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Commission file number 0-2604
GENERAL BINDING CORPORATION
(Exact name of registrant as specified in its charter)

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Item 1. Business

Item 1, "Business" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report contains, and other periodic reports and press releases of the Company may contain, certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. General Binding Corporation ("GBC" or the "Company") intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "forecast," "project," "plan," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future.

Factors which could have a material adverse effect on operations and could affect management's outlook or future prospects of the Company and its subsidiaries include, but are not limited to: a) competition within the office products, document finishing and film lamination markets; b) the effects of economic and political conditions; c) the issues associated with the restructuring of certain of GBC's operations; d) the ability of GBC's distributors to successfully market and sell GBC's products; e) the ability of GBC to obtain capital to finance anticipated operating and capital requirements; f) the availability and price of raw materials; g) dependence on certain suppliers of manufactured products; h) the effect of consolidation in the office products industry; and i) other factors indicated in GBC's registration statements and reports filed with the SEC.

GBC, incorporated in 1947, and its subsidiaries are engaged in the design, manufacture and distribution of branded office equipment, related supplies and laminating equipment and films. Between 1995 and 1998, GBC grew rapidly through a series of acquisitions. While the acquired entities contributed a significant amount of revenue to GBC, they also added significant new infrastructure and high debt levels. Further, integration of the acquisitions proved more difficult than management expected. Recognizing these issues, in 1999, the Company began implementation of a multi-phase process with the goal of returning GBC to long-term profitability. The first phase of the program included rationalization of SKU's and facilities, as well as headcount reductions. In 2000, GBC's operating results improved, and its debt levels were reduced. While the overall economic environment had a negative impact on the Company's results in 2001, GBC management continued to move forward with Phase II of the profit improvement program. In the fourth quarter of 2001, after a comprehensive six-month operational review, the Company launched its "Operational Excellence Program." This program is based upon a continuous improvement process which uses the "80/20 principles" of simplification, segmentation and intense focus. The goals of this program include: a) focusing on greater profitability and long-term revenue growth; b) streamlining and improving worldwide

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infrastructure; and c) generating cash to increase financial flexibility. The program has produced positive results in 2002 and 2003 and is expected to continue with further operational and financial improvements in 2004, although there can be no assurance that such improvement will continue and to what extent. The savings from this program have helped to offset the effect of a challenging sales environment, fund investments related to new sales, marketing and product development initiatives, and reduce the Company's debt levels.

In 2003, GBC modified its segment reporting to reflect the Company's organizational changes. The changes primarily consisted of combining three of GBC's four business units into the following two new groups - Commercial and Consumer Group ("CCG") and Industrial and Print Finishing Group ("IPFG"). The CCG was created through the combination of the former Document Finishing and Office Products Groups and is responsible for marketing the Company's binding, laminating, visual display (writing boards, bulletin boards, easels, etc.), and other products for use by consumers and commercial customers. The IPFG, which is comprised of the former Films Group and what was the Automated Products division of the Document Finishing Group, targets "print-for-pay" and other finishing customers who use GBC's professional grade finishing equipment and supplies.

The Commercial and Consumer Group's major products include binding, punching and laminating equipment and related supplies, visual communications products (writing boards, bulletin boards, easels, etc.), document shredders, custom binders and folders, and desktop accessories, as well as maintenance and repair services for these products. The Industrial and Print Finishing Group's primary products include thermal and pressure-sensitive laminating films, mid-range and commercial high-speed laminators, and large-format digital print laminators. The Europe Group distributes the Commercial and Consumer Groups' products to customers in Europe. The Company's products are either manufactured in one of GBC's 14 plants located throughout the world or sourced from third parties. GBC products and services are sold directly through the Company's sales force, telemarketing personnel and internet portals, and indirectly through a network of distributors, office product superstores, wholesal ers, contract/commercial stationers and other retail dealers.

The following table summarizes the percentage of revenue derived from the sale of office equipment and supplies and service for the last three fiscal years:

Financial information by business group and geographical area is included in note 13 to the consolidated financial statements.

