---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2005

Commission File Number 0-2604GENERAL BINDING CORPORATION(Exact name of registrant as specified in its
charter)36-0887470(I.R.S. employer identification No.)Delaware(State or other jurisdiction of incorporation or
organization)One GBC Plaza,
Northbrook, Illinois 60062(Address of principal executive offices, including zip code)

(847) 272-3700(Registrant's telephone number, including area
code)

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

Yes XNo ____

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes XNo ____

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.

|                                       | Outstanding at
|-------------------------------------- | --------------
|Class                                  | July 29, 2005 
|Common Stock, $0.125 par value         | 14,500,562    
|Class B Common Stock, $0.125 par value | 2,398,275     

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GENERAL BINDING CORPORATION AND SUBSIDIARIESFORM
10-QFor the Quarter Ended June 30, 2005Table of Contents

|PART I  | Financial Information                                                                                             |  | Page
|------- | ----------------------------------------------------------------------------------------------------------------- |  | ----
|Item 1. | Financial Statements                                                                                              |  |     
|        | Condensed Consolidated Balance Sheets as of June 30,2005 and
      December 31, 2004                              |  | 2   
|        | Condensed Consolidated Statements of Income for the threemonths and
      six months ended June 30, 2005 and 2004 |  | 3   
|        | Condensed Consolidated Statements of Cash Flows for thesix months
      ended June 30, 2005 and 2004              |  | 4   
|        | Notes to Condensed Consolidated Financial Statements                                                              |  | 5   
|Item 2. | Management's Discussion and Analysis of Financial Condition and Results
      of Operations                       |  | 23  
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 34  
|Item 4. | Controls and Procedures                                                                                           |  | 35  
|PART II | Other Information                                                                                                 |  |     
|Item 6. | Exhibits                                                                                                          |  | 35  
|        | Signatures                                                                                                        |  | 36  

1

GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS(000 omitted)

|                                                                                                                      |                                                    |                                                   |                         | June 30,                |                         | December 31,
|--------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------- | ----------------------- | ----------------------- | ----------------------- | ------------
|                                                                                                                      |                                                    |                                                   |                         | 2005                    |                         | 2004        
|                                                                                                                      |                                                    |                                                   |                         | (unaudited)             |                         |             
|ASSETS                                                                                                                |                                                    |                                                   |                         |                         |                        
|Current assets:                                                                                                       |                                                    |                                                   |                         |                        
|                                                                                                                      | Cash and cash equivalents                          |                                                   | $ 11,951                |                         | $ 6,259                
|                                                                                                                      | Receivables, less allowances for doubtful accounts |                                                   |                         |                         |                        
|                                                                                                                      |                                                    | and sales returns: 2005 - $15,789, 2004 - $16,476 |                         | 140,276                 |                         | 141,445     
|                                                                                                                      | Inventories:                                       |                                                   |                         |                         |                        
|                                                                                                                      |                                                    | Raw materials                                     |                         | 18,848                  |                         | 20,637      
|                                                                                                                      |                                                    | Work in process                                   |                         | 5,251                   |                         | 6,584       
|                                                                                                                      |                                                    | Finished goods                                    |                         | 76,195                  |                         | 70,775      
|                                                                                                                      |                                                    | Total inventories                                 |                         | 100,294                 |                         | 97,996      
|                                                                                                                      | Deferred tax assets                                |                                                   | 11,663                  |                         | 12,437                 
|                                                                                                                      | Other                                              |                                                   |                         | 12,293                  |                         | 14,043      
|                                                                                                                      |                                                    | Total current assets                              |                         | 276,477                 |                         | 272,180     
|Capital assets at cost                                                                                                |                                                    | 257,367                                           |                         | 272,092                
|Less - accumulated depreciation                                                                                       |                                                    | (182,402)                                         |                         | (187,399)              
|                                                                                                                      | Net capital assets                                 |                                                   | 74,965                  |                         | 84,693                 
|Goodwill and other intangible assets, net of accumulated
      amortization                                           |                                                    | 149,933                                           |                         | 150,383                
|Other                                                                                                                 |                                                    |                                                   | 39,144                  |                         | 33,158                 
|                                                                                                                      | Total assets                                       |                                                   | $ 540,519
      ======= |                         | $ 540,414
      =======
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                  |                                                    |                                                   |                         |                        
|Current liabilities:                                                                                                  |                                                    |                                                   |                         |                        
|                                                                                                                      | Accounts payable                                   |                                                   | $ 50,008                |                         | $ 49,758               
|                                                                                                                      | Accrued liabilities                                |                                                   | 85,972                  |                         | 90,205                 
|                                                                                                                      | Notes payable                                      |                                                   | 6,323                   |                         | 7,788                  
|                                                                                                                      | Current maturities of long-term debt               |                                                   | 22,992                  |                         | 25,925                 
|                                                                                                                      |                                                    | Total current liabilities                         |                         | 165,295                 |                         | 173,676     
|Long-term debt, less current maturities                                                                               |                                                    | 265,029                                           |                         | 255,165                
|Other long-term liabilities                                                                                           |                                                    | 32,432                                            |                         | 33,727                 
|Stockholders' equity:                                                                                                 |                                                    |                                                   |                         |                        
|                                                                                                                      | Common stock                                       |                                                   | 1,962                   |                         | 1,962                  
|                                                                                                                      | Class B common stock                               |                                                   | 300                     |                         | 300                    
|                                                                                                                      | Additional paid-in capital                         |                                                   | 27,806                  |                         | 26,445                 
|                                                                                                                      | Retained earnings                                  |                                                   | 76,310                  |                         | 78,171                 
|                                                                                                                      | Treasury stock                                     |                                                   | (16,731)                |                         | (21,398)               
|                                                                                                                      | Accumulated other comprehensive income             |                                                   | (11,884)                |                         | (7,634)                
|                                                                                                                      |                                                    | Total stockholders' equity                        |                         | 77,763                  |                         | 77,846      
|Total liabilities and stockholders' equity                                                                            |                                                    | $ 540,519
      =======                           |                         | $ 540,414
      =======
|The accompanying notes to condensed consolidated financial statements
      are an integral part of these statements.

2

GENERAL BINDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(000 omitted, except per share data)

|                                                                                                                      |                                                                  |                     | Three months ended     | Six months ended    
|--------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------- | ---------------------- | --------------------
|                                                                                                                      |                                                                  |                     | June 30,               | June 30,            
|                                                                                                                      |                                                                  |                     | 2005                   | 2004                
|                                                                                                                      |                                                                  |                     | (Unaudited)            | (Unaudited)         
|Net sales                                                                                                             | $ 186,900                                                        | $ 174,375           | $ 367,052              | $ 345,306           
|Costs and expenses:                                                                                                   |                                                                  |                     |                        |                     
|                                                                                                                      | Product cost of sales, including development and
    engineering | 115,390             | 106,787                | 227,478             
|                                                                                                                      | Selling, service and administrative                              | 58,776              | 56,052                 | 119,388             
|                                                                                                                      | Equity in earnings from joint ventures                           | (408)               | (189)                  | (967)               
|                                                                                                                      | Interest expense                                                 | 6,912               | 6,599                  | 13,606              
|                                                                                                                      | Restructuring and other:                                         |                     |                        |                     
|                                                                                                                      |                                                                  | Restructuring       | 191                    | -                   
|                                                                                                                      |                                                                  | Other               | 1,645                  | -                   
|                                                                                                                      | Other expense, net                                               | 66                  | 583                    | 1,057               
|Income before taxes                                                                                                   | 4,328                                                            | 4,543               | 1,044                  | 5,521               
|                                                                                                                      | Income tax expense                                               | 2,754               | 1,957                  | 2,905               
|Net income (loss)                                                                                                     | $ 1,574
      =====                                              | $ 2,586
      ===== | $ (1,861)
      ====== | $ 3,036
      ===== 
|Other comprehensive income:                                                                                           |                                                                  |                     |                        |                     
|                                                                                                                      | Foreign currency translation adjustments                         | (3,108)             | (2,145)                | (5,520)             
|                                                                                                                      | Income on derivative financial instruments                       | 713                 | 744                    | 1,270               
|Comprehensive (loss) income, net of taxes                                                                             | $ (821)
      =====                                              | $ 1,185
      ===== | $ (6,111)
      ====== | $ 2,107
      ===== 
|Net income (loss) per common share (1)                                                                                |                                                                  |                     |                        |                     
|                                                                                                                      | Basic                                                            |                     | $ 0.10
      ====      | $ 0.16
      ====   
|                                                                                                                      | Diluted                                                          | $ 0.09
      ====   | $ 0.15
      ====      | $ (0.11)
      =====
|Weighted average number of common shares outstanding: (2)                                                            
|                                                                                                                      | Basic                                                            |                     | 16,501                 | 16,180              
|                                                                                                                      | Diluted                                                          | 17,410              | 16,837                 | 16,400              
|                                                                                                                     
|(1)Amounts represent per share amounts for both Common Stock and Class B
      Common Stock.                         
|(2) Weighted average shares includes both Common Stock and Class B
      Common Stock.                               
|The accompanying notes to condensed consolidated financial statements
      are an integral part of these statements.

