<PAGE>

COMPANY OVERVIEW

-    Northstar Computer Forms, Inc. designs, manufactures, and markets internal
     bank forms, negotiable documents, and custom business forms and services.

-    The Company's primary emphasis is MICR (Magnetic Ink Character Recognition)
     printing. Customers include financial institutions and processors of MICR
     encoded documents.

-    Northstar's three business segments sell their products nationally through
     distributors, with direct marketing to the nation's 200 largest banks.

-    The Company works through strategic business alliances and
     distributor/business partners to provide full support to customers and
     coverage of market opportunities throughout the country.

-    Corporate headquarters are in Brooklyn Park, Minnesota.



BUSINESS PROGRESS - 1998

-    Formed two strategic alliances to enhance sales to the top 200 banks and to
     community banks.

-    Second best sales and earnings in the Company's history.

-    Expanded and implemented The Star Computer System--comprehensive operations
     management software--in two additional plants.

-    Moved Denver operation into a new 23,000 square foot building to
     accommodate expanded product offerings.

-    Invested $2.1 million in capital equipment including Internet-based,
     pre-press data communications and computer-supported composition and remote
     proofing.

<PAGE>


<TABLE>
<CAPTION>

Year Ended October 31                                    1998             1997           %Change
<S>                                                    <C>               <C>             <C>
     Results of Operations (In thousands)
                  Net Sales                            $41,810           $46,277            (10)
                  Operating Income                       3,479             7,298            (52)
                  Net Earnings                           1,783             4,136            (57)

     Financial Condition (In thousands)
                  Total Assets                         $29,452           $33,325            (12)
                  Stockholders' Equity                  18,611            16,766             11
                  Working Capital                        7,658             7,214              6
                  Weighted Average Shares                2,655             2,598              2

     Per Share Data
                  Net Earnings                         $   .67           $  1.59            (58)
                  Dividends Declared                       .14               .12              2
                  Stockholder's Equity                    7.00              6.45              9

     Key Ratios and Other Data
                  Current Ratio                            2.7               2.0
                  Long-Term Debt-to-Cap                   17.5%             30.4%
                  Gross Profit on Sales                   27.2%             33.3%
                  Return on Average Equity                10.1%             28.1%
                  Return on Net Sales, Pretax              7.2%             14.3%
                  Number of Employees                      435               535


</TABLE>

<PAGE>


Dear Fellow Stockholders,

After the exceptional year in 1997, Northstar had both a reduction in sales 
and in earnings in fiscal 1998. However, the year was still the second best 
in company history. We were challenged in 1998 by the need for new business 
to replace four large contracts that ended during the year. Replacement 
business is now in hand, and the management team has negotiated staggered 
terms so that revenue exposure is stabilized. We are now well positioned for 
fiscal 1999 performance to significantly surpass fiscal 1998.

Sales for the fiscal year ended October 31, 1998, were $41,809,938, a 9.7 
percent decrease from the previous year of $46,277,461. Net earnings 
decreased 56.9 percent from $4,135,922 to $1,782,941. Basic earnings per 
share were $ .67 in fiscal 1998 compared to $1.59 in the previous year.

The company's primary focus in fiscal 1998 was to form strategic alliances 
with other companies in our industry in order to strengthen sales and 
marketing coverage of the end user market. We have entered into two such 
alliances, and our new partners have large sales groups that concentrate on 
sales and services to large banks and community banks respectively. Northstar 
is well known as a premier manufacturing organization, and the two alliances 
will strengthen the sales and marketing reach of our company.

During the year we made great strides in doing electronic commerce with key 
customers. As you review this report, our employees will tell you of several 
exciting applications of this new technology. We have strived to continue our 
practice of being easy to do business with, of staying on the leading edge of 
several technologies, and of being the low cost producer. We believe this 
strategy continues to serve the best interest of our customers, employees and 
shareholders.

We appreciate your support as we move into an exciting year in 1999.





  /s/ Roger T. Bredesen                          /s/ Kenneth E. Overstreet
-----------------------------                   -----------------------------
  Roger T. Bredesen                              Kenneth E. Overstreet
  Chief Executive Officer                        President

<PAGE>




Strengthening market coverage through partnering

Consolidation and mega-mergers have transformed the financial services industry.
The new, very large financial services companies need "power suppliers," for
one-stop shopping, full national support and cutting-edge technology. To address
this challenge, Northstar has expanded its operations, invested heavily in
technology and increased its market coverage.

In a new strategy to stay on top, Northstar has formed strategic alliances with
other companies--with complementary strengths--addressing the same target
markets. These partnerships expand the effective size and strength of the sales
organization, providing full support to national banks and other very large
customers and full coverage of opportunities. Some partnerships provide
immediate access to previously unavailable categories of customers.

In one new partnering relationship, Northstar manufactures financial forms for a
major supplier of bank processing equipment serving 23 of the top 25 banks in
the country. Custom printed on a private label basis, the forms comply to the
rigid specifications of the partner's equipment. Northstar's quality control and
competitive pricing enable the partner to treat the forms as its own. The large
banks served by the business partner's national sales force order the forms with
confidence that they will perform perfectly with their processing systems.

Working with a major provider of documents and supplies for community banks,
Northstar has significantly increased its potential business with that segment
of the bank market. This business partner's sales force of approximately 400
representatives provides nationwide coverage of community banks, which can now
order a full spectrum of forms and supplies through a single source. Using a
toll-free number to order internal bank forms, the sales force representatives
access Northstar's customer service representatives answering directly on behalf
of the business partner. Orders are entered into Northstar's 

<PAGE>

Star Computer System, which ensures that the forms are manufactured and 
shipped by the operating unit that can do it most efficiently. The Star 
System also transfers the information to the business partner's computer 
system on a daily basis for tracking and billing, allowing both companies to 
improve efficiencies.

Yet another partnership--with a financial printing company specializing in
on-demand typesetting, printing and document distribution services--enables
Northstar to provide specialty numbered forms to a major customer in the
insurance industry. The key to this relationship is that the insurance company
needs big-company manufacturing capability, but wants the personal attention and
responsiveness of dealing with a more agile and responsive team like Northstar
and its partner.

Northstar continues to serve the needs of the many large bank customers that
came on stream through the acquisition of the Deluxe Financial Forms Division in
1996. Working through expanded distributor/business partners around the country,
Northstar has reinforced these relationships through effective two-way
communications, in many cases achieving preferred vendor status.

Northstar also continues to serve the needs of medium-sized and smaller banks
through its national network of distributors. This business remains strong and
continues to expand.

Expanding Product and Service Offering

Northstar expanded its product offering in 1998 through the addition of
envelopes, individualized gift certificates and over 400 new internal bank
forms. This broad product offering supports the "one-stop shopping" concept for
customers. As electronic commerce grows in popularity, more and more customers
of Northstar and its business partners are ordering their financial forms,
business forms and negotiable documents on-line, through point-and-click
transactions. Electronic Data Interchange (EDI) at Northstar ensures accurate
order entry and efficient invoicing. The billing system now links electronically
to 



<PAGE>

business partners and distributors for electronic or conventional billing to 
meet customer needs.

Northstar continues to expand support and services for customers:

-    Two new, highly automated warehouses near its manufacturing plants
     integrate production and distribution in support of the forms management
     programs required by large financial institutions. These customers using
     Northstar forms management rest assured that their every branch and
     operating unit will have a constant supply of all forms and materials.

-    Summary billing creates a comprehensive statement, electronically or on
     paper as desired, breaking out ordering by organizational components in any
     way the customer requests.

-    Using Pick and Pack, a customer orders to take advantage of quantity
     discounts, but has its forms shipped in smaller quantities whenever it
     requests them.

-    The SecureStar program allows customers to select from over 30 high-tech
     security options for customized protection against fraud.

Fast-forward to flexibility

Bringing the new Star Computer System on stream in its operating locations is
taking Northstar to a significantly higher level of operating efficiency and
flexibility than ever possible before. With software created specifically for
the financial forms business, The Star System allows the Company to operate on a
fully coordinated, seamless basis to ensure rapid and efficient production of
all forms and documents.

When an order comes in from a customer directly, or by a business partner or
distributor, the information is efficiently entered on the system once and for
all. Programmed to balance the workload among the various Northstar operations
for optimal productivity, the system can also readily reassign work in the event
of a power outage or other contingency in any individual production plant.
Work-in-process information is instantly 

<PAGE>

available to those authorized throughout the Company. The system also 
provides the necessary data to the computer systems of business partners and 
distributors for tracking and invoicing as required.

Moving ahead through technology

Annual investments of over $2 million in technology have moved Northstar into
the forefront of automation in its industry. A premier producer of bank forms,
business forms and negotiable documents ON PAPER, Northstar has become virtually
PAPERLESS in its composition, pre-press, tracking and invoicing systems.

-    Designers create documents on Macintosh, PC and Unix-based systems quickly
     and efficiently, taking advantage of the latest upgrades in publishing
     software.

-    Proofing has moved from "snail mail" to e-mail. Instead of sending paper
     proofs overnight to customers and awaiting their response, designers
     transmit their layouts electronically in seconds, often getting the
     response back in minutes rather than days.

-    Advanced file servers allow document files to be transmitted between
     departments or between plants on the Internet.

-    The creation of printing plates, which used to involve the developing,
     cutting and taping of photographic film, now happens electronically,
     through an on-screen, point-and-click computer program, with much greater
     flexibility and efficiency.

-    On-press, computerized electronic sequencing of numbers eliminates waste
     when paper rolls are changed--without stopping the printing of sequentially
     numbered documents.

-    Northstar has also continued to upgrade its state-of-the art capabilities
     in image processing for banking customers, enabling them to reduce encoding
     activities.