Competition

GBC's products and services are sold in highly competitive markets. The Company believes that the principal points of competition in its markets are product and service quality, price, design and engineering capabilities, product development, conformity to customer specifications, timeliness and completeness of delivery and quality of post-sale support. Competitive conditions often require GBC to match or better competitors' prices to retain business or market share. The Company believes that it can maintain and/or improve its competitive position through continued

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investment in manufacturing, quality standards, marketing and customer service and support.  However, there can be no assurance that GBC will have sufficient resources to continue to make such investments or that it will be successful in maintaining its competitive position. There are no significant barriers to entry into the markets for most of GBC's products and services. Certain of GBC's current and potential competitors may have greater financial, marketing and research and development resources than GBC.

No single customer accounted for more than 10% of GBC's net sales. GBC does, however, have certain major customers. The loss of, or major reduction in business from, one or more of GBC's major customers could have a material adverse effect on GBC's financial position or results of operations.

GBC's order backlog is not considered a material factor in the Company's business, nor is the business seasonal in any significant respect.

The primary materials used in the manufacturing of many of GBC's products are polyester and polypropylene substrates, wood and aluminum. These materials are available from a number of suppliers, and GBC is not dependent upon any single supplier for any of these materials. In general, GBC's gross profit may be affected from time to time by fluctuations in the prices of these materials because competitive markets for GBC's products make it difficult to pass through raw material price increases to customers. Based on its experience, GBC believes that adequate quantities of these materials will be available in adequate supplies in the foreseeable future. However, there can be no assurance that such materials will continue to be available in adequate supply in the future or that shortages in supply will not result in price increases that could have a material adverse effect on GBC's financial position or results of operations.

GBC is dependent on the continued services of certain members of its senior management team. GBC believes it could replace key personnel in an orderly fashion should the need arise; however, the loss of, and inability to attract replacements for, any of such key personnel could have a material adverse effect on GBC's financial position or results of operations.

GBC relies on GMP Co. Ltd. ("GMP"), in which the Company holds an equity interest of approximately 20%, as its sole supplier of many of the laminating machines it distributes. GBC has a long-term supply agreement with GMP. However, there can be no assurance that GMP will be able to perform any or all of its obligations to the Company. GMP's equipment manufacturing facility is located in the Republic of Korea, and its ability to fulfill GBC's requirements for laminating machines could be affected by Korean and other regional and worldwide economic, political and governmental conditions. Additionally, GMP has a highly leveraged capital structure and its ability to continue to obtain financing is required to ensure the orderly continuation of its operations. See the "Restructuring and Other" and the "GMP

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Relationship " sections of Item 7, "Management Discussion and Analysis of Financial Condition and Results of  Operations" for further discussion of GBC's investment in and relationship with GMP. Although GBC believes alternative suppliers could be found, changing suppliers for the laminating machines manufactured by GMP would require lead times of a duration that are likely to result in a disruption of supply. There can be no assurance that GBC would be able to find an alternative supplier or suppliers on a timely basis or on favorable terms. Any material disruption in GBC's ability to deliver orders for laminating machines on a timely basis could have a material adverse effect on GBC's reputation with customers and its financial position or results of operations.

GBC has significant operations outside the United States. Approximately 38% of GBC's 2003 revenues were from international sales. GBC's international operations may be significantly affected by economic, political and governmental conditions in the countries where GBC sources products or has manufacturing facilities or where its products and services are sold. In addition, changes in economic or political conditions in any of the countries in which GBC operates could result in unfavorable exchange rates, new or additional currency or exchange controls, other restrictions being imposed on the operations of GBC or expropriation of the Company's assets. GBC's operations and financial position may also be adversely affected by significant fluctuations in the value of the US dollar relative to international currencies. As discussed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", GBC's international operations benefited fro m a weaker U.S. dollar in 2003 compared to 2002. A strengthening of the U.S. dollar in 2004 compared to 2003 levels would have a negative impact on the Company's results.