3

GENERAL BINDING CORPORATION AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (000 omitted)

|                                                                                                                      |                                                                       |                                           |                     | Six months ended June 30,
|--------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------------- | ------------------- | -------------------------
|                                                                                                                      |                                                                       |                                           |                     | 2005                     
|                                                                                                                      |                                                                       |                                           |                     | (Unaudited)              
|Operating activities:                                                                                                 |                                                                       |                                           |                    
|Net (loss) income                                                                                                     |                                                                       | $ (1,861)                                 | $ 3,036            
|Adjustments to reconcile net (loss) income to net cash provided by                                                    |                                                                       |                                           |                    
|operating activities:                                                                                                 |                                                                       |                                           |                    
|                                                                                                                      | Depreciation                                                          |                                           | 8,105               | 9,853                    
|                                                                                                                      | Amortization                                                          |                                           | 3,163               | 2,258                    
|                                                                                                                      | Equity in earnings from joint ventures                                |                                           | (967)               | (356)                    
|                                                                                                                      | Provision for doubtful accounts and sales returns                     |                                           | 1,275               | 1,429                    
|                                                                                                                      | Provision for inventory reserves                                      |                                           | 225                 | 3,157                    
|                                                                                                                      | Decrease in non-current deferred taxes                                |                                           | (905)               | (487)                    
|                                                                                                                      | Increase in other long-term assets                                    |                                           | (4,525)             | (1,631)                  
|                                                                                                                      | Other                                                                 |                                           | 197                 | (1,195)                  
|Changes in current assets and liabilities:                                                                            |                                                                       |                                           |                    
|                                                                                                                      | Increase in receivables                                               |                                           | (5,046)             | (4,994)                  
|                                                                                                                      | Increase in inventories                                               |                                           | (5,186)             | (22,723)                 
|                                                                                                                      | Decrease (increase) in other current assets                           |                                           | 1,055               | (222)                    
|                                                                                                                      | Decrease (increase) in deferred tax assets                            |                                           | 90                  | (163)                    
|                                                                                                                      | Decrease (increase) in accounts payable and accrued
      liabilities |                                           | 1,296               | (6,812)                  
|                                                                                                                      | (Decrease) increase in income taxes payable                           |                                           | (743)               | 194                      
|                                                                                                                      |                                                                       | Net cash used in operating activities     |                     | (3,827)                  
|Investing activities:                                                                                                 |                                                                       |                                           |                    
|                                                                                                                      | Capital expenditures                                                  |                                           | (3,755)             | (3,594)                  
|                                                                                                                      | Payments for acquisitions and investments                             |                                           | (250)               | (1,304)                  
|                                                                                                                      | Proceeds from sale of plant and equipment                             |                                           | 2,989               | 185                      
|                                                                                                                      |                                                                       | Net cash used in investing activities     |                     | (1,016)                  
|Financing activities:                                                                                                 |                                                                       |                                           |                    
|                                                                                                                      | Proceeds from long-term debt-maturities greater than 90
    days      |                                           | 65,741              | 121,722                  
|                                                                                                                      | Repayments of long-term debt-maturities greater than 90
    days      |                                           | (111,474)           | (132,688)                
|                                                                                                                      | Net change in debt-maturities of 90 days or less                      |                                           | 69,837              | 26,084                   
|                                                                                                                      | Decrease (increase) in current portion of long-term debt              |                                           | (18,257)            | 651                      
|                                                                                                                      | Payments of debt issuance costs                                       |                                           | (71)                | (78)                     
|                                                                                                                      | Proceeds from the exercise of stock options                           |                                           | 3,292               | 1,345                    
|                                                                                                                      |                                                                       | Net cash provided by financing activities |                     | 9,068                    
|Effect of exchange rates on cash                                                                                      |                                                                       | 1,467                                     | 713                
|                                                                                                                      | Net increase (decrease) in cash and cash equivalents                  |                                           | 5,692               | (5,620)                  
|Cash and cash equivalents at the beginning of the year                                                                |                                                                       | 6,259                                     | 9,568              
|Cash and cash equivalents at the end of the period                                                                    |                                                                       | $ 11,951
      ======                     | $ 3,948
      =====
|Supplemental disclosure:                                                                                              |                                                                       |                                           |                    
|                                                                                                                      | Interest paid                                                         |                                           | $ 12,854            | $ 13,236                 
|                                                                                                                      | Income taxes paid                                                     |                                           | 4,468               | 2,659                    
|The accompanying notes to condensed consolidated financial statements
      are an integral part of these
statements.

4

GENERAL BINDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Unaudited)

> (1) Basis of Presentation

The condensed consolidated financial statements include the accounts of
General Binding Corporation and its subsidiaries ("GBC" or the "Company"). These
financial statements have been prepared by GBC, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. GBC believes that the disclosures
included in these condensed consolidated financial statements are adequate to
make the information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in GBC's 2004 Annual Report
on Form 10-K. In the opinion of management, all adjustments necessary to present
the financial position of GBC as of June 30, 2005 and the results of their
operations and cash flows for the six months ended June 30, 2005 and 2004 have
been included. Operating results for any interim period are not necessarily
indicative of results that may be expected for the full year.

The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of certain estimates by management in
determining the entity's assets, liabilities, revenues and expenses. Such
estimates and management judgement include the allowance for doubtful accounts
and sales returns, allowances for slow-moving and obsolete inventory, deferred
income tax valuation allowance, tax reserves, and long-lived assets. Actual
results could differ from the estimates used by management.

Certain amounts for prior periods have been reclassified to conform to the
2005 presentation.

> (2) Stock Compensation Plan

GBC has stock-based compensation plans for employees and non-employee
directors that provide for the issuance of stock options and restricted stock
units. The Company applies the recognition and measurement principles of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for these plans. In
accordance with the intrinsic value method, no compensation expense is
recognized for the Company when stock options are granted, however, the Company
does record compensation expense related to the awards of restricted stock
units.

5

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," to all stock-based compensation (000
omitted):

|                                                                                                        | Three months ended June 30,  |                               | Six months ended June 30,
|------------------------------------------------------------------------------------------------------- | ---------------------------- | ----------------------------- | -------------------------
|                                                                                                        | 2005                         | 2004                          |                          
|Net income (loss), as reported                                                                          | $ 1,574                      | $ 2,586                       |                          
|Add: Stock-based compensation expense included in reported net income,
      net of tax                 | 294                          | 160                           |                          
|Deduct: Total stock-based compensation expense determined under the
      fair value method, net of tax | (1,044)                      | (831)                         |                          
|Pro forma net (loss) income                                                                             | $ 824          
      =====  | $ 1,915          
      ===== |                          
|Earnings (loss) per share - basic                                                                       |                              |                               |                          
|As reported                                                                                             | $ 0.10          
      ====  | $ 0.16          
      ====   |                          
|Pro forma                                                                                               | $ 0.05          
      ====  | $ 0.12          
      ====   |                          
|Earnings (loss) per share - diluted                                                                     |                              |                               |                          
|As reported                                                                                             | $ 0.09          
      ====  | $ 0.15          
      ====   |                          
|Pro forma                                                                                               | $ 0.05           
      ==== | $ 1.11          
      ====   |                          

Pro forma compensation expense for stock options was calculated using the
Black-Scholes model, with the following weighted-average assumptions for grants
in 2005 and 2004 respectively: expected life of ten years for 2005 and 2004;
expected volatility of 67% and 59%; and risk-free interest rates of 4.25% and
4.42%. The weighted-average fair values of stock options granted during the
periods were $10.06 and $11.98 in 2005 and 2004, respectively. The nominal
vesting period approach was used. Applying the non-substantive vesting period
approach upon the adoption of SFAS No. 123 R, "Accounting for stock-based
compensation," will not have a material impact. See further discussion in Note
8.

> (3) Borrowings

GBC has two financing arrangements that provide the Company with the majority
of its debt capacity. A significant portion of GBC's long-term funding has been
provided through its primary senior credit facility (the "Primary Facility"). As
of June 30, 2005, the Primary Facility was comprised of a $72.5 million
multi-currency revolving credit facility and term loans totaling $96.4 million.
Outstanding borrowings under the Primary Facility at June 30, 2005 included
$96.4 million for the term loans and $26.0 million under the revolving credit
facility. In addition, there were outstanding letters of credit of $11.9
million, which further reduce GBC's availability under the revolving credit
facility. GBC's other major financing arrangement is a multi-currency revolving
credit facility in the Netherlands ("the Netherlands Facility") with total
availability of approximately $18 million. As of June 30, 2005, the Netherlands
Facility had no outstanding borrowings. GBC also has a mortgage financing
arrangement under which its real estate holdings in Northbrook, Illinois and its
real estate and equipment holdings in Addison, Illinois are pledged as
collateral ("Mortgage Financing"). During the first quarter of 2005, GBC sold
its real estate holdings in Skokie, Illinois, which previously had also been
pledged as collateral under the Mortgage Financing. Approximately

6

$1.9 million
of the proceeds from sale were used to prepay the Mortgage Financing. As of June
30, 2005, outstanding borrowings under the Mortgage Financing were $8.0 million.

Interest rates on the Primary Facility are variable and, during 2005, were
set at LIBOR plus 3.5% for borrowings under the $72.5 million multi-currency
revolving credit line, and LIBOR plus 4.50% for the term loans. 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.

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, multi-currency revolving credit line
borrowings are subject to a "borrowing base" which is based upon certain
formulas tied to GBC's trade receivables and inventory. With the exception of
certain domestic assets (primarily property, plant and equipment) pledged under
a Mortgage Financing, substantially all of the assets of General Binding
Corporation and its domestic subsidiaries, as well as a portion of the equity in
certain foreign subsidiaries are pledged as collateral under the Primary
Facility.

In January 2005, the Company entered into an amendment to the Primary
Facility. The amendment, among other things, modifies certain financial
covenants related to Total Leverage and Senior Leverage, as those terms are
defined in the Primary Facility, to make them less restrictive. The
modifications also provided for the planned disposition of certain real
property. The Company was in compliance with the financial covenants of the
Primary Facility both before and after the amendment.

As of and for the six months ended June 30, 2005, the Company was in
compliance with all financial covenants.

7

Long-term debt consisted of the following at June 30, 2005 and December 31,
2004 (000 omitted):

> June 30,
>     December 31,2005
>     2004Credit FacilitiesU.S. Dollar borrowings - Term loan -
>       (weighted average floating 
>       interest rate of 7.59% at June 30, 2005 and 6.70% at
>       December 31, 2004)
>     $ 96,448
>     $ 112,000U.S. Dollar borrowings - Revolving Credit Agreement -
>       (weighted average floating 
>       interest rate of  7.09% at June 30,
>     2005)
>     26,000
>     -Industrial Development Bonddue March 2026 - (floating interest rate of 2.36%
>       at June 30, 2005 and 2.06% at December 31, 2004)
>     6,840
>     6,840Notes PayableSenior Subordinated Notes, U.S.
>       Dollar borrowing, due 2008 -
>        (fixed    interest rate of 9.375%)
>     150,000
>     150,000Notes Payable (Mortgage Financing), U.S.
>       Dollar borrowing, due monthly August 2003 to July 2008
>       - (fixed interest rate of 6.62%)
>     7,999
>     11,133Other borrowings
>     7,057
>     8,905Total debt
>     294,344
>     288,878Less-current maturities
>     (29,315)
>     (33,713)Total Long-term debt
>     $ 265,029 
>       =======
>     $ 255,165 
>       =======(4

GBC's Certificate of Incorporation provides for 40,000,000 authorized shares
of Common Stock, $0.125 par value per share, and 4,796,550 shares of Class B
Common Stock, $0.125 par value per share. Each Class B share is entitled to 15
votes and is to be automatically converted into one share of common stock upon
transfer thereof. All of the Class B shares are owned by Lane Industries, Inc.,
GBC's majority stockholder.

