ACCO Brands
Annual Report 2010

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2010 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-08454ACCO Brands Corporation(Exact Name of Registrant as Specified in Its Charter) Delaware 36-2704017(State or Other Jurisdictionof Incorporation or Organization) (I.R.S. EmployerIdentification Number)300 Tower ParkwayLincolnshire, Illinois 60069(Address of Registrant’s Principal Executive Office, Including Zip Code)(847) 541-9500(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes ¨ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (asdefined in Rule 12b-2 of the Exchange Act). Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þAs of June 30, 2010, the aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately $201 million.As of February 1, 2011, the registrant had outstanding 54,922,783 shares of Common Stock.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be issued in connection with registrant’s annual stockholder’s meeting to be held on May 17,2011 are incorporated by reference into Part III of this report. Table of ContentsTABLE OF CONTENTS PART I ITEM 1. Business 3 ITEM 1A. Risk Factors 8 ITEM 1B. Unresolved Staff Comments 14 ITEM 2. Properties 15 ITEM 3. Legal Proceedings 15 ITEM 4. (Removed and Reserved) 15 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 16 ITEM 6. Selected Financial Data 18 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 41 ITEM 8. Financial Statements and Supplementary Data 43 ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 95 ITEM 9A. Controls and Procedures 95 ITEM 9B. Other Information 95 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 95 ITEM 11. Executive Compensation 95 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 96 ITEM 13. Certain Relationships and Related Transactions, and Director Independence 96 ITEM 14. Principal Accountant Fees and Services 96 PART IV ITEM 15. Exhibits and Financial Statement Schedules 97 Signatures 103 2Table of ContentsPART ICautionary Statement Regarding Forward-Looking Statements. Certain statements made in this Annual Report on Form 10-K are “forward-lookingstatements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to becovered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are includingthis statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certain assumptions anddescribe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “will,” “believe,” “expect,” “intend,”“anticipate,” “estimate,” “forecast,” “project,” “plan,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategiesis inherently uncertain. Because actual results may differ from those predicted by such forward-looking statements, you should not place undue reliance onsuch forward-looking statements when deciding whether to buy, sell or hold the Company’s securities. We undertake no obligation to update these forward-looking statements in the future. The factors that could affect our results or cause plans, actions and results to differ materially from current expectationsare detailed in this report, including under “Item 1. Business,” “Item 1A. Risk Factors” and the financial statement line item discussions set forth in “Item 7.Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and from time to time in our other SEC filings.Website Access to Securities and Exchange Commission ReportsThe Company’s Internet website can be found at www.accobrands.com. The Company makes available free of charge on or through its website itsannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnishedpursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, or furnishes them to,the Securities and Exchange Commission. We also make available the following documents on our Internet website: the Audit Committee Charter; theCompensation Committee Charter; the Corporate Governance and Nominating Committee Charter; our Corporate Governance Principles; and ourCode of Business Conduct and Ethics. The Company’s Code of Business Conduct and Ethics applies to all of our directors, officers (including the ChiefExecutive Officer, Chief Financial Officer and Principal Accounting Officer) and employees. You may obtain a copy of any of the foregoing documents,free of charge, if you submit a written request to ACCO Brands Corporation, 300 Tower Parkway, Lincolnshire, IL. 60069, Attn: Investor Relations.ITEM 1. BUSINESSOverviewACCO Brands is one of the world’s largest suppliers of select categories of branded office products (excluding furniture, computers, printers and bulkpaper) to the office products resale industry. We design, develop, manufacture and market a wide variety of traditional and computer-related office products,supplies, binding and laminating equipment and related consumable supplies, personal computer accessory products, paper-based time management productsand presentation aids and products. Through a focus on research, marketing and innovation, we seek to develop new products that meet the needs of ourconsumers and commercial end-users, which we believe will increase the product positioning of our brands. We compete through a balance of innovation, alow-cost operating model and an efficient supply chain. We sell our products primarily to markets located in North America, Europe and Australia. Ourbrands include GBC , Kensington , Quartet , Rexel, Swingline, Wilson Jones , Marbig, NOBO and Day-Timer , among others.The majority of our office products are used by businesses. Most of these end-users purchase our products from our customers, which includecommercial contract stationers, retail superstores, wholesalers, resellers, mail order and internet catalogs, mass merchandisers, club stores and dealers. We alsosupply our products directly to 3®®®®®®Table of Contentscommercial and industrial end-users and to the educational market. Historically we have targeted the premium-end of the product categories in which wecompete. However, we also supply private label products for our customers where we believe we have an economic advantage or where it is necessary tomerchandise a complete category.Our leading brand positions provide the scale to enable us to invest in product innovation and drive market growth across our product categories. Inaddition, the expertise we use to satisfy the exacting technical specifications of our more demanding commercial customers is in many instances the basis forexpanding our products and innovations to consumer products.Our strategy centers on a combination of growing sales and market share and generating acceptable profitability and returns. Specifically, we havesubstantially reduced our operating expenses and seek to leverage our platform for organic growth through greater consumer understanding, productinnovation, marketing and merchandising, disciplined category expansion including broader product penetration and possible strategic transactions andcontinued cost realignment. To achieve these goals, we plan to continue to execute the following strategies: (1) invest in research, marketing and innovation,(2) penetrate the full product spectrum of our categories and (3) opportunistically pursue strategic transactions.We utilize a combination of manufacturing and third-party sourcing to procure our products, depending on transportation costs, service needs anddirect labor costs associated with each product.Our priority for cash flow over the near term, after internal growth, is to fund the reduction of debt and invest in new products through both organicdevelopment and acquisitions. For a description of certain factors that may have had, or may in the future have, a significant impact on our business, financialcondition or results of operations, see Item 1A, Risk Factors.Reportable SegmentsOur Company is organized into three business segments: ACCO Brands Americas, ACCO Brands International and Computer Products Group.The following table shows the percentages of consolidated revenue from continuing operations derived from each of our reportable segments in theyears indicated: Segment 2010 2009 2008 ACCO Brands Americas 52% 53% 52% ACCO Brands International 35% 34% 35% Computer Products Group 13% 13% 13% ACCO Brands Americas and ACCO Brands InternationalThese two segments manufacture, source and sell traditional office products and supplies and document finishing solutions. ACCO Brands Americascomprises the North, Central and South American markets, and ACCO Brands International comprises the rest of the world, principally Europe, Australia andAsia-Pacific.Examples of our traditional office products and supplies are staplers, staples, punches, ring binders, trimmers, sheet protectors, hanging file folders,clips and fasteners, dry-erase boards, dry-erase markers, easels, bulletin boards, overhead projectors, transparencies, laser pointers and screens. These productsare sold under leading brands including Quartet, Rexel, Swingline, Wilson Jones, Marbig, NOBO, ACCO, Derwent and Eastlight. Examples of ourdocument finishing solutions are binding, lamination and punching equipment, binding and lamination supplies, report covers, archival report covers andshredders. These products are sold primarily under the GBC brand. We also provide machine maintenance and repair services sold under the GBC brand.Included in the ACCO Brands Americas segment are our personal organization tools, including time management products, primarily under the Day-Timerbrand name. 4®®®®®®Table of ContentsThe customer base to which our products are sold is made up of large global and regional resellers of our products. It is through these large resellers thatthe Company’s products reach the end consumer. Our customer base includes commercial contract stationers, office products superstores, wholesalers,distributors, mail order and internet catalogs, mass merchandisers, club stores and independent dealers. The majority of sales by our customers are to businessend-users, which generally seek office products that have added value or ease of use features and a reputation for reliability, performance and professionalappearance. Some of our document finishing products are sold directly to high volume end-users and commercial reprographic centers and indirectly tolower-volume consumers worldwide. Approximately two-thirds of the Day-Timer business is sold through the direct channel, which markets product throughthe internet and periodic sales catalogs and ships product directly to our end-user customers. The remainder of the business sells to large resellers andcommercial dealers.Computer Products GroupThis Group designs, distributes, markets and sells accessories for laptop and desktop computers and Apple iPod, iPad and iPhone products. Theseaccessories primarily include security locks, power adapters, input devices such as mice and keyboards, laptop computer carrying cases, hubs and dockingstations, ergonomic devices and technology accessories for iPods, iPads and iPhones. The Computer Products Group sells mostly under the Kensingtonand Kensington Microsaver brand names, with the majority of its revenue coming from the U.S. and Western Europe.All of our computer products are manufactured by third-party suppliers, principally in Asia, and are stored in and distributed from our regionalfacilities. Our computer products are sold primarily to consumer electronics retailers, information technology value-added resellers, original equipmentmanufacturers and office products retailers.For further information on the Company’s business segments see Note 15, Information on Business Segments, to our consolidated financial statementscontained in Item 8 of this report.Discontinued OperationsIn June 2009, the Company completed the sale of its commercial print finishing business for final gross proceeds of $16.2 million. The results ofoperations and loss on sale of this business are reported in discontinued operations for all periods presented. For further information on the Company’sdiscontinued operations see Note 18, Discontinued Operations, to our consolidated financial statements contained in Item 8 of this report.Customers/CompetitionOur sales are generated principally in North America, Europe and Australia. For the fiscal year ended December 31, 2010, these markets represented59%, 24% and 14% of our net sales, respectively. Our top ten customers are Staples, Office Depot, United Stationers, BPGI, OfficeMax, S.P. Richards, ColesGroup, Wal-Mart/Sam’s Club, Lyreco and Spicers, together accounting for 49% of our net sales for the fiscal year ended December 31, 2010. Sales to Staplesamounted to approximately 13% of consolidated net sales for each of the three years ended 2010, 2009 and 2008. Sales to Office Depot, Inc. and subsidiariesamounted to approximately 11% of consolidated net sales for each of the three years ended 2010, 2009 and 2008. Sales to no other customer exceeded 10%of consolidated sales for any of these periods.Current trends among our customers include fostering high levels of competition among suppliers, demanding innovative new products and requiringsuppliers to maintain or reduce product prices and deliver products with shorter lead times and in smaller quantities. Other trends are for retailers to importgeneric products directly from foreign sources and sell those products, which compete with our products, under the customers’ own private-label brands. Thecombination of these market influences, along with a recent and continuing trend of consolidation among resellers, has created an intensely competitiveenvironment in which our 5®®®®®®®®Table of Contentsprincipal customers continuously evaluate which product suppliers they use. This results in pricing pressures, the need for stronger end-user brands, broaderproduct penetration within categories, the ongoing introduction of innovative new products and continuing improvements in customer service.Competitors of the ACCO Brands Americas and ACCO Brands International segments include Avery Dennison, Esselte, 3M, Newell, Hamelin, Smead,Fellowes, Mead, Franklin Covey and Spiral Binding. Competitors of the Computer Products Group include Belkin, Logitech, Targus and Fellowes.Certain financial information for each of our business segments and geographic regions is incorporated by reference to Note 15, Information onBusiness Segments, to our consolidated financial statements contained in Item 8 of this report.Product Development and Product Line RationalizationOur strong commitment to understanding our consumers and defining products that fulfill their needs drives our product development strategy, whichwe believe is and will continue to be a key contributor to our success in the office products industry. Our new products are developed from our own consumerunderstanding, our own research and development or through partnership initiatives with inventors and vendors. Costs related to consumer research andproduct research when paid directly by ACCO Brands are included in marketing costs and research and development expenses, respectively. Research anddevelopment expenses amounted to $24.0 million, $18.6 million and $22.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.Our product line strategy emphasizes the divestiture of businesses and rationalization of product offerings that do not meet our long-term strategicgoals and objectives. We consistently review our businesses and product offerings, assess their strategic fit and seek opportunities to divest non-strategicbusinesses. The criteria we use in assessing the strategic fit include: the ability to increase sales for the business; the ability to create strong, differentiatedbrands; the importance of the business to key customers; the business relationship with existing product lines; the impact of the business to the market; andthe business’s actual and potential impact on our operating performance.As a result of this review process, during 2009 we completed the sale of our former commercial print finishing business. This business representedapproximately $100 million in annual net sales.Raw MaterialsThe primary materials used in the manufacturing of many of our products are plastics, resin, polyester and polypropylene substrates, paper, steel, wood,aluminum, melamine, zinc and cork. These materials are available from a number of suppliers, and we are not dependent upon any single supplier for any ofthese materials. In general, our gross profit may be affected from time to time by fluctuations in the prices of these materials because our customers requireadvance notice and negotiation to pass through raw material price increases, giving rise to a delay before cost increases can be passed on to our customers.See “Risk Factors—Risks Related to Our Business.” The raw materials and labor costs we incur are subject to price increases that could adversely affect ourprofitability. Based on experience, we believe that adequate quantities of these materials will be available in the foreseeable future. In addition, a significantportion of the products we sell in our international markets are sourced from China and other Far-Eastern countries and are paid for in U.S. dollars. Thus,movements of their local currency to the U.S. dollar have the same impacts as raw material price changes and we adjust our pricing in these markets to reflectthese currency changes.SupplyOur products are either manufactured or sourced to ensure that we supply our customers with appropriate customer service, quality products, innovativesolutions and attractive pricing. We have built a customer-focused business model with a flexible supply chain to ensure that these factors are appropriatelybalanced. Using a 6Table of Contentscombination of manufacturing and third-party sourcing also enables us to reduce our costs and effectively manage our production assets by lowering ourcapital investment and working capital requirements. Our strategy is to manufacture those products that would incur a relatively high freight expense or havehigh service needs and source those products that have a high proportion of direct labor cost. Low-cost sourcing mainly comes from China, but we alsosource from other Asian countries and Eastern Europe. Where freight costs or service issues are significant, we source from factories located in or near to ourdomestic markets.SeasonalityOur business, as it concerns both historical sales and profit, has experienced increased sales volume in the third and fourth quarters of the calendar year.Two principal factors have contributed to this seasonality: the office products industry, its customers and ACCO Brands specifically are major suppliers ofproducts related to the “back-to-school” season, which occurs principally during June, July, August and September for our North American business andduring November, December and January for our Australian business; and our offering includes several products which lend themselves to calendar year-endpurchase timing, including Day-Timer planners, paper organization and storage products (including bindery) and Kensington computer accessories, whichincrease with traditionally strong fourth-quarter sales of personal computers.Intellectual PropertyWe have many patents, trademarks, brand names and trade names that are, in the aggregate, important to our business. The loss of any individual patentor license, however, would not be material to us taken as a whole. Many of our trademarks are only important in particular geographic markets or regions. Ourprincipal registered trademarks are: GBC, Kensington, Quartet, Rexel, Swingline, Wilson Jones, Marbig, NOBO, Day-Timer, Microsaver and ACCO.See “Risk Factors—Risks Related to Our Business.”Environmental MattersWe are subject to federal, state and local laws and regulations concerning the discharge of materials into the environment and the handling, disposaland clean-up of waste materials and otherwise relating to the protection of the environment. It is not possible to quantify with certainty the potential impactof actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. In the opinion of ourmanagement, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have amaterial adverse effect upon our capital expenditures, financial condition, results of operations or competitive position. See “Risk Factors—Risks Related toOur Business.”EmployeesAs of December 31, 2010, the Company had approximately 4,200 full-time and part-time employees. There have been no strikes or material labordisputes at any of our facilities during the past five years. We consider our employee relations to be good. 7®®®®®®®®Table of ContentsITEM 1A. RISK FACTORSThe factors that are discussed below, as well as the matters that are generally set forth in this report on Form 10-K and the documentsincorporated by reference herein, could materially and adversely affect the Company’s business, results of operations and financial condition.Risks Related to Our BusinessSales of our products may be adversely affected by issues that affect business, commercial and consumer spending decisions during periods ofeconomic uncertainty.The majority of our products are used by businesses, whose purchasing power is influenced by general economic conditions. With respect to our officeproducts, because we have typically targeted the higher-margin, premium-end of the product categories in which we compete, sales of our products can bevery sensitive to uncertain U.S. and global economic conditions, particularly in categories where we compete against private label or generic products thatgenerally are sold at lower prices. We believe that consumer and commercial end-users choose our products based on the status of our brands and theperception that our products have added value and a reputation for reliability, ease-of-use, performance and professional appearance than less expensivealternatives. However, in periods of economic uncertainty, businesses and consumers may seek or be forced to purchase more lower-cost, private label orother economy brands, or to forego certain purchases altogether.Our substantial indebtedness may adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changesin the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt, prevent us from meeting our obligations under ourindebtedness and otherwise adversely affect our results of operations and financial condition.As of December 31, 2010, we had $727.6 million of outstanding debt. This indebtedness could have negative consequences to us, such as: • requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing theavailability of our cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions andother general corporate purposes; • limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements orother cash requirements; • increasing our vulnerability to economic downturns and changing market conditions; • limiting our operational flexibility due to the covenants contained in our debt agreements; • placing us at a competitive disadvantage relative to competitors that have less debt; • to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates; and • limiting our ability to buy back our stock or pay cash dividendsThe agreements governing our indebtedness contain financial and other restrictive covenants that limit our ability to engage in activities that may bein our long-term best interests. Our ability to meet our expense and debt service obligations will depend on our future