GBC and its operations, both in the U.S. and abroad, are subject to national, state, provincial and/or local laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal, and management of, certain materials and waste, as well as impose liability for the costs of investigating and cleaning up, and certain damages resulting from present and past spills, disposals, or other releases of hazardous substances or materials (collectively, "Environmental Laws"). Environmental Laws can be complex and may change often. Capital and operating expenses required to comply with

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Environmental Laws can be significant, and violations may result in substantial fines and penalties. In addition, Environmental Laws, such as the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA," also known as "Superfund"), in the United States impose liability on several grounds for the investigation and cleanup of contaminated soil, ground water, buildings, and for damages to natural resources at a wide range of properties. For example, contamination at properties formerly owned or operated by GBC, as well as at properties the Company currently owns and operates, and properties to which hazardous substances were sent by GBC, may result in liability for the Company under Environmental Laws. While the Company currently has no claims outstanding, GBC has an inherent risk of liability under Environmental Laws both with respect to ongoing operations and with respect to contamination that may have occurred in the past on its properties or as a result of its operations. There can be no assurance that the costs of complying with Environmental Laws and any claims concerning noncompliance, or liability with respect to contamination will not in the future have a material adverse effect on the Company's financial position or results of operations.

As of December 31, 2003, GBC employed approximately 3,800 people worldwide. Employee relations are considered to be excellent.

The Company's internet website address is www.gbc.com. Through the investor relations section of the website, GBC makes available its Annual, Quarterly and Current Reports (Forms 10-K, 10-Q, and 8-K) in addition to reports on Forms 3, 4 and 5 filed by its executive officers and directors, free of charge shortly after the reports are electronically filed with or furnished to the Securities and Exchange Commission.

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Item 2. Properties

In addition to the manufacturing and distribution locations listed below, GBC operates sales and service offices throughout the world. GBC also owns a 65,000 square foot world headquarters building in Northbrook, Illinois and a 33,000 square foot business group headquarters building in

Skokie, Illinois. Management believes that the Company's manufacturing facilities are suitable and adequate for its operations and are maintained in a good state of repair.

Major manufacturing and distribution is conducted at the following locations with the principal business group user indicated by footnote:

In the normal course of business, from time to time there may be various actions pending against the Company or its subsidiaries, but in the opinion of management, these actions are unlikely, individually or in the aggregate, to have a material adverse effect on the Company's financial statements.

GBC is not a party to any material pending legal proceedings, and neither GBC nor any of its officers or directors are aware of any material contemplated proceeding.

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None.

The Company's Common Stock, $0.125 par value share, trades on the Nasdaq National Market under the symbol "GBND." The following table shows high, low and closing prices for GBC's Common Stock, $0.125 par value, as quoted on the Nasdaq National Market for the calendar quarters indicated below:

Approximate Number of Equity Security Holders:

The Company paid no cash dividends on its Common Stock in 2003, 2002 and 2001 and does not anticipate paying any cash dividend in the near future. The Company is limited by existing covenants in the Company's Primary Credit Facility (as defined in the "Liquidity and Capital Resources" section of Item 7, "Management Discussion and Analysis of Financial Condition and Results of Operations" of this report), with regard to paying dividends. The Company has retained, and expects to continue to retain, its earnings for reinvestment in its business. The declaration and payment of any dividends in the future, and their amounts will be determined by GBC's Board of Directors in light of conditions then existing, including the Company's earnings, its financial condition, working capital and capital expenditure requirements and other factors.

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(000 omitted except per share and ratio data):

The following section highlights significant factors impacting GBC's operations and financial condition. The following discussion should be read in conjunction with Item 6, "Selected Financial Data" and Item 8, "Financial Statements and Supplementary Data".

GBC is engaged in the design, manufacture and distribution of office equipment, related supplies and laminating equipment and films. As described in more detail in "Item 1. Business," in 2003, GBC implemented organizational changes and created two business groups - Commercial and Consumer Group ("CCG") and Industrial and Print Finishing Group ("IPFG"). CCG, created through the combination of the former Document Finishing and Office Products Groups, focuses on marketing strategies for "consumer-ready" products that leverage GBC's leadership among customers of its binding, laminating and information-display products in the work, school and home environments. IPFG, created through the combination of the former Films Group and the Automated Products Division of the Document Finishing Group, targets print-for-pay and other finishing customers who use GBC's professional-grade finishing equipment and supplies as part of their mass production of sophisticated, professional applications.

