (43        | )          |   |   | (114 | ) |
| Amortization of goodwill                            |       |                      |       |                              |       | (50              | )          | (20        | )          |   |   | (70 | ) |
| Impairment of goodwill                              |       |                      |       |                              |       | (547             | )          | (26        | )          |   |   | (573 | ) |
| **Total operating costs**                           | ** ** | **(1**                    | )          |                              | ** ** | **(1,683**       | **)**      | **(870**   | **)**      |   | ** ** | **(2,554** | **)** |
| **Operating result**                                | ** ** | **(1**                    | )          |                              | ** ** | **(398**         | **)**      | **98**     |       |   | ** ** | **(301** | **)** |
| Net financing costs                                 |       | 160                       |       | 28                                |       | (386             | )          | (1         | )          |   |   | (199 | ) |
| **Result from operations before taxes**             | ** ** | **159**                   | ** ** | **28**                            | ** ** | **(784**         | **)**      | **97**     |       |   | ** ** | **(500** | **)** |
| Taxes on result from operations                     |       | (62                       | )          | (9                                | )          | 3                |       | 50         |       |   |   | (18 | ) |
| Other financial results                             |       |                      |       |                              |       | 13               |       | 3          |       |   |   | 16 |   |
| Results from subsidiaries                           |       | (363                      | )          | (566                              | )          |             |       | —     |       | 929 |   | — |   |
| Minority interests                                  |       |                      |       |                              |       |             |       | (12        | )          |   |   | (12 | ) |
| **Net result from operations**                      | ** ** | **(266**                  | **)**      | **(547**                          | **)**      | **(768**         | **)**      | **138**    | ** ** | **929** | ** ** | **(514** | **)** |
| Extraordinary result (after tax)                    |       |                      |       |                              |       | (33              | )          | (41        | )          |   |   | (74 | ) |
| Extraordinary result subsidiaries                   |       | (63                       | )          | (41                               | )          |             |       |       |       | 104 |   | — |   |
| **Net result**                                      | ** ** | **(329**                  | **)**      | **(588**                          | **)**      | **(801**         | **)**      | **97**     | ** ** | **1,033** | ** ** | **(588** | **)** |

 

F-85

----

 