performance, which will be affected byfinancial, business, economic and other factors, including potential changes in customer preferences, the success of product and marketing innovation andpressure from competitors. Should our sales decline, we may not be able to generate sufficient cash flow to pay our debt service obligations when due. If weare unable to meet our debt service obligations or should we fail to comply with our financial and other restrictive covenants, we may be required to refinanceall or part of our existing debt (in all likelihood on terms less favorable than our current terms), sell important strategic assets at unfavorable prices or 8Table of Contentsborrow more money. We may not be able to, at any given time, refinance our debt, sell assets or borrow more money on terms acceptable to us or at all. Theinability to refinance our debt could have a material adverse effect on our financial condition and results from operations.Our failure to comply with certain restrictive debt covenants could result in an event of default which, if not cured or waived, could result in theacceleration of all of our debts.Certain covenants we have made in connection with our existing borrowings restrict our ability to, among other things, incur additional indebtedness,incur certain liens on our assets, issue preferred stock or certain disqualified stock, pay dividends on capital stock, make other restricted payments, includinginvestments, sell our assets, and enter into consolidations or mergers or other transactions with affiliates. Our asset-based revolving credit facility alsorequires us to maintain specified financial ratios under certain conditions and satisfy financial condition tests. Our ability to meet those financial ratios andtests and otherwise comply with our financial covenants may be affected by events beyond our control, and we may not be able to continue to meet thoseratios, tests and covenants. Our ability to generate sufficient cash from operations to meet our debt obligations will depend upon our future operatingperformance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. Abreach of any of these covenants, ratios, tests or restrictions, as applicable, or any inability to pay interest on, or principal of, our outstanding debt as itbecomes due could result in an event of default under any of the agreements governing any of our debt obligations, in which case our lenders could elect todeclare all amounts outstanding to be immediately due and payable. If the lenders accelerate the payment of any of our indebtedness, our assets may not besufficient to repay in full such indebtedness and any other indebtedness that would become due as a result of such acceleration and, if we were unable toobtain replacement financing or any such replacement financing was on terms that were less favorable than the indebtedness being replaced, our liquidityand results of operations would be materially and adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources.”We require a significant amount of cash to service our debt. Our ability to meet our cash requirements and service our debt could be impacted bymany factors that are outside our control, including global economic conditions and access to credit markets.Our future operating performance is dependent on many factors, some of which are beyond our control, including prevailing economic, financial andindustry conditions. Worsening global economic conditions would adversely impact commercial spending and our sales would likely decline or becomeincreasingly concentrated in lower margin products, and our business, financial condition, results of operations and/or cash flows could be materiallyadversely affected.The impact of any negative global economic conditions and the ability of our suppliers and customers to access credit markets is also unpredictable,and may create additional risks for us, both directly and indirectly. The inability of suppliers to access financing or the insolvency of one or more of oursuppliers could lead to disruptions in our supply chain, which could adversely impact our sales and/or increase our costs. Our suppliers may require us to paycash in advance or obtain letters of credit for their benefit as a condition to selling us their products and services. If one or more of our principal customerswere to file for bankruptcy, our sales could be adversely impacted and our ability to collect outstanding accounts receivable from any such customer could belimited. Any of these risks and uncertainties could have a material adverse effect on our business, financial condition, results of operations and/or cash flows.Our operating performance and ability to comply with covenants under our borrowing arrangements are dependent on our continued ability to accessfunds under our credit and loan agreements, including under our asset-based revolving credit facility, and from cash on hand, maintain sales volumes, driveprofitable growth, realize cost savings and generate cash from operations. The financial institutions that fund our asset-based revolving credit facility are alsoimpacted by any volatility in the credit markets, and if one or more of them cannot fulfill our revolving credit requests, our operations may be adverselyimpacted. 9Table of ContentsDuring the third quarter of 2009, the Company completed a series of transactions to refinance its indebtedness. These transactions resulted in both anincreased amount of indebtedness as well as an increase to the weighted average interest rate on our indebtedness. As such, these transactions have increasedthe cost of servicing our debt, which has negatively impacted our results of operations and cash flows. (For a further discussion on the Company’s refinancingtransactions, see Note 3, Long-term debt and Short-term borrowings, under Item 8, Financial Statements and Supplementary Data.)Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate therisks associated with our substantial leverage.We and our subsidiaries may be able to incur substantial additional indebtedness in the future because the terms of our existing indebtedness do notprohibit us or our subsidiaries from doing so, within certain limits. Based on our borrowing base, as of December 31, 2010 our revolving credit facilitypermitted borrowing of up to an additional $168.1 million. If new indebtedness is added to our and our subsidiaries’ current debt levels, the related risks thatwe and they now face could intensify.Failure to maintain our credit ratings could limit our access to the capital markets, adversely affect the cost and terms upon which we are able toobtain additional financing and negatively impact our business.Although we believe existing cash, funds generated by operations and amounts available under our asset-based revolving credit facility willcollectively provide adequate resources to fund our ongoing operating requirements, we may be required to seek additional financing to compete effectivelyin our market. In light of the current difficulties in the financial markets, there can be no assurance that we will be able to maintain our credit ratings. We haveexperienced downgrades in the past and may experience further downgrades. Failure to maintain these credit ratings could, among other things, limit ouraccess to the capital markets and adversely affect the cost and terms upon which we are able to obtain additional financing, including any financing from oursuppliers, which could negatively impact our business. A credit rating is not a recommendation to buy, sell or hold any security and may be revised orwithdrawn at any time by the issuing organization. Each credit rating should be evaluated independently of any other credit rating.Our business is dependent on a limited number of customers, and a substantial reduction in sales to these customers could significantly impact ouroperating results.The office products industry is concentrated in a small number of major customers, principally office products superstores (which combine contractstationers, retail and mail order), office products resellers and mass merchandisers. A relatively limited number of customers account for a large percentage ofour total net sales. Our top ten customers accounted for 49% of our net sales for the fiscal year ended December 31, 2010. Sales to Staples and Office Depot,Inc. and subsidiaries during the same period amounted to approximately 13% and 11%, respectively, of our 2010 net sales. The loss of, or a significantreduction in, business from one or more of our major customers could have a material adverse effect on our business, financial condition and results ofoperations. A concentrated customer base also exposes us to increased concentration of customer credit risk.A bankruptcy of one or more of the Company’s major customers could have a material adverse effect on our financial condition and results ofoperations.Were any of the Company’s major customers to make a bankruptcy filing, the Company could be adversely impacted. The nature of that impact couldbe not only a reduction in future sales, but also a loss associated with the potential inability to collect any outstanding accounts receivable from any suchcustomer. Such a result could negatively impact our financial results and cash flows and ability to remain in compliance with our loan covenants. 10Table of ContentsOur pension costs could substantially increase as a result of volatility in the equity markets or interest rates.The difference between plan obligations and assets, or the funded status of our defined benefit pension plans, is a significant factor in determining thenet periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Changes in interest rates and the market value of planassets can impact the funded status of these plans and cause volatility in the net periodic benefit cost and future funding requirements of these plans. Theexact amount of cash contributions made to pension plans in any year is dependent upon a number of factors, including the investment returns on pensionplan assets, and a significant increase in our pension funding requirements could have a negative impact on our cash flow and financial condition.Impairment charges could have a material adverse effect on our financial results.In prior years we have recorded significant amounts of goodwill and other asset impairment charges adversely affecting financial results. Future eventsmay occur that may also adversely affect the reported value of our assets and require impairment charges, which could further adversely affect our financialresults. Such events may include, but are not limited to, a sustained decline in our stock price, strategic decisions made in response to changes in economicand competitive conditions, the impact of the economic environment on our customer base or a material adverse change in our relationship with significantcustomers.Our industry is subject to further consolidation, and further consolidation of our customers could cause a reduction to our margins and sales.While the office products industry already has a concentrated reseller base, if current trends continue, these resellers, our customers, are likely toconsolidate further. Customer consolidation is likely to result in pricing pressures to which we are subject, leading to downward pressure on our margins andprofits. Additionally, consolidation among customers can result in decreased inventory levels maintained by these customers, which can negatively impactour sales during the transition period for any such consolidation. Further, there can be no assurance that consolidating customers would leverage ourinternational scope and distribution capabilities by concentrating their purchasing activity with us.If we do not compete successfully in the competitive office products industry, our business and revenues may be adversely affected.Our products and services are sold in highly competitive markets. We believe that the principal points of competition in these markets are productinnovation, quality, price, merchandising, design and engineering capabilities, product development, timeliness and completeness of delivery, conformity tocustomer specifications and post-sale support. Competitive conditions may require us to significantly discount prices in order to retain business or marketshare. We believe that our competitive position will depend on continued investment in innovation and product development, manufacturing and sourcing,quality standards, marketing and customer service and support. Our success will depend in part on our ability to anticipate and offer products that appeal tothe changing needs and preferences of our customers in the various market categories in which we compete. We may not have sufficient resources to make theinvestments that may be necessary to anticipate those changing needs and we may not anticipate, identify, develop and market products successfully orotherwise be successful in maintaining our competitive position. There are no significant barriers to entry into the markets for most of our products andservices. We also face increasing competition from our own customers’ private label and direct sourcing initiatives.Our business is subject to risks associated with seasonality, which could adversely affect our cash flow, financial condition or results of operations.Our business, as it concerns both historical sales and profit, has experienced higher sales volume in the third and fourth quarters of the calendar year.Two principal factors have contributed to this seasonality: the office products industry’s customers and our product line. We are major suppliers of productsrelated to the 11Table of Contents“back-to-school” season, which occurs principally during June, July, August and September for our North American business and November, December andJanuary for our Australian business; and our product line includes several products that lend themselves to calendar year-end purchase timing. If either ofthese typical seasonal increases in sales of certain portions of our product line does not materialize, we could experience a material adverse effect on ourbusiness, financial condition and results of operations.The raw materials and labor costs we incur are subject to price increases that could adversely affect our profitability.The primary materials used in the manufacturing of many of our products are resin, plastics, polyester and polypropylene substrates, paper, steel, wood,aluminum, melamine, zinc and cork. In general, our gross profit may be affected from time to time by fluctuations in the prices of these materials because ourcustomers require advance notice and negotiation to pass through raw material price increases, giving rise to a delay before cost increases can be passed toour customers. We attempt to reduce our exposure to increases in these costs through a variety of measures, including periodic purchases, future deliverycontracts and longer-term price contracts together with holding our own inventory; however, these measures may not always be effective. Inflationary andother increases in costs of materials and labor have occurred in the past and may recur, and raw materials may not continue to be available in adequate supplyin the future. Shortages in the supply of any of the raw materials we use in our products and other factors, such as inflation, could result in price increases thatcould have a material adverse effect on our financial condition or results of operations.We are subject to supplier credit and order fulfillment risk.We purchase products for resale under credit arrangements with our vendors. In weak global markets, vendors may seek credit insurance to protectagainst non-payment of amounts due to them. During any period of declining operating performance, or should we experience severe liquidity challenges,vendors may demand that we accelerate our payment for their products. Also, credit insurers may curtail or eliminate coverage to the vendors. If vendorsbegin to demand accelerated payment of amounts due to them or if they begin to require advance payments or letters of credit before goods are shipped to us,these demands could have a significant adverse impact on our operating cash flow and result in a severe drain on our liquidity. In addition, if our vendors areunable to access liquidity or become insolvent, they could be unable to supply us with product. Also, some of our vendors are dependent upon otherindustries for raw materials and other products and services necessary to produce and provide the products they supply to us. Any adverse impacts to thoseindustries could have a ripple effect on these vendors, which could adversely impact their ability to supply us at levels we consider necessary or appropriatefor our business, or at all. Any such disruptions could negatively impact our ability to deliver products and services to our customers, which in turn couldhave an adverse impact on our business, operating results, financial condition or cash flow.Risks associated with currency volatility could harm our business.Approximately 52% of our net sales for the fiscal year ended December 31, 2010 were from foreign sales. While the recent relative volatility of theU.S. dollar to other currencies has impacted our businesses’ sales, profitability and cash flows as the results of non-U.S. operations have decreased whenreported in U.S. dollars, we cannot predict the rate at which the U.S. dollar will trade against other currencies in the future. If the U.S. dollar were tosubstantially strengthen, making the dollar significantly more valuable relative to other currencies in the global market, such an increase could harm ourability to compete, and therefore, materially and adversely affect our financial condition and our results of operations. More specifically, a significant portionof the products we sell are sourced from China and other Southeast Asian countries and are paid for in U.S. dollars. Thus, movements of their local currency tothe U.S. dollar have the same impacts as raw material price changes in addition to the currency translation impact noted above. 12Table of ContentsRisks associated with outsourcing the production of certain of our products could harm our business.Historically, we have outsourced certain manufacturing functions to third-party service providers in China and other countries. Outsourcing generates anumber of risks, including decreased control over the manufacturing process potentially leading to production delays or interruptions, inferior productquality control and misappropriation of trade secrets. In addition, performance problems by these third-party service providers could result in cost overruns,delayed deliveries, shortages, quality issues or other problems, which could result in significant customer dissatisfaction and could materially and adverselyaffect our business, financial condition and results of operations.If one or more of these third-party service providers becomes insolvent or unable or unwilling to continue to provide services of acceptable quality, atacceptable costs, in a timely manner or any combination thereof, our ability to deliver our products to our customers could be severely impaired. Furthermore,the need to identify and qualify substitute service providers or increase our internal capacity could result in unforeseen operational problems and additionalcosts. Substitute service providers might not be available or, if available, might be unwilling or unable to offer services on acceptable terms. Moreover, ifcustomer demand for our products increases, we may be unable to secure sufficient additional capacity from our current service providers, or others, oncommercially reasonable terms, if at all.We depend on GMP Co. Ltd. to supply many of the laminating machines we distribute, and any inability of GMP Co. Ltd. to perform its obligationscould harm our business.We rely on GMP Co. Ltd., in which we hold a minority equity interest, as our sole supplier of many of the laminating machines we distribute. GMP maynot be able to continue to perform any or all of its obligations to us. GMP’s equipment manufacturing facility is located in the Republic of Korea, and itsability to supply us with laminating machines may be affected by Korean and other regional or worldwide economic, political or governmental conditions.Additionally, GMP has a highly leveraged capital structure and its ability to continue to obtain financing is required to ensure the orderly continuation of itsoperations. If GMP became incapable of supplying us with adequate equipment, and if we could not locate a suitable alternative supplier in a timely manneror at all, and negotiate favorable terms with such supplier, it would have a material adverse effect on our business.Any inability to secure, protect and maintain rights to intellectual property could harm our business.We own and license many patents, trademarks, brand names and trade names that are, in the aggregate, important to our business. The loss of anyindividual patent or license may not be material to us taken as a whole, but the loss of a number of patents or licenses that represent principal portions of ourbusiness, or expenses related to defending or maintaining the patents or licenses, could have a material adverse effect on our business.We may become involved in intellectual property claims being asserted against us that could cause us to incur substantial costs, divert the efforts ofour management, and require us to pay substantial damages or require us to obtain a license, which might not be available on reasonable terms, if at all. Wecould also incur substantial costs to pursue legal actions relating to the unauthorized use by third parties of our intellectual property, which could have amaterial adverse effect on our business, results of operation or financial condition. If our brands become diluted, if our patents are infringed or if ourcompetitors introduce brands and products that cause confusion with our brands in the marketplace, the value that our consumers associate with our brandsmay become diminished, which could negatively impact our sales. If third parties assert claims against our intellectual property rights and we are not able tosuccessfully resolve those claims, or our intellectual property becomes invalidated, we could lose our ability to use the technology, brand names or otherintellectual property that were the subject of those claims, which, if such intellectual property is material to the operation of our business or our financialresults, could have a material adverse effect on our business, financial condition and results from operations. 