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The Groups' revenues are primarily derived from:

The transition of manufacturing operations from the Buffalo Grove facility was completed in 2002; administrative and support personnel previously located in the Buffalo Grove facility were transferred to other GBC locations by early 2003. Actions associated with the Amelia facility and other reductions in force were completed in 2002.

Net Loss

Net sales in 2002 were $701.7 million, a decrease of 1.4% from 2001. The Company's sales were negatively impacted by weak economic conditions in the United States. Net sales by business segment are summarized below (000 omitted):

During 2002, GBC recorded inventory rationalization and write-down charges of $1.0 million. These charges related to product line rationalization and reflect an adjustment to the realizable value of certain products which the Company decided to discontinue in 2001. During 2001, GBC recorded inventory rationalization and write-down charges of $8.8 million. These charges relate to product line rationalization and efforts to reduce the number of SKU's offered. Charges by business group were: Consumer and Commercial Group, $4.9 million; Industrial and Print Finishing Group, $0.1 million; and Europe Group, $3.8 million.

Amortization of Goodwill and Other Intangibles

Interest Expense

Interest expense increased by $2.7 million to $39.9 million in 2002 compared to 2001. The increase in interest expense primarily resulted from higher effective interest rates during 2002 on GBC's Revolving Credit Facility, which were only partially offset by lower average borrowings.

During 2003, GBC entered into three new financing agreements. On June 26, 2003, the Company completed the refinancing of its primary senior credit facility (the "Primary Facility"). The new $197.5 million Primary Facility includes a $72.5 million multicurrency revolving credit line and a $125 million term loan. The maturity date on the Primary Facility is January 15, 2008, and it provides for significantly lower interest rate spreads than the previous senior credit facility (the "Previous Primary Facility"). In the fourth quarter of 2003, a payment of $2.5 million was made on the term loan, reducing it to $122.5 million. As of December 31, 2003, outstanding borrowings under the Primary Facility included $122.5 million for the term loan, and outstanding letters of credit of $13.8 million which reduce GBC's availability under the revolving credit line. Concurrent with the completion of the Primary Facility, GBC entered into a mortgage financing arrangement under which its real estate holdings in Northbrook and Skokie, Illinois and its real estate and equipment in Addison, Illinois are pledged as collateral ("Mortgage Financing"). The $14.8 million proceeds from the Mortgage Financing were used to repay a portion of the Previous Primary Facility. As of December 31, 2003, the outstanding balance on the Mortgage Financing was $13.8 million. In April 2003, GBC entered into a new multicurrency revolving credit facility in the Netherlands (the "Netherlands Facility"). The maturity date on the Netherlands Facility is April 9, 2008. The majority of $16.8 million that had been borrowed under the Netherlands Facility was used to repay a portion of the Previous Primary Facility. As of December 31, 2003, there were no outstanding borrowings under the Netherlands Facility.

Interest rates on the Primary Facility are variable and are set at LIBOR plus 3.75% for borrowings under the $72.5 million multicurrency revolving credit line, and LIBOR plus 4.50% for the term loan. Borrowings under the Primary Facility are subject to a "pricing grid" which provides for lower interest rates in the event that certain of GBC's financial ratios improve in future periods.

Primary Credit Facility - Financial Covenants

GBC must meet certain restrictive financial covenants as defined under the Primary Facility. The covenants become more restrictive over time and require the Company to maintain certain ratios related to total leverage, senior leverage, fixed charge coverage, as well as a minimum level of consolidated net worth. There are also other covenants, including restrictions on dividend payments, acquisitions, additional indebtedness, and capital expenditures. In addition to the restrictive covenants, multicurrency revolving credit line borrowings are subject to a "borrowing base" which is determined based upon certain formulas tied to GBC's trade receivables and inventory. With the exception of its assets pledged under the Mortgage Financing, substantially all of the assets of General Binding Corporation and its domestic subsidiaries, as well as a portion of equity in certain foreign subsidiaries are pledged as collateral under the Primary Facility.