**Buhrmann N.V. Consolidated Balance SheetDecember 31, 2004**

 
| ** **                                          | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Issuer of  debt**                                 | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                          | ** ** | **In millions of €** | ** ** |
| **Fixed assets**                                    |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Intangible fixed assets                             |       | —                    |       | —                            |       | 1,286            |       | 117       |       | — |   | 1,403 |   |
| Tangible fixed assets                               |       | —                    |       | —                            |       | 123              |       | 67        |       | — |   | 190 |   |
| Financial fixed assets                              |       | 23                        |       | 3                                 |       | 378              |       | 17        |       | (37 | ) | 384 |   |
| ** **                                          | ** ** | **23**                    | ** ** | **3**                             | ** ** | **1,787**        | ** ** | **201**   | ** ** | **(37** | **)** | **1,977** |   |
| **Group participations**                            |       |                      | ** ** | **1,549**                         |       |             |       |      | ** ** | **(1,549** | **)** | **—** | ** ** |
| **Current assets**                                  |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Inventories of trade goods                          |       | —                    |       | —                            |       | 260              |       | 162       |       |   |   | 422 |   |
| Accounts receivable                                 |       | —                    |       | —                            |       | 381              |       | 350       |       |   |   | 731 |   |
| Other receivables                                   |       | —                    |       | —                            |       | 138              |       | 59        |       |   |   | 197 |   |
| Cash and deposits                                   |       | —                    |       | —                            |       | 141              |       | 13        |       |   |   | 154 |   |
| ** **                                          | ** ** | **—**                | ** ** | **—**                        | ** ** | **920**          | ** ** | **584**   |       |   | ** ** | **1,504** |   |
| **Total assets**                                    | ** ** | **23**                    | ** ** | **1,552**                         | ** ** | **2,707**        | ** ** | **785**   | ** ** | **(1,586** | **)** | **3,481** | ** ** |
| **Group equity**                                    |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Ordinary Shares                                     |       |                      |       | 166                               |       |             |       |      |       |   |   | 166 |   |
| Preference Shares                                   |       |                      |       | 64                                |       |             |       |      |       |   |   | 64 |   |
| Additional paid in capital                          |       |                      |       | 2,080                             |       |             |       |      |       |   |   | 2,080 |   |
| Retained earnings                                   |       | 1,392                     |       | (961                              | )          | (2,159           | )          | 680       |       | 87 |   | (961 | ) |
| Treasury shares                                     |       |                      |       | (10                               | )          |             |       |      |       |   |   | (10 | ) |
| Undistributed profit                                |       |                      |       | 80                                |       |             |       |      |       |   |   | 80 |   |
| Minority interests                                  |       |                      |       |                              |       |             |       | 55        |       |   |   | 55 |   |
| ** **                                          | ** ** | **1,392**                 | ** ** | **1,419**                         | ** ** | **(2,159**       | **)**      | **735**   | ** ** | **87** | ** ** | **1,474** |   |
| **Provisions**                                      |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Pensions                                            |       | —                    |       | —                            |       | 1                |       | 15        |       | — |   | 16 |   |
| Deferred taxes                                      |       | 34                        |       | 1                                 |       | 109              |       | 2         |       | (37 | ) | 109 |   |
| Other                                               |       | —                    |       | —                            |       | 55               |       | 19        |       | — |   | 74 |   |
| ** **                                          | ** ** | **34**                    | ** ** | **1**                             | ** ** | **165**          | ** ** | **36**    | ** ** | **(37** | **)** | **199** |   |
| **Long-term liabilities**                           |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Subordinated loans                                  |       | 110                       |       | 115                               |       | —           |       | —    |       |   |   | 225 |   |
| Other loans                                         |       | 504                       |       | —                            |       | 79               |       | 14        |       |   |   | 597 |   |
| Intercompany financing                              |       | (2,046                    | )          | —                            |       | 4,075            |       | (393      | )          | (1,636 | ) | — |   |
| ** **                                          | ** ** | **(1,432**                | **)**      | **115**                           | ** ** | **4,154**        | ** ** | **(379**  | **)**      | **(1,636** | **)** | **822** |   |
| **Current liabilities**                             |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Loans                                               |       | 20                        |       | —                            |       | —           |       | 13        |       |   |   | 33 |   |
| Bank overdrafts                                     |       | —                    |       | —                            |       | 30               |       | (24       | )          |   |   | 6 |   |
| Accounts payable                                    |       | —                    |       | —                            |       | 383              |       | 280       |       |   |   | 663 |   |
| Other liabilities                                   |       | 9                         |       | 17                                |       | 134              |       | 124       |       |   |   | 284 |   |
| ** **                                          | ** ** | **29**                    | ** ** | **17**                            | ** ** | **547**          | ** ** | **393**   |       |   | ** ** | **986** |   |
| **Total group equity, provisions and  liabilities** | ** ** | **23**                    | ** ** | **1,552**                         | ** ** | **2,707**        | ** ** | **785**   | ** ** | **(1,586** | **)** | **3,481** | ** ** |

 

F-86

----

 