The recorded value of GBC shares held by the Company (treasury stock)
decreased during the period by $4.7 million as 408,304 shares were issued to
employees and directors related to restricted stock units and stock options
previously granted under the Company's stock compensation plans were
exercised.

8

The following table illustrates the computation of basic and diluted earnings
per share (000 omitted except per share data):

> Three months ended June 30,
>     Six months ended June 30,2005
>     2004
>     2005
>     2004Numerator:Net income available to common shareholders
>     $ 1,574        
>       =====
>     $ 2,586       
>       =====
>     $ (1,861)     
>       ======
>     $ 3,036       
>       =====Denominator:Denominator for basic earnings per share -
>       Weighted average number of common Shares outstanding  (1)
>     16,501
>     16,180
>     16,400
>     16,143Effect of dilutive securities:Employee stock options (3)
>     754
>     407
>     -
>     503Restricted stock units (3)
>     155
>     250
>     -
>     241Denominator for diluted earnings per share -
>       Adjusted weighted-average shares (1)
>       And assumed conversions
>     17,410       
>       =====
>     16,837       
>       =====
>     16,400      
>       =====
>     16,887       
>       =====Earnings (loss) per share - basic (2)
>     $0.10       
>       ====
>     $ 0.16       
>       ====
>     $ (0.11)     
>          =====
>     $ 0.19       
>       ====Earnings (loss) per share - diluted (2)
>     $0.09       
>       ====
>     $ 0.15       
>       ====
>     $ (0.11)     
>       =====
>     $ 0.18       
>       ====(1) Weighted average shares includes both Common Stock and Class B Common
>   Stock.
>   (2)Amounts represent per share amounts for both Common Stock and Class B
> Common Stock.
> (3) For the six months ended June 30, 2005 and 2004, GBC had 791,812 and
> 744,185 dilutive shares outstanding, respectively. These dilutive shares are
> related to stock options and restricted stock units that were granted under the
> Company's stock compensation plans. Potentially dilutive shares were not
> included for the six months ended June 30, 2005 diluted earnings per share
> calculation as they would have been anti-dilutive.

(5) Restructuring and Other

During the first six months of 2005, GBC recorded restructuring charges of
$1.3 million, which consisted of $0.6 million in lease costs related to exiting
a facility in the UK and $0.7 million related to workforce reductions in several
European locations. Approximately 48 employees were severed as a result of these
actions.

During the first six months of 2004, GBC recorded restructuring charges of
$0.8 million related to workforce reduction programs which were announced in
2003.

The components of the restructuring expenses are as follows (000 omitted):

> Three months ended June 30,
>     Six months ended June
>       30,2005
>     2004
>     2005
>     2004Severance and early retirement benefits
>     $ 252
>     $ -
>     $ 655
>     $ 823Lease costs
>     (61)
>     -
>     639
>     -Total restructuring expenses
>     $ 191
>       ====
>     $ -
>       ==
>     $ 1,294
>       =====
>     $ 823
>       ====9
> Changes in the restructuring reserve for the six months ended June 30, 2005
> were as follows (000 omitted):

> Severance
>     Other Exit Costs
>     LeaseCosts
>     TotalBalance at December 31, 2004
>     $ 927
>     $ 99
>     $ 1,856
>     $ 2,882Activities during the period:Provisions
>     655
>     -
>     639
>     1,294Cash charges
>     (799)
>     -
>     (159)
>     (958)Non-cash charges
>     (85)
>     (6)
>     (31)
>     (122)Balance at June 30, 2005(1)
>     $ 698
>       ====
>     $ 93
>       ===
>     $ 2,305
>       =====
>     $ 3,096
>       =====(1) The restructuring reserve at June 30, 2005 consisted of $1.5 million
> related to current items reported in the balance sheet as a separate item and
> $1.6 million related to long-term lease agreement costs reported in the
> balance sheet as a component of other long-term
> liabilities.

Management believes that the restructuring provisions recorded will be
adequate to cover estimated restructuring costs that will be paid in future
periods. Management expects that the remaining balance of the liability for
severance and asset impairment and other exit costs will be paid in 2005. Lease
costs (lease payments in excess of the sublease income) average approximately
$0.3 million annually until the last lease terminates in 2013. The balance in
the restructuring reserve at June 30, 2005 is primarily related to severance and
lease costs.

During the first six months of 2005, GBC recorded other charges of $4.2
million. These expenses were primarily professional fees incurred in connection
with the pending merger with ACCO World Corporation ("ACCO"), which are not
contingent upon completion of the transaction. See Note (12) for further
discussion regarding the pending merger with ACCO.

(6) Retirement Plans and Post-Retirement Benefits

The following table summarizes the components of net periodic pension costs
for the Company's retirement plans (000 omitted):

|                              |                    | Three months
      ended
|----------------------------- | ------------------ | ------------------------
|                              |                    | June 30,
      2005     
|                              |                    | Domestic                
|Service cost                  | $ 91               |                         
|Interest cost                 | 17                 |                         
|Expected return on            |                    |                         
|                              | plan assets        | -                       
|Amortization of unrecognized: |                    |                         
|                              | Recognized losses  | 3                       
|                              | Prior service cost | -                       
|                              | Total              | $ 111
      ====        
|Company contributions         | $ -
      ==       |                         



10

|                              |                    | Six months ended   
|----------------------------- | ------------------ | -------------------
|                              |                    | June 30,
      2005
|                              |                    | Domestic           
|Service cost                  | $ 178              |                    
|Interest cost                 | 34                 |                    
|Expected return on            |                    |                    
|                              | plan assets        | -                  
|Amortization of unrecognized: |                    |                    
|                              | Recognized losses  | 5                  
|                              | Prior service cost | -                  
|                              | Total              | $ 217
      ====   
|Company contributions         | $ -
      ==       |                    

The Company expects to contribute a total of $2.7 million to its pension
plans in 2005.

The following summarizes the components of net periodic post-retirement
benefit costs (000 omitted):

|                              |                            | Three months ended |       | Six months ended
|----------------------------- | -------------------------- | ------------------ | ----- | ----------------
|                              |                            | June 30,           |       | June 30,        
|                              |                            | 2005               |       | 2004            
|Service cost                  | $ 156                      |                    | $ 218 |                 
|Interest cost                 | 93                         |                    | 160   |                 
|Amortization of unrecognized: |                            |                    |       |                 
|                              | Net transaction obligation | -                  |       | 11              
|                              | Prior service cost         | (19)               |       | -               
|                              | Recognized losses          | -                  |       | 61              
|                              | Total                      | $ 230
      ====   |       | $ 450
      ====

(7) Business Segments and Foreign Operations

GBC is engaged in the design, manufacture and distribution of office
equipment, related supplies and laminating equipment and supplies. The Company
has three primary business groups: a) Commercial and Consumer Group ("CCG"); b)
Industrial and Print Finishing Group ("IPFG"); and c) Europe.

CCG's revenues are primarily derived from the sale of 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 through both indirect channels (resellers, including office product
superstores, contract/commercial stationers, wholesalers, mail order companies,
mass marketers and other dealers) and direct channels (salespersons,
telemarketers, internet portals, etc.). The Group's products and services are
sold to customers which include the home markets and office markets, commercial
reprographic centers, educational and training markets, and government agencies
throughout North and South America and the Asia/Pacific region. The Europe Group
distributes many of the

IPFG's revenues are primarily derived through sales of thermal and pressure
sensitive films, mid-range and commercial high-speed laminators and large-format
digital print laminators.

11

The

Expenses incurred by the three reportable segments described above relate to
costs incurred to manufacture or purchase products, as well as some selling,
general and administrative costs. For internal management purposes and the
presentation below, operating income is calculated as net sales (i) less cost of
sales, (ii) less selling, service and administrative expenses, (iii) plus equity
in the earnings or losses of joint ventures.

GBC does not separately identify (i) restructuring and other expenses, (ii)
interest expense, or (iii) income taxes for its operating segments.
Additionally, certain expenses of a corporate nature and certain shared service
expenses are not allocated to the business groups. Sales between business groups
are recorded at cost for domestic business units, and cost plus a normal profit
margin for sales between domestic and international business units. GBC's
business groups record expenses for certain services provided and expense
allocations; however, the charges and allocations between business groups are
not significant.

Segment data is provided below for the three and six months ended June 30,
2005 and 2004 (000 omitted):

|                                     |           | Unaffiliated
      Customer Sales
|------------------------------------ | --------- | ---------------------------------
|                                     |           | Three months ended June 30 ,     
|                                     |           | 2005                             
|Commercial and Consumer Group        | $ 117,511 |                                  
|Industrial and Print Finishing Group | 42,067    |                                  
|Europe                               | 27,322    |                                  
|                                     | Total     | $ 186,900
      =======          



|                                     |          | Segment Operating Income         
|------------------------------------ | -------- | ---------------------------------
|                                     |          | Three months ended June
      30,
|                                     |          | 2005                             
|Commercial and Consumer Group        | $ 11,647 |                                  
|Industrial and Print Finishing Group | 5,699    |                                  
|Europe                               | 2,099    |                                  
|Unallocated corporate items          | (6,303)  |                                  
|                                     | Total    | $ 13,142
      ======            

Affiliated Customer
      SalesThree months ended June 30,
    
    Six months ended June 30,2005
    
    2004
    
    2005
    
    2004Commercial and Consumer Group
    $ 2,014
    
    $ 2,805
    
    $ 4,455
    
    $ 4,529Industrial and Print Finishing Group
    6,331
    
    5,716
    
    12,919
    
    11,997Europe
    1,680
    
    2,753
    
    4,549
    
    6,103Eliminations
    (10,025)
    
    (11,274)
    
    (21,923)
    
    (22,629)Total
    $ -
      ==
    
    $- 
      ==
    
    $ -
      ==
    
    $ -
      ==


12

|                                     |           | Total Segment
      Assets
|------------------------------------ | --------- | --------------------------
|                                     |           | June 30,2005              
|Commercial and Consumer Group        | $ 350,422 |                           
|Industrial and Print Finishing Group | 77,432    |                           
|Europe                               | 59,253    |                           
|Unallocated corporate items          | 53,412    |                           
|                                     | Total     | $ 540,519
      =======   

The following is a reconciliation of segment operating income to income
before taxes (000 omitted):

|                                 |                     | Three months ended June 30, |                     | Six months ended June
      30,
|-------------------------------- | ------------------- | --------------------------- | ------------------- | -------------------------------
|                                 |                     | 2005                        |                     | 2004                           
|Total segment operating income   | $ 13,142            |                             | $ 11,725            |                                
|Interest expense                 | (6,912)             |                             | (6,599)             |                                
|Restructuring and other expenses | (1,836)             |                             | -                   |                                
|Other expense                    | (66)                |                             | (583)               |                                
|Income before taxes              | $ 4,328
      ===== |                             | $ 4,543
      ===== |                                

GBC's products are sold primarily in North America, Latin America, Europe,
Japan and Australia to office product resellers and directly to end-users in the
business, education, commercial/professional and government markets. GBC has a
large base of customers; however, the loss of, or major reduction in business,
or failure to collect receivables from one or more of GBC's major customers
could have a material adverse effect on GBC's financial position or results of
operations.