13Table of ContentsCertain of our patents covering products in the computer security category begin to expire in January 2012. We recognized approximately $7.5million, $4.6 million and $7.6 million in royalty revenue related to these patents in the years ended December 31, 2010, 2009 and 2008, respectively. Oncethese patents expire, competitors may be able to legally utilize our technology and competition could increase, resulting in the Company realizing lowergross margin from the loss of royalty receipts and possibly lower gross margin for certain of our products. There can be no assurance that the royalty incomewe currently receive pursuant to license agreements covering the patents that will expire can be replaced, or that we will not experience a decline in grossprofit margin on related products.Our success depends on our ability to attract and retain qualified personnel.Our success will depend on our ability to attract and retain qualified personnel, including executive officers and other key management personnel. Wemay not be able to attract and retain qualified management and other personnel necessary for the development, manufacture and sale of our products, and keyemployees may not remain with us in the future. If we do not retain our key employees, we may experience substantial disruption in our businesses. The lossof key management personnel or other key employees or our potential inability to attract such personnel may adversely affect our ability to manage ouroverall operations and successfully implement our business strategy.We are subject to global environmental regulation and environmental risks.We and our operations, both in the United States and abroad, are subject to national, state, provincial and/or local environmental laws and regulationsthat impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, certain materialsand waste. We are also subject to laws regulating the content of toxic chemicals and materials in the products we sell. Environmental laws and regulationscan be complex and may change often. Capital and operating expenses required to comply with environmental laws and regulations can be significant, andviolations may result in substantial fines, penalties and civil damages. The costs of complying with environmental laws and regulations and any claimsconcerning noncompliance, or liability with respect to contamination in the future could have a material adverse effect on our financial condition or resultsof operations.Product liability claims or regulatory actions could adversely affect our financial results or harm our reputation or the value of our end-user brands.Claims for losses or injuries purportedly caused by some of our products arise in the ordinary course of our business. In addition to the risk ofsubstantial monetary judgments, product liability claims or regulatory actions could result in negative publicity that could harm our reputation in themarketplace or the value of our end-user brands. We also could be required to recall and possibly discontinue the sale of possible defective or unsafeproducts, which could result in adverse publicity and significant expenses. Although we maintain product liability insurance coverage, potential productliability claims are subject to a self-insured deductible or could be excluded under the terms of the policy.ITEM 1B. UNRESOLVED STAFF COMMENTSNone. 14Table of ContentsITEM 2. PROPERTIESWe have manufacturing facilities in North America, Europe and Australia, and maintain distribution centers in relation to the regional markets weservice. We lease our principal U.S. headquarters in Lincolnshire, Illinois. The following table indicates the principal manufacturing and distributionfacilities of our subsidiaries as of December 31, 2010: Location Functional Use Owned/Leased U.S. Properties: Ontario, California Distribution/Manufacturing Leased Booneville, Mississippi Distribution/Manufacturing Owned/Leased Ogdensburg, New York Distribution/Manufacturing Owned/Leased East Texas, Pennsylvania Distribution/Manufacturing/Office Owned Pleasant Prairie, Wisconsin Distribution/Manufacturing Leased Non-U.S. Properties: Sydney, Australia Distribution/Manufacturing/Office Owned/Leased Brampton, Canada Distribution/Manufacturing/Office Leased Tabor, Czech Republic Manufacturing Owned Vozicka, Czech Republic Distribution Owned Denton, England Manufacturing Owned Halesowen, England Distribution Owned Lillyhall, England Manufacturing Leased Tornaco, Italy Distribution Leased Lerma, Mexico Manufacturing/Office Owned Born, Netherlands Distribution Leased Wellington, New Zealand Distribution/Office Owned Arcos de Valdevez, Portugal Manufacturing Owned We believe that the properties are suitable to the respective businesses and have production capacities adequate to meet the needs of the businesses.ITEM 3. LEGAL PROCEEDINGSWe are, from time to time, involved in routine litigation incidental to our operations. None of the legal proceedings in which we are currently involved,individually or in the aggregate, is material to our consolidated financial condition or results of operations nor are we aware of any material pending orcontemplated proceedings. We intend to vigorously defend, or resolve by settlement, any such matters as appropriate.ITEM 4. (REMOVED AND RESERVED) 15Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “ABD.” The following table sets forth, for the periodsindicated, the high and low sales prices for our common stock as reported on the NYSE for 2009 and 2010: High Low 2009 First Quarter $4.79 $0.67 Second Quarter 3.79 0.97 Third Quarter 7.67 2.24 Fourth Quarter 7.80 5.74 2010 First Quarter $8.62 $5.92 Second Quarter 9.47 4.93 Third Quarter 6.81 4.63 Fourth Quarter 8.89 5.52 As of February 1, 2011, the Company had approximately 12,115 registered holders of its common stock.Dividend PolicyWe have not paid any dividends on our common stock since becoming a public company. We intend to retain any future earnings to fund thedevelopment and growth of our business and reduce our indebtedness. Currently our debt agreements restrict our ability to make dividend payments and wedo not anticipate paying any cash dividends in the foreseeable future. Any determination as to the declaration of dividends is at our board of directors’ solediscretion based on factors it deems relevant. 16Table of ContentsSTOCK PERFORMANCE GRAPHThe following graph compares the cumulative total stockholder return on our common stock to that of the S&P Office Services and Supplies(SuperCap) Index and the Russell 2000 Index assuming an investment of $100 in each from December 31, 2005 through December 31, 2010. Cumulative Total Return 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 ACCO Brands Corporation $100.00 $108.04 $65.47 $14.08 $29.71 $34.78 Russell 2000 100.00 118.37 116.51 77.15 98.11 124.46 S & P Office Services & Supplies (SuperCap) 100.00 113.52 100.99 62.69 73.84 87.28 17Table of ContentsITEM 6. SELECTED FINANCIAL DATASELECTED HISTORICAL FINANCIAL DATAThe following table sets forth our selected consolidated financial data. The selected consolidated financial data as of and for the five fiscal years endedDecember 31 are derived from our consolidated financial statements. The data should be read in conjunction with the consolidated financial statements andrelated notes included elsewhere in this annual report. Year Ended December 31, 2010 2009 2008 2007 2006 (in millions of dollars, except per share data) Income Statement Data: Net sales $1,330.5 $1,272.5 $1,578.2 $1,834.8 $1,847.0 Cost of products sold(1) 915.1 893.2 1,094.4 1,262.3 1,305.2 Gross profit 415.4 379.3 483.8 572.5 541.8 Operating costs and expenses: Advertising, selling, general and administrative expenses(1) 294.0 273.1 379.0 433.5 432.0 Amortization of intangibles 6.9 7.2 7.7 7.9 8.4 Restructuring charges (0.5) 17.4 28.8 21.0 44.1 Goodwill and asset impairment charges(2) — 1.8 274.4 2.3 — Total operating costs and expenses 300.4 299.5 689.9 464.7 484.5 Operating income (loss) 115.0 79.8 (206.1) 107.8 57.3 Interest expense, net 78.2 67.0 63.7 64.1 61.1 Income (loss) from continuing operations(3) 11.5 (115.8) (263.0) 34.0 2.1 Per common share: Income (loss) from continuing operations(3) Basic $0.21 $(2.13) $(4.85) $0.63 $0.04 Diluted $0.20 $(2.13) $(4.85) $0.62 $0.04 Balance Sheet Data (at year end): Total assets $1,149.6 $1,106.8 $1,282.2 $1,898.5 $1,849.6 External debt 727.6 725.8 708.7 775.3 805.1 Total stockholders’ equity (deficit) (79.8) (117.2) (3.4) 438.3 384.0 Other Data: Cash provided by operating activities $54.9 $71.5 $37.2 $81.2 $120.9 Cash used by investing activities 14.9 3.9 18.7 55.2 21.4 Cash used by financing activities 0.1 44.5 37.7 35.4 145.0 (1)Income (loss) from continuing operations was impacted by certain other charges that have been recorded within cost of products sold, and advertising,selling, general and administrative expenses. These charges are incremental to the cost of the Company’s underlying restructuring actions and do notqualify as restructuring. These charges include redundant warehousing or storage costs during the transition to new distribution centers, equipment andother asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities, certain costs associated withthe Company’s debt refinancing and employee retention incentives. Within cost of products sold on the Consolidated Statements of Operations for theyears ended December 31, 2009, 2008, 2007 and 2006, these charges totaled $3.4 million, $7.5 million, $17.2 million and $10.8 million, respectively.Within advertising, selling, general and administrative expenses on the Consolidated Statements of Operations for the years ended December 31, 2009,2008, 2007 and 2006, these charges totaled $1.2 million, $3.1 million, $16.3 million and $10.8 million, respectively. Included within the 2008 result,is a charge for $4.2 million related to the exit of the 18Table of Contents Company’s former CEO, a $3.5 million gain on the sale of a manufacturing facility and net gains of $2.4 million on the sale of three additionalproperties. The Company did not incur restructuring and integration charges in 2010.(2)The following table sets forth the Company’s pre-tax impacts of the non-cash goodwill and asset impairment charges recorded during 2009, 2008 and2007, respectively. For a further discussion of the impairment charges, see Note 8, Goodwill and Identifiable Intangible Assets, to our consolidatedfinancial statements, contained in Item 8 of this report. (in millions of dollars) 2009 2008 2007 Continuing Operations Segment: ACCO Brands Americas $0.9 $160.6 $1.6 ACCO Brands International 0.9 111.0 0.7 Computer Products Group — 2.8 — Total Continuing Operations $1.8 $274.4 $2.3 (3)During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S.deferred taxes. For a further discussion of the valuation allowance, see Note 10, Income Taxes, to our consolidated financial statements, contained inItem 8 of this report. 19Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSINTRODUCTIONACCO Brands Corporation is one of the world’s largest suppliers of select categories of branded office products (excluding furniture, computers,printers and bulk paper) to the office products resale industry. We design, develop, manufacture and market a wide variety of traditional and computer-relatedoffice products, supplies, binding and laminating equipment and related consumable supplies, personal computer accessory products, paper-based timemanagement products and presentation aids and products. Through a focus on research, marketing and innovation, we seek to develop new products thatmeet the needs of our consumers and commercial end-users, which we believe will increase the product positioning of our brands. We compete through abalance of innovation, a low-cost operating model and an efficient supply chain. We sell our products primarily to markets located in North America, Europeand Australia. Our brands include GBC, Kensington, Quartet, Rexel, Swingline, Wilson Jones, Marbig, NOBO and Day-Timer, among others.The majority of our office products are used by businesses. Most of these end-users purchase our products from our customers, which includecommercial contract stationers, retail superstores, wholesalers, resellers, mail order and internet catalogs, mass merchandisers, club stores and dealers. We alsosupply certain of our products directly to commercial end-users and to the educational market. Historically we have targeted the premium-end of the productcategories in which we compete. However, we also supply private label products for our customers where we believe we have an economic advantage orwhere it is necessary to merchandise a complete category.Our leading brand positions provide the scale to enable us to invest in product innovation and drive market growth across our product categories. Inaddition, the expertise we use to satisfy the exacting technical specifications of our more demanding commercial customers is in many instances the basis forexpanding our products and innovations to consumer products.Our current strategy centers on a combination of growing sales and market share and generating acceptable profitability and financial returns.Specifically, we have substantially reduced our operating expenses and seek to leverage our platform for organic growth through greater consumerunderstanding, product innovation, marketing and merchandising, disciplined category expansion including broader product penetration and possiblestrategic transactions and continued cost realignment. To achieve these goals, we plan to continue to execute the following strategies: (1) invest in research,marketing and innovation, (2) penetrate the full product spectrum of our categories and (3) opportunistically pursue strategic transactions.In June 2009, the Company completed the sale of its commercial print finishing business for final gross proceeds of $16.2 million, after final workingcapital adjustments made during the third quarter. As a result of the adjustments, the Company received net cash proceeds before expenses of $12.5 millionand a $3.65 million note due from the buyer payable in installments of $1.325 million in June, 2011 and $2.325 million in June, 2012. Interest on the unpaidbalance is payable at the rate of 4.9 percent per annum. The gross proceeds received are before fees and expenses related to the transactions and provisionsarising from continuing litigation related to the transaction. The commercial print finishing business has been classified as a discontinued operation in ourconsolidated financial statements for all periods presented. For further information on the Company’s discontinued operations see Note 18, DiscontinuedOperations, to our consolidated financial statements contained in Item 8 of this report.Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financialstatements of ACCO Brands Corporation and the accompanying notes contained therein. Unless otherwise noted, the following discussion pertains only toour continuing operations. 20®®®®®®Table of ContentsOverview of Company PerformanceACCO Brands’ results are dependent upon a number of factors affecting sales, including pricing and competition. Historically, key drivers of demandin the office products industry have included trends in white collar employment levels, gross domestic product (GDP) and growth in the number of smallbusinesses and home offices together with increasing usage of personal computers. Pricing and demand levels for office products have also reflected asubstantial consolidation within the global resellers of office products. This consolidation has led to multiple years of industry pricing pressure and a moreefficient level of asset utilization by customers, resulting in lower sales volumes for suppliers of office products. We sell products in highly competitivemarkets, and compete against large international and national companies, regional competitors and against our own customers’ private-label direct sourcing.With 52% of revenues for the fiscal year ended December 31, 2010 arising from foreign operations, exchange rate fluctuations can play a major role inour reported results. Foreign currency fluctuations impact our business in two important ways. The first and more obvious foreign exchange impact comesfrom the translation of our foreign operations results into U.S. dollars: a weak US dollar therefore benefits ACCO Brands and a strong U.S. dollar will diminishthe contribution from our foreign operations. The second, but potentially larger and less obvious impact is from foreign currency fluctuations on our cost ofgoods sold. A significant portion of the products we sell worldwide are sourced from Asia (approximately 70%) and paid for in U.S. dollars. However, ourinternational operations sell in their local currency, and are exposed to their domestic currency movements against the U.S. dollar. A strong U.S. dollar,therefore, increases our cost of goods sold and a weak U.S. dollar decreases our cost of goods sold for our international operations.We respond to these market changes by adjusting our sales prices, but this response can be difficult during periods of rapid fluctuation. A significantportion of our foreign-currency cost of goods purchases is hedged with forward foreign currency contracts, which delays the economic effect of a fluctuatingU.S. dollar helping us align market pricing changes. The financial impact on our business of foreign exchange movements for cost of goods is also furtherdelayed by inventory, which is valued on a first- in, first-out (“FIFO”) basis. The two foreign exchange exposures impact the business at different times: thetranslation of results is impacted immediately when the exchange rates move, whereas the impact on our cost of goods is typically delayed up to six monthsdue to a combination of currency hedging and the inventory cycle.During 2010, the cost of certain commodities used to make our products increased significantly, negatively impacting our cost of goods, mainly forproducts sold in the second half of the year. We continue to monitor commodity costs and work with our suppliers and customers to negotiate balanced andfair pricing that best reflect the current economic environment. Select price increases took effect during the third quarter of 2010. However, these priceincreases were negotiated before the most significant commodity cost increases and therefore only partially offset the higher commodity costs. Additionally,the Company has implemented price increases in the first quarter of 2011 which are intended to further help offset those additional cost increases.The Company did not initiate restructuring and integration charges in 2010, but has adjusted outstanding reserve estimates as necessary. Cashpayments related to prior years’ restructuring and integration activities amounted to $7.5 million (excluding capital expenditures) during 2010. It is expectedthat additional disbursements of $3.0 million will be completed by the end of 2011 as the Company spends amounts accrued on its balance sheet. Anyresidual cash payments beyond 2011 are anticipated to be offset by expected proceeds from real estate held for sale. Additionally, in the first half of 2011, theCompany anticipates incurring $6 to $9 million of cash expenses related to the rationalization of its European operations. It is expected that savings realizedin the second half of 2011 will offset much of the costs related to this rationalization.The year-over-year comparative results were impacted by $26.8 million of additional salary, management incentive and employee benefits expense forthe twelve months ended December 31, 2010, whereas the prior year benefited from temporary salary reductions and suspension of certain benefit plans in theU.S. 21Table of ContentsThe Company funds liquidity needs for capital investment, working capital and other financial commitments through cash flow from continuingoperations and its $175.0 million revolving credit facility. Based on our borrowing base, as of December 31, 2010, approximately $168.1 million remainedavailable for borrowing under our revolving credit facility.During the second quarter of 2009, the Company determined that it was no longer more likely than not that its U.S. deferred tax assets would berealized, and as a result, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S. deferred tax assets. Fora further discussion see Note 10, Income Taxes, under Item 8, Financial Statements and Supplementary Data. In addition, during the second quarter of 2009,the Company recorded a non-cash impairment charge of $1.8 million on certain of its trade names.Refinancing TransactionsOn September 30, 2009, the Company issued $460.0 million aggregate principal amount of its 10.625% Senior Secured Notes due March 15, 2015 (the“Senior Secured Notes”), and entered into a four-year senior secured asset-based revolving credit facility providing for borrowings of up to $175.0 millionsubject to borrowing base limitations (the “ABL Facility”). Initial borrowings under the ABL Facility were $16.1 million. These funds, together with the$453.1 million in proceeds from the issuance of the Senior Secured Notes, were used to (i) repay all outstanding borrowings under and terminate theCompany’s prior senior secured credit agreements, (ii) repay all outstanding borrowings under and terminate the Company’s accounts receivablesecuritization program, (iii) terminate the Company’s cross-currency swap agreement, (iv) repurchase approximately $29.1 million aggregate principalamount of its 7 5/8% senior subordinated notes due August 15, 2015 (“Senior Subordinated Notes”) and (v) pay the fees, expenses and other costs relating tosuch transactions (collectively the “Refinancing Transactions”).On September 30, 2009, the Company repurchased $29.1 million of outstanding Senior Subordinated Notes for a purchase price of $24.2 million,which resulted in a pre-tax gain of $4.9 million on the early extinguishment of debt and is included in Other (income) expense, net in the consolidatedstatements of operations.For a further discussion on the Company’s refinancing transactions, see Note 3, Long-term debt and Short-term borrowings, under Item 8, FinancialStatements and Supplementary Data.Fiscal 2010 versus Fiscal 2009The following table presents the Company’s results for the years ended December 31, 2010 and 2009. Year EndedDecember 31, Amount of Change (in millions of dollars) 2010 2009 $ % Net sales $1,330.5 $1,272.5 $58.0 5% Cost of products sold 915.1 893.2 21.9 2% Gross profit 415.4 379.3 36.1 10% Gross profit margin 31.2% 29.8% 1.4pts Advertising, selling, general and administrative expenses 294.0 273.1 20.9 8% Restructuring charges (0.5) 17.4 (17.9) (103)% Goodwill and asset impairment charges — 1.8 (1.8) NM Operating income 115.0 79.8 35.2 44% Operating income margin 8.6% 6.3% 2.3pts Interest expense, net 78.2 67.0 11.2 17% Equity in earnings of joint ventures (8.3) (4.4) (3.9) (89)% Other expense, net 1.4 5.1 (3.7) (73)% Income taxes 32.2 127.9 (95.7) (75)% Effective tax rate 73.7% NM NM Income (loss) from continuing operations 11.5 (115.8) 127.3 110% Income (loss) from discontinued operations, net of income taxes 0.9 (10.3) 11.2 109% Net income (loss) 12.4 (126.1) 138.5 110% 22Table of ContentsNet SalesNet sales increased $58.0 million, or 5%, to $1.3 billion led by solid performance in the Computer Products Group and translation gains from theweaker U.S. dollar relative to the prior year, which favorably impacted sales by 2%, or $30.7 million. All segments reported volume increases. Sales growthwas partially offset by reduced pricing in the International and Americas segments.