**Buhrmann N.V. Consolidated Balance SheetDecember 31, 2003**

 
| ** **                                          | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|-----------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Issuer of  debt**                                 | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                          | ** ** | **In millions of €** | ** ** |
| **Fixed assets**                                    |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Intangible fixed assets                             |       |                      |       |                              |       | 1,421            |       | 122       |       |   |   | 1,543 |   |
| Tangible fixed assets                               |       |                      |       |                              |       | 137              |       | 71        |       |   |   | 208 |   |
| Financial fixed assets                              |       | 4                         |       | 4                                 |       | 405              |       | 8         |       |   |   | 421 |   |
| ** **                                          | ** ** | **4**                     | ** ** | **4**                             | ** ** | **1,963**        | ** ** | **201**   |       |   | ** ** | **2,172** |   |
| **Group participations**                            |       |                      | ** ** | **1,629**                         |       |             |       |      | ** ** | **(1,629** | **)** | **—** | ** ** |
| **Current assets**                                  |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Inventories of trade goods                          |       |                      |       |                              |       | 248              |       | 175       |       |   |   | 423 |   |
| Accounts receivable                                 |       |                      |       |                              |       | 411              |       | 325       |       |   |   | 736 |   |
| Other receivables                                   |       |                      |       |                              |       | 156              |       | 45        |       |   |   | 201 |   |
| Cash and deposits                                   |       |                      |       |                              |       | 128              |       | 17        |       |   |   | 145 |   |
|                                                |       |                      |       |                              | ** ** | **943**          | ** ** | **562**   |       |   | ** ** | **1,505** |   |
| **Total assets**                                    | ** ** | **4**                     | ** ** | **1,633**                         | ** ** | **2,906**        | ** ** | **763**   | ** ** | **(1,629** | **)** | **3,677** | ** ** |
| **Group equity**                                    |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Ordinary Shares                                     |       |                      |       | 164                               |       |             |       |      |       |   |   | 164 |   |
| Preference Shares                                   |       |                      |       | 64                                |       |             |       |      |       |   |   | 64 |   |
| Additional paid in capital                          |       |                      |       | 2,055                             |       |             |       |      |       |   |   | 2,055 |   |
| Retained earnings                                   |       | 1,433                     |       | (705                              | )          | (2,019           | )          | 773       |       | (187 | ) | (705 | ) |
| Treasury shares                                     |       |                      |       | (10                               | )          |             |       |      |       |   |   | (10 | ) |
| Undistributed profit                                |       |                      |       | (132                              | )          |             |       |      |       |   |   | (132 | ) |
| Minority interests                                  |       |                      |       |                              |       |             |       | 48        |       |   |   | 48 |   |
| ** **                                          | ** ** | **1,433**                 | ** ** | **1,436**                         | ** ** | **(2,019**       | **)**      | **821**   | ** ** | **(187** | **)** | **1,484** |   |
| **Provisions**                                      |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Pensions                                            |       |                      |       |                              |       | 2                |       | 16        |       |   |   | 18 |   |
| Deferred taxes                                      |       | 2                         |       | 35                                |       | 125              |       | 15        |       |   |   | 177 |   |
| Other                                               |       |                      |       |                              |       | 60               |       | 19        |       |   |   | 79 |   |
| ** **                                          | ** ** | **2**                     | ** ** | **35**                            | ** ** | **187**          | ** ** | **50**    |       |   | ** ** | **274** |   |
| **Long-term liabilities**                           |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Subordinated loans                                  |       | 277                       |       | 115                               |       |             |       |      |       |   |   | 392 |   |
| Other loans                                         |       | 460                       |       |                              |       | 81               |       | 16        |       |   |   | 557 |   |
| Intercompany financing                              |       | (2,187                    | )          | —                            |       | 4,114            |       | (485      | )          | (1,442 | ) | — |   |
| ** **                                          | ** ** | **(1,450**                | **)**      | **(1,327**                        | **)**      | **4,195**        | ** ** | **(469**  | **)**      | **(1,442** | **)** | **949** |   |
| **Current liabilities**                             |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Loans                                               |       | 11                        |       |                              |       | 2                |       | 15        |       |   |   | 28 |   |
| Bank overdrafts                                     |       |                      |       |                              |       | 21               |       | (16       | )          |   |   | 5 |   |
| Accounts payable                                    |       |                      |       |                              |       | 373              |       | 271       |       |   |   | 644 |   |
| Other liabilities                                   |       | 8                         |       | 47                                |       | 147              |       | 91        |       |   |   | 293 |   |
| ** **                                          | ** ** | **19**                    | ** ** | **47**                            | ** ** | **543**          | ** ** | **361**   |       |   | ** ** | **970** |   |
| **Total group equity, provisions and  liabilities** | ** ** | **4**                     | ** ** | **191**                           | ** ** | **2,906**        | ** ** | **763**   | ** ** | **(1,629** | **)** | **3,677** | ** ** |

 

F-87

----

 