Financial information for the three and six months ended June 30, 2005 and
2004, by geographical area is summarized below (000 omitted):

|                    | Unaffiliated Customer
      Sales |  | Total Long-lived
      Assets
|------------------- | --------------------------------- |  | -----------------------------
|                    | Three months ended June 30,       |  | Six months ended June 30,    
|                    | 2005                              |  | 2004                         
|US                  | $ 109,535                         |  | $ 104,242                    
|Europe              | 41,619                            |  | 39,677                       
|Other International | 35,746                            |  | 30,456                       
|                    | $ 186,900
      =======           |  | $ 174,375
      =======      

(8) New Accounting Standards

In December 2004, the FASB issued a revision to SFAS No. 123, "Share Based
Payment" ("SFAS No. 123 (R)"). This statement requires companies to recognize
the cost of employee services received in exchange for an award of equity
instruments. Prior to the revision to SFAS No. 123, companies had an alternative
to either recognize the cost of employee services based upon fair value at the
grant date, or to use the intrinsic value method of accounting under APB No. 25.
GBC currently accounts for stock options in accordance with APB No. 25 under
which stock options issued to employees generally result in no compensation
expense. GBC's adoption of SFAS No. 123 (R) will result in compensation expense
related to stock options issued to employees. In April 2005, the SEC approved a
new

13

rule which defers the implementation date of SFAS No. 123 (R). The new rule
allows adoption for annual, rather than interim periods that begin after June
15, 2005. The Company is in the process of evaluating the impact of SFAS No. 123
(R), and will adopt it in the first quarter of 2006. See Note 2 to the condensed
consolidated financial statements for pro-forma disclosure information related
to stock compensation expense.

In December 2004, the FASB issued FASB Staff Position No. FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004 ("AJCA")." The AJCA,
enacted in October 2004, introduces a temporary 85% dividends received deduction
on the repatriation of certain foreign earnings of a U.S. taxpayer, provided
certain criteria are met. FAS 109-2 provides accounting and disclosure guidance
for the repatriation provision. It allows companies time beyond the financial
reporting period of enactment to evaluate the effect of the AJCA on unremitted
earnings of foreign subsidiaries for the purpose of applying the "indefinite
reversal criterion" under APB Opinion No. 23, "Accounting for Income Taxes -
Special Areas." Due to the Company's pending merger with ACCO, GBC has not
decided on whether, and to what extent, it might repatriate unremitted foreign
earnings under the provision. See Note 11 to the Condensed Consolidated
Financial Statements for further discussion.

(9) Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, GBC tests its goodwill balances to determine
whether these assets are impaired. The annual impairment test is performed as of
January 1. In 2005, it was determined that the Company's goodwill balances were
not impaired.

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 June 30, 2005, there have been no
events or circumstances which would warrant a revision to the remaining useful
lives of these assets.

GBC's other intangible assets as of June 30, 2005 and December 31, 2004 are
summarized below (000 omitted):

|                                      | Gross Carrying Amount at | Accumulated Amortization at
|------------------------------------- | ------------------------ | ---------------------------
|                                      | June 30,                 | December 31,               
|                                      | 2005                     | 2004                       
|Customer agreements and relationships | $ 5,767                  | $ 5,767                    
|Patents                               | 1,544                    | 1,544                      
|Total                                 | $ 7,311
      =====      | $ 7,311
      =====        

14

Expected amortization expense related to GBC's other intangible assets is
summarized below (000 omitted):

|Fiscal year ended December 31, | AmortizationExpense
|------------------------------ | -------------------
|2005                           | $ 527              
|2006                           | 458                
|2007                           | 458                
|2008                           | 75                 

> (10) Summarized Financial Information - Joint Ventures (unaudited)

Summarized financial information for GBC's joint ventures, which are
accounted for under the equity method of accounting, is as follows (000s
omitted):

|                             |          | Three months ended June 30, |          | Six months ended June 30,
|---------------------------- | -------- | --------------------------- | -------- | -------------------------
|                             |          | 2005                        |          | 2004                     
|Income statement information |          |                             |          |                          
|Net sales                    | $ 47,124 |                             | $ 37,313 |                          
|Gross profit                 | 16,390   |                             | 13,044   |                          
|Net income                   | 985      |                             | 244      |                          



|                          | June 30, | December 31,
|------------------------- | -------- | ------------
|                          | 2005     | 2004        
|Balance sheet information |          |             
|Current assets            | $ 91,891 | $ 63,646    
|Non-current assets        | 54,318   | 37,810      
|Current liabilities       | 81,754   | 53,828      
|Non-current liabilities   | 31,228   | 21,943      

The summarized financial information is presented as of and for the end of
the second fiscal quarter for GMP and Pelikan Quartet; both of these entities
have a September 30 fiscal year end. Information for the Neschen GBC Graphic
Films joint venture is as of and for the periods ended June 30, which has a
December 31 fiscal year end.

During the quarter, the Company's Pelikan Quartet joint venture, of which GBC
owns 50%, purchased 80% of the Australian company Geoff Penney (Australia) Pty
Ltd. GBC's share of Geoff Penney's income since the acquisition is reflected in
the results of Pelikan Quartet above. Geoff Penney's net sales for its fiscal
year June 30, 2004 were approximately $37.4 million; net income for the same
period was approximately $4.5 million.

> (11) Income Taxes

Income tax expense in the first six months of 2005 was $2.9 million on
pre-tax income of $1.0 million. The company recorded a minimal tax benefit for
the pre-tax charge of $4.2 million related to the pending merger with ACCO
because the majority of the amount is not deductible for U.S. tax purposes (see
section below titled "Pending Merger with ACCO" for further discussion.) The
Company only recognized a tax benefit of $0.1 million for the $1.3 million
pre-tax restructuring charges due to the Company's tax position in the
jurisdictions where the charges were incurred.

15

On October 22, 2004, President Bush signed the American Jobs Creation Act of
2004 (the "Act"). The Act creates a temporary incentive for U.S. corporations to
repatriate accumulated income earned abroad by providing an 85% dividends
received deduction for certain dividends from controlled foreign corporations. 
The deduction is subject to a number of limitations. Due to the Company's pending merger
with ACCO, GBC has not yet decided on whether, and to what extent, it might
repatriate foreign earnings that have not yet been remitted to the U.S. Based on
the Company's analysis to date, the range of reasonably possible amounts that
GBC may repatriate is between zero and $69 million (of which $44 million
currently is considered permanently reinvested). GBC estimates that the
related potential range of additional income tax liability is from zero to $1.4
million, based upon current legislation. Also, the amount of additional income
tax expense resulting from repatriation of foreign earnings under the provision would be
reduced by the part of the eligible dividend that is attributable to foreign
earnings on which a deferred tax liability had been previously
accrued.

> (12) Pending Merger with ACCO

On March 16, 2005, GBC, along with Fortune Brands, Inc. ("Fortune"),
announced an agreement for Fortune to spin-off its ACCO World Corporation office
products unit ("ACCO") to Fortune's stockholders to be followed immediately by
the merger of a subsidiary of ACCO with and into GBC. The merger is expected to
be completed some time during the third quarter of 2005.

Subsequent to the filing of the Company's most recent report on Form 10Q
dated May 10, 2005, GBC and Fortune further announced that: a) the waiting
period for the U.S. Federal Trade Commission to review the transaction, required
under the Hart-Scott-Rodino-Antitrusts Improvements Act has expired, b) the
registration statement relating to the issuance of ACCO Brands common stock to
GBC stockholders was declared effective by the Securities and Exchange
Commission on July 15, 2005; which contains the proxy statement/prospectus -
information statement that describes the proposed merger, merger agreement and
the related issuance of ACCO Brands common stock, c) GBC will hold a special
meeting of its stockholders on August 15, 2005 to vote on the proposed merger,
and GBC's majority stockholder, Lane Industries, Inc., has agreed to vote for
the merger, and d) the transaction is expected to close shortly following the
GBC stockholder meeting. During the first six months of 2005, GBC reported $4.2
million in other expenses, consisting primarily of professional fees, which have
been incurred in connection with the pending merger.

> (13) Condensed Consolidating Financial Information

During 1998, GBC issued $150 million of 9.375% Senior Subordinated Notes
which are due in 2008. Each of GBC's domestic restricted subsidiaries has
jointly and severally, fully and unconditionally guaranteed the Senior
Subordinated Notes. Rather than filing separate financial statements for each
guarantor subsidiary with the Securities and Exchange Commission, GBC has
elected to present the following consolidating financial statements which detail
the results of operations, financial position and cash flows of the Parent,
Guarantors, and Non-Guarantors (in each case carrying investments under the
equity method), and the eliminations necessary to arrive at the information for
GBC on a

16

consolidated basis.