The most restrictive financial covenants under the Primary Facility require the Company to maintain the following targets and ratios:

• Minimum Leverage Ratios:

There are two leverage ratio tests under the Primary Facility. The ratios are computed by dividing the cumulative four quarter trailing EBITDA (as defined under the Primary Facility) into the Company's total debt and its senior debt (total debt less subordinated debt).

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The Primary Facility requires that GBC's leverage ratios as of the end of each quarter be no higher than:

• Fixed Charge Coverage Ratio:

The fixed charge coverage ratio is computed based upon consolidated trailing four quarter EBITDA (as defined under the Primary Facility) less consolidated capital expenditures, divided by consolidated fixed charges (as defined under the Primary Facility). As of the end of each quarter through the fourth quarter of 2005, GBC must maintain a ratio in excess of 1.10 to 1 and must maintain a ratio in excess of 1.15 to 1 for each quarter thereafter.

• Consolidated Net Worth:

GBC must maintain consolidated net worth (as defined under the Primary Facility) of $37.0 million plus the sum of 50% of consolidated net income of each quarterly period subsequent to June 30, 2003.

Principal payments on the term loan are due quarterly beginning with the fourth quarter of 2003. The required quarterly payments are as follows:

The remaining balance of the term loan is due on the maturity date of the Primary Facility, January 15, 2008.

As of and for the period ended December 31, 2003, GBC was in compliance with all covenants under the Primary Facility.

The Primary Facility includes a $72.5 million multicurrency borrowing facility that GBC uses to fund its working capital requirements. The Company's borrowing capacity under the facility is limited by a "borrowing base," which is specifically defined in the facility and is computed as 85% of eligible trade receivables and 50% of eligible inventory. Eligible receivables are generally defined as current domestic and Canadian receivables which are reduced by certain obligations of the Company, and eligible inventory is generally defined as inventory owned by GBC's domestic and Canadian operations. At December 31, 2003, GBC's borrowing base was adequate to support GBC's expected future working capital requirements. If, however, there were to be a significant deterioration in the quality of GBC's eligible receivables or inventory, there can be no assurance that adequate liquidity would be available under the Facility.

Cash provided by operating activities was $51.6 million for the year ended December 31, 2003, compared to $46.5 million for 2002, an increase of $5.1 million. The increase in cash provided by operating activities in 2003 compared to 2002 is primarily due to a reduction in the use of working capital, lower cash interest payments and increased segment operating income, all of which were partially offset by cash income taxes paid in 2003 compared to refunds in 2002.

Net cash used in investing activities was $10.6 million during 2003, compared to $7.7 million in 2002. In 2003, GBC invested $2.2 million in a joint venture arrangement for the Industrial and Print Finishing Group.

In January 2003, the FASB issued Interpretation No. 46 (FIN No. 46), "Consolidation of Variable Interest Entities." The objective of FIN No. 46 is to improve financial reporting by companies with transactions involving variable interest entities. Prior to FIN No. 46, companies generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. Under FIN No. 46, a variable interest entity would be consolidated by a company if that company is subject to a majority of the risk or loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. In

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 December 2003, the FASB issued a revision to FIN No. 46 ("46R") to clarify certain provisions of FIN No. 46 and to exempt certain entities from its requirements. Special effective dates apply to enterprises that have fully or partially applied FIN No. 46 prior to issuance of 46R. Otherwise, application of 46R or FIN No. 46 is required in financial statements of public entities for periods ending after December 15, 2003. GBC is still assessing the impact, if any, 46R and FIN No. 46 will have on the Company's results or financial position.

In December 2003, the FASB issued a revision to SFAS No. 132, " Employers Disclosures about Pensions and Other Postretirement Benefits." This statement revises certain disclosures about pension plans and other postretirement benefit plans. The additional disclosures required by this statement include: information describing the types of plan assets; investment strategy; measurement date(s); plan obligations; cash flows; and components of net periodic benefit cost to be recognized during interim periods. GBC is required to adopt the new disclosures about foreign plans and estimated future benefit payments in 2004.