-    Linking its variable image printing system to an Internet server, Northstar
     has increased by ten-fold its ability to produce gift certificates,
     redemption checks and other individualized documents for retail and
     direct-mail customers.

<PAGE>


<TABLE>
<CAPTION>
                                                              Year Ended, October 31:
                                    1998              1997             1996             1995             1994             1993
Results of Operations
<S>                              <C>               <C>              <C>              <C>              <C>              <C>
Net Sales                        $41,809,938       $46,277,461      $28,903,158      $24,215,962      $22,633,951      $20,019,575
Gross Profit                      11,356,506        15,417,187        6,748,180        4,975,894        5,177,970        4,652,286
Operating Income                   3,478,686         7,298,492        2,375,086        1,902,976        2,135,223        1,697,710
Net Earnings                       1,782,941         4,135,922        1,263,056        1,363,410        1,285,835        1,374,657
Cash Flow/Ops                      5,183,231         5,833,641        2,872,187        1,376,858        2,322,240        2,076,189
Financial Condition
Total Assets                     $29,451,672       $33,324,874      $29,401,432      $17,523,364      $16,499,238      $12,042,847
Working Capital                    7,658,171         7,214,439        5,381,223      $ 4,545,734        3,357,561        3,935,416
Current Ratio                            2.7               2.0              2.2              3.3              2.6              3.4
Long Term Debt                     3,945,550         7,330,550      $10,565,175      $ 2,535,000        2,795,000                -
Stockholders' Equity              18,611,095        16,765,854      $12,638,535      $11,587,122      $10,399,485      $ 9,303,208
Key Ratios Analysis
Gross Profit                            27.2%             33.3%            23.3%            20.6%            22.9%            23.2%
Operating Income                         8.3%             15.8              8.2              7.9              9.4              8.4
Net Earnings                             4.3%              8.9              4.4              5.6              5.7              6.9
Return on Equity                        10.1%             28.1             10.4             12.4             13.0             15.7
L-T Debt to Capitalization              17.5%             30.4             45.5             18.0             21.2
Per Share Data
Book Value                       $      7.00       $      6.45      $      4.91      $      4.41      $      3.93      $      3.55
Net Earnings                             .67              1.59              .49              .52              .49              .53
Dividends                                .14               .12              .09              .08              .08              .07
Weighted Average
  Outstanding Shares               2,655,096         2,598,093        2,572,658        2,626,094        2,642,549        2,617,227
</TABLE>

Stock Information/Register

The Company's common stock is traded under the symbol NSCF on the Nasdaq 
National Market. As of January 18, 1999, the approximate number of 
stockholders was 900 and holders of record 245. The following table sets 
forth the range of high and low quotations per share for 1998 and 1997. In 
1998 and 1996 the Company declared dividends of $.14 per share and $.12 per 
share, respectively. Future dividends are restricted to a maximum of 20 
percent of consolidated net income under the Company's term loan agreement. 
(See Note 7 to Consolidated Financial Statements.)

<TABLE>
<CAPTION>
1998 Quarter                  High           Low          Close
<S>                           <C>            <C>          <C>
1st                           10.88          7.61          9.72
2nd                           10.16          7.78          9.67
3rd                           10.00          7.75          8.00
4th                            9.50          6.25          6.88
Present-1-18-1999              8.63          8.63          8.63

<CAPTION>
1997 Quarter                  High           Low          Close
<S>                           <C>            <C>          <C>
1st                           13.67          5.50          7.67
2nd                            9.24          6.67          7.32
3rd                           11.67          7.67         11.33
4th                           12.17          9.50         11.50

</TABLE>

<PAGE>
                                                                              1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
-------------------------------------------------------------------------------
INTRODUCTION
The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the financial statements and footnotes which appear
elsewhere in this Annual Report.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions readers that statements
contained herein, other than historical data, may be forward-looking and subject
to risks and uncertainties. The following important factors could cause the
Company's actual results to differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company:

-    Loss of one or more major customers due to bank consolidations or other
     reasons,

-    Rise in paper prices which outpaces the Company's ability to pass the
     increase onto its customers,

-    Inability to extend existing contracts or successfully negotiate new
     contracts,

-    Technological obsolescence of the Company's products or manufacturing
     equipment,

-    Contracting market for traditional business forms products,

-    Competition from large national manufacturers of internal bank forms and
     custom business forms.

These factors are discussed in more detail in Exhibit 99 to the Company's form
10K.

The following table sets forth, for the years indicated, certain items in the
Company's consolidated statement of earnings as a percentage of net sales and
the percentage changes of the dollar amounts of such items as compared with the
prior year.

<TABLE>
<CAPTION>
                                                                           1998 Compared    1997 Compared to
                                1998           1997          1996             to 1997            1996
------------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>           <C>           <C>              <C>
Net Sales                      100.0%          100.0%          100.0%           (9.7%)           60.1%
------------------------------------------------------------------------------------------------------------
Cost of Goods Sold              72.8            66.7            76.7            (1.3)            39.3
------------------------------------------------------------------------------------------------------------
Gross  Profit                   27.2            33.3            23.3           (26.3)           128.5
------------------------------------------------------------------------------------------------------------
Selling General and
Administrative Expenses         18.8            17.5            15.1            (3.0)            85.7
------------------------------------------------------------------------------------------------------------
Operating Income                 8.3            15.8             8.2           (52.3)           207.3
------------------------------------------------------------------------------------------------------------
Net Earnings                     4.3             8.9             4.4           (56.9)           227.5
------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
                                                                              2


RESULTS OF OPERATIONS
NET SALES. Net sales in 1998 decreased $4,467,523 from $46,277,461 in 1997 to
$41,809,938 in 1998. The 1997 net sales increased $17,374,303 from 1996 sales of
$28,903,158. Internal bank forms contributed 69.7 percent of sales in 1998
compared to 72.4 percent in 1997 and 63.5 percent in 1996. The balance of sales
were custom business forms products, principally secure and negotiable
documents.

Sales of internal bank forms decreased $4,555,289 from $33,680,702 in 1997 to
$29,125,413 in 1998, a decrease of 13.5 percent. The 1997 internal bank forms
sales increased $15,321,643, an 83.5 percent increase from the 1996 sales of
$18,359,059. Approximately 96 percent of the decrease for 1998 and 79 percent of
the increase for 1997 can be attributed to the financial forms division of
Deluxe Corporation that the Company acquired in July 1996, now called Northstar
Financial Forms. During 1998, competition in the internal bank forms industry
became more intense, particularly in contract negotiations with larger banks.
This increased competition resulted in non-renewal of three sales contracts for
Northstar Financial Forms. In addition, as part of the 1996 acquisition, the
Northstar Financial Forms division had a two year contract to manufacture a
special product line for Deluxe Corporation (Deluxe). Deluxe elected not to
renew the contract in 1998. The non-renewal of these four sales contracts
accounted for approximately $3.0 million of the sales reduction in internal bank
forms for 1998. The remaining sales of internal bank forms remained relatively
flat for 1998 with no significant change in product mix, sales prices or
customer base compared to 1997.

Sales of custom business forms include standard business forms as well as
various secure and negotiable documents such as gift certificates, money orders,
certificates of title and bank official checks. Custom business forms sales were
relatively flat with $12,684,525 in sales in 1998 compared to $12,596,758 in
1997 and $10,544,099 in 1996. During 1998, there was no significant change in
the sales mix between standard business forms and secure and negotiable
documents or in the customer base compared to 1997. Approximately 92 percent of
the increase in 1997 was from increased sales in one negotiable document product
line.

GROSS PROFIT. Gross profit was $11,356,506 (27.2 percent of net sales) in 1998
compared to $15,417,187 (33.3 percent of net sales) in 1997 and $6,748,180 (23.3
percent of net sales) in 1996. In 1998, strong competition in the internal bank
forms market resulted in renewal of certain contracts at reduced profit margins.
In addition, retail sales to financial institutions accounted for 34 percent of
Company sales in 1998 compared to 37 percent in 1997 and 23 percent in 1996.
Retail sales generally have a higher gross profit which is then offset by higher
selling and administrative expenses, which consist primarily of personnel costs
to administer these sales. The increased number of contracts with lower margin
levels, the decrease in retail sales and the overall decrease in sales reduced
the absorption of fixed and semi-fixed costs thereby decreasing the gross
profit. For example, although variable components of manufacturing costs,
particularly materials and direct labor, remained relatively stable as a
percentage of sales, other fixed and semi-fixed costs had a negative impact on
gross margin. In 1998, due to the reduced cost absorption from the overall
reduction in sales, fixed costs such as depreciation and building occupancy
costs and semi-fixed costs such as indirect labor accounted for a 4.0 percent
decrease in gross profit. In 

<PAGE>
                                                                              3

1997, material costs decreased approximately 7 percent. This decrease in 
material costs was due to paper price declines in certain types of paper and 
changes in product mix to more labor intensive products. In addition, the 
increased sales improved the absorption of costs. These factors increased the 
gross profit from the 1996 level of 23.3 percent to 33.3 percent in 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased $240,875 in 1998 compared to 1997 and
increased $3,745,601 in 1997 compared to 1996. In 1998, sales commissions to
distributor/partners were restructured to provide additional incentive to
increase new business. These restructured commission cost increases were offset
by decreases in costs related to employee profit sharing and bonuses and reduced
computer service costs. The 1997 increase of $3,745,601 included approximately
$3,350,000 in expenses for the financial forms division acquired in the last
fiscal quarter of 1996. The balance of the increase in 1997 is principally due
to increased contributions to employee benefit plans.

OTHER INCOME AND EXPENSE. Other income and expense consists principally of
interest expense which decreased $250,347 in 1998 due to debt repayments and
increased $526,077 in 1997 due to the debt incurred with the Northstar Financial
Forms Division acquisition.