17

Consolidating Balance Sheets (000 omitted)

|                                           |                                      |                            | June 30, 2005          
|------------------------------------------ | ------------------------------------ | -------------------------- | -----------------------
|                                           |                                      |                            | Parent                 
|Assets                                     |                                      |                            |                        
|Current assets:                            |                                      |                            |                        
|                                           | Cash and cash equivalents            | $ 298                      | $ -                    
|                                           | Receivables, net                     | 74,848                     | -                      
|                                           | Inventories, net                     | 60,269                     | 788                    
|                                           | Deferred tax assets                  | 12,622                     | (3,239)                
|                                           | Other                                | 4,394                      | -                      
|                                           | Due from affiliates                  | -                          | 57,013                 
|                                           |                                      | Total current assets       | 152,431                
|Net capital assets                         | 43,723                               | 5,488                      | 25,754                 
|Goodwill and other intangibles, net of     |                                      |                            |                        
|                                           | accumulated amortization             | 119,636                    | 22,394                 
|Other                                      |                                      | 24,026                     | 6,125                  
|Investment in subsidiaries                 | 176,959                              | 163,149                    | -                      
|                                           | Total assets                         | $ 516,775
      =======    | $ 251,718
      =======
|                                           |                                      |                            |                        
|Liabilities and Stockholders' Equity       |                                      |                            |                        
|Current liabilities:                       |                                      |                            |                        
|                                           | Accounts payable                     | $ 31,188                   | $ 999                  
|                                           | Accrued liabilities                  | 53,383                     | 852                    
|                                           | Notes payable                        | -                          | -                      
|                                           | Current maturities of long-term debt | 22,918                     | -                      
|                                           | Due to affiliates                    | 47,069                     | -                      
|                                           |                                      | Total current liabilities  | 154,558                
|Long-term debt - affiliated                | -                                    | -                          | 555                    
|Long-term debt, less current maturities    | 264,369                              | -                          | 660                    
|Other long-term liabilities                | 20,085                               | 72                         | 12,275                 
|Stockholders' equity:                      |                                      |                            |                        
|                                           | Common Stock                         | 1,962                      | -                      
|                                           | Class B Common Stock                 | 300                        | -                      
|                                           | Additional paid-in capital           | 27,806                     | 101,210                
|                                           | Retained earnings                    | 76,310                     | 141,770                
|                                           | Treasury stock                       | (16,731)                   | -                      
|                                           | Accumulated other comprehensive      |                            |                        
|                                           | income                               | (11,884)                   | 6,815                  
|                                           |                                      | Total stockholders' equity | 77,763                 
|Total liabilities and stockholders' equity | $ 516,775
      =======              | $ 251,718
      =======    | $ 212,411
      =======

18

Consolidating Balance Sheets (000 omitted)

|                                           |                                      |                            | December 31, 2004      
|------------------------------------------ | ------------------------------------ | -------------------------- | -----------------------
|                                           |                                      |                            | Parent                 
|Assets                                     |                                      |                            |                        
|Current assets:                            |                                      |                            |                        
|                                           | Cash and cash equivalents            | $ 556                      | $ 1                    
|                                           | Receivables, net                     | 71,593                     | -                      
|                                           | Inventories, net                     | 60,035                     | 387                    
|                                           | Deferred tax assets                  | 13,228                     | (3,161)                
|                                           | Other                                | 4,678                      | -                      
|                                           | Due from affiliates                  | -                          | 51,877                 
|                                           |                                      | Total current assets       | 150,090                
|Net capital assets                         | 49,737                               | 5,980                      | 28,976                 
|Goodwill and other intangibles, net of     |                                      |                            |                        
|                                           | accumulated amortization             | 119,900                    | 22,394                 
|Other                                      |                                      | 11,811                     | 10,390                 
|Investment in subsidiaries                 | 177,359                              | 165,427                    | -                      
|                                           | Total assets                         | $ 508,897
      =======    | $ 253,295
      =======
|                                           |                                      |                            |                        
|Liabilities and Stockholders' Equity       |                                      |                            |                        
|Current liabilities:                       |                                      |                            |                        
|                                           | Accounts payable                     | $ 30,624                   | $ 878                  
|                                           | Accrued liabilities                  | 53,031                     | 486                    
|                                           | Notes payable                        | -                          | -                      
|                                           | Current maturities of long-term debt | 25,547                     | -                      
|                                           | Due to affiliates                    | 48,077                     | -                      
|                                           |                                      | Total current liabilities  | 157,279                
|Long-term debt - affiliated                | 71                                   | -                          | 595                    
|Long-term debt, less current maturities    | 254,426                              | -                          | 739                    
|Other long-term liabilities                | 19,275                               | 174                        | 11,364                 
|Deferred tax liabilities                   | -                                    | -                          | 2,914                  
|Stockholders' equity:                      |                                      |                            |                        
|                                           | Common Stock                         | 1,962                      | -                      
|                                           | Class B Common Stock                 | 300                        | -                      
|                                           | Additional paid-in capital           | 26,445                     | 95,470                 
|                                           | Retained earnings                    | 78,171                     | 139,360                
|                                           | Treasury stock                       | (21,398)                   | -                      
|                                           | Accumulated other comprehensive      |                            |                        
|                                           | income                               | (7,634)                    | 16,927                 
|                                           |                                      | Total stockholders' equity | 77,846                 
|Total liabilities and stockholders' equity | $ 508,897
      =======              | $ 253,295
      =======    | $ 220,438
      =======

19

Consolidating Income Statements (000
omitted)

|                                                |                                                |                     | Three months ended June 30, 2005
|----------------------------------------------- | ---------------------------------------------- | ------------------- | --------------------------------
|                                                |                                                |                     | Parent                          
|Unaffiliated sales                              | $ 109,537                                      | $ -                 | $ 77,363                        
|Affiliated sales                                | 11,100                                         | -                   | 7,573                           
|                                                | Net sales                                      | 120,637             | -                               
|                                                | Cost of sales, including development and       |                     |                                 
|                                                | engineering                                    | 80,797              | 31                              
|                                                | Selling, service and administrative            | 35,304              | -                               
|                                                | Equity in earnings from joint ventures         | 195                 | -                               
|                                                | Restructuring and other                        | 1,646               | -                               
|                                                | Interest expense                               | 6,722               | -                               
|                                                | Other (Income) expense                         | (912)               | (90)                            
|                                                | (Loss) income before taxes and undistributed   |                     |                                 
|                                                | earnings of wholly owned subsidiaries          | (3,115)             | 59                              
|Income (benefits) taxes                         | (960)                                          | 34                  | 3,680                           
|                                                | (Loss) income before undistributed earnings of |                     |                                 
|                                                | wholly owned subsidiaries                      | (2,155)             | 25                              
|Undistributed earnings (losses) of wholly-owned |                                                |                     |                                 
|                                                | subsidiaries                                   | 3,729               | (217)                           
|Net income (loss)                               | $ 1,574
      =====                            | $ (192)
      ===== | $ 3,704
      =====             



|                                                |                                                |                     | Three months ended June 30, 2004
|----------------------------------------------- | ---------------------------------------------- | ------------------- | --------------------------------
|                                                |                                                |                     | Parent                          
|Unaffiliated sales                              | $ 104,242                                      | $ -                 | $ 70,133                        
|Affiliated sales                                | 11,432                                         | -                   | 8,837                           
|                                                | Net sales                                      | 115,674             | -                               
|                                                | Cost of sales, including development and       |                     |                                 
|                                                | engineering                                    | 76,984              | (56)                            
|                                                | Selling, service and administrative            | 34,605              | -                               
|                                                | Equity in earnings from joint ventures         | 359                 | -                               
|                                                | Restructuring and other                        | (107)               | -                               
|                                                | Interest expense                               | 6,438               | 7                               
|                                                | Other (Income) expense                         | (870)               | (128)                           
|                                                | (Loss) income before taxes and undistributed   |                     |                                 
|                                                | earnings of wholly owned subsidiaries          | (1,735)             | 177                             
|Income (benefits) taxes                         | (351)                                          | 68                  | 2,240                           
|                                                | (Loss) income before undistributed earnings of |                     |                                 
|                                                | wholly owned subsidiaries                      | (1,384)             | 109                             
|Undistributed earnings (losses) of wholly-owned |                                                |                     |                                 
|                                                | subsidiaries                                   | 3,970               | 4,683                           
|Net income (loss)                               | $ 2,586
      =====                            | $ 4,792
      ===== | $ 3,861
      =====             

20

Consolidating Income Statements

|                                                |                                                |                     | Six months ended June 30, 2005
|----------------------------------------------- | ---------------------------------------------- | ------------------- | ------------------------------
|                                                |                                                |                     | Parent                        
|Unaffiliated sales                              | $ 211,100                                      | $ -                 | $ 155,952                     
|Affiliated sales                                | 23,561                                         | -                   | 16,886                        
|                                                | Net sales                                      | 234,661             | -                             
|                                                | Cost of sales, including development and       |                     |                               
|                                                | engineering                                    | 157,654             | 175                           
|                                                | Selling, service and administrative            | 71,874              | -                             
|                                                | Equity in earnings from joint ventures         | 116                 | -                             
|                                                | Restructuring and other                        | 4,247               | -                             
|                                                | Interest expense                               | 13,253              | 1                             
|                                                | Other (Income) expense                         | (1,362)             | (413)                         
|                                                | (Loss) income before taxes and undistributed   |                     |                               
|                                                | earnings of wholly owned subsidiaries          | (11,121)            | 237                           
|Income (benefits) taxes                         | (2,934)                                        | 114                 | 5,725                         
|                                                | (Loss) income before undistributed earnings of |                     |                               
|                                                | wholly owned subsidiaries                      | (8,187)             | 123                           
|Undistributed earnings (losses) of wholly-owned |                                                |                     |                               
|                                                | subsidiaries                                   | 6,326               | 2,095                         
|Net (loss) income                               | $ (1,861)
      ======                         | $ 2,218
      ===== | $ 6,203
      =====           



|                                                |                                                |                     | Six months ended June 30, 2004
|----------------------------------------------- | ---------------------------------------------- | ------------------- | ------------------------------
|                                                |                                                |                     | Parent                        
|Unaffiliated sales                              | $ 202,328                                      | $ -                 | $ 142,978                     
|Affiliated sales                                | 22,518                                         | -                   | 16,571                        
|                                                | Net sales                                      | 224,846             | -                             
|                                                | Cost of sales, including development and       |                     |                               
|                                                | engineering                                    | 150,729             | (37)                          
|                                                | Selling, service and administrative            | 68,711              | -                             
|                                                | Equity in earnings from joint ventures         | 529                 |                               
|                                                | Restructuring and other                        | 234                 | -                             
|                                                | Interest expense                               | 12,907              | 12                            
|                                                | Other (Income) expense                         | (1,765)             | (278)                         
|                                                | (Loss) income before taxes and undistributed   |                     |                               
|                                                | earnings of wholly owned subsidiaries          | (6,499)             | 303                           
|Income (benefits) taxes                         | (2,924)                                        | 136                 | 5,273                         
|                                                | (Loss) income before undistributed earnings of |                     |                               
|                                                | wholly owned subsidiaries                      | (3,575)             | 167                           
|Undistributed earnings (losses) of wholly-owned |                                                |                     |                               
|                                                | subsidiaries                                   | 6,611               | 8,015                         
|Net income (loss)                               | $ 3,036
      =====                            | $ 8,182
      ===== | $ 6,444
      =====           