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and freight and distribution costs, including depreciation related to assets used inthe manufacturing and distribution process, inbound and outbound freight, shipping and handling costs, purchasing costs associated with materials andpackaging used in the production processes. Cost of products sold increased $21.9 million, or 2%, to $915.1 million. The increase principally reflects theimpact of currency translation of $18.1 million, increased sales volume, and commodity and compensation cost increases, partially offset by improvedsourcing and production efficiencies.In addition, the prior-year period includes certain other charges that have been recorded within cost of products sold that did not qualify asrestructuring. Those charges include redundant warehousing or storage costs during the transition to a new distribution center, equipment and other assetmove costs, ongoing facility overhead and maintenance costs after exit and employee retention incentives. For the year ended December 31, 2009, thosecharges totaled $3.4 million.Gross ProfitGross profit increased $36.1 million, or 10%, to $415.4 million and gross profit margin increased to 31.2% from 29.8%. The increases in gross profitand margin were primarily due to increased sales volume, favorable product mix and sourcing, production, freight and distribution efficiencies compared tothe period last year, partially offset by increased commodity costs and compensation costs. Gross profit also increased from favorable currency translation of$12.6 million.SG&A (Advertising, selling, general and administrative expenses)Advertising, selling, general and administrative expenses (“SG&A”) include advertising, marketing, selling, research and development, customerservice, depreciation related to assets outside the manufacturing and distribution processes and all other general and administrative expenses outside themanufacturing and distribution functions (e.g., finance, human resources, information technology, etc.). SG&A increased $20.9 million, or 8%, to $294.0million, with currency translation contributing $4.9 million of the increase and, as a percentage of sales, SG&A increased to 22.1% from 21.5%. The currentyear results include $24.2 million of additional salary, management incentive and employee benefits expense. The lower expense in 2009 was largely due totemporary reductions in salary and benefits.In addition, certain other charges have been recorded within SG&A. These charges are incremental to the cost of the Company’s underlyingrestructuring actions and do not qualify as restructuring. These charges include redundant costs during the transition to a new location, asset move costs,facility overhead and maintenance costs after exit, gains on the sale of exited facilities, certain costs associated with the Company’s debt refinancing andemployee retention incentives. For the year ended December 31, 2009, those charges totaled $1.2 million.Operating IncomeOperating income increased 44%, or $35.2 million, to $115.0 million principally as a result of favorable currency translation contributing $7.6 million,and the absence of $23.8 million in impairment, restructuring and other charges incurred in the prior year. As a percentage of sales, operating incomeimproved to 8.6% from 6.3%. The improvement in operating income margin was driven by improved gross margin, as discussed above, and the decrease inimpairment, restructuring and other charges, which was partially offset by the SG&A increase as discussed above. 23Table of ContentsInterest Expense, Equity in Earnings of Joint Ventures and Other (Income) ExpenseInterest expense was $78.2 million compared to $67.0 million in the prior-year period. The increase principally reflects higher average interest ratesassociated with the Company’s refinancing, which was completed at the end of September 2009.Equity in earnings of joint ventures increased $3.9 million to $8.3 million reflecting higher revenue and reduced expenses related to an acquisitionmade by one of our unconsolidated joint ventures in the prior year.Other expense was $1.4 million, compared to $5.1 million in the prior-year period. In the prior year, in connection with the refinancing transactions,the Company recorded a $9.1 million loss on the early extinguishment of debt associated with the repayment of $403.0 million of borrowings outstandingunder its senior secured credit agreements and accounts receivable securitization facility, partially offset by a $4.9 million gain on the early extinguishmentof debt in connection with the repurchase of $29.1 million of Senior Subordinated Notes.Income TaxesFor the year ended December 31, 2010, the Company recorded income tax expense from continuing operations of $32.2 million on income beforetaxes of $43.7 million. This compares to prior year income tax expense from continuing operations of $127.9 million on income before taxes of $12.1million. During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance on its U.S. deferredtax assets. The high effective tax rate for 2010 is due to an increase in the valuation allowance of $15.7 million because no tax benefit is being provided onlosses incurred in the U.S. and certain foreign jurisdictions where valuation allowances are recorded against future tax benefits, and because of an $8.6million expense recorded to reflect the tax impact of foreign currency fluctuations on an intercompany debt obligation, partially offset by the benefit of a$2.8 million out-of-period adjustment recorded in the second quarter to increase deferred tax assets of a non- U.S. subsidiary.Income (Loss) from Continuing OperationsIncome from continuing operations was $11.5 million, or $0.20 per diluted share, compared to a loss of $115.8 million, or $2.13 per diluted share, inthe prior year.Income (Loss) from Discontinued OperationsIncome from discontinued operations was $0.9 million, or $0.02 per diluted share, compared to a $10.3 million loss, or $0.19 per diluted share, in theprior-year period. In June 2009, the Company completed the sale of its commercial print finishing business for final proceeds of $16.2 million, after finalworking capital adjustments made during the third quarter. As a result of the adjustments, the Company received net cash proceeds before expenses of $12.5million and a $3.65 million note due from the buyer payable in installments of $1.325 million in June, 2011 and $2.325 million in June, 2012. Interest on theunpaid balance is payable at the rate of 4.9 percent per annum. The sale resulted in a pre-tax loss for the year 2009 of $0.8 million ($1.1 million after-tax),which included a pre-tax pension curtailment gain of $0.5 million. During the fourth quarter of 2010, the Company completed the sale of a property formerlyoccupied by its commercial print finishing business, resulting in a gain on sale of $1.7 million. Also in 2010, the Company recorded a loss on sale of $0.1million ($0.2 million after-tax) related to the settlement of litigation attributable to the wind-down of the disposed operations. For a further discussion of theCompany’s discontinued operations see Note 18, Discontinued Operations, under Item 8, Financial Statements and Supplementary Data. 24Table of ContentsThe components of discontinued operations for the years ended December 31, 2010 and 2009 are as follows: (in millions of dollars) 2010 2009 Pre-tax income (loss) $1.4 $(9.0) Provision for income taxes 0.3 0.2 Loss on sale, net of tax (0.2) (1.1) Income (loss) from discontinued operations $0.9 $(10.3) Net Income (Loss)Net income was $12.4 million, or $0.22 per diluted share, compared to a net loss of $126.1 million, or $2.32 per diluted share in the prior year.Segment DiscussionACCO Brands AmericasResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2010 2009 $ % Net sales $688.3 $671.5 $16.8 3% Operating income 56.3 38.6 17.7 46% Operating income margin 8.2% 5.7% 2.5 pts Impairment, restructuring and other charges — 6.9 (6.9) NM ACCO Brands Americas net sales increased $16.8 million, or 3%, to $688.3 million. The favorable impact from foreign currency translation increasedsales by $12.1 million, or 2%. Sales volume increased 2% driven by growth in all markets, partially offset by reduced pricing.ACCO Brands Americas operating income increased $17.7 million, to $56.3 million, and operating income margin increased to 8.2% from 5.7% in theprior year period. The increase in operating income primarily reflects the impact of an improved gross margin resulting from improved product mix; sourcing,production, freight and distribution efficiencies; the absence of $6.9 million in impairment, restructuring and other charges incurred in the 2009 period; and$2.0 million of foreign exchange benefit. This increase was partially offset by $17.3 million of higher compensation expense resulting primarily fromtemporary salary reductions and suspension of management incentive programs and retirement plan contributions in 2009 together with increasedcommodity costs in 2010.ACCO Brands InternationalResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2010 2009 $ % Net sales $465.2 $438.0 $27.2 6% Operating income 36.8 27.4 9.4 34% Operating income margin 7.9% 6.3% 1.6pts Impairment, restructuring and other charges — 13.5 (13.5) NM ACCO Brands International net sales increased $27.2 million, or 6%, to $465.2 million. The favorable impact from foreign currency translationincreased sales by $18.7 million, or 4%. All regions experienced volume growth, offset by lower pricing, principally in Australia where foreign exchangevolatility required significant price increases in 2009, which were reversed in 2010. 25Table of ContentsACCO Brands International operating income increased $9.4 million, to $36.8 million, and operating income margin increased to 7.9% from 6.3% inthe prior-year period. The increase in operating income was primarily the result of the absence of $13.5 million in impairment, restructuring and other chargesincurred in the 2009 period. Reduced operating performance came from our European operations, which suffered increases in its cost of goods sold due tohigher commodity costs and weak local currencies versus the US dollar together with increased customer program costs. This decrease in operating incomewas partially offset by improved operating performance from our other international regions.Computer Products GroupResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2010 2009 $ % Net sales $177.0 $163.0 $14.0 9% Operating income 43.0 31.7 11.3 36% Operating income margin 24.3% 19.4% 4.9 pts Impairment, restructuring and other charges — 2.6 (2.6) NM Computer Products net sales increased $14.0 million, or 9%, to $177.0 million. The increase reflects strong growth in sales mainly from securityproducts in most regions. There was no net impact due to currency translation on the full year results.Operating income increased 36%, or $11.3 million, to $43.0 million, with operating income margins increasing to 24.3% from 19.4%. The increase inoperating income was principally due to higher royalty income from security products, favorable product mix, higher sales volumes and the absence of $2.6million in restructuring and other charges incurred in the 2009 period, partially offset by $4.0 million of higher compensation expense resulting primarilyfrom temporary salary reductions, and the suspension of management incentive programs and retirement plan contributions in 2009.Fiscal 2009 versus Fiscal 2008The following table presents the Company’s results for the years ended December 31, 2009 and 2008. Year EndedDecember 31, Amount of Change (in millions of dollars) 2009 2008 $ % Net sales $1,272.5 $1,578.2 $(305.7) (19)% Cost of products sold 893.2 1,094.4 (201.2) (18)% Gross profit 379.3 483.8 (104.5) (22)% Gross profit margin 29.8% 30.7% (0.9) pts Advertising, selling, general and administrative expenses 273.1 379.0 (105.9) (28)% Restructuring charges 17.4 28.8 (11.4) (40)% Goodwill and asset impairment charges 1.8 274.4 (272.6) (99)% Operating income (loss) 79.8 (206.1) 285.9 139% Operating income margin 6.3% NM NM Interest expense, net 67.0 63.7 3.3 5% Equity in earnings of joint ventures (4.4) (6.5) 2.1 32% Other (income) expense, net 5.1 (17.2) 22.3 130% Income taxes 127.9 16.9 111.0 NM Effective tax rate NM NM NM Loss from continuing operations (115.8) (263.0) 147.2 56% Loss from discontinued operations, net of income taxes (10.3) (76.2) 65.9 86% Net loss (126.1) (339.2) 213.1 63% 26Table of ContentsNet SalesNet sales decreased $305.7 million, or 19%, to $1.27 billion. The decline in sales was broad-based and occurred in every business unit, driven mainlyby weak consumer demand. The unfavorable impact of foreign currency translation reduced net sales by $57.1 million (4%). The decline in sales waspartially offset by price increases in international markets, which offset the adverse foreign currency effect on our Asian sourced cost of goods sold ininternational markets.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in themanufacturing and distribution process, inbound and outbound freight, shipping and handling costs, purchasing costs associated with materials andpackaging used in the production processes. Cost of products sold decreased $201.2 million, or 18%, to $893.2 million. The decrease principally reflects thedecrease in volume and the decrease from currency translation, partially offset by increased cost of goods from commodity costs and adverse foreign currencyeffect on our Asian sourced cost of goods sold in international markets.In addition, certain other charges have been recorded within cost of products sold. These charges are incremental to the cost of the Company’sunderlying restructuring actions but do not qualify as restructuring. These charges include redundant warehousing or storage costs during the transition tonew distribution centers, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, and employee retentionincentives. For the year ended December 31, 2009 and 2008, these charges totaled $3.4 million and $7.5 million, respectively.Gross ProfitGross profit decreased $104.5 million, or 22%, to $379.3 million. Currency translation adversely impacted gross profit by $17.7 million. Gross profitdecreased principally due to lower sales volume. Gross profit margin decreased to 29.8% from 30.7% due to adverse product mix and lower demand in ourdirect customer channel and higher commodity costs, reflecting the reduction in non-essential spending by customers and sustained weakness of the USdollar, respectively. Freight and distribution costs were also higher than planned as we continue to place great focus on our achievement of required customerservice metrics. Partly offsetting the decline were benefits from the flow through of price increases and product outsourcing savings.SG&A (Advertising, selling, general and administrative expenses)SG&A expenses include advertising, marketing, selling (including commissions), research and development, customer service, depreciation related toassets outside the manufacturing and distribution processes and all other general and administrative expenses outside the manufacturing and distributionfunctions (e.g., finance, human resources, information technology, etc.). SG&A decreased $105.9 million, or 28%, to $273.1 million, with favorable currencytranslation contributing $12.5 million, or 3% of the decline. As a percentage of sales, SG&A improved to 21.5% from 24.0% reflecting cost reductioninitiatives, which included reducing marketing and discretionary expenditures, temporary pay and benefit reductions for U.S. based employees, includingfreezing the U.S. pension plan and voluntary unpaid leave in Europe (which benefitted mainly the first half by $13.4 million). In addition, management againpaid minimal incentive plan payments, which was consistent with 2008.In addition, certain other charges have been recorded within SG&A. These charges are incremental to the cost of the Company’s underlyingrestructuring actions and do not qualify as restructuring. These charges include redundant costs during the transition to a new location, asset move costs,facility overhead and maintenance costs after exit, gains on the sale of exited facilities, certain costs associated with the Company’s debt refinancing andemployee retention incentives. For the year ended December 31, 2009 and 2008, these charges totaled $1.2 27Table of Contentsmillion and $3.1 million, respectively. Included within these amounts, in 2008, the Company recognized a $3.5 million gain on the sale of a manufacturingfacility and recorded net gains of $2.4 million on the sale of three additional properties.Operating Income (Loss)Operating income was $79.8 million compared to an operating loss of $206.1 million in the prior year. The increase in operating income wasprincipally driven by a net year over year decrease of $272.6 million in goodwill and trade name impairment charges lower marketing expenditures, thebenefits from cost reductions including lower payroll costs, partially offset by lower sales volume, adverse product mix and adverse foreign exchangetranslation of $4.9 million.Interest Expense, Equity in Earnings of Joint Ventures and Other (Income) ExpenseInterest expense increased $3.3 million to $67.0 million, reflecting higher interest rates for the last quarter from the Company’s new capital structure.Equity in earnings of joint ventures decreased $2.1 million to $4.4 million reflecting lower income from our unconsolidated joint ventures. Thedecrease reflects the economic slowdown, higher borrowing and other costs associated with a business acquisition made by the Australian joint venture in thefirst quarter of 2009 and adverse foreign currency translation.Other expense was $5.1 million, compared to income of $17.2 million in the prior-year period. In connection with the refinancing transactions thatoccurred in September 2009, the Company recorded a $9.1 million loss on the early extinguishment of debt associated with the repayment of $403.0 millionof borrowings outstanding under its senior secured credit agreements and accounts receivable securitization facility, partially offset by a $4.9 million gain onthe early extinguishment of debt in connection with the repurchase of $29.1 million of Senior Subordinated Notes. See Note 3, Long-term debt and Short-term borrowings, under Item 8, Financial Statements and Supplementary Data for a further discussion on the Company’s refinancing transactions. During2008, the Company purchased $49.6 million of its outstanding Senior Subordinated Notes resulting in gains of $19.0 million on the early extinguishment ofdebt.Income TaxesFor the year ended December 31, 2009, the Company recorded income tax expense of $127.9 million on income before taxes of $12.1 million. Thiscompares to income tax expense of $16.9 million on a loss before taxes of $246.1 million in the prior year period. During the second quarter of 2009, theCompany recorded a non-cash charge of $108.1 million to establish a valuation allowance on its U.S. deferred tax assets. Income tax expense in 2008 of$16.9 million included an increase in the valuation allowance of $27.4 million relating to certain foreign and domestic state deferred tax assets and tax losscarryforwards.Loss from Continuing OperationsLoss from continuing operations was $115.8 million, or $2.13 per diluted share, compared to a loss from continuing operations of $263.0 million or$4.85 per diluted share in the prior year.Loss from Discontinued OperationsLoss from discontinued operations was $10.3 million, or $0.19 per diluted share, compared to $76.2 million, or $1.41 per share, in the prior-yearperiod. In the first quarter of 2009 the Company recorded an additional charge of $3.3 million ($1.8 million after-tax) to reflect a change in the estimate of thefair value less the cost to dispose of its commercial print finishing business. In June 2009, the Company completed the sale of its commercial print finishingbusiness for final proceeds of $16.2 million, after final working capital adjustments 28Table of Contentsmade during the third quarter. As a result of the adjustments, the Company received net cash proceeds before expenses of $12.5 million and a $3.65 millionnote due from the buyer payable in installments of $1.325 million in June, 2011 and $2.325 million in June, 2012. Interest on the unpaid balance is payableat the rate of 4.9 percent per annum. The sale resulted in a pre-tax loss of $0.8 million ($1.1 million after-tax). The loss on sale includes a pre-tax pensioncurtailment gain of $0.5 million. During the year ended December 31, 2008, the Company recorded $84.8 million of goodwill and asset impairment charges.Included in this amount were charges to goodwill of $35.1 million, property, plant and equipment of $22.2 million, identifiable intangible assets of $10.5million and other current assets of $17.0 million. For a further discussion of the Company’s discontinued operations see Note 18, Discontinued Operations,under Item 8, Financial Statements and Supplementary Data.The components of discontinued operations for the years ended December 31, 2009 and 2008 are as follows: (in millions of dollars) 2009 2008 Pre-tax loss $(9.0) $(88.4) Provision (benefit) for income taxes 0.2 (12.2) Loss on sale, net of tax (1.1) — Loss from discontinued operations $(10.3) $(76.2) Net LossNet loss was $126.1 million, or $2.32 per diluted share, compared to a net loss of $339.2 million, or $6.26 per diluted share in 2008.Segment DiscussionACCO Brands AmericasResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2009 2008 $ % Net sales $671.5 $820.8 $(149.3) (18)% Operating income (loss) 38.6 (134.0) 172.6 NM Operating income margin 5.7% NM NM Impairment, restructuring and other charges 6.9 181.5 (174.6) NM ACCO Brands Americas net sales decreased $149.3 million, or 18%, to $671.5 million. The decrease reflects volume declines in all markets driven byweak consumer demand. Demand was lower in direct and commercial channels than at retail and reflects the higher level of durable products in the productmix that have experienced greater volume decline due to the poor economy and are sold in those channels. Further contributing to the decline in net saleswas $16.5 million of adverse foreign currency translation, which accounted for 2% of the overall sales decline.ACCO Brands Americas operating income was $38.6 million compared to an operating loss of $134.0 million in the prior year. The increase inoperating income was principally due to a net year-over-year decrease of $159.7 million in goodwill and trade name impairment charges, reducedrestructuring and other charges and other cost reductions, including reduced marketing expenditures, headcount reductions, temporary salary and benefitreductions in the first two quarters, partially offset by lower sales volumes, commodity cost increases, and freight and distribution expense spending whichwas higher than planned and which we considered necessary to achieve our improved customer service metrics. 