PROVISION FOR INCOME TAXES. The provision for incomes taxes increased to 40.5
percent in 1998 compared to 37.4 percent in 1997 and 39.9 percent in 1996.

NET EARNINGS. Net earnings were $1,782,941 ($ 0.67 per basic share) in 1998
compared to $4,135,922 ($1.59 per basic share) in 1997 and $1,263,056 ($ 0.49
per basic share) in 1996. Return on average assets was 5.7 percent in 1998
compared to 13.2 percent in 1997 and 5.4 percent in 1996. Return on average
stockholders' equity was 10.1 percent in 1998 compared to 28.1 percent in 1997
and 10.4 percent in 1996.

FINANCIAL CONDITION
ACQUISITION: In July 1996 the Company acquired certain assets of the financial
forms division of Deluxe Corporation for $9.3 million. The Company financed the
acquisition with a $9.0 million term loan. This acquisition consisted
principally of manufacturing equipment at an appraised value of $7.3 million.
The Company continues to expand its manufacturing capacity through the
acquisition of other equipment. Capital expenditures for 1998 were $1.8 million
compared to $2.0 million in 1997 and $1.0 million for 1996.

LONG TERM DEBT. The Company's long term debt consists of the term loan 
related to the 1996 acquisition and Industrial Development Revenue Bonds 
which were used to finance construction. The term loan and the bonds are 
collateralized by the Company's property, plant and equipment, inventories 
and accounts receivable. In addition to the required payments on the debt, 
the Company prepaid $2,000,000 on its term loan in 1998 resulting in total 
debt repayment of $5,235,000 for the year. This repayment in 1998 reduced 
long term debt from $10,565,550 on October 31, 1997 to $5,330,550 on October 
31, 1998. Both the term loan and the bonds specify limits on capital 
expenditures and dividends as well as 

<PAGE>
                                                                              4

specify working capital, net worth and certain financial ratios that the 
Company must maintain.

LIQUIDITY. Cash provided by operations remained relatively constant at $5.2
million in 1998 compared to $5.8 million in 1997. Cash provided by operations
was $2.9 million in 1996. Although 1998 net earnings decreased $2.4 million from
1997, the change in operating assets and liabilities to effectively offset each
other during 1998 resulting in no significant change in cash compared to the
$1.2 million decrease in cash during 1997 from the change in these assets and
liabilities. The Company's working capital was $7.7 million as of October 31,
1998 compared to $7.2 million as of October 31, 1997. Depreciation and
amortization expense was $2,861,826 and $2,729,918 for 1998 and 1997
respectively.

If necessary to finance operations, the Company has a $1.5 million line of
credit at an interest rate equal to the bank's reference rate. The Company did
not have to utilize this line of credit during 1998 or 1997. The Company
believes its existing financial resources are adequate to fund its 1999
operations, including projected capital expenditures of $2.1 million and
dividend payments, and foresees no events or uncertainties that are likely to
have a material impact on its liquidity.

OUTLOOK. Merger and acquisition activity in the banking industry is extremely
strong at this time. Banks generally consolidate their purchasing of internal
bank forms with one supplier. Therefore, the Company could obtain or lose a
significant customer or numerous smaller customers as this consolidation
activity continues. The Company continues to work to stabilize and increase its
customer base. During the third quarter of 1998, the Company was able to obtain
three new large-volume internal bank form customers which are expected to
positively impact sales in 1999. In addition, to increase and improve market
penetration in the internal bank forms market, the Company has developed
additional distribution channels by forming two new strategic alliances with
other companies in the financial forms industry. Sales with one of these
partners has already begun. Sales with the second alliance depends on the
partner's ability to sell internal bank forms as ancillary products used in the
equipment it sells to the banking industry. In the custom business forms market,
the Company has verbally agreed to an extension and expansion of its contracts
to manufacture negotiable documents for its largest customer. The proposed new
contract would be for a four- year term with sales from a new product line
estimated at $3 million annually. The Company also has a proposal pending for
one other new negotiable document contract.

Paper price changes, sales volume changes and sales mix changes are three 
factors with a significant effect on the Company's gross profit. The Company 
expects the paper industry to increase prices in 1999, but at this time 
expects to be able to pass these paper price increases onto its customers. In 
1999 sales volumes are expected to increase in both custom business forms and 
internal bank forms with no significant change in the sales mix. Based upon 
these expectations, the Company expects the 1999 gross profit to exceed the 
1998 gross profit both in total and as a percentage of sales.

The Company does not anticipate significant changes in selling, general and
administrative costs for 1999. Based on the projected increase in sales volume,
these costs are expected to decrease as a percentage of sales in 1999. 

<PAGE>
                                                                              5

The outlook for the Company has been positively affected by the internal bank 
forms computer system which the Company developed and installed in the first 
location in the last quarter of 1997. This system has been continually 
enhanced and is now installed in three of the Company's four internal bank 
forms production facilities. The fourth installation is scheduled for the 
second quarter of fiscal 1999. The integrated computer system is already 
increasing operating efficiencies within the three plants by streamlining 
order processing, enhancing equipment utilization and improving billing and 
reporting capabilities.

NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income," a new standard requiring the reporting and
display of "Comprehensive Income" (defined as the change in equity of a business
enterprise during a period from sources other than those resulting from
investment by owners and distributions to owners) and its components in a
full-set of general-purpose financial statements. The new standard will be
effective for the Company's annual financial statements in fiscal year 1999. In
fiscal years 1998, 1997 and 1996, the Company did not have any changes in
stockholders' equity from nonowner sources.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of 
an Enterprise and Related Information," a new standard for reporting 
information about business segments in financial statements. The new standard 
will be effective for the Company's annual financial statements in fiscal 
year 1999. The Company has not determined what impact, if any, this new 
standard will have on its reporting of segment information.

In March 1998, the Accounting Standards Executive Committee issued Statement 
of Position (SOP) 98-1, "Accounting for the Costs of Computer Software 
Developed or Obtained for Internal Use." The SOP provides guidance on 
accounting for the costs of computer software developed or obtained for 
internal use. The Company is reviewing the requirements of the SOP and does 
not expect it to significantly change its current accounting for software 
costs. SOP 98-1 is required to be adopted by the Company for its fiscal year 
2000.

<PAGE>
                                                                              6

YEAR 2000 READINESS

STATE OF READINESS. As part of the Company's Y2K Plan, management is in the
process of evaluating its information technology ("IT") and non-information
("non-IT") technology systems, including manufacturing equipment, telephone and
mechanical systems and other equipment and systems with embedded date sensitive
technology for Year 2000 compliance. The Company's Y2K Plan is focused on
assessing and ensuring compliance in the following areas: IT and non-IT
hardware, operating systems, software applications and custom applications.
Additionally, the Company is reviewing the Year 2000 compliance status of its
customers, vendors and other service providers.

HARDWARE. The Company is in the process of completing its assessment of its IT
and non-IT hardware for Y2K compliance. The Company estimates that 70% of its IT
and non-IT hardware has either been upgraded for Y2K compliance or has been
certified internally or through the appropriate vendor to be compliant. The
Company expects that the remaining IT and non-IT hardware will be upgraded or
certified as Y2K compliant by August 31, 1999.

OPERATING SYSTEMS. The Company's operating systems are SCO Unix 5.0 or higher,
Microsoft NT4X and Microsoft Windows 95 or 98. SCO Unix has certified versions
5.0 to be Y2K compliant. Microsoft has certified Windows 98 to be compliant and
95 to be compliant with minor issues. Microsoft has certified NT4X software as
compliant now that the upgrade released in December 1998 has been installed.

SOFTWARE APPLICATIONS. The Company's primary information systems application
consist of licensed product purchased from Plantrol Systems, Ltd. (Plantrol).
Plantrol has certified that all installations since January 1, 1997 are Y2K
compliant. All systems in our internal bank forms manufacturing plants were
installed subsequent to January 1, 1997. For the custom business forms
application which was installed prior to 1997, Plantrol has installed Y2K
service patches and the Company has tested the compliance on a computer server
operating system running the Year 2000. The minor application errors noted have
been patched. The Company's software systems also consist of Mecca computer
composition systems and one Solimar System, Inc. (Solimar) Print Management
System. At some of the Company's locations, the Mecca systems require service
patches which will be installed in early 1999. Solimar has certified its system
to be Y2K compatible. The Company believes that date/time issues related to some
limited custom applications are either non-essential to the functioning of the
application, or can be worked around, or the function can be accomplished
manually if required.

OTHER TECHNOLOGY. The Company has started to replace other technology that is
known to be non Y2K compatible or to upgrade hardware and software as needed.
The security systems at all locations have either been certified as Y2K
compatible or the required upgrades have been ordered. Other items such as
telephone systems that are not Y2K compatible are being upgraded or replaced as
deemed appropriate. In the first quarter of 1999, the phone system of the one
location deemed not to be upgradeable was replaced with a new Y2K compliant
system. Such expenditures are included in the 1999 proposed capital expenditure
budget of $2.1 million.

<PAGE>
                                                                              7

THIRD PARTY RELATIONSHIPS. Because Y2K issues also impact the Company by
affecting the business and operations of the Company's vendors, customers and
other business partners, the Company is in the process of communicating with
these parties in order to determine their Y2K compliance status. This
communication is in the early stage, and accordingly, the Company has not been
able to determine if the failure of a third-party to be Y2K compliant will have
a materially adverse effect on the Company. The Company anticipates that this
part of its Y2K plan will be complete by July 1999.