**Buhrmann N.V. Consolidated Statement of CashFlows December 31, 2004**

 
| ** **                                                             | ** ** | **Guarantor**             | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Issuer of  debt**                                                    | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                                             | ** ** | **In millions of €** | ** ** |
| **Cash flow from operating activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Operating result                                                       |       | (1                        | )          | —                            |       | 118              |       | 44        |       |   |   | 161 |   |
| *Adjustments for:*                                                     |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Depreciation of tangible fixed assets and  software                    |       | —                    |       | —                            |       | 62               |       | 22        |       |   |   | 84 |   |
| Amortization and impairment of goodwill                                |       | —                    |       | —                            |       | 43               |       | 2         |       |   |   | 45 |   |
| Addition to/(release of) provisions                                    |       | —                    |       | —                            |       | (9               | )          | 16        |       |   |   | 7 |   |
| Net (increase)/decrease in working capital                             |       | 6                         |       | 2                                 |       | 21               |       | 7         |       |   |   | 36 |   |
| *Other operational payments:*                                          |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Interest received/(paid)                                               |       | 136                       |       | 34                                |       | (235             | )          | 3         |       |   |   | (62 | ) |
| Profit taxes received/(paid)                                           |       | —                    |       | (45                               | )          | 44               |       | (21       | )          |   |   | (22 | ) |
| Payments charged to provisions                                         |       | —                    |       | —                            |       | (6               | )          | (20       | )          |   |   | (26 | ) |
| **Net cash provided by operating activities**                          | ** ** | **141**                   | ** ** | **(9**                            | **)**      | **38**           | ** ** | **53**    |       |   | ** ** | **223** | ** ** |
| **Cash flow from investing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Net investments in tangible fixed assets  and internally used software |       | —                    |       | —                            |       | (45              | )          | (14       | )          |   |   | (59 | ) |
| Acquisitions                                                           |       | —                    |       | —                            |       | —           |       | (6        | )          |   |   | (6 | ) |
| Investments in financial fixed assets                                  |       | —                    |       | —                            |       | (4               | )          | —    |       |   |   | (4 | ) |
| Payments related to integration of  acquisitions                       |       | —                    |       | —                            |       | (3               | )          | —    |       |   |   | (3 | ) |
| Divestments including transaction expenses                             |       | —                    |       | (10                               | )          | —           |       | —    |       |   |   | (10 | ) |
| **Net cash provided by (used in) investing  activities**               | ** ** | **—**                | ** ** | **(10**                           | **)**      | **(52**          | **)**      | **(20**   | **)**      |   | ** ** | **(82** | **)** |
| **Cash flow from financing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Dividend payments                                                      |       | —                    |       | (11                               | )          | —           |       | —    |       |   |   | (11 | ) |
| Payment to and repurchase of interests of  minority shareholders       |       | —                    |       | —                            |       | —           |       | (8        | )          |   |   | (8 | ) |
| Paid financing fees                                                    |       | (39                       | )          | —                            |       | —           |       | —    |       |   |   | (39 | ) |
| Intercompany financing                                                 |       | (33                       | )          | 30                                |       | 24               |       | (21       | )          |   |   | — |   |
| Repayment of long-term debt (net)                                      |       | (69                       | )          | —                            |       | —           |       | —    |       |   |   | (69 | ) |
| **Net cash (used in) provided by financing  activities**               | ** ** | **(141**                  | **)**      | **19**                            | ** ** | **24**           | ** ** | **(29**   | **)**      |   | ** ** | **(127** | **)** |
| **Net cash flow**                                                      | ** ** | **—**                | ** ** | **—**                        | ** ** | **10**           | ** ** | **4**     |       |   | ** ** | **14** | ** ** |

 

F-88

----

 