21



Consolidating Statement of Cash Flows (000
omitted)

|                                                    |                                                |                                           | Six months ended June 30, 2005
|--------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------------------------------
|                                                    |                                                |                                           | Parent                        
|Net cash (used in) provided by operating activities | $ (11,359)                                     | $ 54                                      | $ 7,478                       
|Investing activities:                               |                                                |                                           |                               
|                                                    | Capital expenditures                           | (1,990)                                   | (55)                          
|                                                    | Payments of acquisitions and investments       | (250)                                     | -                             
|                                                    | Proceeds from sale of plant and equipment      | 2,765                                     | -                             
|                                                    |                                                | Net cash used in investing activities     | 525                           
|Financing activities:                               |                                                |                                           |                               
|                                                    | Increase (decrease) in intercompany borrowings | 40                                        | -                             
|                                                    | Proceeds of long-term debt-                    |                                           |                               
|                                                    |                                                | maturities greater than 90 days           | 64,448                        
|                                                    | Repayments of long-term debt-                  |                                           |                               
|                                                    |                                                | maturities greater than 90 days           | (110,345)                     
|                                                    | Net change in borrowings-maturities            |                                           |                               
|                                                    |                                                | of 90 days or less                        | 70,000                        
|                                                    | Increase in current portion of                 |                                           |                               
|                                                    |                                                | long-term obligations                     | (16,788)                      
|                                                    | Payments of debt issuance costs                | (71)                                      | -                             
|                                                    | Proceeds from the exercise of stock options    | 3,292                                     | -                             
|                                                    |                                                | Net cash provided by financing activities | 10,576                        
|Effect of exchange rates on cash                    | -                                              | -                                         | 1,467                         
|Net decrease in cash & cash equivalents             | (258)                                          | (1)                                       | 5,951                         
|Cash and cash equivalents at the beginning of       |                                                |                                           |                               
|                                                    | the year                                       | 556                                       | 1                             
|Cash and cash equivalents at the end of the period  | $ 298
      ====                               | $ -
      ==                              | $ 11,653
      ======         



|                                                    |                                                |                                           | Six months ended June 30, 2004
|--------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------------------------------
|                                                    |                                                |                                           | Parent                        
|Net cash (used in) provided by operating activities | $ (6,807)                                      | $ 266                                     | $ (12,115)                    
|Investing activities:                               |                                                |                                           |                               
|                                                    | Capital expenditures                           | (2,234)                                   | (273)                         
|                                                    | Payments of acquisitions and investments       | (1,304)                                   | -                             
|                                                    | Proceeds from sale of plant and equipment      | 185                                       | -                             
|                                                    |                                                | Net cash used in investing activities     | (3,353)                       
|Financing activities:                               |                                                |                                           |                               
|                                                    | (Decrease) increase in intercompany borrowings | (351)                                     | -                             
|                                                    | Proceeds of long-term debt-                    |                                           |                               
|                                                    |                                                | maturities greater than 90 days           | 108,500                       
|                                                    | Repayments of long-term debt-                  |                                           |                               
|                                                    |                                                | maturities greater than 90 days           | (128,811)                     
|                                                    | Net change in borrowings-maturities            |                                           |                               
|                                                    |                                                | of 90 days or less                        | 26,000                        
|                                                    | Increase in current portion of                 |                                           |                               
|                                                    |                                                | long-term obligations                     | -                             
|                                                    | Payments of debt issuance costs                | (78)                                      | -                             
|                                                    | Proceeds from the exercise of stock options    | 1,345                                     | -                             
|                                                    |                                                | Net cash provided by financing activities | 6,605                         
|Effect of exchange rates on cash                    | -                                              | -                                         | 713                           
|Net decrease in cash & cash equivalents             | (3,555)                                        | (7)                                       | (2,058)                       
|Cash and cash equivalents at the beginning of       |                                                |                                           |                               
|                                                    | the year                                       | 3,749                                     | 1                             
|Cash and cash equivalents at the end of the period  | $ 194
      ====                               | $ (6)
      ===                           | $ 3,760
      =====           