COST TO ADDRESS YEAR 2000 ISSUES. Although the ultimate cost of attaining Year
2000 compliance is not fully known at this time, managements best estimate is
that the external costs will not be material. These costs will be funded from
operations. The Company does not track internal personnel time spent on IT
projects, including the Y2K project. To date, no information technology projects
have been delayed as a result of the Company's Y2K project. In the event the
Company's Y2K Plan is not successful or implemented timely, the Company may need
to devote more resources to the process and additional costs may be incurred.
Such a situation could have a materially adverse effect on the Company's
financial condition and results of operations.

WORST CASE SCENARIO. The Company believes that the worst scenario that could 
reasonably result from the Year 2000 problem would be the failure of one or 
more significant vendors, customers or business partners to become Year 2000 
compliant and the inability of the Company to determine and react on a timely 
basis to mitigate the effects. Even though the Company is undertaking its Y2K 
Plan in an effort to minimize its risks, there can be no assurance that this 
scenario or any other impact of the Y2K problem will not have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

CONTINGENCY PLANS. To date, the Company has not yet developed any detailed 
contingency plans to address Year 2000 compliance deficiencies, as it is 
still in the process of gathering data from its customers, vendors and other 
business partners regarding their Year 2000 compliance and otherwise 
implementing its Y2K Plan. To the extent that the Company identifies Year 
2000 compliance issues that cannot be addressed on a timely basis, it will 
seek to develop appropriate contingency plans in order to mitigate its risk.

<PAGE>
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
                     ASSETS                                     1998                    1997
<S>                                                       <C>                     <C>
Current assets:
     Cash and cash equivalents                            $  4,162,845            $  5,317,881 
     Accounts receivable, net                                4,936,112               6,614,209 
     Inventories                                             2,245,338               1,912,646 
     Deferred income taxes                                     255,656                 318,656 
     Other current assets                                      687,769                 267,737 
                                                          ------------            ------------

      Total current assets                                  12,287,720              14,431,129 
                                                          ------------            ------------

Property, plant and equipment, net                          14,153,269              15,211,143 
Notes receivable, less current portion                         161,573                 829,108 
Goodwill, net                                                1,556,293               1,757,799 
Other assets, net                                            1,292,817               1,095,695 
                                                          ------------            ------------

      Total assets                                        $ 29,451,672            $ 33,324,874 
                                                          ------------            ------------
                                                          ------------            ------------

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt                       1,385,000               3,235,000 
     Accounts payable                                        1,316,878               1,373,805 
     Accrued liabilities                                     1,927,671               2,607,885 
                                                          ------------            ------------

      Total current liabilities                              4,629,549               7,216,690 
     
Long-term debt, less current portion                         3,945,550               7,330,550 
Deferred compensation                                          738,845                 827,147 
Deferred income taxes                                        1,526,633               1,184,633 

Commitments (Notes 7 and 8)

Stockholders' equity:
     Common shares; $.05 par value, authorized 
        5,000,000 shares; issued and outstanding, 
        1998: 2,714,436; 1997:  2,642,207                      135,722                 132,110 
     Additional paid-in capital                              2,671,492               2,245,730 
     Retained earnings                                      15,803,881              14,388,014 
                                                          ------------            ------------

      Total stockholders' equity                            18,611,095              16,765,854 
                                                          ------------            ------------

      Total liabilities and stockholders' equity          $ 29,451,672            $ 33,324,874 
                                                          ------------            ------------
                                                          ------------            ------------
</TABLE>

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

                                     2

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                              1998                      1997                  1996
<S>                                                      <C>                      <C>                   <C>
Net sales                                                $  41,809,938            $  46,277,461         $  28,903,158 

Cost of goods sold                                          30,453,432               30,860,274            22,154,978 
                                                         -------------            -------------         -------------

      Gross profit                                          11,356,506               15,417,187             6,748,180 

Selling, general and administrative expenses                 7,877,820                8,118,695             4,373,094 
                                                         -------------            -------------         -------------

      Operating income                                       3,478,686                7,298,492             2,375,086 
                                                         -------------            -------------         -------------

Other income (expense):                                               
     Interest expense                                         (642,169)                (892,516)             (366,439)
     Other, net, principally interest income                   158,424                  196,946                94,409 
                                                         -------------            -------------         -------------

                                                              (483,745)                (695,570)             (272,030)
                                                         -------------            -------------         -------------

      Earnings before provision for income taxes             2,994,941                6,602,922             2,103,056 

Provision for income taxes                                   1,212,000                2,467,000               840,000 
                                                         -------------            -------------         -------------

      Net earnings                                       $   1,782,941            $   4,135,922         $   1,263,056 
                                                         -------------            -------------         -------------
                                                         -------------            -------------         -------------

Net earnings per common share:
     Basic                                               $        0.67            $        1.59         $        0.49
                                                         -------------            -------------         -------------
                                                         -------------            -------------         -------------

     Diluted                                             $        0.62            $        1.48         $        0.48
                                                         -------------            -------------         -------------
                                                         -------------            -------------         -------------
</TABLE>

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

                                           3

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>

                                                                COMMON STOCK
                                                         --------------------------         ADDITIONAL
                                                                          STATED              PAID-IN         RETAINED
                                                          SHARES          CAPITAL             CAPITAL        EARNINGS
<S>                                                      <C>             <C>               <C>             <C>
Balances at October 31, 1995                             1,713,896       $  85,695         $  1,983,865    $  9,517,562 

Purchase and retirement of stock                              (389)            (20)              (2,704)
                                                                                                                        
Stock options exercised                                      3,064             153               14,016
                                                                                                                        
Cash dividends, $.130 per share                                                                                (223,088)
                                                                                                       
Net earnings                                                                                                  1,263,056 
                                                        ----------       ---------         ------------    ------------
Balances at October 31, 1996                             1,716,571          85,828            1,995,177      10,557,530 
                                                                                                                        
Stock options exercised                                     44,900           2,245              294,590
                                                                                                                        
Cash dividends, $.175 per share                                                                                (305,438)
                                                                                                       
Net earnings                                                                                                  4,135,922 
                                                        ----------       ---------         ------------    ------------
                                                                                                                        
Balances at October 31, 1997                             1,761,471          88,073            2,289,767      14,388,014 
                                                                                                                        
Stock split                                                880,690          44,035              (46,269)
                                                                                                       
Stock options exercised                                     72,275           3,614              257,994 
                                                                                                       
Cash dividends, $.137 per share                                                                                (367,074)
                                                                                                                        
Tax benefit from stock options exercised                                                        170,000
                                                                                                                        
Net earnings                                                                                                  1,782,941 
                                                        ----------       ---------         ------------    ------------

Balances at October 31, 1998                             2,714,436       $ 135,722         $  2,671,492    $ 15,803,881
                                                        ----------       ---------         ------------    ------------
                                                        ----------       ---------         ------------    ------------
</TABLE>

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

                                           4

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                          1998                 1997            1996
<S>                                                                   <C>                  <C>             <C>
Cash flows from operating activities:
     Net earnings                                                     $  1,782,941         $  4,135,922    $  1,263,056 
     Adjustments to reconcile net earnings to net                                 
      cash provided by operating activities:                                      
      Depreciation                                                       2,517,552            2,458,399       1,736,839 
      Amortization                                                         344,274              271,519          79,118 
      Provision for losses on (recovery of) receivables                    (70,586)             167,437          63,857 
      Deferred income taxes                                                405,000              (25,000)        348,000 
      Loss (gain) on sale of land and equipment                             50,286               (5,576)         (3,687)
      Changes in certain operating assets and                                     
        liabilities                                                        153,764           (1,169,060)       (614,996)
                                                                      ------------         ------------    ------------

      Net cash provided by operating activities                          5,183,231            5,833,641       2,872,187 
                                                                      ------------         ------------    ------------
                                                                                                       
Cash flows from investing activities:
     Capital expenditures and equipment deposits                        (1,577,203)          (1,465,679)     (1,021,415)
     Capitalized computer software costs                                  (236,405)            (584,321)                 
     Purchase of certain assets of a division of
       Deluxe Corporation                                                                                    (9,324,754)
     Proceeds from sale of land and equipment                               67,239               12,400           5,550 
     Notes receivable granted                                                                                   (65,919)
     Notes receivable repayments                                           736,932              117,219          83,137 
                                                                      ------------         ------------    ------------
                                                                                                       
      Net cash used in investing activities                             (1,009,437)          (1,920,381)    (10,323,401)
                                                                      ------------         ------------    ------------
                                                                                                       
Cash flows from financing activities:                                             
     Principal payments on long-term debt                               (5,235,000)          (1,029,450)       (140,000)
     Borrowing on long-term debt                                                                              9,000,000 
     Dividends paid                                                       (353,204)            (240,869)       (222,914)
     Stock options exercised                                               261,608              296,835          14,169 
     Other, net                                                             (2,234)                              (2,724)
                                                                      ------------         ------------    ------------
                                                                                                       
      Net cash (used in) provided by financing                                    
       activities                                                       (5,328,830)            (973,484)      8,648,531 
                                                                      ------------         ------------    ------------

Net (decrease) increase in cash and                                               
      cash equivalents                                                  (1,155,036)           2,939,776       1,197,317 
                                                                                                       
Cash and cash equivalents at beginning of year                           5,317,881            2,378,105       1,180,788 
                                                                      ------------         ------------    ------------
                                                                                                       
Cash and cash equivalents at end of year                              $  4,162,845         $  5,317,881    $  2,378,105 
                                                                      ------------         ------------    ------------
                                                                      ------------         ------------    ------------
</TABLE>

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

                                           5

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     NATURE OF THE BUSINESS:

     Northstar Computer Forms, Inc. and Subsidiary (the Company) designs, 
     manufactures and markets printed forms with an emphasis on MICR 
     (Magnetic Ink Character Recognition) printing.  The Company's two 
     business concentrations are custom business forms which are marketed in 
     the North Central United States and negotiable documents and internal 
     bank forms which are marketed nationally.  Sales are principally made 
     through distributors, with the remainder directly to end-user customers. 
     Approximately 34%, 37% and 23% of the Company's net sales were to 
     financial institutions in fiscal years 1998, 1997 and 1996, 
     respectively.  The Company's corporate headquarters is in Brooklyn Park, 
     Minnesota.