29Table of ContentsACCO Brands InternationalResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2009 2008 $ % Net sales $438.0 $551.5 $(113.5) (21)% Operating income (loss) 27.4 (73.8) 101.2 NM Operating income margin 6.3% NM NM Impairment, restructuring and other charges 13.5 121.3 (107.8) (89)% ACCO Brands International net sales decreased $113.5 million, or 21%, to $438.0 million. The decrease reflected volume declines, principally inEurope, driven by weak consumer demand particularly for durable products and a small amount ($7.4 million) of lost product placement (share loss). Inaddition, the unfavorable impact of foreign currency translation reduced net sales by 6%, or $33.6 million. These items were partially offset by the flow-through from price increases.ACCO Brands International operating income was $27.4 million compared to an operating loss of $73.8 million in the prior year. The increase inoperating income was principally due to a net year-over-year decrease of $110.1 million in goodwill and trade name impairment charges and other costsavings associated with reduced selling and marketing expenditures, lower headcount, and business integration activities, partially offset by lower salesvolumes, higher pension costs, and freight and distribution expense spending which was higher than planned and which we considered necessary to achieveour improved customer service metrics. Price increases approximately offset higher Asian-sourced costs and freight due to the relative strength of the U.S.dollar.Computer Products GroupResults Year EndedDecember 31, Amount of Change (in millions of dollars) 2009 2008 $ % Net sales $163.0 $205.9 $(42.9) (21)% Operating income 31.7 30.1 1.6 5% Operating income margin 19.4% 14.6% 4.8 pts Impairment, restructuring and other charges 2.6 6.9 (4.3) (62)% Computer Products net sales decreased $42.9 million, or 21%, to $163.0 million. The decrease in sales was primarily due to lower sales volumes fromweak demand, particularly in the United States and the United Kingdom, as well as $7.0 million of unfavorable currency translation that accounted for 3% ofthe total sales decline. Contributing to the decline in the United States was the loss of Circuit City as a major customer as a result of its bankruptcy in thefourth quarter of 2008, which accounted for 7% of the decline in the year.Operating income increased $1.6 million, or 5%, to $31.7 million, and operating income margin increased to 19.4% from 14.6%. The increase inoperating income was principally due to lower impairment, restructuring and other charges, cost-reductions including reduced marketing, legal and otherdiscretionary expenditures, and temporary salary reductions, partially offset by lower sales volumes. The improvement in operating margin resulted fromsubstantial reductions in advertising, selling, general and administrative expenses including the temporary benefits from salary and benefit reductions forU.S. employees. Excess inventory largely resulting from the bankruptcy of Circuit City was fully liquidated during the year at favorable recovery rates,resulting in a $1.3 million credit in 2009. 30Table of ContentsLiquidity and Capital ResourcesOur primary liquidity needs are to service indebtedness, fund capital expenditures and support working capital requirements. Our principal sources ofliquidity are cash flows from operating activities, cash and cash equivalents held and borrowings under our ABL Facility (defined below). Because of theseasonality of our business we typically carry greater cash balances in the third and fourth quarters of our fiscal year. Lower cash balances are typicallycarried during the first and second quarters due to the timing of payments made by the Company pursuant to customer rebate and management incentiveprograms. We maintain adequate financing arrangements at market rates. Our priority for cash flow over the near term, after internal growth, is to invest in newproducts through both organic development and acquisitions and to fund the reduction of debt.Refinancing TransactionsOn September 30, 2009, the Company issued $460.0 million aggregate principal amount of its 10.625% Senior Secured Notes due March 15, 2015,and entered into a four-year senior secured asset-based revolving credit facility (“ABL Facility”) providing for borrowings of up to $175.0 million subject toborrowing base limitations including a $40 million sub-limit for letters of credit and an optional $50 million accordion feature (available to fund workingcapital growth if needed). Initial borrowings under the ABL Facility were $16.1 million. As of December 31, 2010 and 2009 there were no borrowingsoutstanding under the ABL Facility. These funds together with the $453.1 million in proceeds from the issuance of the Senior Secured Notes were used to(i) repay all these outstanding borrowings under and terminate the Company’s prior senior secured credit agreements, (ii) repay all outstanding borrowingsunder and terminate an accounts receivable securitization program, (iii) terminate a cross-currency swap agreement, (iv) repurchase approximately $29.1million aggregate principal amount of the Senior Subordinated Notes due August 15, 2015 and (v) pay the fees, expenses and other costs related to suchtransactions.See Note 3, Long-term debt and Short-term borrowings, under Item 8, Financial Statements and Supplementary Data for a further discussion on theCompany’s refinancing transactions.Loan CovenantsThe indentures governing our Senior Secured Notes and Senior Subordinated Notes do not contain quarterly or annual financial performancecovenants. However, these indentures restrict, among other things, ACCO Brands’ ability and the ability of ACCO Brands’ restricted subsidiaries to, subjectto certain exceptions, incur additional indebtedness, create liens, pay dividends, make certain investments, enter into certain types of transactions withaffiliates and provide for limitations on any restricted subsidiary’s ability to pay dividends, make loans, or transfer assets to ACCO Brands or other restrictedsubsidiaries.The ABL Facility contains customary terms and conditions, including limitations on liens and indebtedness, asset sales, and intercompanytransactions. A springing fixed charge financial covenant would be triggered if the excess availability under the ABL Facility falls below $20.0 million or15% of total commitments. The ABL Facility also contains cash dominion provisions that apply in the event that the Company’s excess availability fails tomeet certain thresholds. Further, it limits the ability of the Company to repurchase Senior Subordinated Notes while the facility is utilized.The Senior Secured Notes, Senior Subordinated Notes and the ABL Facility contain customary events of default, including payment default, breach ofrepresentation and warranties, covenant defaults, cross-defaults and cross-accelerations, certain bankruptcy or insolvency events, judgment defaults, certainERISA-related events, changes in control or ownership and invalidity of any collateral or guarantee or other document. Any inability to pay interest on, orprincipal of, our outstanding debt as it becomes due could result in an event of default under any of the agreements governing any of our debt obligations, inwhich case our lenders could elect to declare all amounts outstanding to be immediately due and payable. If the lenders accelerate the payment of any of ourindebtedness, our assets may not be sufficient to repay in full such indebtedness and any other indebtedness that would become due as a result of suchacceleration and, if we were unable to obtain replacement financing or any 31Table of Contentssuch replacement financing was on terms that were less favorable than the indebtedness being replaced, our liquidity and results of operations would bematerially and adversely affected.Compliance with Loan CovenantsBased on our borrowing base, as of December 31, 2010, the amount available for borrowings under the Company’s ABL Facility was $168.1 million(allowing for $6.9 million of letters of credit outstanding on that date). The Company’s ABL Facility would not be affected by a change in its credit rating.As of and for the period ended December 31, 2010, the Company was in compliance with all applicable loan covenants.Guarantees and SecurityThe Senior Secured Notes are guaranteed on a senior secured basis by the Company’s existing and future domestic subsidiaries, with certainexceptions, and are secured on a first-priority basis by a lien on substantially all of the Company’s and guarantors’ present and future assets (other thanreceivables and inventory and their related general intangibles and certain other assets), including equipment, certain owned and leased real propertyinterests, trade names and certain other intellectual property, certain intercompany receivables and all present and future equity interests of each of theCompany’s and guarantors’ directly owned domestic subsidiaries and up to 65% of the present and future equity interests of certain of the Company’s and theguarantors’ directly owned foreign subsidiaries, in each case subject to certain exceptions and customary permitted liens. The Senior Secured Notes and therelated guarantees also are secured on a second-priority basis by a lien on the assets that secure the Company’s and the guarantors’ obligations under the ABLFacility, including accounts receivable, inventory and the other assets identified as excluded first-lien assets above.The Company’s obligations under the ABL Facility are guaranteed by the same subsidiaries that guarantee the Senior Secured Notes together withcertain of the Company’s foreign subsidiaries and are secured on a first-priority basis by a lien on substantially all of the Company’s and such guarantors’accounts receivable, inventory and the other assets identified as excluded first-lien assets above with respect to the Notes.Cash FlowFiscal 2010 versus Fiscal 2009Cash Flow from Operating ActivitiesFor the year ended December 31, 2010, cash provided from operating activities was $54.9 million, compared to $71.5 million in the prior year. Netincome for 2010 was $12.4 million. The net loss for 2009 was $126.1 million, and was principally the result of a $108.1 million non-cash charge related tothe impairment of U.S. deferred tax assets. Non-cash adjustments to pre-tax net income in 2010 totaled $46.2 million, compared to $59.9 million in 2009. Pre-tax net income adjusted for non-cash charges was $91.2 million in 2010 compared to $62.2 million in 2009. 2010 2009 Pre-tax Net Income—Continuing Operations $43.7 $12.1 Pre-tax Net Income/(Loss)—Discontinued Operations 1.3 (9.8) Pre-tax Net Income 45.0 2.3 Pre-tax Non-cash Charges 46.2 59.9 Pre-tax Net Income Adjusted for Non-cash Charges $91.2 $62.2 (1)The Company believes this to be a meaningful indicator of cash flow from operations, as it eliminates non-cash charges. 32(1)Table of ContentsThe table below shows our cash flow from accounts receivable, inventories and accounts payable for the years ended December 31, 2010 and 2009,respectively: 2010 2009 Accounts Receivable $(18.5) $41.5 Inventories (9.8) 78.7 Accounts Payable 14.8 (54.9) Cash Flow from Net Working Capital $(13.5) $65.3 Operating cash flow in 2010 of $54.9 million was the result of the realization of income from operations, partly offset by the use of cash to fund networking capital and contributions to our pension plans. During the 2010 year, a recurring pattern of strong sales during the final month of each quarter leadto higher quarter end accounts receivable balances. In addition, inventory levels increased in comparison to the prior year due to higher commodity costs andin support of the sales growth anticipated during the first quarter of 2011. Reduced cash payments associated with restructuring and integration activities of$30.8 million were partially offset by interest payments that were $16.2 million higher and cash contributions to our pension plans that were $7.7 millionhigher, than the prior year, respectively. The operating cash flow of $71.5 million in 2009 included a net source of $65.3 million that was generated as wefocused on right-sizing our net working capital. Significant inventory reductions were achieved across our global businesses and our accounts receivableremained well-controlled as we responded to sales volume declines due to the economic downturn. Because of the inability of some of our suppliers to obtaincredit insurance, we were required to pay certain suppliers more promptly, offsetting some of our gains from working capital management.Cash Flow from Investing ActivitiesCash used by investing activities was $14.9 million and $3.9 million for the years ended December 31, 2010 and 2009, respectively. Gross capitalexpenditures were $12.6 million and $10.3 million for the years ended December 31, 2010 and 2009, respectively, with the increase related to investments ininformation technology projects, primarily in our foreign operations. Litigation settlements associated with discontinued operations resulted in payments of$3.7 million in 2010, in comparison to $9.2 million of net cash proceeds that were received in the prior year when the discontinued operations were sold.Related to discontinued operations, additional cash proceeds of $3.7 million and additional payments associated with the sale of approximately $1.5 millionare expected. Proceeds from the disposition of assets were $2.5 million for the year ended 2010, an increase of $1.9 million from the prior year, principallydue to the sale of a former property of our discontinued operations during the fourth quarter of 2010.Cash Flow from Financing ActivitiesCash used by financing activities was $0.1 million and $44.5 million for the years ended December 31, 2010 and 2009, respectively. The decrease incash used by financing activities primarily reflects the impact of the Company’s refinancing transactions, which were completed at the end of the thirdquarter of 2009 and included the settlement of a Euro debt cross-currency swap at a cost of $40.8 million and $20.6 million of debt issuance payments. SeeNote 3, Long-term debt and Short-term borrowings, for a further discussion on the Company’s refinancing transactions.Fiscal 2009 versus Fiscal 2008Cash Flow from Operating ActivitiesFor the year ended December 31, 2009, cash provided from operating activities was $71.5 million, compared to $37.2 million in the prior year. The netloss for 2009 was $126.1 million, and was principally the result of a $108.1 million non-cash charge related to the impairment of U.S. deferred tax assets. Thenet loss for the 2008 year was $339.2 million, and was principally the result of non-cash tangible and intangible asset 33Table of Contentsimpairment expenses totaling $359.2 million (pre-tax). Non-cash adjustments to pre-tax net income in 2009 totaled $59.9 million, compared to $390.7million in 2008. Pre-tax net income adjusted for non-cash charges was $62.2 million in 2009 compared to $56.2 million in 2008. 2009 2008 Pre-tax Net Income/(Loss)—Continuing Operations $12.1 $(246.1) Pre-tax Net Income/(Loss)—Discontinued Operations (9.8) (88.4) Pre-tax Net Income/(Loss) 2.3 (334.5) Pre-tax Non-cash Charges 59.9 390.7 Pre-tax Net Income Adjusted for Non-cash Charges $62.2 $56.2 (1)The Company believes this to be a meaningful indicator of cash flow from operations, as it eliminates non-cash charges.The table below shows our cash flow from accounts receivable, inventories and accounts payable for the years ended December 31, 2009 and 2008,respectively: 2009 2008 Accounts Receivable $41.5 $80.8 Inventories 78.7 (8.4) Accounts Payable (54.9) (36.9) Cash Flow from Net Working Capital $65.3 $35.5 The operating cash flow of $71.5 million in 2009 included a net source of $65.3 million that was generated as we focused on right-sizing our workingcapital. Significant inventory reductions were achieved across our global businesses and our accounts receivable remained well-controlled as we respondedto sales volume declines due to the economic downturn. Because of the inability of some of our suppliers to obtain credit insurance, we were required to paycertain suppliers more promptly, offsetting some of our gains from working capital management. For the year 2008, operating cash flow of $37.2 millionincluded a net source of $35.5 million from working capital, driven by excess cash collections of accounts receivable during the fourth quarter, reflecting thesignificant decrease in sales which did not replenish our accounts receivable balance. This was partly offset by increased inventory levels, as we were not ableto quickly right-size inventories in response to the lower sales demand that our business experienced during the second half of the year.Cash Flow from Investing ActivitiesCash used by investing activities was $3.9 million and $18.7 million for the years ended December 31, 2009 and 2008, respectively. Gross capitalexpenditures were $10.3 million and $43.5 million for the years ended December 31, 2009 and 2008, respectively. The decrease was driven by thecompletion of distribution facility and information technology projects in the prior year, as well as planned reductions in spending in 2009. The sale ofdiscontinued operations during 2009 generated cash proceeds of $9.2 million, net of selling costs. Additional cash proceeds of $3.8 million and additionalcosts associated with that sale of approximately $5.6 million are expected to be paid at a future date. Activity in 2008 included $24.8 million of net proceeds,primarily from the sale of four former manufacturing and administrative facilities.Cash Flow from Financing ActivitiesCash used by financing activities was $44.5 million and $37.7 million for the years ended December 31, 2009 and 2008, respectively. The increase incash used by financing activities was entirely driven by the refinancing transactions described above, including $40.8 million associated with the settlementof our Euro debt cross-currency swap, and $20.6 million of debt issuance payments. See Note 3, Long-term debt and Short-term borrowings, for a furtherdiscussion on the Company’s refinancing transactions. 34(1)Table of ContentsCapitalizationWe had approximately 54.9 million common shares outstanding as of December 31, 2010.Adequacy of Liquidity SourcesThe Company is subject to credit risk relative to the ability of counterparties to meet their contractual payment obligations or the potential non-performance of counterparties to deliver contracted commodities or services at the contracted price. The impact of any global economic downturn and theability of our suppliers and customers to access credit markets is also unpredictable, outside of our control and may create additional risks for us, bothdirectly and indirectly. The inability of suppliers to access financing or the insolvency of one or more of our suppliers could lead to disruptions in our supplychain, which could adversely impact our sales and/or increase our costs. Our suppliers may require us to pay cash in advance or obtain letters of credit fortheir benefit as a condition to selling us their products and services. If one or more of our principal customers were to file for bankruptcy, our sales could beadversely impacted and our ability to collect outstanding accounts receivable from any such customer could be limited. Any of these risks and uncertaintiescould have a material adverse effect on our business, financial condition, results of operations or cash flows.Based on its 2011 business plan and latest forecasts, the Company believes that cash flow from operations, its current cash balance and other sources ofliquidity, including borrowings available under our ABL Facility will be adequate to support requirements for working capital, capital expenditures andservice indebtedness for the foreseeable future. Our future operating performance is dependent on many factors, some of which are beyond our control,including prevailing economic, financial and industry conditions (see “Risk Factors Item 1A”).Our operating performance and ability to comply with restrictions under our borrowing arrangements are dependent on our continued ability to accessfunds under our credit and loan agreements, including under our ABL Facility and from cash on hand, maintain sales volumes, drive profitable growth,realize cost savings and generate cash from operations. The financial institutions that fund our ABL Facility could also be impacted by any volatility in thecredit markets, and if one or more of them could not fulfill our revolving credit requests, our operations may be adversely impacted. If our revolving credit isunavailable due to a lender not being able to fund requested amounts, or because we have not maintained compliance with our covenants, or we do not meetour sales or growth initiatives within the time frame we expect, our cash flow could be materially adversely impacted. A material decrease in our cash flowcould cause us to fail to meet our obligations under our borrowing arrangements. A default under our credit or loan agreements could restrict or terminate ouraccess to borrowings and materially impair our ability to meet our obligations as they come due. If we do not comply with any of our covenants and thereafterwe do not obtain a waiver or amendment that otherwise addresses that non-compliance, our lenders may accelerate payment of all amounts outstanding underthe affected borrowing arrangements, which amounts would immediately become due and payable, together with accrued interest. Such an accelerationwould cause a default under the indentures governing the Senior Secured Notes and the Senior Subordinated Notes and other agreements that provide us withaccess to funding. Any one or more defaults, or our inability to generate sufficient cash flow from our operations in the future to service our indebtedness andmeet our other needs, may require us to refinance all or a portion of our existing indebtedness or obtain additional financing or reduce expenditures that wedeem necessary to our business. There can be no assurance that any refinancing of this kind would be possible or that any additional financing could beobtained. The inability to obtain additional financing could have a material adverse effect on our financial condition and on our ability to meet ourobligations to noteholders.Our cash flows from operating activities are dependent upon a number of factors that affect our sales, including demand, pricing and competition.Historically, key drivers of demand in the office products industry have included economic conditions generally, and specifically trends in gross domesticproduct (GDP), which affects business confidence and the propensity to purchase consumer durables, white collar employment levels, and growth in thenumber of small businesses and home offices together with increasing usage of personal 35Table of Contentscomputers. Pricing and demand levels for office products have also reflected a substantial consolidation within the global resellers of office products. Thoseresellers are our principal customers. This consolidation has led to increased pricing pressure on suppliers and a more efficient level of asset utilization bycustomers, resulting in lower sales volumes and higher costs from more frequent small orders for suppliers of office products. We sell products in highlycompetitive markets, and compete against large international and national companies, regional competitors and against our own customers’ direct andprivate-label sourcing initiatives.Off-Balance-Sheet Arrangements and Contractual Financial ObligationsWe do not have any material off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financialcondition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.Our contractual obligations and related payments by period at December 31, 2010 were as follows: Total 2011 2012 - 2013 2014 - 2015 Thereafter (in millions of dollars) Contractual obligations Notes payable and long-term debt $733.3 $0.2 $0.4 $732.7 $— Interest on long-term debt 321.5 69.6 139.2 112.7 — Operating lease obligations 98.5 20.0 29.8 20.0 28.7 Purchase obligations 33.3 30.9 1.6 0.8 — Other long-term liabilities 12.2 12.2 — — — Total $1,198.8 $132.9 $171.0 $866.2 $28.7 (1)Debt obligations include an amount in excess of the carrying value of debt which reflects the original issue discount on the Senior Secured Notes ($5.7million as of December 31, 2010). (2)Purchase obligations primarily consist of contracts and non-cancelable purchase orders for raw materials and finished goods. (3)Obligations related to the other long-term liabilities consist of payments for the Company’s pension plans.Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2010, we areunable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $5.7 million of unrecognizedtax benefits have been excluded from the contractual obligations table above. See Note 10, Income Taxes, under Item 8, Financial Statements andSupplementary Data, for a discussion on income taxes.Critical Accounting PoliciesOur financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Preparation of ourfinancial statements require us to make judgments, estimates and assumptions that affect the amounts of actual assets, liabilities, revenues and expensespresented for each reporting period. Actual results could differ significantly from those estimates. We regularly review our assumptions and estimates, whichare based on historical experience and, where appropriate, current business trends. We believe that the following discussion addresses our critical accountingpolicies, which require more significant, subjective and complex judgments to be made by our management.Revenue RecognitionWe recognize revenue from product sales when earned, net of applicable provisions for discounts, returns and allowances. We consider revenue to berealized or realizable and earned when all of the following criteria are 36(1)(2)(3)Table of Contentsmet: title and risk of loss have passed to the customer, persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinableand collectability is reasonably assured. We also provide for our estimate of potential bad debt at the time of revenue recognition.Allowances for Doubtful Accounts and Sales ReturnsTrade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts and returns. The allowance for doubtful accountsrepresents estimated uncollectible receivables associated with potential customer defaults on contractual obligations, usually due to customers’ potentialinsolvency. The allowance includes amounts for certain customers where a risk of default has been specifically identified. In addition, the allowance includesa provision for customer defaults on a general formula basis when it is determined the risk of some default is probable and estimable, but cannot yet beassociated with specific customers. The assessment of the likelihood of customer defaults is based on various factors, including the length of time thereceivables are past due, historical experience and existing economic conditions.The allowance for sales returns represents estimated uncollectible receivables associated with the potential return of products previously sold tocustomers, and is recorded at the time that the sales are recognized. The allowance includes a general provision for product returns based on historical trends.In addition, the allowance includes a reserve for currently authorized customer returns that are considered to be abnormal in comparison to the historicalbasis.InventoriesInventories are priced at the lower of cost (principally first-in, first-out with minor amounts at average) or market. A reserve is established to adjust thecost of inventory to its net realizable value. Inventory reserves are recorded for obsolete or slow moving inventory based on assumptions about futuredemand and marketability of products, the impact of new product introductions and specific identification of items, such as product discontinuance orengineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economicconditions, customer inventory levels or competitive conditions differ from expectations.Property, Plant and EquipmentProperty, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of theassets. Gains or losses resulting from dispositions are included in operating income. Betterments and renewals, which improve and extend the life of an asset,are capitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software’s useful life.Estimated useful lives of the related assets are as follows: Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or 10 yearsMachinery, equipment and furniture 3 to 10 yearsLong-Lived AssetsWe test long-lived assets for impairment whenever events or changes in circumstances indicate that the assets’ carrying amount is not recoverable fromits undiscounted cash flows. When such events occur, we compare the sum of the undiscounted cash flows expected to result from the use and eventualdisposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate at the time offuture cash flow, derived from the most recent business projections. If this comparison indicates that there is an impairment, the amount of the impairment iscalculated using a quoted market price, or if unavailable, using discounted expected future cash flows. The discount rate applied to these cash flows is basedon our weighted average cost of capital, computed by selecting market rates at the valuation 37Table of Contentsdates for debt and equity that are reflective of the risks associated with an investment in the Company’s industry as estimated by using comparable publiclytraded companies.Indefinite-Lived IntangiblesIndefinite-lived intangibles are tested for impairment on an annual basis and written down when impaired. An interim impairment test is performed ifan event occurs or conditions change that would more likely than not reduce the fair value below the carrying value.In addition, purchased intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite.Certain of our trade names have been assigned an indefinite life as we currently anticipate that these trade names will contribute cash flows to ACCO Brandsindefinitely.We review indefinite-lived intangibles for impairment annually, and whenever market or business events indicate there may be a potential adverseimpact on a particular intangible. We consider the implications of both external factors (e.g., market growth, pricing, competition, and technology) andinternal factors (e.g., product costs, margins, support expenses, and capital investment) and their potential impact on cash flows for each business in both thenear and long term, as well as their impact on any identifiable intangible asset associated with the business. Based on recent business results, consideration ofsignificant external and internal factors, and the resulting business projections, indefinite-lived intangible assets are reviewed to determine whether they arelikely to remain indefinite-lived, or whether a finite life is more appropriate. In addition, based on events in the period and future expectations, managementconsiders whether the potential for impairment exists.Goodwill and Intangible AssetsWe test goodwill for impairment at least annually, normally in the second quarter, and on an interim basis if an event or circumstance indicates that it ismore likely than not that an impairment has been incurred. If the carrying amount of the goodwill exceeds its fair value, an impairment loss is recognized. Inapplying a fair-value-based test, estimates are made of the expected future cash flows to be derived from each reporting unit. The resulting fair valuedetermination is significantly impacted by estimates of future prices for our products, capital needs, economic trends and other factors.Given the current economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates andassumptions made for purposes of our impairment testing during 2010 will prove to be accurate predictions of the future. If our assumptions regardingforecasted revenue or margin growth rates of certain reporting units are not achieved, we may be required to record additional impairment charges in futureperiods, whether in connection with our next annual impairment testing in the second quarter of fiscal year 2011 or prior to that, if any such changeconstitutes a triggering event outside of the quarter from when the annual impairment test is performed. It is not possible at this time to determine if any suchfuture impairment charge would result or, if it does, whether such charge would be material.Employee Benefit PlansWe provide a range of benefits to our employees and retired employees, including pensions, post-retirement, post-employment and health care benefits.We record annual amounts relating to these plans based on calculations specified by accounting principles generally accepted in the United States ofAmerica, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases, turnover rates and healthcare cost trend rates. Actuarial assumptions are reviewed on an annual basis and modifications to these assumptions are made based on current rates andtrends when it is deemed appropriate. As required by accounting principles generally accepted in the United States of America, the effect of our modificationsare generally recorded and amortized over future periods. We believe that the assumptions utilized in recording our obligations under the plans arereasonable based on our experience. The actuarial assumptions used to record our plan obligations could differ materially from actual results due to changingeconomic and 38Table of Contentsmarket conditions, higher or lower withdrawal rates or other factors which may impact the amount of retirement related benefit expense recorded by us infuture periods.The discount rate assumptions used to determine the postretirement obligations of the benefit plans is based on a spot-rate yield curve that matchesprojected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. The assumed discountrates reflect market rates for high-quality corporate bonds currently available. The Company’s discount rates were determined by considering the average ofpension yield curves constructed of a large population of high quality corporate bonds. The resulting discount rates reflect the matching of plan liability cashflows to the yield curves.The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested based onour investment profile to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixedincome returns and equity returns, while also considering historical returns over the last 10 years, and asset allocation and investment strategy.Pension expenses were $8.2 million, $6.3 million and $2.9 million, respectively, in the years ended December 31, 2010, 2009 and 2008. Post-retirement expenses were $0.0 million, $0.0 million and $0.3 million, respectively, for the years ended December 31, 2010, 2009 and 2008. In 2011, weexpect pension expense of approximately $6.8 million and post-retirement expense of approximately $0.2 million. On January 20, 2009, the Company’sBoard of Directors approved plan amendments to temporarily freeze the Company’s U.S. pension and non-qualified supplemental retirement plans effectiveMarch 7, 2009. No additional benefits will accrue under these plans after that date until further action by the Board of Directors.A 25-basis point change (0.25%) in our discount rate assumption would lead to an increase or decrease in our pension expense of approximately $1.1million for 2011. A 25-basis point change (0.25%) in our long-term rate of return assumption would lead to an increase or decrease in pension expense ofapproximately $0.9 million for 2011.Customer Program CostsCustomer programs and incentives are a common practice in the office products industry. We incur customer program costs to obtain favorable productplacement, to promote sell-through of products and to maintain competitive pricing. Customer program costs and incentives, including rebates, promotionalfunds and volume allowances, are accounted for as a reduction to gross sales. These costs are recorded at the time of sale based on management’s bestestimates. Estimates are based on individual customer contracts and projected sales to the customer in comparison to any thresholds indicated by contract. Inthe absence of a signed contract, estimates are based on historical or projected experience for each program type or customer. Management periodicallyreviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of a change in sales volumeexpectations or customer contracts).Income TaxesDeferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted toreflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets toan amount that is more likely than not to be realized. Facts and circumstances may change that cause the Company to revise the conclusions on its ability torealize certain net operating losses and other deferred tax attributes.The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcomeof any uncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we haveadequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorableadjustments to our estimated tax liabilities in the period the assessments are revised or resolved. 39Table of ContentsStock-Based CompensationStock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over thevesting period. Determining the appropriate fair value model to use requires judgment. Determining the assumptions that enter into the model is highlysubjective and also requires judgment, including long-term projections regarding stock price volatility, employee exercise, post-vesting termination, and pre-vesting forfeiture behaviors, interest rates and dividend yields. The grant date fair value of each award is estimated using the Black-Scholes option-pricingmodel.We have utilized historical volatility for a pool of peer companies for a period of time that is comparable to the expected life of the option to determinevolatility assumptions. The weighted average expected option term reflects the application of the simplified method, which defines the life as the average ofthe contractual term of the options and the weighted average vesting period for all option tranches. The risk-free interest rate for the expected term of theoption is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeitures are estimated at the time of grant in order to calculate the amount ofshare-based payment awards ultimately expected to vest. The forfeiture rate is based on historical rates.The use of different assumptions would result in different amounts of stock compensation expense. Holding all other variables constant, the indicatedchange in each of the assumptions below increases or decreases the fair value of an option (and hence, expense), as follows: Assumption Change toAssumption Impact on Fair Valueof Option Expected volatility Higher Higher Expected life Higher Higher Risk-free interest rate Higher Higher Dividend yield Higher Lower The pre-vesting forfeitures assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeitures assumption would notimpact the total amount of expense ultimately recognized over the vesting period. Different forfeitures assumptions would only impact the timing of expenserecognition over the vesting period. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts and circumstances.Management is not able to estimate the probability of actual results differing from expected results, but believes our assumptions are appropriate, basedupon our historical and expected future experience.Recent Accounting PronouncementsIn January 2010, the Financial Accounting Standards Board issued an update to existing standards on fair value measurements. The guidance requiresadditional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements. The new guidance is effective forinterim and annual reporting periods beginning after December 15, 2009. The Company adopted this guidance in the first quarter of 2010, the impact ofwhich concerns disclosure only, and its adoption did not impact the Company’s consolidated financial statements. 40Table of ContentsITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe office products industry is concentrated in a small number of major customers, principally office products superstores, large retailers, wholesalersand contract stationers. Customer consolidation and share growth of private-label products continue to increase pricing pressures, which may adversely affectmargins for the Company and its competitors. The Company is addressing these challenges through design innovations, value-added features and services, aswell as continued cost and asset reduction.The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. The Company entersinto financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financialinstruments are major financial institutions.Foreign Exchange Risk ManagementThe Company enters into forward foreign currency and option contracts principally to hedge currency fluctuations in transactions (primarilyanticipated inventory purchases and intercompany loans) denominated in foreign currencies, thereby limiting the risk that would otherwise result fromchanges in exchange rates. The majority of the Company’s exposure to local currency movements is in Europe, Australia, Japan and Canada. All of theexisting foreign exchange contracts as of December 31, 2010 have maturity dates in 2011. Increases and decreases in the fair market values of the forwardagreements are expected to be offset by gains/losses in recognized net underlying foreign currency transactions or loans. Notional amounts of outstandingforeign currency forward exchange contracts were $185.6 million and $186.5 million at December 31, 2010 and 2009, respectively. The net fair value ofthese foreign currency contracts was $(1.8) million and $0.0 million at December 31, 2010 and 2009, respectively. At December 31, 2010, a 10% unfavorableexchange rate movement in our portfolio of foreign currency forward contracts would have increased our unrealized losses by $19.7 million. Consistent withthe use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains orlosses, respectively, in the remeasurement of the underlying transactions being hedged. When taken together, the Company believes these forward contractsand the offsetting underlying commitments do not create material market risk.For more information related to outstanding foreign currency forward exchange contracts see Note 13, Fair Value of Financial Instruments and Note12, Derivative Financial Instruments, under Item 8, Financial Statements and Supplementary Data.Interest Rate Risk ManagementOur Senior Secured Notes and Senior Subordinated Notes have fixed interest rates and, accordingly, are not exposed to market risk resulting fromchanges in interest rates. However, the fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market valueof fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. In addition, fair market values will also reflect the credit markets’view of credit risk spreads. These interest rate changes may affect the fair market value of the fixed interest rate debt and any repurchases of these notes, butdo not impact our earnings or cash flows.Interest rates under the ABL Facility are based on the London Interbank Offered Rate (LIBOR). Pricing is subject to quarterly adjustment based on theaverage availability under the ABL Facility during the prior quarter. The range of borrowing costs under the pricing grid is LIBOR plus 3.75% to LIBOR plus4.25% with a LIBOR rate floor of 1.50%. The Company is required to pay a quarterly commitment fee on the unused portion of the ABL facility ranging from0.5% to 1.0%. There were no borrowings outstanding under the Company’s ABL Facility as of December 31, 2010. 41Table of ContentsThe following table summarizes information about the Company’s major fixed rate debt components as of December 31, 2010, including the principalcash payments (excluding the original issue discount on the Senior Secured Notes) and interest rates.Debt Obligations Stated Maturity Date Total FairValue 2011 2012 2013 2014 2015 Thereafter (in millions) Long term debt: Fixed rate (U.S. dollars) Senior SecuredNotes (U.S. dollars) $— $— $— $— $460.0 $— $460.0 $519.8 Average fixed interest rate 10.63% 10.63% 10.63% 10.63% 10.63% — 10.63% Senior Subordinated Notes (U.S. dollars) $— $— $— $— $271.3 $— $271.3 $272.7 Average fixed interest rate 7.63% 7.63% 7.63% 7.63% 7.63% — 7.63% 42Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firms 44 Management’s Report on Internal Control Over Financial Reporting 46 Consolidated Balance Sheets as of December 31, 2010 and 2009 47 Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 48 Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 49 Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and2008 50 Notes to Consolidated Financial Statements 51 43Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders of ACCO Brands Corporation:We have audited the accompanying consolidated balance sheets of ACCO Brands Corporation and subsidiaries as of December 31, 2010 and 2009,and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income (loss), and cash flows for each of the years inthe two-year period ended December 31, 2010. In connection with our audits of the consolidated financial statements, we also audited the relatedconsolidated financial statement schedule, Schedule II—Valuation and Qualifying Accounts and Reserves. We also have audited ACCO BrandsCorporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ACCO Brands Corporation’s management is responsible forthese consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying management report on internal control over financial reporting. Our responsibility isto express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on ouraudits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement andwhether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statementsincluded examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, the consolidated financial statements and financial statement schedules referred to above present fairly, in all material respects, thefinancial position of ACCO Brands Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flowsfor each of the years in the two-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also in our opinion,ACCO Brands Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ KPMG LLPChicago, IllinoisFebruary 24, 2011 44Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of ACCO Brands Corporation:In our opinion, the consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for the year endedDecember 31, 2008 present fairly, in all material respects, the results of operations and cash flows of ACCO Brands Corporation for the year endedDecember 31, 2008, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financialstatement schedule for the year ended December 31, 2008 presents fairly, in all material respects, the information set forth therein when read in conjunctionwith the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conductedour audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basisfor our opinion./s/PricewaterhouseCoopers LLPChicago, IllinoisMarch 2, 2009 45Table of ContentsMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement of ACCO Brands Corporation and its subsidiaries is responsible for establishing and maintaining adequate internal controls overfinancial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financialreporting is designed and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding thereliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally acceptedaccounting principles.