22

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

> The following narrative discusses the results of operations, liquidity and
> capital resources for GBC on a consolidated basis. This section should be read
> in conjunction with GBC's Annual Report on Form 10-K for the fiscal year ended
> December 31, 2004. See "Management's Discussion and Analysis of Financial
> Condition and Results of Operations" contained therein.Results of Operations - Quarter Ended June 30, 2005 compared to
> Quarter Ended June 30, 2004Sales
> GBC's net sales for the second quarter of 2005 increased 7.2% to $186.9
> million compared to $174.4 million in the second quarter of 2004. The Company's
> net sales were favorably impacted by a weaker U.S. dollar in 2005 compared to
> 2004. The effect of foreign exchange rates benefited sales by approximately 2%
> in the second quarter of 2005. Net sales by business segment are summarized
> below (000 omitted):
> Three months endedJune
>       30,2005
>     2004Commercial and Consumer Group
>     $ 117,511
>     $ 108,897Industrial and Print Finishing Group
>     42,067
>     39,107Europe Group
>     27,322
>     26,371Net Sales
>     $ 186,900        
>       =======
>     $ 174,375       
>       =======The Commercial and Consumer Group's sales increased $8.6 million or 7.9% for
> the second quarter of 2005 when compared to 2004, primarily due to strong volume
> increases in sales of visual communication products in the Group's U.S. indirect
> business, and significant increases in shredder sales in Japan due to changes in
> privacy legislation. Sales for the Industrial and Print Finishing Group
> increased by $3.0 million or 7.6% in the second quarter of 2005 when compared to
> the prior year, primarily due to growth in the Group's U.S. and European
> commercial films business. Sales in the Europe Group increased $1.0 million or
> 3.6% in 2005, due primarily to the effect of a weaker U.S. dollar in 2005
> compared to 2004. The effect of foreign exchange rates benefited the Europe
> Group by 3% in the second quarter of 2005. The increase in local currency sales
> in Europe is due to general volume increases which were offset by the continued
> competitive pricing environment for certain products.Gross Margins, Costs and Expenses
> Gross margin for GBC is calculated as net sales less cost of sales. GBC's
> gross profit margin in the second quarter of 2005 declined 0.5 points to 38.3%
> 23
> compared to the second quarter of 2004. Modest margin declines in CCG and IPFG
> were partially offset by a margin improvement in the Europe Group, as GBC's
> operating initiatives have helped to offset market price increases in commodity
> raw materials.
> Selling, service and administrative expenses were up $2.7 million or 4.9% due
> to higher variable selling expenses in CCG and the Europe Group associated with
> higher sales volumes, and to a lesser extent, the adverse effect of exchange
> rate movements on international expenses. IPFG improved operating efficiency,
> holding selling, service and administrative expenses essentially flat, even with
> its increased sales levels. For the Company as a whole, operating expenses as a
> percentage of net sales dropped to 31.4% from 32.1% last year.
>     Segment Operating Income
> Segment operating income for GBC's business groups, which is calculated as
> net sales (i) less cost of sales, (ii) less selling, service and administrative
> expenses, (iii) plus equity in the earnings or losses of joint ventures, is
> summarized below (000 omitted):
> Segment
>       Operating Income
>       Three months endedJune
>       30,2005
>     2004Commercial and Consumer Group
>     $ 11,647
>     $ 11,267Industrial and Print Finishing Group
>     5,699
>     5,067Europe Group
>     2,099
>     1,444Unallocated corporate items
>     (6,303)
>     (6,053)Total
>     $ 13,142         
>       ======
>     $ 11,725        
>       ======Operating income for the second quarter of 2005 increased 12.1% or $1.4
> million compared to 2004. Operating income in the Commercial and Consumer Group
> increased by $0.4 million in the second quarter of 2005, primarily due to higher
> sales volume, which was partially offset by lower margins and higher variable
> selling and distribution expense in the Group's U.S. office products business
> and in Japan. The Industrial and Print Finishing Group's operating income
> increasedapproximately 12.5% in the second quarter of 2005 compared to
> 2004, primarily in the Group's U.S. Commercial Films business due to higher
> sales volumes and higher margins, while operating expenses remained relatively
> flat. Europe's operating income improved by $0.7 million in the second quarter
> of 2005 compared to 2004, due to higher sales and improved margins, which were
> partially offset by increased operating expenses. Corporate expenses are higher
> in 2005 compared to 2004 as a result of higher incentive compensation accruals,
> primarily related to the pending merger with ACCO and fluctuations in GBC's
> stock price.
> 24
>     Restructuring and Other
> During the second quarter of 2005, GBC incurred restructuring charges of $0.2
> million primarily related to a workforce reduction at a manufacturing facility
> in Portugal. The Company incurred no restructuring charges during the second
> quarter of 2004.
> In the second quarter of 2005, GBC reported an additional $1.7 million in
> other expenses which were primarily professional fees incurred in connection
> with the pending merger with ACCO (see section titled "Pending Merger with ACCO"
> below for further discussion.)Interest ExpenseInterest expense increased by $0.3 million to $6.9 million in the second
> quarter of 2005 compared to 2004, primarily due to higher floating interest
> rates on the Company's primary senior credit facility.Income Taxes
> Income tax expense in the second quarter of 2005 was $2.8 million on pre-tax
> income of $4.3 million resulting in a 64% effective tax rate. GBC's effective
> income tax rate was significantly impacted by expenses related to the pending
> merger with ACCO, as many of these expenses are not deductible for federal
> income tax purposes. In addition, the effective tax rate was increased by the
> treatment of planned dividends by foreign subsidiaries.
> In the second quarter of 2004, income tax expense was $2.0 million on pre-tax
> income of $4.5 million, resulting in an effective rate of 43%.
> On October 22, 2004, President Bush signed the American Jobs Creation Act of
> 2004 (the "Act"). The Act creates a temporary incentive for U.S. corporations to
> repatriate accumulated income earned abroad by providing an 85% dividends
> received deduction for certain dividends from controlled foreign corporations. 
> The deduction is subject to a number of limitations. Due to the Company's pending merger
> with ACCO, GBC has not yet decided on whether, and to what extent, it might
> repatriate foreign earnings that have not yet been remitted to the U.S. Based on
> the Company's analysis to date, the range of reasonably possible amounts that
> GBC may repatriate is between zero and $69 million (of which $44 million
> currently is considered permanently reinvested). GBC estimates that the
> related potential range of additional income tax liability is from zero to $1.4
> million, based upon current legislation. Also, the amount of additional income
> tax expense resulting from repatriation of foreign earnings under the provision would be
> reduced by the part of the eligible dividend that is attributable to foreign
> earnings on which a deferred tax liability had been previously
> accrued.
> 25
> Net Income (Loss)
> GBC had net income of $1.6 million for the second quarter of 2005 ($0.09 per
> share diluted), compared to net income of $2.6 million for the second quarter of
> 2004 ($0.15 per share diluted). While segment operating income for the quarter
> increased significantly, net income and earnings per share were significantly
> impacted by the expenses related to the pending merger with ACCO and the high
> effective income tax rate.Six Months Ended June 30, 2005 compared to Six Months June 30,
> 2004SalesGBC's net sales for the first half of 2005 compared to the first half of 2004
> increased 6.3% to $367.1 million. The Company's net sales were favorably
> impacted by a weaker U.S. dollar in 2005 compared to 2004. The effect of foreign
> exchange rates benefited sales by approximately 2.0% in the first half of 2005
> compared to 2004. Net sales by business segment are summarized below (000
> omitted):
> Six months ended June 30,2005
>     2004Commercial and Consumer Group
>     $ 225,787
>     $ 214,325Industrial and Print Finishing Group
>     84,065
>     76,910Europe Group
>     57,200
>     54,071Net Sales
>     $ 367,052       
>       =======
>     $ 345,306        
>       =======The Commercial and Consumer Group's sales increased $11.5 million or 5.3% for
> the first six months of 2005 when compared to 2004 primarily due to increased
> volume of visual communications products in the Group's U.S. indirect business
> and higher sales of shredders in Japan resulting from end user demand. Sales for
> the Industrial and Print Finishing Group increased $7.2 million or 9.3% due to
> continued strong volume growth in both the U.S. and European Commercial Films
> business , as well as continued growth in the U.S. Digital Print Finishing
> business. Sales in the Asia Commercial Films business increased 34% during the
> first six months of 2005. Approximately 2% of the Industrial and Print Finishing
> Group's sales increase was attributable to foreign exchange rate fluctuations.
> Sales in the Europe Group increased by $3.1 million or 5.8%, in the first six
> months of 2005, of which approximately 4% of the increase related to exchange
> rate fluctuations. Sales in Europe were favorably impacted by higher sales of
> binding equipment, binding and laminating supplies, and strong growth in the
> export channel.
> 26
> Gross Margins, Costs and Expenses
> Gross margin for GBC is calculated as net sales less cost of sales. GBC's
> gross profit margin in the first half of 2005 declined 0.5 points to 38.0%
> compared to the first half of 2004. Gross margin declines in the Commercial and
> Consumer Group and the Industrial and Print Finishing group were partially
> offset by margin increases in Europe, as price increases and operating
> improvements were unable to fully offset the impact of higher raw material costs
> and price pressures in certain markets.
> Total selling, service and administrative expenses in the first half of 2005
> increased $6.8 million or 6.0% compared to 2004. Operating expenses in the first
> half of 2005 were approximately $1.9 million higher than 2004 due to the impact
> of foreign currency translation rates. In addition, higher sales volumes caused
> increases in variable selling and distribution expenses. Also, in comparison to
> the first half of 2004, the Company experienced significantly higher non-cash
> compensation expense tied to GBC's stock price, which increased considerably
> after the announcement of the Company's pending merger with ACCO. Selling,
> service and administrative expenses as a percentage of sales decreased 0.1% to
> 32.5% in the first half of 2005 compared to 2004.Segment Operating IncomeSegment operating income for GBC's business groups, which is calculated as
> net sales (i) less cost of sales, (ii) less selling, service and administrative
> expenses (iii) plus equity in the earnings or losses of joint ventures, is
> summarized below (000 omitted):
> Segment
>       Operating Income
>       Six months endedJune 30,2005
>     2004Commercial and Consumer Group
>     $ 20,487
>     $ 19,919Industrial and Print Finishing Group
>     11,455
>     9,925Europe Group
>     3,904
>     3,594Unallocated corporate items
>     (14,693)
>     (12,775)Total
>     $ 21,153        
>       ======
>     $ 20,663        
>       ======Segment operating income for the first half of 2005 increased 2.4% or $0.5
> million compared to 2004. Operating income in the Commercial and Consumer Group
> increased by $0.6 million, or 2.9%, in the first half of 2005 due to higher
> sales levels. The Industrial and Print Finishing Group's operating income
> increased 15.4% or $1.5 million. Sales in the major divisions were partially
> offset by reduced gross profit margins and increased variable selling and
> distribution expenses. The Industrial and Print Finishing Group also benefited
> from income at
> 27
> the Group's Neschen joint venture in the first half of 2005
> compared to a loss in 2004. Corporate expenses are higher in 2005 compared to
> 2004 due to previously mentioned higher non-cash compensation expense tied to
> GBC's stock price. The Europe Group's operating income increased 8.6% or $0.3
> million, as high sales and margins exceeded increases in operating expenses.Restructuring and OtherDuring the first half of 2005, GBC incurred restructuring charges of $1.3
> million primarily related to the costs of exiting a facility in the UK and
> European workforce reduction programs. In 2004, GBC recorded restructuring
> charges of $0.8 million related to workforce reduction programs which were
> announced in 2003.
> In the first half of 2005, GBC reported $4.2 million in other expenses, which
> were primarily professional fees incurred in connection with the pending merger
> with ACCO (see section titled "Pending Merger with ACCO" below for further
> discussion).Interest ExpenseInterest expense increased by $0.2 million to $13.6 million in the first half
> of 2005 compared to 2004 due to higher floating interest rates on the Company's
> primary senior credit facility.Income Taxes
> Income tax expense in the first half of 2005 was $2.9 million on pre-tax
> income of $1.0 million. GBC's income tax provision was significantly impacted by
> expenses related to the pending merger with ACCO, as many of these expenses are
> not deductible for federal income tax purposes. In addition, income tax expenses
> was increased by the treatment of planned dividends by foreign subsidiaries.
> In the first half of 2004, income tax expense was $2.5 million on pre-tax
> income of $5.5 million, resulting in an effective rate of 45%.
> On October 22, 2004, President Bush signed the American Jobs Creation Act of
> 2004 (the "Act"). The Act creates a temporary incentive for U.S. corporations to
> repatriate accumulated income earned abroad by providing an 85% dividends
> received deduction for certain dividends from controlled foreign corporations. 
> The deduction is subject to a number of limitations. Due to the Company's pending merger
> with ACCO, GBC has not yet decided on whether, and to what extent, it might
> repatriate foreign earnings that have not yet been remitted to the U.S. Based on
> the Company's analysis to date, the range of reasonably possible amounts that
> GBC may repatriate is between zero and $69 million (of which $44 million
> currently is considered permanently reinvested). GBC estimates that the
> 28
> related potential range of additional income tax liability is from zero to $1.4
> million, based upon current legislation. Also, the amount of additional income
> tax expense resulting from repatriation of foreign earnings under the provision would be
> reduced by the part of the eligible dividend that is attributable to foreign
> earnings on which a deferred tax liability had been previously
> accrued.Net Income (Loss)GBC realized a net loss of $1.9 million for the first half of 2005 compared
> to net income of $3.0 million for the first half of 2004.
> While segment operating income for the six months ended June 30, 2005
> increased above the 2004 level, net income and earnings per share were
> significantly impacted by the expenses related to the pending merger with ACCO,
> and the high effective income tax rate.Liquidity and Capital ResourcesManagement assesses the Company's liquidity in terms of its overall debt
> capacity and ability to generate cash from operations to fund its operating
> activities, capital needs and debt service requirements. Significant factors
> affecting liquidity are cash flows generated from operating activities, capital
> expenditures, interest and debt service requirements, adequate bank lines of
> credit and financial flexibility to attract long-term capital with satisfactory
> terms. GBC's primary sources of liquidity and capital resources are internally
> generated cash flows and borrowings under GBC's revolving credit
> facility.Credit Facilities
> GBC has two financing arrangements that provide the Company with the majority
> of its debt capacity. A significant portion of GBC's long-term funding has been
> provided through its primary senior credit facility (the "Primary Facility"). As
> of June 30, 2005, the Primary Facility was comprised of a $72.5 million
> multi-currency revolving credit facility and term loans totaling $96.4 million.
> Outstanding borrowings under the Primary Facility at June 30, 2005 included
> $96.4 million as term loans and $26.0 million under the revolving credit
> facility. In addition, there were outstanding letters of credit of $11.9
> million, which further reduce GBC's availability under the revolving credit
> facility. GBC's other major financing arrangement is a multi-currency revolving
> credit facility in the Netherlands ("the Netherlands Facility"), with borrowing
> availability of approximately $18 million. As of June 30, 2005, there were no
> outstanding borrowings against the Netherlands Facility. GBC also has a mortgage
> financing arrangement under which its real estate holdings in Northbrook,
> Illinois and its real estate and equipment holdings in Addison, Illinois are
> pledged as collateral ("Mortgage Financing"). During the first quarter of 2005,
> GBC sold its real estate holdings in Skokie, Illinois, which previously had also
> been pledged as collateral
> 29
> under the mortgage financing. Approximately $1.9
> million of the proceeds from that sale were used to prepay the Mortgage
> Financing. As of June 30, 2005, outstanding borrowings on the Mortgage Financing
> were $8.0 million.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 and 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 its equity in certain foreign subsidiaries are pledged as
> collateral under the Primary Facility.
> In January 2005, the Company entered into an amendment to the Primary
> Facility. The amendment, among other things, modified certain financial
> covenants related to Total Leverage and Senior Leverage, as those terms are
> defined in the Primary Facility, to make them less restrictive. The
> modifications also provided for the planned disposition of the Skokie, Illnois
> real estate. The Company was in compliance with the financial covenants of the
> Primary Facility both before and after the amendment.Primary Facility - Financial Covenant Compliance
> As of and for the period ended June 30, 2005, GBC was in compliance with all
> financial covenants under the Primary Facility. There can, however, be no
> assurance that the Company will continue to remain in compliance. If the Company
> were to fail one or more of its covenants and were unable to obtain an amendment
> to the Primary Facility or a waiver in the event of a covenant violation, the
> Company's liquidity would be severely impacted.Primary Facility - Borrowing Base Availability
> The Primary Facility includes a $72.5 million multi-currency borrowing
> facility that GBC uses to fund its working capital requirements. The Company's
> borrowing capacity under the facility is limited by restrictive covenants on the
> amount of Total Leverage and Senior Leverage, as well as 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 June
> 30, 2005,
> 30
> 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 Flows
> Cash used in operating activities was $3.8 million for the six months ended
> June 30, 2005, compared to $18.7 million in the same six month period in 2004.
> During the first half of 2005, the Company was able to better manage inventory
> levels, and minimized the need for additional investment in inventories. While
> inventory levels were increased in the first half of 2004 in order to improve
> customer service levels, the need to facilitate the transition of certain
> manufacturing operations from the Company's facility in Booneville, Mississippi
> to Nuevo Laredo, Mexico caused additional increases in 2004. This transition was
> completed in the third quarter of 2004.
> Net cash used in investing activities was $1.0 million during 2005, compared
> to $4.7 million in 2004. The change was due primarily to $2.7 million in
> proceeds from the sale of GBC's real estate holdings in Skokie, Illinois in
> 2005, and $1.0 million lower investments in joint ventures in 2005 compared to
> 2004.
> Net cash provided by financing activities was $9.1 million during 2005,
> compared to $17.0 million in 2004. Decreased borrowings due primarily to the
> changes in inventories were partially offset by a $1.9 million prepayment of the
> mortgage financing from the proceeds of the sale of GBC's real estate holdings
> in Skokie, Illinois.GBC is restricted under its credit agreements from paying dividends, and
> therefore no dividends were paid during the first six months of 2005 and
> 2004.Pending Merger with ACCO
> On March 16, 2005, the Company, along with Fortune Brands, Inc. ("Fortune"),
> announced that they had entered into an agreement for Fortune to spin-off its
> ACCO World Corporation office products unit ("ACCO") to Fortune's stockholders
> to be followed immediately by the merger of a subsidiary of ACCO with and into
> GBC. For the six months ended June 30, 2005, GBC reported $4.2 million in other
> expenses, consisting primarily of professional fees which have been incurred in
> connection with the pending merger.
> Subsequent to the filing of the Company's most recent report on Form 10Q
> dated May 10, 2005, GBC and Fortune further announced that: a) the waiting
> period for the U.S. Federal Trade Commission to review the transaction, required
> under the Hart-Scott-Rodino-Antitrust Improvements Act has expired, b)the
> registration statement relating to the issuance of ACCO Brands common stock to
> GBC
> 31
> stockholders was declared effective by the Securities and Exchange
> Commission on July 15, 2005, which contains the proxy statement/prospectus -
> information statement that describes the proposed merger, merger agreement and
> the related issuance of ACCO Brands common stock, and c) GBC will hold a special
> meeting of its stockholders on August 15, 2005 to vote on the proposed merger,
> and GBC's majority stockholder, Lane Industries, Inc., has agreed to vote for
> the merger. It is expected that the transaction will close shortly following the
> GBC stockholder meeting.
> New Accounting Standards
> In December 2004, the FASB issued a revision to SFAS No. 123, "Share Based
> Payment." This statement requires companies to recognize the cost of employee
> services received in exchange for an award of equity instruments. Prior to the
> revision to SFAS No. 123, companies had an alternative to either recognize the
> cost of employee services based upon fair value at the grant date, or to use the
> intrinsic value method of accounting under APB No. 25. GBC currently accounts
> for stock options in accordance with APB No. 25 under which stock options issued
> to employees generally result in no compensation expense. GBC's adoption of SFAS
> No. 123 (R) will result in compensation expense related to stock options issued.
> In April 2005, the FASB approved a new rule which defers the implementation date
> of SFAS No. 123 (R). The new rule allows adoption for annual, rather than
> interim periods that begin after June 15, 2005. The Company is in the process of
> evaluating the impact of SFAS No. 123 (R), and will adopt it in the first
> quarter of 2006. See Note 2 to the condensed consolidated financial statements
> for pro-forma disclosure information related to stock compensation expense.
> In December 2004, the FASB issued FASB Staff Position No. FAS 109-2,
> "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
> Provision within the American Jobs Creation Act of 2004 ("AJCA")." The
> AJCA,
> enacted in October 2004, introduces a temporary 85% dividends received deduction
> on the repatriation of certain foreign earnings of a U.S. taxpayer, provided
> certain criteria are met. FAS 109-2 provides accounting and disclosure guidance
> for the repatriation provision. It allows companies time beyond the financial
> reporting period of enactment to evaluate the effect of the AJCA on unremitted
> earnings of foreign subsidiaries for the purpose of applying the "indefinite
> reversal criterion" under APB Opinion No. 23, "Accounting for Income Taxes -
> Special Areas." Due to the Company's pending merger with ACCO, GBC has not
> decided on whether, and to what extent, it might repatriate unremitted foreign
> earnings under the provision. See Note 11 to the Condensed Consolidated
> Financial Statements for further discussion.
> Forward - Looking Statements
> "Management's Discussion and Analysis of Financial Condition and Results of
> Operations" and elsewhere in this report contain, and other periodic reports and
> 32
> 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. 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.