In July 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with Exit and Disposal Activities." This statement revises the accounting for exit and disposal activities under EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity," by spreading out the reporting of expenses related to restructuring activities. Commitment to a plan to exit an activity or dispose of long-lived assets will no longer be sufficient to record a one-time charge for most anticipated costs. Instead, companies will record exit or disposal costs when they are "incurred" and can be measured at fair value, and they will subsequently adjust the recorded liability for changes in estimated cash flows. The provisions of SFAS No.146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. Companies may not restate previously issued financial statements for the effect of the provisions of SFAS No. 146, and liabilities that a company previously recorded under EITF Issue 94-3 are grandfathered. GBC's adoption of SFAS No. 146 in 2003 has not have a material impact on its consolidated financial statements.

As discussed in notes 1 and 11 to the consolidated financial statements, GBC and Lane Industries, Inc. (the Company's majority shareholder) have entered into Tax Allocation Agreements, which determine GBC's U.S. Federal and U.S. State income liabilities. Other related party transactions are detailed in GBC's 2003 Proxy Statement. No other related party transactions had a material impact on GBC's financial position, cash flow, or results of operations.

The following accounting policies are considered to be critical to the understanding of GBC's financial statements because their application requires significant management judgement. The Company's reported financial results rely upon estimates and assumptions which are uncertain. For all of these policies, management cautions that future events rarely develop exactly as forecast, and even the best estimates may require adjustment.

The provision for doubtful accounts is established based upon historical losses on trade receivables, the aging of customer account balances, and the creditworthiness of specific customers. Historically, GBC has not realized significant losses on trade receivables. As discussed under Credit Concentration, certain of GBC's customers routinely carry significant trade receivable balances. Deterioration of the creditworthiness of such customers could have a significant negative impact on the financial results of GBC.

An allowance for potential sales returns is established as revenue is recognized. This allowance is based upon historical trends for specific customer groups. Additionally, the Company monitors the "sell through" information provided by significant resellers of its products. The allowance is adjusted periodically based upon such information. Management believes that the allowance is susceptible to reasonable estimation and adequately provides for future returns; however, market changes and customer strategies could impact this estimate in the future.

GBC's inventory is valued at manufactured cost or purchase cost. An allowance is established to adjust the cost of inventory to its net realizable value. The allowance is based upon historical and estimated future sales of specific inventory items. Changes in future demand for products or inaccurate estimates of demand for new products could have a significant impact on the Company's allowance. Additionally, a decision by major resellers of GBC's products to no longer carry these products could have a significant impact on the Company's future results.

the underlying temporary differences become taxable or deductible, the Company could be required to increase the valuation allowance against all or a significant portion of its remaining net deferred tax assets resulting in an increase in the effective tax rate.

In the normal course of business, GBC is regularly audited by U.S. Federal, U.S. State and Foreign tax authorities, and is periodically challenged regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. Management believes the Company's tax positions comply with applicable tax laws. In evaluating the exposure associated with various tax filing positions, GBC maintains accruals for uncertain tax positions. While the Company believes these reserves are adequate, its effective income tax rate in a given period could be impacted if matters for which accruals have been established are resolved in amounts in excess of or/less than the accruals.

In accordance with SFAS No. 144, "Accounting for the Impairment of or Disposal of Long-lived Assets," the Company reviews potential impairment of long-lived assets whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. During 2003, 2002 and 2001, provisions were established for certain assets impacted by restructuring activities. Such provisions were based upon a comparison of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount asset or asset group. If the undiscounted cash flows are less than the carrying amount, an impairment is recognized based upon the fair value of the asset or asset groups.

During 2003, the Company evaluated its investment in GMP for potential impairment. As a result of this review, GBC recorded a non-cash charge of $4.7 million to reduce its investment. See the "GMP Relationship" section of Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of GBC's relationship with GMP.

In accordance with SFAS No. 142, GBC tests its goodwill balances at least annually to determine whether these assets are impaired. GBC recorded a non-cash impairment charge of $110 million ($79 million after-tax) effective January 1, 2002, as the cumulative effect of adopting this standard. The Company performs its annual impairment test at January 1 of each fiscal year. In addition, SFAS No. 142 also requires that previously recognized intangible assets, other than goodwill, be reassessed to determine the appropriateness of the estimated useful lives of these assets. Intangible assets determined to have finite lives are amortized over those lives and intangible assets that have indefinite lives are not amortized. As of December 31, 2003, there have been no events or circumstances which would warrant a revision to the remaining useful lives of these assets.