     REVENUE RECOGNITION:

     The Company recognizes sales principally upon shipment of the product to 
     the customer.

     CONSOLIDATION:

     The consolidated financial statements include the accounts of  Northstar 
     Computer Forms (Northstar) and General Financial Supply, Inc. (General 
     Financial), its wholly-owned subsidiary.  All significant intercompany 
     balances and transactions have been eliminated in consolidation.

     CASH EQUIVALENTS:

     The Company considers all highly liquid investments purchased with 
     original maturities of three months or less to be cash equivalents.

     INVENTORIES:

     Inventories are stated at the lower of cost or market using the last-in, 
     first-out (LIFO) method.  As of October 31, 1998 and 1997, consolidated 
     inventories, stated at LIFO, approximated the cost of consolidated 
     inventories using the first-in, first-out (FIFO) method.

     PROPERTY, PLANT AND EQUIPMENT:

     Property, plant and equipment are recorded at cost and are depreciated 
     using the straight-line method.  The estimated useful lives are 15 - 40 
     years for buildings, 5 - 10 years for machinery and equipment, and 3 - 8 
     years for furniture and fixtures and automobiles.  Leasehold 
     improvements are amortized on a straight-line basis generally over the 
     term of the respective leases. Gains or losses on dispositions are 
     included in current earnings.  Major renewals or betterments are 
     capitalized while maintenance and repairs are charged to current 
     operations when incurred.

                                6

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

     COMPUTER SOFTWARE COSTS:

     The Company capitalizes costs incurred for developing and obtaining 
     computer software, primarily relating to modifying and installing new 
     information technology systems for internal use.  These costs are 
     amortized on a straight-line basis over five years, the estimated useful 
     lives of the underlying assets.

     In March 1998, the Accounting Standards Executive Committee issued 
     Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer 
     Software Developed or Obtained for Internal Use."  This SOP provides 
     guidance on accounting for the costs of computer software developed or 
     obtained for internal use.  The Company is reviewing the requirements of 
     the SOP and does not expect it to significantly change its current 
     accounting for software costs.  SOP 98-1 is required to be adopted by 
     the Company for its fiscal year 2000.

     GOODWILL:

     During fiscal year 1996, the Company recorded goodwill in connection 
     with its purchase of substantially all the assets of the Financial Forms 
     Division of Deluxe Corporation (see Note 2).  Goodwill represents the 
     excess of the purchase price over the estimated fair value of the 
     identifiable assets acquired and is being amortized on a straight-line 
     basis over 10 years.

     LONG-LIVED ASSETS:

     The recoverability of long-lived assets, including goodwill, is assessed 
     annually or whenever adverse events or changes in circumstances or 
     business climate indicate that the expected cash flows previously 
     anticipated warrant reassessment.  When such reassessments indicate the 
     potential of impairment, all business factors are considered and, if the 
     carrying values of long-lived assets are not likely to be recovered from 
     future net operating cash flows, they will be written down for financial 
     reporting purposes.

     INCOME TAXES:

     Deferred income taxes are recorded to reflect the tax consequences on 
     future years of differences between the tax bases of assets and 
     liabilities and their financial reporting amounts based on enacted tax 
     laws and statutory tax rates applicable to the periods in which the 
     differences are expected to affect taxable income.  Income tax expense 
     or benefit is the tax refundable or payable for the period and the 
     change during the period in deferred tax assets and liabilities.

                                     7

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

     EARNINGS PER SHARE:

     In February 1997, the Financial Accounting Standards Board (FASB) issued 
     Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings 
     Per Share," a new standard for computing and presenting earnings per 
     share.  As required, the Company adopted this new standard in the first 
     quarter of fiscal year 1998.  Net earnings per share (EPS) for all 
     periods presented have been computed by dividing net earnings by the 
     weighted average number of common shares outstanding (basic EPS) and by 
     the weighted average number of common and common equivalent shares 
     outstanding (diluted EPS).  The Company's common equivalent shares 
     consist of stock options when their effect is not antidilutive.

     The computations of basic and diluted weighted average common shares
     outstanding are as follows:

<TABLE>
<CAPTION>
                                                        1998         1997        1996
     <S>                                             <C>          <C>          <C>
     Weighted average common shares outstanding      2,655,096    2,598,093   2,572,658

     Common equivalent shares outstanding:
          Option equivalents                           199,387      187,860      72,378
                                                     ---------    ---------   ---------
     Weighted average common and common
          equivalent shares outstanding              2,854,483    2,785,953   2,645,036
                                                     ---------    ---------   ---------
                                                     ---------    ---------   ---------
</TABLE>

     At October 31, 1998, 1997 and 1996, 9,000, 30,000 and 72,000 outstanding 
     options were excluded from the computation of diluted earnings per share 
     for the year then ended because the options' exercise price was greater 
     than the average market price of the Company's common shares during the 
     respective year.

     NEW ACCOUNTING PRONOUNCEMENTS:

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
     Income," a new standard requiring the reporting and display of 
     "Comprehensive Income" (defined as the change in equity of a business 
     enterprise during a period from sources other than those resulting from 
     investment by owners and distributions to owners) and its components in 
     a full-set of general-purpose financial statements.  The new standard 
     will be effective for the Company's annual financial statements in 
     fiscal year 1999.  In fiscal years 1998, 1997 and 1996, the Company did 
     not have any changes in stockholders' equity from nonowner sources.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments 
     of an Enterprise and Related Information," a new standard for reporting 
     information about business segments in financial statements.  The new 
     standard will be effective for the Company's annual financial statements 
     in fiscal year 1999.  The Company has not determined what impact, if 
     any, this new standard will have on its reporting of segment information.


                                     8

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

     USE OF ESTIMATES:

     The preparation of financial statements in conformity with generally 
     accepted accounting principles requires management to make estimates and 
     assumptions that affect the reported amounts of assets and liabilities 
     and disclosure of contingent assets and liabilities at the date of the 
     financial statements and the reported amounts of revenues and expenses 
     during the reporting period. Actual results could differ from those 
     estimates.  The most significant areas which require the use of 
     management's estimates relates to the determination of the allowances 
     for uncollectible accounts receivable and obsolete inventory and 
     components of the calculation of the deferred compensation accrual.

2.   ACQUISITION:

     In July 1996, the Company purchased substantially all of the assets of 
     the Financial Forms Division of Deluxe Corporation (the Acquisition) for 
     $9,200,000 in cash and incurred $124,754 of direct acquisition costs.  
     The assets acquired consisted principally of equipment which was used by 
     Deluxe Corporation to manufacture internal bank forms.  The Company has 
     continued to use the assets to manufacture internal bank forms, which is 
     the same product manufactured by the Company's subsidiary, General 
     Financial.  The Company recorded goodwill of $2,015,065 in connection 
     with the Acquisition.

     In the year of acquisition, the financial results attributable to the 
     Acquisition were included in the Consolidated Statement of Earnings for 
     the period from the acquisition date through October 31, 1996.  The 
     unaudited financial results of operations for the fiscal year ended 
     October 31, 1996, on a pro forma basis as though the Acquisition 
     occurred as of November 1, 1995, are as follows:

<TABLE>
     <S>                                                  <C>
     Net sales                                            $  43,650,175
     Net earnings                                             1,773,502

     Diluted net earnings per common share                        $0.67
</TABLE>

                                     9

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


3.   SELECTED BALANCE SHEET INFORMATION:

     The following provides additional information concerning selected balance
     sheet accounts at October 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                               1998           1997
   <S>                                     <C>           <C>
   Accounts receivable, net:
      Accounts receivable                  $  5,074,112  $  6,908,209 
      Allowance for doubtful accounts          (138,000)     (294,000)
                                           ------------  ------------
                                           $  4,936,112  $  6,614,209 
                                           ------------  ------------
                                           ------------  ------------

   Inventories:                                        
      Raw material                            1,394,156     1,492,927 
      Work in process                           598,846       329,175 
      Finished goods                            252,336        90,544 
                                           ------------  ------------

                                           $  2,245,338  $  1,912,646 
                                           ------------  ------------
                                           ------------  ------------
      
   Property, plant and equipment, net:                 
      Land                                      109,626       109,626 
      Buildings                               3,993,073     3,927,785 
      Machinery and equipment                24,124,637    23,346,491 
      Furniture and fixtures                  1,804,043     1,733,622 
      Automobiles                               335,322       295,068 
      Leasehold improvements                     66,313        66,313 
                                           ------------  ------------

                                             30,433,014    29,478,905 
      Accumulated depreciation              (16,213,432)  (14,201,449)
      Accumulated amortization                  (66,313)      (66,313)
                                           ------------  ------------
                                           $ 14,153,269  $ 15,211,143 
                                           ------------  ------------
                                           ------------  ------------

   Goodwill, net:
      Goodwill                                2,015,065     2,015,065 
      Accumulated amortization                 (458,772)     (257,266)
                                           ------------  ------------

                                           $  1,556,293  $  1,757,799 
                                           ------------  ------------
                                           ------------  ------------

   Other assets, net:
      Computer software costs, net of 
        accumulated amortization of 
        $171,683 and $48,429 at 
        October 31, 1998 and
        1997, respectively                      649,043       535,892 
      Cash value of life insurance, net 
        of outstanding loans
        of $166,857 at October 31, 
        1998 and 1997                           359,918       308,646
      Other                                     283,856       251,157 
                                           ------------  ------------

                                           $  1,292,817  $  1,095,695 
                                           ------------  ------------
                                           ------------  ------------
</TABLE>