**Buhrmann N.V. Consolidated Statement of CashFlows December 31, 2003**

 
| ** **                                                             | ** ** | **Guarantor**             | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Issuer of  debt**                                                    | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                                             | ** ** | **In millions of €** | ** ** |
| **Cash flow from operating activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Operating result                                                       |       | (1                        | )          |                              |       | 108              |       | 64        |       |   |   | 171 |   |
| *Adjustments for:*                                                     |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Depreciation of tangible fixed assets and  software                    |       |                      |       |                              |       | 65               |       | 39        |       |   |   | 104 |   |
| Amortization and impairment of goodwill                                |       |                      |       |                              |       | 101              |       | 4         |       |   |   | 105 |   |
| Addition to/(release of) provisions                                    |       |                      |       |                              |       | (8               | )          | 8         |       |   |   | — |   |
| Net (increase)/decrease in working capital                             |       | (14                       | )          |                              |       | 67               |       | 28        |       |   |   | 81 |   |
| *Other operational payments:*                                          |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Interest received/(paid)                                               |       | 189                       |       | 51                                |       | (348             | )          | (26       | )          |   |   | (134 | ) |
| Other financial income                                                 |       |                      |       |                              |       | 17               |       | 1         |       |   |   | 18 |   |
| Profit taxes received/(paid)                                           |       |                      |       |                              |       | (28              | )          | 6         |       |   |   | (22 | ) |
| Payments charged to provisions                                         |       |                      |       |                              |       | (8               | )          | (43       | )          |   |   | (51 | ) |
| **Net cash provided by operating activities**                          | ** ** | **174**                   | ** ** | **51**                            | ** ** | **(34**          | **)**      | **81**    |       |   | ** ** | **272** | ** ** |
| **Cash flow from investing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Net investments in tangible fixed assets  and internally used software |       |                      |       |                              |       | (45              | )          | (34       | )          |   |   | (79 | ) |
| Acquisitions                                                           |       |                      |       |                              |       |             |       | (10       | )          |   |   | (10 | ) |
| Payments related to integration of  acquisitions                       |       |                      |       |                              |       | (8               | )          |      |       |   |   | (8 | ) |
| Divestments including transaction expenses                             |       |                      |       | 641                               |       |             |       |      |       |   |   | 641 |   |
| **Net cash provided by (used in) investing  activities**               | ** ** | **—**                | ** ** | **641**                           | ** ** | **(53**          | **)**      | **(44**   | **)**      |   | ** ** | **544** | ** ** |
| **Cash flow from financing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Dividend payments                                                      |       |                      |       | (9                                | )          |             |       |      |       |   |   | (9 | ) |
| Payment to and repurchase of interests of  minority shareholders       |       |                      |       |                              |       |             |       | (7        | )          |   |   | (7 | ) |
| Paid financing fees                                                    |       | (25                       | )          |                              |       |             |       |      |       |   |   | (25 | ) |
| Intercompany financing                                                 |       | 495                       |       | (683                              | )          | 221              |       | (33       | )          |   |   | — |   |
| Settlement interest rate swaps                                         |       |                      |       |                              |       | (40              | )          |      |       |   |   | (40 | ) |
| Repayment of long-term debt                                            |       | (600                      | )          |                              |       |             |       |      |       |   |   | (600 | ) |
| **Net cash (used in) provided by financing  activities**               | ** ** | **(130**                  | **)**      | **(692**                          | **)**      | **181**          | ** ** | **(40**   | **)**      |  

  | ** ** | **(681** | **)** |
| **Net cash flow**                                                      | ** ** | **44**                    | ** ** | **—**                        | ** ** | **94**           | ** ** | **(3**    | **)**      |   | ** ** | **135** | ** ** |

 

F-89

----

 