As a result of GBC's global activities, the Company has assets, liabilities, loans and cash flows denominated in currencies other than the U.S. dollar. From time to time, GBC utilizes a foreign exchange risk management program to manage its foreign exchange exposures to help minimize the adverse impact of currency movements. Certain loans and cash flows in the U.S. and in foreign countries are currently hedged through foreign currency forward contracts.

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To the Board of Directors and Shareholders of General Binding Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and stockholders' equity present fairly, in all material respects, the financial position of General Binding Corporation ("GBC") and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of GBC'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 auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The financial statements of General Binding Corporation as of, and for the year ended December 31, 2001, (prior to the adjustments discussed in notes 1, 2 and 13), were audited by other independent accountants who have ceased operations. Those accountants expressed an unqualified opinion on those financial statements in their report, dated January 25, 2002 (except with respect to the matters discussed in Note 13 of the 2001 financial statements, as to which the date was March 9, 2002).

As discussed in notes 1 and 2 to the consolidated financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets" (SFAS No. 142).

As discussed above, the financial statements of General Binding Corporation as of, and for the year ended December 31, 2001, were audited by other independent accountants who have ceased operations. As described in note 2, these financial statements have been revised to include the transitional disclosures required by SFAS No.142, which was adopted by the Company as of January 1, 2002. Further, as described in note 13, the Company revised the reporting of segment information. We audited such disclosures and revisions in segment information as described in notes 2 and 13. In our opinion, such transitional disclosures and revisions in segment information for 2001 in notes 2 and 13 are appropriate and have been properly applied. Also as described in notes 1 and 13, these financial statements have been revised to reflect the adoption of EITF 01-09, as of January 1, 2002. We audited the revisions to the 2001 statements described in notes 1 and 13 as a result of the adoption of EITF 01-09. In our opinion, such revisions for 2001 in notes 1 and 13 are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such disclosures and revisions and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

PricewaterhouseCoopers LLP
Chicago, Illinois
February 25, 2004

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The following report is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP. As discussed in notes (1), (2) and (13) to the consolidated financial statements, the Company adopted the provisions of Emerging Issues Task Force Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer" (Issue 01-09), and Statement of Financial Accounting Standards No.142, "Goodwill and Other Intangible Assets"(SFAS No. 142). As discussed in notes (1), (2), and (13) the Company has reflected the impact of adopting Issue 01-09 in the 2001 consolidated financial statements, the transitional disclosures for 2001 as required by SFAS No. 142 in the notes to the consolidated financial statements and revisions to the reporting of segment information. The Arthur Andersen LLP report does not extend to these changes to the 2001 consolidated financial statements and notes thereto. The adjustments to the 2001 consolidated financial statements and notes thereto were reported on by PricewaterhouseCoopers LLP as stated in their report appearing herein. Also, the Arthur Andersen LLP report is dual dated with a reference to note 13 of the consolidated financial statements. The reference to note 13 of the consolidated financial statements is no longer applicable as such information from prior years has been incorporated into other notes of the consolidated financial statements.

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To the Board of Directors and Stockholders of General Binding Corporation:

We have audited the accompanying consolidated balance sheets of General Binding Corporation ("GBC," a Delaware corporation) and Subsidiaries as of December 31, 2001* and 2000*, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001*. These consolidated financial statements are the responsibility of GBC's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of General Binding Corporation and Subsidiaries as of December 31, 2001* and 2000*, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001*, in conformity with accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II** is the responsibility of GBC's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule** has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

Arthur Andersen LLP
Chicago, Illinois
January 25, 2002
(Except with respect to the matters discussed in Note 13, as to which the date is March 9, 2002)

33

General Binding Corporation and Subsidiaries
Consolidated Statements of Income
(000 omitted, except per share data)

34

General Binding Corporation and Subsidiaries
Consolidated Balance Sheets
(000 omitted, except share data)