                                     10

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


3.   SELECTED BALANCE SHEET INFORMATION, CONTINUED:

<TABLE>
                                                1998            1997
<S>                                        <C>            <C>
Accrued liabilities:

      Payroll and bonuses                  $    504,888   $    676,811 
      Vacation                                  345,471        341,050 
      Profit sharing                            301,125        540,000 
      Real estate taxes                         195,454        214,192 
      Dividends                                 190,017        176,147 
      Other                                     390,716        659,685 
                                           ------------   ------------

                                           $  1,927,671   $  2,607,885 
                                           ------------   ------------
                                           ------------   ------------
</TABLE>

4.   SUPPLEMENTAL CASH FLOW INFORMATION:

     Changes in certain operating assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                1998            1997              1996
<S>                                        <C>             <C>              <C>
   Accounts receivable                     $  1,748,683    $  (2,052,911)   $  (1,146,436)
   Inventories                                 (332,692)         379,411         (974,143)
   Other assets                                (592,914)        (111,704)         (96,583)
   Accounts payable                             (56,927)        (729,732)       1,283,976 
   Accrued liabilities                         (612,825)       1,293,928          269,662 
   Deferred compensation                            439           51,948           48,528 
                                           ------------    -------------    -------------

                                           $    153,764    $  (1,169,060)   $    (614,996)
                                           ------------    -------------    -------------
                                           ------------    -------------    -------------


   Cash paid during the year for:
      Interest                             $    699,308    $     834,348    $     357,948
      Income taxes                            1,456,894        2,222,243          384,105
</TABLE>

                                       11

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5.   NOTES RECEIVABLE:

     Notes receivable consisted of the following at October 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                          1998                   1997
  <S>                                                                  <C>                    <C>
  Brooklyn Park Economic Development Authority Tax Increment
     Financing Note, interest at 9.5%, payable in semi-annual
     installments of $48,889, with remaining principal and
     interest due August 2001.                                         $  204,250             $  258,008 

  Note receivable, interest at 8%.  During fiscal year 1998, this
     note receivable was paid in full to the Company.                           -                614,666 

  Other, mainly customers, with various terms                              33,095                101,603 
                                                                       ----------             ----------

                                                                          237,345                974,277 

  Less current portion, included in "other current assets"                (75,772)              (145,169)
                                                                       ----------             ----------

                                                                       $  161,573             $  829,108 
                                                                       ----------             ----------
                                                                       ----------             ----------
</TABLE>

     Management believes that the carrying values of its notes receivable as 
     of October 31, 1998, approximate their fair value.

6.   BANK LINE OF CREDIT:

     In July 1996, the Company entered into a Revolving Credit agreement 
     (Agreement) with a bank in connection with a term loan (see Note 7) and 
     the Acquisition (see Note 2).  Under this Agreement, the Company may 
     borrow up to $1,500,000 with interest accruing at the prime interest 
     rate.  The Company would have the option to convert the variable 
     interest rate on all or a portion of these borrowings to a fixed rate 
     determinable at the date of conversion upon notification to the bank.  
     Collateral for borrowings under this Agreement, as well as the related 
     covenants, are the same as the term loan the Company entered into during 
     July 1996 (see Note 7).  There were no borrowings under this Agreement 
     during fiscal years 1998, 1997 or 1996.

                                       12

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


7.  LONG-TERM DEBT:

    Long-term debt consisted of the following at October 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                1998                1997
     <S>                    <C>                 <C>
     Revenue Bonds          $  2,010,000        $  2,345,000
     Term Loan                 3,320,550           8,220,550
                            ------------        ------------
                               5,330,550          10,565,550
     Less current portion     (1,385,000)         (3,235,000)
                            ------------        ------------

                            $  3,945,550        $  7,330,550
                            ------------        ------------
                            ------------        ------------
</TABLE>

     REVENUE BONDS:

     In August 1994, the Company received proceeds of $2,945,000 from the 
     issuance of Variable Rate Demand Industrial Development Revenue Bonds 
     (Revenue Bonds) in connection with the construction of the Company's 
     corporate headquarters and manufacturing facility.  The Revenue Bonds 
     require annual principal payments of $335,000 through fiscal year 2004 
     and bear interest at an interest rate which varies based upon comparable 
     tax-exempt issues, but not to exceed 12%.  The interest rate at October 
     31, 1998, was 3.5%.  The Company has an option to convert the variable 
     interest rate on these bonds to a fixed interest rate determinable at 
     the date of conversion upon notification to the bond trustee.  The 
     Revenue Bonds are collateralized by an outstanding irrevocable 
     direct-pay letter of credit with a financial institution equal to the 
     outstanding principal amount of the Revenue Bonds.

     The letter of credit is renewable upon mutual agreement of the Company 
     and the financial institution.  If the letter of credit is not renewed 
     and the Company is unable to obtain a similar letter of credit with 
     another financial institution, the Revenue Bonds may be callable at the 
     option of the bond trustee.

     The Company's outstanding letter of credit expires in August 2000 and is 
     collateralized by its corporate headquarters and manufacturing facility, 
     inventories and accounts receivable.  The letter of credit agreement, 
     among other things, requires the Company to not exceed annual capital 
     expenditures ranging from $1,200,000 to $1,400,000 until the Revenue 
     Bonds have been fully paid, maintain certain minimum net worth 
     requirements, meet certain leverage and cash flow ratios, as well as 
     limits cash dividends. The letter of credit agreement also allows for 
     the lender to call the debt upon any "material change in the nature of 
     the business."  For fiscal years 1997, 1998 and 1999 only, the letter of 
     credit agreement was amended to increase the allowable maximum annual 
     capital expenditure amount to $2,100,000 for fiscal year 1997 and 
     $2,500,000 for fiscal years 1998 and 1999.

                                       13

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


7.   LONG-TERM DEBT, CONTINUED:

     TERM LOAN:

     In July 1996, the Company entered into a term loan (Term Loan) with a 
     bank for $9,000,000 in connection with the Acquisition (see Note 2).  
     The Term Loan is collateralized by substantially all the Company's 
     assets and requires remaining quarterly principal payments of $262,500 
     through October 2001, with the remaining principal amount to be paid in 
     January 2002.  The Company has an option, upon written notice to the 
     bank, to accrue interest on its outstanding Term Loan balance based on 
     the prime interest rate or the Eurodollar rate.  At October 31, 1998, 
     the interest rate used to accrue interest on the Term Loan was 7.27%.  
     Also, the Term Loan agreement requires excess cash flow, as defined in 
     the agreement, as well as the net proceeds on any sale of stock be used 
     to make principal payments on the Term Loan. Accordingly, due to the 
     excess cash flow provision, the Company classified $2,000,000 as of 
     October 31, 1997, as a component of the current portion of long-term 
     debt (current liability) in addition to its scheduled principal payments 
     due in the succeeding fiscal year under the Term Loan agreement. During 
     fiscal year 1998, the Company made additional principal payments of 
     $2,000,000 in excess of its scheduled principal payments due under the 
     Term Loan.  In exchange for the $2,000,000 prepayment, the bank waived 
     the requirement for the Company to make any "excess cash flow" debt 
     repayment related to fiscal year 1998.  The Company has an option to 
     convert the variable interest rate on all or a portion of the Term Loan 
     to a fixed interest rate determinable at the date of conversion upon 
     notification to the bank.

     The Term Loan agreement, among other things, requires the Company to not 
     exceed annual capital expenditures ranging from $1,200,000 to $1,400,000 
     from fiscal year 1998 until the Term Loan and related revolving line of 
     credit (see Note 6) have been fully paid, maintain certain minimum net 
     worth requirements, meet certain current and cash flow ratios, as well 
     as limits cash dividends and lease payments.  The Term Loan agreement 
     also allows for the lender to call the debt upon any "material change in 
     the nature of the business."  For fiscal years 1997, 1998 and 1999 only, 
     the Term Loan agreement was amended to increase the allowable maximum 
     annual capital expenditure amount to $2,100,000 for fiscal year 1997 and 
     $2,500,000 for fiscal years 1998 and 1999.

     Aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
     FISCAL YEAR
     <S>                                                 <C>
          1999                                           $  1,385,000
          2000                                              1,385,000
          2001                                              1,385,000
          2002                                                505,550
          2003                                                335,000
          2004                                                335,000
                                                         ------------

                                                         $  5,330,550
                                                         ------------
                                                         ------------
</TABLE>

     Management believes that the carrying value of its long-term debt as of
     October 31, 1998, approximates its fair value.

                                       14

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


8.   OPERATING LEASES, INCLUDING RELATED PARTY LEASE:

     The Company leases certain buildings and equipment under six separate 
     operating lease agreements expiring through 2007 and requiring monthly 
     payments in addition to real estate taxes, insurance and maintenance 
     costs. The Company has the option to extend the lease term upon 
     expiration of one of the leases.

     In August 1997, the Company began leasing the Company's Financial Forms 
     Division manufacturing facility from the Company's Chairman and Chief 
     Executive Officer under an operating lease agreement expiring in fiscal 
     year 2007, with two additional five-year extensions available at the 
     option of the Company.  This operating lease agreement requires monthly 
     payments, subject to increase every three years based on that period's 
     average price index, as defined in the lease agreement, in addition to 
     real estate taxes, utilities, assessments, insurance and maintenance 
     costs.