**Buhrmann N.V. Consolidated Statement of CashFlows December 31, 2002**

 
| ** **                                                             | ** ** | **Guarantor**             | ** ** | **Non-  guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
|------------------------------------------------------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------------|------------|-----------|------------|
| **Issuer of  debt**                                                    | ** ** | **Parent**                | ** ** | **Subsidiaries**                  |
| ** **                                                             | ** ** | **In millions of €** | ** ** |
| **Cash flow from operating activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Operating result                                                       |       | (1                        | )          |                              |       | (271             | )          | (29       | )          |   |   | (301 | ) |
| *Adjustments for:*                                                     |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Depreciation of tangible fixed assets and  software                    |       |                      |       |                              |       | 71               |       | 43        |       |   |   | 114 |   |
| Amortization and impairment of goodwill                                |       |                      |       |                              |       | 470              |       | 173       |       |   |   | 643 |   |
| Addition to/(release of) provisions                                    |       |                      |       |                              |       | (6               | )          | 7         |       |   |   | 1 |   |
| Net (increase)/decrease in working capital                             |       | 1                         |       | (1                                | )          | 60               |       | (8        | )          |   |   | 52 |   |
| *Other operational payments:*                                          |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Interest received/(paid)                                               |       | 197                       |       | 59                                |       | (434             | )          | (6        | )          |   |   | (184 | ) |
| Profit taxes received/(paid)                                           |       |                      |       |                              |       | 43               |       | (59       | )          |   |   | (16 | ) |
| Payments charged to provisions                                         |       |                      |       |                              |       | (6               | )          | (45       | )          |   |   | (51 | ) |
| **Net cash provided by operating activities**                          | ** ** | **197**                   | ** ** | **58**                            | ** ** | **(73**          | **)**      | **76**    |       |   | ** ** | **258** | ** ** |
| **Cash flow from investing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Net investments in tangible fixed assets  and internally used software |       |                      |       |                              |       | (67              | )          | (40       | )          |   |   | (107 | ) |
| Acquisitions                                                           |       |                      |       |                              |       |             |       | (9        | )          |   |   | (9 | ) |
| Payments related to integration of  acquisitions                       |       |                      |       |                              |       | (82              | )          | (8        | )          |   |   | (90 | ) |
| Divestments including transaction expenses                             |       |                      |       |                              |       | 6                |       | 62        |       |   |   | 68 |   |
| **Net cash provided by (used in) investing activities**                | ** ** | **—**                | ** ** | **—**                        | ** ** | **(143**         | **)**      | **5**     |       |   | ** ** | **(138** | **)** |
| **Cash flow from financing activities**                                |       |                      |       |                              |       |             |       |      |       |   |   |   |   |
| Dividend payments                                                      |       |                      |       | (25                               | )          |             |       |      |       |   |   | (25 | ) |
| Payment to and repurchase of interests of  minority shareholders       |       |                      |       |                              |       |             |       | (5        | )          |   |   | (5 | ) |
| Paid financing fees                                                    |       | (16                       | )          |                              |       |             |       |      |       |   |   | (16 | ) |
| Intercompany financing                                                 |       | (64                       | )          | (33                               | )          | 195              |       | (98       | )          |   |   | — |   |
| Repayment of long-term debt                                            |       | (162                      | )          |                              |       |             |       |      |       |   |   | (162 | ) |
| **Net cash (used in) provided by financing  activities**               | ** ** | **(242**                  | **)**      | **(58**                           | **)**      | **195**          | ** ** | **(103**  | **)**      |   | ** ** | **(208** | **)** |
| **Net cash flow**                                                      | ** ** | **(45**                   | **)**      | **—**                        | ** ** | **(21**          | **)**      | **(22**   | **)**      |   | ** ** | **(88** | **)** |

 

F-90

----

 