Item 3.

> Foreign Exchange Risk Management

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.

The majority of GBC's exposures to currency movements are in Europe, the
Asia/Pacific region, Canada and Mexico, and the significant hedging transactions
related to these areas outstanding as of June 30, 2005 are presented below. All
of the outstanding contracts have maturity dates in 2005 and 2006. Increases and
decreases in the fair market values of the forward agreements are completely
offset by changes in the values of the net underlying foreign currency
transaction exposures. GBC's contracts are primarily for the sale or purchase of
foreign currencies in exchange for U.S. dollars. Selected information related to
GBC's foreign exchange contracts as of June 30, 2005 is as follows (all items
except exchange rates in millions):

|Forward contracts as of June 30, 2005 | Average ExchangeRate | NotionalAmount | FairMarketValue | Gain(Loss) (2) 
|------------------------------------- | -------------------- | -------------- | --------------- | ---------------
|Currency sold (1)                     |                      |                |                 |                
|Sell Euro/Buy USD                     | 1.21                 | $ 3.7          | $ 3.7           | $ -            
|Sell CAD/Buy USD                      | 0.82                 | 7.7            | 8.1             | (0.4)          
|Sell GBP/Buy USD                      | 1.79                 | 2.1            | 2.1             | -              
|Sell USD/Buy Euro                     | 0.83                 | 2.0            | 2.0             | -              
|Sell USD/Buy MXN                      | 10.75                | 3.6            | 3.8             | 0.2            
|Sell GBP/Buy Euro                     | 1.48                 | 1.5            | 1.5             | -              
|Sell Euro/Buy CAD                     | 0.67                 | 11.7           | 11.2            | 0.5            
|Other                                 |                      | 5.4            | 5.5             | (0.1)          
|Total                                 |                      |                |                 | $ 0.2
      ===

> 33
> (1) CAD = Canadian Dollars; GBP = Pound Sterling; MXN = Mexican Pesos
> (2) As of June 30, 2005, GBC recorded cumulative unrealized gains of approximately $0.5 million in its
> consolidated statement of income related to hedges of intercompany loans (hedge accounting has not
> been applied to these transactions). Unrealized
> losses of approximately $0.3 million related to hedges of intercompany inventory purchases have been recorded in Other
> Comprehensive Income.

Interest Rate Risk Management

Item 4. Controls and
Procedures

> As of the end of the period covered by this Quarterly Report on Form 10-Q,
> the Company carried out an evaluation, under the supervision and with the
> participation of GBC's Disclosure Committee and the Company's management,
> including the Chief Executive Officer and the Chief Financial Officer, of the
> effectiveness of the design and operation of GBC's disclosure controls and
> procedures pursuant to the Exchange Act Rule 15d-14. Based upon that evaluation,
> the Chief Executive Officer and the Chief Financial Officer concluded that GBC's
> disclosure controls and procedures are effective in timely alerting them to
> material information relating to the Company (including its consolidated
> subsidiaries) that would be required to be included in GBC's periodic SEC
> filings.
> There has been no change in the Company's internal control over financial
> reporting that occurred during the quarter ended June 30, 2005 that has
> materially affected, or is reasonable likely to materially affect, the Company's
> internal control over financial reporting.

Part II

Item 6. Exhibits

> Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
> Index hereto.

34

SIGNATURES

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

GENERAL BINDING CORPORATIONBy:
    /s/ Dennis J. MartinDennis J. MartinChairman, President and Chief
      Executive OfficerBy:
    /s/ Don CivginDon CivginSenior Vice President and Chief
      Financial OfficerAugust 9, 2005




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Exhibits Filed with the Securities and Exchange Commission

|Number | Description of Exhibit                                                                                                                                                                                                                                                                                                               
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2    | Amendment to agreement and plan of merger, dated of August 4, 2005, by
      and among Fortune Brands, Inc., ACCO World Corporation, Gemini Acquisition
      Sub, Inc. and General Binding Corporation incorporated by reference herein
      to Exhibit 2.1 to the Company's current report on Form 8-K dated August 8,
      2005.
|31.1   | Certification of the Chief Executive Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        
|31.2   | Certification of the Chief Financial Officer Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        
|32.1   | Certification of the Chief Executive Officer Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        
|32.2   | Certification of the Chief Financial Officer Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        



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