     Future minimum payments, excluding real estate taxes, utilities, 
     assessments, insurance and maintenance costs, under operating lease 
     agreements with noncancellable terms are as follows:

<TABLE>
<CAPTION>
                              NON- 
                             RELATED         RELATED 
   FISCAL YEAR               PARTY            PARTY          TOTAL
<S>                        <C>             <C>            <C>
       1999                $  418,571      $  191,000     $  609,571
       2000                   235,691         191,000        426,691
       2001                   110,141         191,000        301,141
       2002                   110,141         191,000        301,141
       2003                   110,141         191,000        301,141
 Thereafter                   211,104         732,167        943,271
                           ----------      ----------     ----------

                           $1,195,789      $1,687,167     $2,882,956
                           ----------      ----------     ----------
                           ----------      ----------     ----------
</TABLE>

          Total rent expense was $695,062, $774,372 and $221,328 in fiscal 
     years 1998, 1997 and 1996, respectively, exclusive of real estate taxes, 
     insurance and maintenance costs.  Rent expense related to the related 
     party lease, exclusive of real estate taxes, insurance and maintenance 
     costs, was $191,000 and $31,384 in fiscal years 1998 and 1997, 
     respectively.

                                       15

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


9.    INCOME TAXES:

      The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                 FISCAL YEARS
                                  ----------------------------------------
                                       1998         1997          1996
<S>                               <C>           <C>            <C>
     Currently payable:                      
          Federal                 $   684,000   $  2,153,000   $   414,000 
          State                       123,000        339,000        78,000 
                                  -----------   ------------   -----------

                                      807,000      2,492,000       492,000 
                                  -----------   ------------   -----------

     Deferred provision (benefit):           
          Federal                     343,000        (21,000)      298,000 
          State                        62,000         (4,000)       50,000 
                                  -----------   ------------   -----------

                                      405,000        (25,000)      348,000 
                                  -----------   ------------   -----------
                                                                           
                                  $ 1,212,000   $  2,467,000   $   840,000 
                                  -----------   ------------   -----------
                                  -----------   ------------   -----------
</TABLE>

     The actual provision for income taxes differed from the "expected" 
     amounts computed by applying the U.S. federal corporate tax rate of 34% 
     to earnings before provision for income taxes for the fiscal years ended 
     October 31, 1998, 1997 and 1996, respectively, as follows:

<TABLE>
<CAPTION>
                                                                              FISCAL YEARS
                                                         --------------------------------------------
                                                              1998           1997            1996
<S>                                                      <C>             <C>              <C>
     Computed expected provision for income taxes        $  1,018,000    $  2,245,000     $   715,000 
     State income taxes, net of federal tax effect            148,000         221,000          51,500 
     Other, net                                                46,000           1,000          73,500 
                                                         ------------    ------------     -----------

     Actual provision for income taxes                   $  1,212,000    $  2,467,000     $   840,000 
                                                         ------------    ------------     -----------
                                                         ------------    ------------     -----------
</TABLE>

                                       16

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


9.   INCOME TAXES, CONTINUED:

     The approximate effects of temporary differences that gave rise to 
     deferred tax balances at October 31, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
                                                                             1998                  1997
<S>                                                                     <C>                    <C>
     Deferred tax assets:
          Accounts receivable allowance for doubtful accounts           $      55,200          $    117,600 
          Inventories                                                          40,851                35,505 
          Accrued liabilities                                                 124,188               130,420 
          Deferred compensation                                               331,034               321,153 
          Goodwill                                                             58,124                31,258 
                                                                        -------------          ------------

               Total deferred tax assets                                      609,397               635,936 
                                                                        -------------          ------------

     Deferred tax liabilities:
          Property, plant and equipment                                    (1,669,331)           (1,289,063)
          Investment in limited partnership                                  (211,043)             (212,850)
                                                                        -------------          ------------

               Total deferred tax liabilities                              (1,880,374)           (1,501,913)
                                                                        -------------          ------------

               Net deferred tax liabilities                             $  (1,270,977)         $   (865,977)
                                                                        -------------          ------------
                                                                        -------------          ------------
</TABLE>

     The Company has not recorded a valuation allowance as of October 31, 
     1998 and 1997, related to its deferred tax assets as management believes 
     no such allowance is necessary.


10.  PROFIT-SHARING AND BONUS PLANS:

     The Company has a profit-sharing and 401(k) plan (the Plan) covering
     substantially all full-time employees of the Company.  The Plan was amended
     during fiscal year 1997 to include the Company's employees who became
     employed with the Company in connection with the Acquisition (see Note 2)
     and who were previously ineligible to participate in the Plan.  Company
     contributions are determined based upon a profitability formula approved by
     the Company's Board of Directors, but are not to exceed 15% of the salary
     and wages paid to the participants for the year.  Vesting of benefits
     occurs at a rate of 20% for each year of service, commencing after the
     second full year of service.  Vested benefits allocated to the employees'
     accounts are payable upon retirement, death or earlier termination in a
     lump sum or installments.  The Company recognized expense under the Plan of
     $301,125, $540,000 and $192,856 in fiscal years 1998, 1997 and 1996,
     respectively.

                                       17

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


10.  PROFIT-SHARING AND BONUS PLANS, CONTINUED:

     The Company also has a bonus plan for certain key salaried employees. 
     Bonuses are determined, in part, based on a profitability formula 
     approved by the Company's Board of Directors and, in part, at the Board 
     of Directors' discretion.  Company expense under the bonus plan was 
     $203,805, $408,440 and $149,027 in fiscal years 1998, 1997 and 1996, 
     respectively.

11.  DEFERRED COMPENSATION:

     The Company has deferred compensation plans covering four current 
     officers and one former officer of the Company.  The plans for one 
     current and the former officer call for periodic payments ranging from 
     ten to fifteen years at retirement or death of such employees.  The 
     plans for the remaining three current officers call for contributions to 
     a "rabbi trust" to maintain benefits to be paid upon retirement or 
     termination.  Deferred compensation expense was $78,882, $51,397 and 
     $65,114 in fiscal years 1998, 1997 and 1996, respectively.

12.  STOCK OPTIONS:

     The Company has an incentive stock option plan for option grants to 
     employees (ISO Plan) and a nonqualified stock option plan for option 
     grants to the Company's Outside Board of Directors (BOD Plan).  As of 
     October 31, 1998, the Company has reserved 500,000 and 50,000 shares of 
     its common stock for grant under the ISO Plan and BOD Plan, 
     respectively.  During fiscal year 1998, the Company amended its ISO Plan 
     to increase the maximum number of shares reserved for issuance under 
     that plan to 500,000.  Options granted under the ISO Plan and BOD Plan 
     have exercise prices not less than the fair market value of the 
     Company's common stock at the date of grant and become exercisable 
     generally over a five-year period or based on the discretion of the 
     Company's Board of Directors.  Options granted under the ISO Plan expire 
     in August 2003, regardless of the original grant date, and options 
     granted under the BOD Plan expire 10 years from the date of grant.

     In addition, the Company has a nonqualified stock option plan for option 
     grants to the Company's Board of Directors (Non-Active Plan), under 
     which no more options may be granted.  At October 31, 1998, 30,000 of 
     these options are outstanding and have a weighted average exercise price 
     of $3.62.  Of these options, 26,000 are exercisable at October 31, 1998. 
     These options expire through 2005.

                                       18

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


12.  STOCK OPTIONS, CONTINUED:

     The following is a summary of the stock option activity with respect to 
     the ISO, BOD and Non-Active Plans:

<TABLE>
<CAPTION>
                                              WEIGHTED
                                               AVERAGE                       OPTIONS
                                           EXERCISE PRICE                    AVAILABLE
                                             PER SHARE        OPTIONS       FOR GRANT
     <S>                                  <C>                <C>            <C>
     Balance at October 31, 1995                $4.01         286,900         154,002 

     Exercised                                   3.25         (14,000)
     Cancelled                                   4.83          (3,600)          3,600 
     Granted                                     5.55          82,000         (82,000)
     Expired                                     3.75          (2,000)
                                                             --------        --------

     Balance at October 31, 1996                 4.39         349,300          75,602 

     Exercised                                   4.41         (67,350)
     Cancelled                                   5.58          (8,550)          8,550 
     Granted                                     7.17          96,000         (96,000)
     Expired                                     3.87         (14,000)
                                                             --------        --------

     Balance at October 31, 1997                 5.13         355,400         (11,848)

     Authorization of additional stock options                                300,000 
     Exercised                                   3.62         (72,275)
     Cancelled                                   4.28          (3,300)          3,300 
     Granted                                    12.67           9,000          (9,000)
     Expired                                     4.42            (250)
                                                             --------        --------

     Balance at October 31, 1998                $5.75         288,575         282,452
                                                             --------        --------
                                                             --------        --------
</TABLE>

     The Company may grant nonqualified stock options outside of the ISO and 
     BOD Plans to other parties at the discretion of the Company's Board of 
     Directors.  The terms of these options, including the exercise price, 
     vesting provision and expiration of the options, are determined by the 
     Company's Board of Directors prior to the granting of the options.  
     During fiscal year 1995, the Company granted 30,000 of these options to 
     a vendor. At October 31, 1998, all of these options are outstanding and 
     have a weighted average exercise price of $5.09.  These options expire 
     in November 2003.

                                       19

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


12.  STOCK OPTIONS, CONTINUED:

     The following table summarizes information about all stock options 
     outstanding and exercisable at October 31, 1998:
<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
     --------------------------------------------------------------   ---------------------------
                                             WEIGHTED
                                             AVERAGE       WEIGHTED                      WEIGHTED
        RANGE OF                            REMAINING       AVERAGE                      AVERAGE
       EXERCISE            NUMBER          CONTRACTUAL     EXERCISE       NUMBER         EXERCISE
        PRICES           OUTSTANDING          LIFE          PRICE      EXERCISABLE         PRICE
     <S>                 <C>               <C>            <C>          <C>              <C>
     $3.25 - $6.17        279,575           4.6 years     $  4.93       189,525          $  4.71
     $10.58 - $12.67       39,000           4.9 years       11.06
                          -------           ---------     -------       -------          -------

                          318,575           4.7 years     $  5.69       189,525          $  4.71
                          -------           ---------     -------       -------          -------
                          -------           ---------     -------       -------          -------
</TABLE>

     In accordance with SFAS No. 123, "Accounting for Stock-Based 
     Compensation," the Company has chosen to continue to account for 
     stock-based compensation using the intrinsic value method prescribed in 
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued 
     to Employees," and related interpretations.  Accordingly, compensation 
     cost for stock options granted to employees is measured as the excess, 
     if any, of the fair value of the Company's common stock at the date of 
     the grant over the amount an employee must pay to acquire the stock.  
     The Company accounts for stock-based compensation to nonemployees using 
     the fair value method prescribed by SFAS No. 123.  Such compensation 
     costs are amortized on a straight-line basis over the underlying option 
     vesting terms.