**ITEM19: EXHIBITS**

 
| **Exhibit  number** | ** ** | **Description**                                                                                                                                                                                                                                                                               |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ††1.1     |       | Articles of  Association of Buhrmann NV, as last amended, dated May 6, 2004.                                                                                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                          |
| *2.1                |       | Indenture, dated as of October 29, 1999 for the 121/4% Senior Subordinated Notes due 2009 among Buhrmann US Inc.,  as issuer, Buhrmann NV and the other guarantors listed therein and The Bank  of New York, as trustee (including form of note).                                             |
|                |       |                                                                                                                                                                                                                                                                                          |
| *2.2                |       | First  Supplemental Indenture, dated as of January 31, 2000 for the 121/4% Senior Subordinated Notes due 2009 among the Additional  Guarantors, the Guarantors under the Indenture, Buhrmann US Inc. and The Bank  of New York, as Trustee.                                                   |
|                |       |                                                                                                                                                                                                                                                                                          |
| *2.3                |       | Registration  Rights Agreement, dated October 29, 1999 for the 121/4% Senior Subordinated Notes due 2009 among Buhrmann US Inc,  Buhrmann NV and the other guarantors listed therein and Deutsche Bank  Securities Inc., Paribas Corporation and ABN MRO Incorporated as initial  purchasers. |
|                |       |                                                                                                                                                                                                                                                                                          |
| *2.4                |       | Guarantee of  the 121/4% Senior Subordinated Notes due  2009, dated October 29, 1999 among the German Guarantors listed therein.                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                          |
| †† 2.5    |       | Term and  conditions of the 2.00% Guaranteed Convertible Subordinated Bonds due 2010.                                                                                                                                                                                                         |
|                |       |                                                                                                                                                                                                                                                                                          |
| ‡ 2.6          |       | Indenture,  dated as of July 1, 2004 for the 81/4% Senior Subordinated Notes due 2014 among Buhrmann US Inc.,  as issuer, Buhrmann NV and the other guarantors listed therein and The Bank  of New York, as trustee.                                                                          |
|                |       |                                                                                                                                                                                                                                                                                          |
| ‡ 2.7          |       | Form of 81/4% Senior Subordinated Notes due 2014 (included in exhibit 2.6)                                                                                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                                                                          |
| *4.1                |       | Stock  Purchase Agreement, dated as of September 3, 1999 by and between Buhrmann NV,  Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and Bain  Capital Fund VI, L.P.                                                                                                      |
|                |       |                                                                                                                                                                                                                                                                                          |
| *4.2                |       | Amendment  No. 1 to Stock Purchase Agreement, dated October 26, 1999 among Buhrmann NV,  Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P. and Bain  Capital Fund VI, L.P.                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                          |
| 4.3                 |       | Share Sale  and Purchase Agreement, dated February 22, 2005, between the Apollo Holders  and the Bain Holders and others as the sellers and Buhrmann N.V. as the  purchaser, all the issued and outstanding Preference Shares C in Buhrmann  N.V.                                             |
|                |       |                                                                                                                                                                                                                                                                                          |
| *4.4                |       | Purchase  Agreement, dated October 26, 1999 for the 121/4% Senior Subordinated Notes due 2009 by and among Buhrmann NV,  Buhrmann US Inc. and Deutsche Bank Securities Inc., Paribas Corporation and  ABN AMRO Incorporated as initial purchasers.                                            |
|                |       |                                                                                                                                                                                                                                                                                          |
| **4.5               |       | Distributor  Agreement, dated December 10, 2002 between Heidelberg Druckmaschinen  Aktiengesellschaft (Heidelberg) and Buhrmann NV, effective as of July 1,  2003.                                                                                                                            |
|                |       |                                                                                                                                                                                                                                                                                          |
| †4.6           |       | Deposit  Agreement, dated as of December 21, 1993, Amended and Restated as of  September 20, 2001 by and among Buhrmann NV and The Bank of New York as  Depositary and Owners and Holders of American Depositary Receipts.                                                                    |
|                |       |                                                                                                                                                                                                                                                                                          |
| **4.7               |       | Form of  employment contract for Members of the Executive Board.                                                                                                                                                                                                                              |
|                |       |                                                                                                                                                                                                                                                                                          |
| **4.8               |       | Dutch Master  Receivables Purchase Agreement, amended and restated on July 18, 2002 between                                                                                                                                                                                                   |

 

----

 
|              |   | Buhrmann-Ubbens  BV, Proost and Brandt BV, Buhrmann Silver S.A, Silver Securitisation B.V.,  Deutsche Trustee Company Limited and Buhrmann NV.                                                                                                                                                                              |
|-------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 4.9  |   | New US  Originator Accession Agreement, dated April 16, 2003, between ASAP Software  Expres, Inc. and Deutsche Trustee Company Limited and Buhrmann NV.                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 4.10 |   | New Dutch  Originator Accession Agreement, dated April 16, 2003, between Buhrmann Office  Products Nederland B.V. and Deutsche Trustee Company Limited.                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 4.11 |   | Onward Dutch  Receivables Re-Purchase Agreement, dated October 31, 2003, between Buhrmann  Silver S.A., Buhrmann Ubbens B.V., Proost and Brandt B.V. and Deutsche  Trustee Company Limited.                                                                                                                                 |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| **4.12            |   | US  Contribution Agreement, amended and restated on July 18, 2002, between  Corporate Express Office Products, Inc., Corporate Express of Texas, Inc.,  Burhmann Silver US LLC, Buhrmann NV and Deutsche Trustee Company Limited.                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| **4.13            |   | English  Originator Notice of Intention to Make Offers to Sell, given on July 18,  2002, by Robert Horne Group PLC, The Howard Smith Paper Group Limited and The  M6 Paper Group Limited to Buhrmann Silver S.A.                                                                                                            |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 4.14 |   | European  Receivables Warehouse Company Sale and Purchase Agreement, dated October 31,  2003, between Buhrmann Silver S.A., Horne Group PLC, The Howard Smith Paper  Group Limited, The M6 Paper Group Limited and Deutsche Trustee Company  Limited.                                                                       |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| **4.15            |   | Master  Definitions and Framework Deed, amended and restated July 18, 2002 between  various parties in the securitization program.                                                                                                                                                                                          |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| **4.16            |   | English  Standard Terms and Conditions, amended and restated July 18, 2002 between  various parties in the securitization program.                                                                                                                                                                                          |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 4.17 |   | Master Deed  of Release and Termination, dated October 31, 2003, between various parties  in the Securitsation Programme.                                                                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 4.18              |   | Agreement  for the sale and purchase of the Paper Merchanting Division of Buhrmann N.V.  , dated September 8, 2003 between Buhrmann N.V. and PaperlinX Limited.                                                                                                                                                             |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 4.19              |   | Senior  Facilities Agreement, as amended June 28, 2004, between Buhrmann NV, as  Parent, Buhrmann US Inc., as Borrower, various Guarantors, Deutsche Bank AG  London and ABN AMRO Bank N.V., as Arrangers, Deutsche Bank AG London, as  Agent, Deutsche Bank AG London, as Security Trustee, and various Lenders.           |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 4.20              |   | Amendment to  Senior Facilities Agreement, dated December 1, 2004 between Buhrmann NV, as  Parent, Buhrmann US Inc., as Borrower, various Guarantors, Deutsche Bank AG  London and ABN AMRO Bank N.V., as Arrangers, Deutsche Bank AG London, as  Agent, Deutsche Bank AG London, as Security Trustee, and various Lenders. |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 4.21              |   | Amendment to  Senior Facilities Agreement, dated March 10, 2005, between Buhrmann NV, as  Parent, Buhrmann US Inc., as Borrower, various Guarantors, Deutsche Bank AG  London and ABN AMRO Bank N.V., as Arrangers, Deutsche Bank AG London, as  Agent, Deutsche Bank AG London, as Security Trustee, and various Lenders.  |
| 8.1               |   | List of  significant Subsidiaries of Buhrmann NV.                                                                                                                                                                                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| †† 11.1 |   | Business  Principles and Code of Ethics.                                                                                                                                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 12.1              |   | Certifications  of Buhrmann’s Chief Executive Officer and Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          |
|              |   |                                                                                                                                                                                                                                                                                                                        |
| 13.1              |   | Certifications  of Buhrmann’s Chief Executive Officer and Chief Financial Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          |

 

----

 
| 14.1   |   | Audit  Committee Charter, as last amended, dated December 10, 2004.                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                            |
| 14.2   |   | Compensation,  Nominating and Corporate Governance Committee Charter,as last amended, dated  December 10, 2004. |

 

----

* Incorporated by reference toRegistration Statement of Buhrmann NV on Form F-4, dated March 31, 2000, FileNo. 333-11768.

 

** Incorporated by reference toAnnual Report of Buhrmann NV on Form 20-F, dated. June 27, 2003, File No.001-16663.

 

† Incorporated by reference toPost Effective Amendment No. 1 to the Form F-6 Registration Statement filedwith the Securities and Exchange Commission on August 24, 2001.

 

†† Incorporated by reference toAnnual Report of Buhrmann NV on Form 20-F, dated. June 21, 2004, File No.001-16663.

 

‡  Incorporated by reference to Amendment No. 1to Registration Statement of Buhrmann NV on Form F-4 dated September 7, 2004,File No. 333-117584.

 

----

 

**SIGNATURES**

** **

The registrant hereby certifiesthat it meets all of the requirements for filing on Form 20-F and that it hasduly caused and authorized the undersigned to sign this annual report on itsbehalf.

 

BUHRMANN NV

 

 
| By:    |   |   /s/  FRANS H.J. KOFFRIE         |   |
|--------|--------|---------------------------------------------|--------|
|   |   |   Name:  Frans H.J. Koffrie       |
|   |   |   Title:  Chief Executive Officer |
|   |   |                                        |
|   |   |                                        |
| By:    |   |   /s/  FLORIS F. WALLER           |   |
|   |   |   Name:  Floris F. Waller         |
|   |   |   Title:  Chief Financial Officer |
|   |   |                                        |
|   |   |                                        |
|   |   |   Dated:  March 11, 2005          |

 

----