     If the Company had elected to recognize compensation expense for options 
     granted in fiscal years 1998, 1997 and 1996 based on the fair value of 
     the options granted at the date of grant as prescribed by SFAS No. 123, 
     the Company's net earnings and diluted net earnings per share for fiscal 
     years 1998, 1997 and 1996 would have been as follows:

<TABLE>
<CAPTION>
                                                  1998           1997             1996
<S>                                         <C>              <C>              <C>
     Net earnings:
          As reported                       $  1,782,941     $  4,135,922     $  1,263,056 
          Pro forma                            1,708,430        4,021,562        1,250,964 

     Diluted net earnings per share:
          As reported                       $       0.62     $       1.48     $       0.48 
          Pro forma                         $       0.60     $       1.44     $       0.47 
</TABLE>

                                       20

<PAGE>

NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


12.  STOCK OPTIONS, CONTINUED:

     The weighted average fair value of options at the date of grant was 
     $5.45, $3.26 and $2.38 per option during fiscal years 1998, 1997 and 
     1996, respectively.

     The fair value of each option grant was estimated on the date of grant 
     using the Black-Scholes option-pricing model and the following key 
     assumptions:

<TABLE>
<CAPTION>
                                                         1998              1997
     <S>                                               <C>              <C>
     Risk-free interest rates                             5.5%             6.3%
     Expected life                                     5 years          5 years
     Expected volatility                                46.20%           47.24%
     Expected dividend yield                             1.26%            1.79%
</TABLE>

13.  STOCK SPLIT:

     On May 31, 1998, the common stock of the Company was split 3 for 2.  All 
     per share and number of share data have been retroactively restated to 
     reflect the stock split, except for those presented in the Consolidated 
     Statements of Changes in Stockholders' Equity.

14.  PREFERRED STOCK:

     The Company has 200,000 shares of authorized, nonvoting preferred stock 
     that to date have not been issued.  The terms of the preferred stock 
     will be finalized and approved by the Board of Directors prior to 
     issuance.

15.  CONCENTRATIONS OF CREDIT RISK:

     At October 31, 1998 and 1997, cash and cash equivalents totaling 
     approximately $3,400,000 and $4,844,000, respectively, were concentrated 
     in one financial institution.  At October 31, 1997, 14.2% of the 
     Company's accounts receivable were from one customer.  The Company 
     generally requires no collateral from its customers to support their 
     accounts receivable.

16.  FOURTH QUARTER ADJUSTMENTS:

     In the fourth quarter of fiscal year 1997, the Company recorded certain 
     adjustments to reflect changes in accounting estimates to amounts 
     reported in previous interim periods of the fiscal year.  The 
     adjustments were related to the estimation of gross profit on net sales 
     from the Company's financial forms division and the interim income tax 
     rate used in previous interim periods of fiscal year 1997.  These 
     adjustments increased fourth quarter net earnings by approximately 
     $207,000 and diluted net earnings per common share by $0.07.

                                       21


<PAGE>

The accompanying consolidated financial statements and related information 
are the responsibility of management.  They have been prepared in conformity 
with generally accepted accounting principles and include amounts that are 
based on our best estimates and judgements under the existing circumstances.  
The financial information contained elsewhere in this Annual Report is 
consistent with that in the consolidated financial statements.

The Company maintains internal accounting control systems that are adequate 
to provide reasonable assurance that the assets are safeguarded from loss or 
unauthorized use.  The systems produce records adequate for preparation of 
financial information.  We believe the Company's systems are effective, and 
the cost of the systems does not exceed the benefits obtained.

The role of independent accountants is to render an independent, professional 
opinion of management's consolidated financial statements to the extent 
required by generally accepted auditing standards.

/s/ ROGER T. BREDESEN              /s/ MARY ANN MORIN
ROGER T. BREDESEN                  MARY ANN MORIN
CHIEF EXECUTIVE OFFICER            CHIEF FINANCIAL OFFICER


<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS


To the Stockholders and Board of Directors
Northstar Computer Forms, Inc.:

In our opinion, the accompanying consolidated balance sheet and the related 
consolidated statements of earnings, changes in stockholders' equity, and 
cash flows present fairly, in all material respects, the financial position 
of Northstar Computer Forms, Inc. and Subsidiary as of October 31, 1998 and 
1997, and the results of their operations and their cash flows for each of 
the three years in the period ended October 31, 1998, in conformity with 
generally accepted accounting principle. These financial statements are the 
responsibility of Northstar Computer Forms, Inc.'s management; our 
responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these statements in accordance with 
generally accepted auditing standards which require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement. An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the 
financial statements, assessing the accounting principals used and 
significant estimates made by management, and evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for the opinion expressed above.




                                       PRICEWATERHOUSECOOPERS LLP



Minneapolis, Minnesota
December 23, 1998


<PAGE>

Annual Meeting
The annual meeting of the shareholders of Northstar Computer Forms, Inc. will be
held Thursday, April 8, 1999 at 3:30 p.m. at the Radisson Plaza Hotel, 35 South
7th Street, Minneapolis, Minnesota 55402.
Form 10-K
A copy of the Form 10-K Report filed with the Securities and Exchange
Commission by the Company may be obtained without charge by written request to:
Mary Ann Morin, Northstar Computer Forms, Inc., 7130 Northland Circle North,
Brooklyn Park, MN 55428-1530.
Independent Accountants
PricewaterhouseCoopers L.L.P.
650 Third Avenue South
Minneapolis, MN 55402
Corporate Offices
7130 Northland Circle North
Brooklyn Park, MN 55428-1530
612-531-7340
Transfer Agent
Norwest Bank Minnesota
Stock Transfer
P.O. Box 64854
St. Paul, MN 55164-0854
1-800-468-9716
Legal Counsel
Parsinen Kaplan Levy Rosberg & Gotlieb P.A.
100 South Fifth Street
Suite 1100
Minneapolis, MN 55402
Quarterly Financial Information (Unaudited and not reviewed)

<TABLE>
<CAPTION>
Fiscal Year 1998                     First Quarter     Second Quarter       Third Quarter      Fourth Quarter
                                          Jan. '98           Apr. '98            July '98            Oct. '98
<S>                                  <C>               <C>                  <C>                <C>
Net Sales                              $10,608,027        $10,753,943         $10,358,271         $10,089,697
Earnings before taxes                      791,575            719,173             589,912             894,281
Provision for income taxes                 297,000            277,000             225,000             412,000
Net earnings                               494,575            442,173             364,912             481,281
Earnings per share                             .18                .15                 .12                 .22
Depreciation and amortization              715,290            726,930             678,818             740,788

<CAPTION>

Fiscal Year 1997                     First Quarter     Second Quarter       Third Quarter      Fourth Quarter
                                          Jan. '97           Apr. '97            July '97            Oct. '97
<S>                                  <C>               <C>                  <C>                <C>
Net Sales                              $11,608,757        $11,740,931         $11,330,222         $11,579,551
Earnings before taxes                      952,693          1,326,609           1,261,296           4,478,824
Provision for income taxes                 382,000            531,000             503,500           1,050,500
Net earnings                               570,693            795,609             757,796           2,011,824

<PAGE>

Earnings per share                             .21                .29                 .27                 .82
Depreciation and amortization              623,731            590,659             638,267             877,261

</TABLE>


<PAGE>

Company Management
-           Northstar Computer Forms, Brooklyn Park, MN
            Mike O'Neil, VP Operations
            Jim Staricha, National Sales Manager
            John Christenson, National Sales Manager

-           Northstar Financial Forms, Roseville, MN
            Stan Klarenbeek, VP Sales/Marketing
            Henry Schultz, Operations Manager

-           Wisconsin Business Forms, Milwaukee, WI
            Steve Otto, General Manager

-           General Financial Supply, Nevada, IA
            Don Dearborn, VP & General Manager

-           General Financial Supply, Bridgewater, VA
            Tony Scarselletta, General Manager

-           General Financial Supply, Denver, CO
            Terry Kennedy, General Manager

Company Operating Locations
-           Northstar Computer Forms, Inc.
            7130 Northland Circle North
            Brooklyn Park, MN 55428
            800-765-6787
            FAX: 612-535-5671
            www.nscf.com
-           General Financial Supply
            321 11th Street
            P.O. Box 179
            Nevada, IA 50201
            800-759-4374
            FAX: 515-382-2414
            www.genfinsup.com
-           Northstar Financial Forms
            2341 St. Croix Street
            Roseville, MN 55113
            800-328-9600
            FAX: 651-638-5237
            www.nff.com
-           General Financial Supply
            213 B Dry River Road
            P.O. Box 105
            Bridgewater, VA 22812
            800-333-6167
            FAX: 540-828-6176
-           Wisconsin Business Forms
            6580 North Industrial Road
            Milwaukee, WI 53223
            800-333-9472
            FAX: 414-358-1894
-           General Financial Supply
            4403 Table Mountain Parkway
            Golden, CA 80403
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            800-288-1223
            FAX: 303-277-0701