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.As required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed the effectiveness of the Company’s internal control over financialreporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in Internal Control-Integrated Framework.Based on our assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 31,2010.The effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 has been audited by KPMG LLP, an independentregistered public accounting firm, as stated in their report that appears herein. /s/ ROBERT J. KELLER /s/ NEAL V. FENWICKRobert J. Keller Neal V. FenwickChairman of the Board and Executive Vice President andChief Executive Officer Chief Financial Officer(principal executive officer) (principal financial officer)February 24, 2011 February 24, 2011 46Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Balance Sheets (in millions of dollars, except share data) December 31, 2010 December 31, 2009 Assets Current assets: Cash and cash equivalents $83.2 $43.6 Accounts receivable less allowances for discounts, doubtful accounts and returns of $16.1 and$18.3, respectively 283.2 259.9 Inventories 216.1 202.4 Deferred income taxes 12.9 9.8 Other current assets 25.3 21.4 Total current assets 620.7 537.1 Property, plant and equipment, net 163.5 181.1 Deferred income taxes 10.6 31.5 Goodwill 144.4 143.4 Identifiable intangibles, net of accumulated amortization of $97.6 and $91.0, respectively 138.2 145.8 Other assets 72.2 67.9 Total assets $1,149.6 $1,106.8 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Notes payable to banks $— $0.5 Current portion of long-term debt 0.2 0.2 Accounts payable 114.8 101.0 Accrued compensation 26.1 18.9 Accrued customer program liabilities 72.8 74.6 Accrued interest 22.0 20.0 Other current liabilities 90.5 78.1 Liabilities of discontinued operations held for sale 1.5 5.6 Total current liabilities 327.9 298.9 Long-term debt 727.4 725.1 Deferred income taxes 81.5 86.6 Pension and post retirement benefit obligations 74.9 94.6 Other non-current liabilities 17.7 18.8 Total liabilities 1,229.4 1,224.0 Stockholders’ equity (deficit): Preferred stock, $0.01 par value, 25,000,000 shares authorized; none issued and outstanding — — Common stock, $0.01 par value, 200,000,000 shares authorized; 55,080,463 and 54,719,296 sharesissued and 54,922,783 and 54,572,191 outstanding, respectively 0.6 0.5 Treasury stock, 157,680 and 147,105 shares, respectively (1.5) (1.4) Paid-in capital 1,401.1 1,397.0 Accumulated other comprehensive loss (86.1) (107.0) Accumulated deficit (1,393.9) (1,406.3) Total stockholders’ equity (deficit) (79.8) (117.2) Total liabilities and stockholders’ equity (deficit) $1,149.6 $1,106.8 See notes to consolidated financial statements. 47Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Operations Year Ended December 31, (in millions of dollars, except per share data) 2010 2009 2008 Net sales $1,330.5 $1,272.5 $1,578.2 Cost of products sold 915.1 893.2 1,094.4 Gross profit 415.4 379.3 483.8 Operating costs and expenses: Advertising, selling, general and administrative expenses 294.0 273.1 379.0 Amortization of intangibles 6.9 7.2 7.7 Restructuring (income) charges (0.5) 17.4 28.8 Goodwill and asset impairment charges — 1.8 274.4 Total operating costs and expenses 300.4 299.5 689.9 Operating income (loss) 115.0 79.8 (206.1) Non-operating expense (income): Interest expense, net 78.2 67.0 63.7 Equity in earnings of joint ventures (8.3) (4.4) (6.5) Other (income) expense, net 1.4 5.1 (17.2) Income (loss) from continuing operations before income taxes 43.7 12.1 (246.1) Income tax expense 32.2 127.9 16.9 Income (loss) from continuing operations 11.5 (115.8) (263.0) Income (loss) from discontinued operations, net of income taxes 0.9 (10.3) (76.2) Net income (loss) $12.4 $(126.1) $(339.2) Per share: Basic earnings (loss) per share: Income (loss) from continuing operations $0.21 $(2.13) $(4.85) Income (loss) from discontinued operations 0.02 (0.19) (1.41) Basic earnings (loss) per share $0.23 $(2.32) $(6.26) Diluted earnings (loss) per share: Income (loss) from continuing operations $0.20 $(2.13) $(4.85) Income (loss) from discontinued operations 0.02 (0.19) (1.41) Diluted earnings (loss) per share $0.22 $(2.32) $(6.26) Weighted average number of shares outstanding: Basic 54.8 54.5 54.2 Diluted 57.2 54.5 54.2 See notes to consolidated financial statements. 48Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Cash Flows Year Ended December 31, (in millions of dollars) 2010 2009 2008 Operating activities Net income (loss) from continuing operations $11.5 $(115.8) $(263.0) Net income (loss) from discontinued operations 0.9 (10.3) (76.2) Deferred income tax (benefit) provision 12.3 112.7 (26.9) (Gain) loss on sale of assets (1.5) 0.8 (6.0) Depreciation 29.6 32.1 33.9 Goodwill and asset impairment charges and other non-cash charges 0.7 6.3 361.5 Amortization of debt issuance costs/bond discount 6.3 6.5 5.9 Amortization of intangibles 6.9 7.2 8.9 Stock based compensation 4.2 3.0 5.5 (Gain) loss on retirement of bank debt — 4.0 (19.0) Changes in balance sheet items: Accounts receivable (18.5) 41.5 80.8 Inventories (9.8) 78.7 (8.4) Other assets (5.1) 10.2 1.5 Accounts payable 14.8 (54.9) (36.9) Accrued expenses and other liabilities (2.2) (37.5) (36.8) Accrued taxes 7.7 (8.8) 9.5 Other operating activities, net (2.9) (4.2) 2.9 Net cash provided by operating activities 54.9 71.5 37.2 Investing activities Additions to property, plant and equipment (12.6) (10.3) (43.5) Assets acquired (1.1) (3.4) — (Payments) proceeds from sale of discontinued operations (3.7) 9.2 — Proceeds from the disposition of assets 2.5 0.6 24.8 Net cash used by investing activities (14.9) (3.9) (18.7) Financing activities Proceeds from long-term borrowings 1.5 469.3 — Repayments of long-term debt (0.2) (397.9) (63.1) Borrowings (repayments) of short-term debt, net (0.5) (54.2) 32.0 Payment of Euro debt hedge — (40.8) — Cost of debt issuance (0.8) (20.6) — Cost of debt amendments — — (6.9) Exercise of stock options and other (0.1) (0.3) 0.3 Net cash used by financing activities (0.1) (44.5) (37.7) Effect of foreign exchange rate changes on cash (0.3) 2.4 (5.0) Net increase (decrease) in cash and cash equivalents 39.6 25.5 (24.2) Cash and cash equivalents Beginning of year 43.6 18.1 42.3 End of period $83.2 $43.6 $18.1 Cash paid during the year for: Interest $70.6 $54.4 $58.9 Income taxes $13.9 $19.7 $22.2 See notes to consolidated financial statements. 49Table of ContentsACCO Brands Corporation and SubsidiariesConsolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss) (in millions of dollars) CommonStock Paid-inCapital AccumulatedOtherComprehensiveIncome (Loss) TreasuryStock AccumulatedDeficit Total ComprehensiveIncome (Loss) Balance at December 31, 2007 $0.6 $1,388.9 $(9.2) $(1.1) $(940.9) $438.3 Net loss — — — — (339.2) (339.2) $(339.2) Income on derivative financial instruments, netof tax — — 3.9 — — 3.9 3.9 Translation impact, net of tax — — (59.3) — — (59.3) (59.3) Pension and postretirement adjustment, net of tax — — (52.9) — (0.1) (53.0) (53.0) Total comprehensive loss $(447.6) Stock-based compensation activity — 5.8 — — — 5.8 Other — 0.1 — — — 0.1 Balance at December 31, 2008 0.6 1,394.8 (117.5) (1.1) (1,280.2) (3.4) Net loss — — — — (126.1) (126.1) $(126.1) Loss on derivative financial instruments, net oftax — — (3.3) — — (3.3) (3.3) Translation impact, net of tax — — 26.7 — — 26.7 26.7 Pension and postretirement adjustment, net of tax — — (12.9) — — (12.9) (12.9) Total comprehensive loss $(115.6) Stock-based compensation activity — 3.0 — (0.3) — 2.7 Other (0.1) (0.8) — — — (0.9) Balance at December 31, 2009 0.5 1,397.0 (107.0) (1.4) (1,406.3) (117.2) Net income — — — — 12.4 12.4 $12.4 Loss on derivative financial instruments, net oftax — — (0.5) — — (0.5) (0.5) Translation impact, net of tax — — 11.0 — — 11.0 11.0 Pension and postretirement adjustment, net of tax — — 10.4 — — 10.4 10.4 Total comprehensive income $33.3 Stock-based compensation activity 0.1 4.2 — (0.1) — 4.2 Other — (0.1) — — — (0.1) Balance at December 31, 2010 $0.6 $1,401.1 $(86.1) $(1.5) $(1,393.9) $(79.8) Shares of Capital Stock CommonStock TreasuryStock Net Shares Shares at December 31, 2007 54,147,897 (47,186) 54,100,711 Stock issuances—stock based compensation 234,865 (70) 234,795 Shares at December 31, 2008 54,382,762 (47,256) 54,335,506 Stock issuances—stock based compensation 336,534 (99,849) 236,685 Shares at December 31, 2009 54,719,296 (147,105) 54,572,191 Stock issuances—stock based compensation 361,167 (10,575) 350,592 Shares at December 31, 2010 55,080,463 (157,680) 54,922,783 See notes to consolidated financial statements. 50Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements1. Basis of PresentationThe management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the consolidated financialstatements and notes contained in this annual report.The consolidated financial statements include the accounts of ACCO Brands Corporation and its domestic and international subsidiaries.Intercompany accounts and transactions have been eliminated in consolidation. Our investments in companies that are between 20% and 50% owned areaccounted for using the equity method of accounting. ACCO Brands has equity investments in the following joint ventures: Pelikan-Artline Pty Ltd(“Pelikan-Artline”)—50% ownership; and Neschen/GBC Graphic Films (“Neschen”)—50% ownership. The Company’s share of earnings from equityinvestments is included on the line entitled “Equity in earnings of joint ventures” in the consolidated statements of operations. Companies in which ourinvestment exceeds 50% have been consolidated.The Company’s former commercial print finishing business is reported in discontinued operations in the consolidated financial statements and relatednotes for all periods presented in the consolidated financial statements. Additional information regarding discontinued operations is discussed in Note 18.2. Significant Accounting PoliciesNature of BusinessACCO Brands is primarily involved in the manufacturing, marketing and distribution of office products—including traditional and computer-relatedoffice products, supplies, binding and laminating equipment and related consumable supplies, personal computer accessory products, paper-based timemanagement products and presentation aids and products—selling primarily to large resellers. The Company’s subsidiaries operate principally in the UnitedStates, Australia, the United Kingdom and Canada.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilitiesat the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from theseestimates.Cash and Cash EquivalentsHighly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.Allowances for Doubtful Accounts, Discounts and ReturnsTrade receivables are stated net of discounts, allowances for doubtful accounts and allowance for returns. The allowance for doubtful accountsrepresents estimated uncollectible receivables associated with potential customer non-payment on contractual obligations, usually due to customers’potential insolvency. The allowances include amounts for certain customers where a risk of non-payment has been specifically identified. In addition, theallowances include a provision for customer non-payment on a general formula basis when it is determined the risk of some non-payment is probable andestimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer non-payment is based on various factors,including the length of time the receivables are past due, historical experience and existing economic conditions. 51Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The allowance for sales returns represents estimated uncollectible receivables associated with the potential return of products previously sold tocustomers, and is recorded at the time that the sales are recognized. The allowance includes a general provision for product returns based on historical trends.In addition, the allowance includes a reserve for currently authorized customer returns that are considered to be abnormal in comparison to the historicalbasis.InventoriesInventories are priced at the lower of cost (principally first-in, first-out) or market. A reserve is established to adjust the cost of inventory to its netrealizable value. Inventory reserves are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability ofproducts, the impact of new product introductions and specific identification of items, such as product discontinuance or engineering/material changes.These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levelsor competitive conditions differ from expectations.Property, Plant and EquipmentProperty, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of theassets. Gains or losses resulting from dispositions are included in operating income. Betterments and renewals that improve and extend the life of an asset arecapitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software’s useful life. Thefollowing table shows estimated useful lives of property, plant and equipment: Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or 10 yearsMachinery, equipment and furniture 3 to 10 yearsLong-Lived AssetsWe test long-lived assets for impairment whenever events or changes in circumstances indicate that the assets’ carrying amount is not recoverable fromits undiscounted cash flows. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use andeventual disposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. If this comparison indicates that there is assetimpairment, the amount of the impairment is typically calculated using discounted expected future cash flows. The discount rate applied to these cash flowsis based on the Company’s weighted average cost of capital, computed by selecting market rates at the valuation dates for debt and equity that are reflectiveof the risks associated with an investment in the Company’s industry as estimated by using comparable publicly traded companies.Intangible AssetsIntangible assets are comprised primarily of indefinite-lived intangible assets acquired and purchased intangible assets arising from the application ofpurchase accounting. Indefinite-lived intangible assets are not amortized, but are evaluated annually to determine whether the indefinite useful life isappropriate. Indefinite-lived intangibles are tested for impairment on an annual basis and written down where impaired. Certain of the Company’s tradenames have been assigned an indefinite life as these trade names are currently anticipated to contribute cash flows to the Company indefinitely.The Company reviews indefinite-lived intangibles for impairment annually, and whenever market or business events indicate there may be a potentialimpact on a particular intangible. The Company considers the 52Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) implications of both external (e.g., market growth, pricing, competition, and technology) and internal factors (e.g., product costs, margins, support expenses,capital investment) and their potential impact on cash flows for each business in both the near and long term, as well as their impact on any identifiableintangible asset associated with the business. Based on recent business results, consideration of significant external and internal factors, and the resultingbusiness projections, indefinite lived intangible assets are reviewed to determine whether they are likely to remain indefinite lived, or whether a finite life ismore appropriate. Finite lived intangibles are amortized over 15, 23 or 30 years.GoodwillGoodwill has been recorded on the Company’s balance sheet and represents the excess of the cost of the acquisitions when compared to the fair valueof the net assets acquired. The Company tests goodwill for impairment at least annually, normally in the second quarter and on an interim basis if an event orcircumstance indicates that it is more likely than not that an impairment loss has been incurred. Recoverability of goodwill is evaluated using a two-stepprocess. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying value ofthe net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assetsassigned to a reporting unit exceeds the fair value of a reporting unit, the second step of the impairment test is performed in order to determine the impliedfair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible and intangible assetsand liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting unit’s goodwill exceedsits implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future sales for the Company’s products, capital needs, economictrends and other factors.Employee Benefit PlansThe Company and its subsidiaries provide a range of benefits to their employees and retired employees, including pension, postretirement, post-employment and health care benefits. The Company records annual amounts relating to these plans based on calculations, which include various actuarialassumptions, including discount rates, assumed rates of return on plan assets, compensation increases, turnover rates and health care cost trend rates. TheCompany reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it isdeemed appropriate to do so. The effect of the modifications are generally recorded and amortized over future periods.Income TaxesDeferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted toreflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets toan amount that is more likely than not to be realized.The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcomeof any uncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we haveadequately provided for our best estimate of the expected outcomes related to these matters. However, our future results may include favorable or unfavorableadjustments to our estimated tax liabilities in the period the assessments are revised or resolved. 53Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Revenue RecognitionWe recognize revenue from product sales when earned, net of applicable provisions for discounts, return and allowances. We consider revenue to berealized or realizable and earned when all of the following criteria are met: title and risk of loss have passed to the customer, persuasive evidence of anarrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. We also provide for our estimate ofpotential bad debt at the time of revenue recognition.Cost of Products SoldCost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in themanufacturing and distribution process, inbound and outbound freight, shipping and handling costs, purchasing costs associated with materials andpackaging used in the production processes.Advertising, Selling, General and Administrative ExpensesAdvertising, selling, general and administrative expenses include advertising, marketing, selling (including commissions), research and development,customer service, depreciation related to assets outside the manufacturing and distribution processes and all other general and administrative expensesoutside the manufacturing and distribution functions (e.g., finance, human resources, information technology, etc.).Customer Program CostsCustomer program costs include, but are not limited to, sales rebates which are generally tied to achievement of certain sales volume levels, in-storepromotional allowances, shared media and customer catalog allowances and other cooperative advertising arrangements, and freight allowance programs.The Company generally recognizes customer program costs as a deduction to gross sales at the time that the associated revenue is recognized. Certaincustomer incentives that do not directly relate to future revenues are expensed when initiated.In addition, accrued customer program liabilities principally include, but are not limited to, sales volume rebates, promotional allowances, sharedmedia and customer catalog allowances and other cooperative advertising arrangements, and freight allowances as discussed above.Shipping and HandlingThe Company reflects all amounts billed to customers for shipping and handling in net sales and the costs incurred from shipping and handlingproduct (including costs to ship and move product from the seller’s place of business to the buyer’s place of business, as well as costs to store, move andprepare products for shipment) in cost of products sold.Warranty ReservesThe Company offers its customers various warranty terms based on the type of product that is sold. Estimated future obligations related to productssold under these warranty terms are provided by charges to operations in the period in which the related revenue is recognized.Advertising CostsAdvertising costs amounted to $93.1 million, $92.9 million and $143.9 million for the years ended December 31, 2010, 2009 and 2008, respectively.These costs include, but are not limited to, cooperative advertising and promotional allowances as described in “Customer Program Costs” above, and areprincipally expensed as incurred. 54Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Research and DevelopmentResearch and development expenses, which amounted to $24.0 million, $18.6 million and $22.3 million for the years ended December 31, 2010, 2009and 2008, respectively, are classified as general and administrative expenses and are charged to expense as incurred.Stock-Based CompensationOur primary types of share-based compensation consist of stock options, stock-settled appreciation rights, restricted stock unit awards, and performancestock unit awards. Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over therequisite service period. Where awards are made with non-substantive vesting periods (for example, where a portion of the award vests upon retirementeligibility), we estimate and recognize expense based on the period from the grant date to the date on which the employee is retirement eligible.Foreign Currency TranslationForeign currency balance sheet accounts are translated into U.S. dollars at the rates of exchange at the balance sheet date. Income and expenses aretranslated at the average rates of exchange in effect during the period. The related translation adjustments are made directly to a separate component ofaccumulated other comprehensive income (loss) in stockholders’ equity. Some transactions are made in currencies different from an entity’s functionalcurrency. Gains and losses on these foreign currency transactions are included in income as they occur.Derivative Financial InstrumentsThe Company recognizes all derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. If the derivativeis designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk arerecognized in earnings in the same period. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of thederivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffectiveportions of changes in the fair value of cash flow hedges are recognized in earnings.Certain forecasted transactions, assets and liabilities are exposed to foreign currency risk. The Company continually monitors its foreign currencyexposures in order to maximize the overall effectiveness of its foreign currency hedge positions. Principal currencies hedged include the U.S. dollar, Euro andPound sterling.Recent Accounting PronouncementsIn January 2010, the Financial Accounting Standards Board issued an update to existing standards on fair value measurements. The guidance requiresadditional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements. The new guidance is effective forinterim and annual reporting periods beginning after December 15, 2009. The Company adopted this guidance in the first quarter of 2010, the impact ofwhich concerns disclosure only, and its adoption did not impact the Company’s consolidated financial statements. 55Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) 3. Long-term Debt and Short-term BorrowingsNotes payable and long-term debt consisted of the following at December 31, 2010 and 2009: (in millions of dollars) 2010 2009 Senior Secured Notes, due March 2015, net of discount(1) (fixed interest rate of 10.625%) $454.3 $453.3 U.S. Dollar Senior Subordinated Notes, due August 2015 (fixed interest rate of 7.625%) 271.3 271.3 Other borrowings 2.0 1.2 Total debt 727.6 725.8 Less: current portion (0.2) (0.7) Total long-term debt $727.4 $725.1 (1)Represents unamortized original issue discount of $5.7 million and $6.7 million, as of December 31, 2010 and 2009, respectively, which is amortizablethrough March 15, 2015.Refinancing TransactionsOn September 30, 2009, the Company issued $460.0 million aggregate principal amount of its 10.625% senior secured notes due March 15, 2015 (the“Senior Secured Notes”), and entered into a four-year senior secured asset-based revolving credit facility providing for borrowings of up to $175.0 millionsubject to borrowing base limitations (the “ABL Facility”). Initial borrowings under the ABL Facility were $16.1 million. These funds together with the$453.1 million in proceeds from the issuance of the Senior Secured Notes were used to (i) repay all outstanding borrowings under and terminate theCompany’s prior senior secured credit agreements, (ii) repay all outstanding borrowings under and terminate the Company’s accounts receivablesecuritization program, (iii) terminate the Company’s cross-currency swap agreement, (iv) repurchase approximately $29.1 million aggregate principalamount of its 7 5/8% senior subordinated notes due August 15, 2015 (“Senior Subordinated Notes”), and (v) pay the fees, expenses and other costs relating tosuch transactions (collectively the “Refinancing Transactions”). The Company elected to enter into the Refinancing Transactions due to the upcomingmaturity of its prior credit facilities.The repayment of borrowings outstanding under the Company’s prior senior secured credit agreements consisted of the following: • Repayment of $247.0 million of principal and accrued interest under its $400.0 million senior secured U.S. dollar term loan facility; • Repayment of $36.5 million of principal and accrued interest under its £63.6 million sterling term loan facility; • Repayment of $35.7 million of principal and accrued interest under its €68.2 million euro term loan facility; and • Repayment of $24.4 million of principal and accrued interest under its $130.0 million U.S. dollar revolving credit facility.The repayment of $340.2 million of borrowings outstanding under the Company’s senior secured credit agreements resulted in a pre-tax loss of $8.9million on the early extinguishment of debt and included the write-off of amendment fees and issuance costs associated with the senior secured creditagreements. The loss on the early extinguishment of debt is included in other (income) expense, net in the consolidated statement of operations for the yearended December 31, 2009. 56Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) In September 2005, the Company entered into a cross-currency swap agreement to hedge a portion of its net investment in Euro-based subsidiariesagainst movements in exchange rates. The five-year cross currency derivative swapped $185.0 million at 3-month U.S. LIBOR interest rates for€152.2 million at three-month EURIBOR rates plus a credit spread. Under the terms of the swap, the Company made quarterly interest payments on€152.2 million and received quarterly interest payments on $185.0 million. The swap served as an effective net investment hedge. The Company used thespot rate method for accounting purposes and, accordingly, any increase or decrease in the fair value of the swap was recorded in the cumulative translationadjustment account within accumulated other comprehensive income. Any hedging ineffectiveness was recorded in the “Interest expense, net” line in theconsolidated statements of operations. On September 30, 2009, the Company terminated its cross-currency swap agreement. The termination of the cross-currency swap resulted in payments of $40.8 million to counterparties representing the fair market value of the cross-currency swap on the termination date.The repayment of $62.8 million of borrowings outstanding under and termination of the Company’s accounts receivable securitization programresulted in a pre-tax loss of $0.2 million on the early extinguishment of debt and included the write-off of issuance costs associated with the accountsreceivable securitization program. The loss on the early extinguishment of debt is included in other (income) expense, net in the consolidated statement ofoperations for the year ended December 31, 2009.On September 30, 2009, the Company repurchased $29.1 million of outstanding Senior Subordinated Notes for a purchase price of $24.2 million,which resulted in a pre-tax gain of $4.9 million on the early extinguishment of debt and is included in other (income) expense, net in the consolidatedstatements of operations.Debt issuance costs of $20.6 million in connection with the refinancing transactions were deferred and are being amortized using the effective interestmethod over the terms of the Senior Secured Notes and ABL Facility.Senior Secured NotesOn September 30, 2009, the Company issued an aggregate principal amount of $460.0 million of Senior Secured Notes with semi-annual interestpayments payable March 15 and September 15 of each year. The Senior Secured Notes were issued at 98.5% of par value, equating to an effective yield tomaturity of approximately 11%. The proceeds from the sale of the Senior Secured Notes were $453.1 million, after deducting an original issue discount of$6.9 million. As discussed above in “Refinancing Transactions”, in conjunction with the proceeds from the initial draw under the ABL Facility, the Companyentered into a series of transactions that included repayment of all amounts outstanding under and termination of its senior secured credit agreements,repayment and termination of its accounts receivable securitization program, termination of its cross-currency swap agreement, the repurchase of a portion ofits Senior Subordinated Notes and the payment of fees, expenses and other costs relating to such transactions.The Senior Secured Notes were offered and sold in a private placement to qualified institutional buyers in the United States pursuant to Rule 144Aunder the Securities Act of 1933, as amended (the “Securities Act”) and to non-U.S. persons outside the United States under Regulation S under the SecuritiesAct. In May, 2010 the Company completed an exchange offer for the Senior Secured Notes sold in the private placement for new Senior Secured Notes thathave been registered under the Securities Act of 1933. The new notes have terms that are substantially identical to the old notes.The indenture governing the Senior Secured Notes does not contain financial performance covenants. However, that indenture does contain covenantslimiting, among other things, the ability to incur additional debt, create liens, pay dividends on capital stock or repurchase capital stock or indebtedness,make certain investments, enter into certain types of transactions with affiliates, restrict or limit dividend or other payments by our 57Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) restricted subsidiaries to the Company or other restricted subsidiaries, use assets as security in other transactions, sell certain assets or enter intoconsolidations with or into other companies.Guarantees and SecurityThe Senior Secured Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by all of our existing and future domesticsubsidiaries, with certain exceptions. The Senior Secured Notes and the related guarantees will rank equally in right of payment with all existing and futuresenior debt and will rank senior in right of payment to all existing and future subordinated debt.The Senior Secured Notes and the guarantees are secured on a first-priority basis by a lien on substantially all of the Company’s and the guarantors’present and future assets (other than accounts receivable, inventory, deposit accounts and certain other assets) and up to 65% of the present and future equityinterests of certain of the Company’s and the guarantors directly owned foreign subsidiaries, in each case subject to certain exceptions and customarypermitted liens. The Senior Secured Notes and the guarantees also are secured on a second-priority basis by a lien on the assets that secure the Company’s andthe guarantors’ obligations under the ABL Facility, including accounts receivable, inventory, and other assets excluded as first-lien assets under the SeniorSecured Notes.Redemption OptionsThe Company may redeem the Senior Secured Notes, in whole or in part, at any time on or after (i) September 15, 2012, at a redemption price equal to105.3% of the principal amount of the Senior Secured Notes redeemed, (ii) September 15, 2013, at a redemption price equal to 102.7% of the principalamount of the Senior Secured Notes redeemed, or (iii) September 15, 2014, at a redemption price equal to 100% of the principal amount of the Senior SecuredNotes redeemed, in each case plus accrued and unpaid interest, including any additional interest. At any time on or before September 15, 2012, the Companymay redeem up to 35% of the aggregate principal amount of the Senior Secured Notes with the net proceeds of qualified equity offerings at a redemptionprice of 110.6% plus accrued and unpaid interest, including any additional interest. At any time the Company may also repurchase the Senior Secured Notesthrough open market or privately negotiated repurchases.Requirements to Offer to RepurchaseIf the Company experiences certain change of control events, the Company must offer to repurchase the Senior Secured Notes at a repurchase priceequal to 101% of the principal amount of the Senior Secured Notes repurchased plus accrued and unpaid interest to the repurchase date. If the Company or itssubsidiaries sell assets under specified circumstances, the Company must offer to repurchase the Senior Secured Notes at a repurchase price equal to 100% ofthe principal amount of the Senior Secured Notes being repurchased, plus accrued and unpaid interest to the repurchase date.Asset-Based Revolving Credit Facility (ABL Facility)On September 30, 2009, the Company, and certain domestic and foreign subsidiaries (collectively, the “Borrowers”) entered into a four-year seniorsecured asset-based revolving credit facility maturing in September 2013 with Deutsche Bank AG, as administrative agent, a co-collateral agent and a lender,and five other lenders, providing for revolving credit financing of up to $175.0 million, including a $40.0 million sub-limit for letters of credit and, subject tocertain conditions, an optional $50.0 million additional credit capacity using an accordion feature. Amounts borrowed under the ABL Facility by theCompany and its domestic subsidiaries are guaranteed by each of the Company’s domestic subsidiaries that guarantee the Senior Secured Notes, and amountsborrowed under the ABL Facility by the Company’s foreign subsidiaries are guaranteed by each of the Company, its domestic subsidiaries that guarantee theSenior Secured Notes and certain foreign subsidiaries. 58Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Borrowers’ ability to borrow under the ABL Facility is limited to a borrowing base equal to 85% of eligible accounts receivable plus up to thelesser of (1) 65% of the lower of cost or fair market value of eligible inventory and (2) 85% of the net orderly liquidation value of eligible inventory minusavailability reserves, and is subject to other conditions, limitations and reserve requirements.Interest rates under the ABL Facility are based on the London Interbank Offered Rate (LIBOR). Pricing is subject to quarterly adjustment based on theaverage availability under the ABL Facility during the prior quarter. The range of borrowing costs under the pricing grid is LIBOR plus 3.75% to LIBOR plus4.25% with a LIBOR rate floor of 1.50%. The Company is required to pay a quarterly commitment fee on the unused portion of the ABL facility ranging from0.5% to 1.0%.Borrowings under the ABL Facility are secured on a first priority basis by all accounts receivable, inventory and cash of the Company and itssubsidiaries organized in the U.S. and certain foreign subsidiaries, and on a second priority basis by property and equipment of the Company and itssubsidiaries organized in the U.S. and the other assets that secure the Senior Secured Notes on a first priority basis.The ABL Facility contains customary terms and conditions, including among other things, limitations on liens and indebtedness, asset sales,repurchase of Senior Subordinated Notes, and intercompany transactions. A springing fixed charge financial covenant would be triggered if the excessavailability under the ABL Facility falls below $20.0 million or 15% of total commitments. The ABL Facility also contains bank account restrictions thatapply in the event that the Company’s excess availability fails to meet certain thresholds. As of December 31, 2010, the amount available for borrowingsunder the Company’s ABL Facility was $168.1 million (allowing for $6.9 million of letters of credit outstanding on that date). There were no borrowingsoutstanding under the Company’s ABL Facility as of December 31, 2010.Senior Subordinated NotesThe indenture governing the Senior Subordinated Notes does not contain financial performance covenants. However, that indenture does containcovenants limiting, among other things, the Company’s and its subsidiaries ability to, incur additional debt, pay dividends on capital stock or repurchasecapital stock or indebtedness, make certain investments, enter into certain types of transactions with affiliates, make dividend or other payments by ourrestricted subsidiaries to ACCO Brands, use assets as security in other transactions, sell certain assets or enter into consolidations with or into othercompanies.Compliance with Loan CovenantsAs of and for the year ended December 31, 2010, the Company was in compliance with all applicable loan covenants.The Company’s ABL Facility would not be affected by a change in its credit rating.4. Pension and Other Retiree BenefitsThe Company has a number of pension plans, principally in the United Kingdom and the United States. The plans provide for payment of retirementbenefits, mainly commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certainqualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basis of anemployee’s length of service and earnings. Cash contributions to the plans are made as necessary to ensure legal funding requirements are satisfied. 59Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Company provides postretirement health care and life insurance benefits to certain employees and retirees in the United States and certainemployee groups outside of the United States. These benefit plans have been frozen to new participants. Many employees and retirees outside of the UnitedStates are covered by government health care programs.On January 20, 2009, the Company’s Board of Directors approved plan amendments to temporarily freeze the Company’s U.S. pension and non-qualified supplemental retirement plans effective March 7, 2009. No additional benefits will accrue under these plans after that date until further action bythe Board of Directors. As a result, the Company recognized a curtailment gain of $1.0 million in operating income during 2009.The following table sets forth the Company’s defined benefit pension plans and other postretirement benefit plans funded status and the amountsrecognized in the Company’s consolidated balance sheets: (in millions of dollars) Pension Benefits Postretirement U.S. International 2010 2009 2010 2009 2010 2009 Change in projected benefit obligation (PBO) Projected benefit obligation at beginning of year $154.4 $151.4 $271.1 $203.4 $13.4 $12.9 Service cost — 1.3 2.3 2.4 0.2 0.1 Interest cost 8.9 9.1 14.6 13.7 0.7 0.8 Actuarial (gain) loss 7.5 10.5 5.1 40.9 — (0.3) Participants’ contributions — — 1.0 1.3 0.2 0.2 Benefits paid (8.3) (8.0) (11.2) (11.2) (1.0) (0.8) Curtailment gain — (9.9) — (1.1) — — Foreign exchange rate changes — — (12.0) 21.7 (0.2) 0.5 Other items — — (2.6) — — — Projected benefit obligation at end of year 162.5 154.4 268.3 271.1 13.3 13.4 Change in plan assets Fair value of plan assets at beginning of year 107.9 87.4 234.5 190.2 — — Actual return on plan assets 18.0 28.2 24.3 27.6 — — Employer contributions 7.2 0.3 6.5 5.7 0.8 0.6 Participants’ contributions — — 1.0 1.3 0.2 0.2 Benefits paid (8.3) (8.0) (11.2) (11.2) (1.0) (0.8) Foreign exchange rate changes — — (10.2) 20.9 — — Other — — (2.6) — — — Fair value of plan assets at end of year 124.8 107.9 242.3 234.5 — — Funded status (Fair value of plan assets less PBO) $(37.7) $(46.5) $(26.0) $(36.6) $(13.3) $(13.4) Amounts recognized in the consolidated balance sheet consist of: Other current liabilities $0.2 $0.2 $0.6 $0.6 $1.3 $1.1 Accrued benefit liability 37.5 46.3 25.4 36.0 12.0 12.3 Components of accumulated other comprehensive income, net of tax: Unrecognized prior service cost (benefit) — — 0.5 0.5 (0.1) (0.1) Unrecognized actuarial (gain) loss 36.9 40.2 48.4 56.6 (3.2) (4.3) All plans have projected benefit obligations in excess of plan assets. 60Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Of the amounts included within accumulated other comprehensive income, the Company expects to recognize the following pre-tax amounts ascomponents of net periodic benefit cost during 2011: Pension Benefits Postretirement (in millions of dollars) U.S. International Prior service cost $— $0.2 $— Actuarial (gain) loss 4.3 3.7 (0.6) $4.3 $3.9 $(0.6) The accumulated benefit obligation for all defined benefit pension plans was $428.8 million and $410.7 million at December 31, 2010 and 2009,respectively.The following table sets out information for pension plans with an accumulated benefit obligation in excess of plan assets: U.S. International (in millions of dollars) 2010 2009 2010 2009 Projected benefit obligation $162.5 $154.4 $62.1 $268.5 Accumulated benefit obligation 162.5 154.4 60.3 253.5 Fair value of plan assets 124.8 107.9 46.0 231.8 The following table sets out the components of net periodic benefit cost: Pension Benefits Postretirement U.S. International (in millions of dollars) 2010 2009 2008 2010 2009 2008 2010 2009 2008 Service cost $— $1.3 $4.7 $2.3 $2.4 $3.9 $0.2 $0.1 $0.2 Interest cost 8.9 9.1 8.9 14.6 13.7 16.2 0.7 0.8 1.0 Expected return on plan assets (10.4) (10.7) (11.5) (15.1) (12.8) (19.8) — — — Amortization of prior service cost (credit) — — (0.1) 0.1 0.2 0.2 — — — Amortization of net loss (gain) 3.0 1.2 — 4.8 3.4 0.5 (0.9) (0.9) (0.9) Curtailment — (1.0) 0.1 — (0.5) (0.2) — — — Net periodic benefit cost $1.5 $(0.1) $2.1 $6.7 $6.4 $0.8 $— $— $0.3 61Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Other changes in plan assets and benefit obligations that were recognized in other comprehensive income during the years ended December 31, 2010,2009 and 2008, respectively, were as follows: Pension Benefits Postretirement U.S. International (in millions of dollars) 2010 2009 2008 2010 2009 2008 2010 2009 2008 Current year actuarial (gain)/loss $(0.2) $(16.1) $65.3 $(4.2) $26.1 $34.4 $— $(0.3) $(2.5) Amortization of actuarial (gain) loss (3.0) (1.2) — (4.8) (3.6) (1.0) 0.9 1.0 0.9 Current year prior service cost — — — — — 0.4 — — — Amortization of prior service cost/(credit) — — 0.1 (0.1) (0.3) (0.4) — — — Curtailment gain — 0.2 — — — — — — — Exchange rate adjustment — — — (3.2) 5.8 (14.9) 0.1 (0.4) 1.4 Other — — — — — (0.1) — — 0.1 Total recognized in other comprehensive income $(3.2) $(17.1) $65.4 $(12.3) $28.0 $18.4 $1.0 $0.3 $(0.1) Total recognized in net periodic benefit cost and other comprehensiveincome $(1.7) $(17.2) $67.5 $(5.6) $34.4 $19.2 $1.0 $0.3 $0.2 AssumptionsWeighted average assumptions used to determine benefit obligations for years ended December 31, 2010, 2009 and 2008 were: Pension Benefits Postretirement U.S. International 2010 2009 2008 2010 2009 2008 2010 2009 2008 Discount rate 5.5% 5.9% 6.5% 5.4% 5.8% 6.5% 5.0% 5.9% 6.5% Rate of compensation increase N/A N/A 4.0% 4.4% 4.5% 3.6% — — — Weighted average assumptions used to determine net cost for years ended December 31, 2010, 2009 and 2008 were: Pension Benefits Postretirement U.S. International 2010 2009 2008 2010 2009 2008 2010 2009 2008 Discount rate 5.9% 6.5% 6.6% 5.8% 6.5% 5.8% 5.9% 6.5% 6.3% Expected long-term rate of return 8.2% 8.2% 8.2% 6.8% 6.3% 6.7% — — — Rate of compensation increase N/A 4.0% 4.0% 4.5% 3.6% 4.4% — — — Weighted average health care cost trend rates used to determine postretirement benefit obligations and net cost at December 31, 2010, 2009 and 2008were: Postretirement Benefits 2010 2009 2008 Health care cost trend rate assumed for next year 8% 7% 9% Rate that the cost trend rate is assumed to decline (the ultimate trend rate) 5% 5% 5% Year that the rate reaches the ultimate trend rate 2020 2020 2020 62Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-point change inassumed health care cost trend rates would have the following effects: (in millions of dollars) 1-Percentage-Point Increase 1-Percentage-Point Decrease Effect on total of service and interest cost $0.2 $(0.2) Effect on postretirement benefit obligation 1.3 (1.1) Plan AssetsThe investment strategy for the Company is to optimize investment returns through a diversified portfolio of investments, taking into considerationunderlying plan liabilities and asset volatility. Each plan has a different target asset allocation, which is reviewed periodically and is based on the underlyingliability structure. The target asset allocation for our U.S. plan is 65% in equity securities and 35% in fixed income securities. The target asset allocation fornon-U.S. plans is set by the local plan trustees.The Company’s pension plan weighted average asset allocations at December 31, 2010 and 2009 were as follows: 2010 2009 U.S. International U.S. International Asset category Equity securities 68% 48% 69% 48% Fixed income 32 42 31 41 Real estate — 4 — 4 Other(1) — 6 — 7 Total 100% 100% 100% 100% (1)Cash and cash equivalents and insurance contracts for certain of our international plans.U.S. Pension Plan AssetsFair value measurements of our U.S. pension plan assets by asset category at December 31, 2010 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2010 Common stocks $6.4 $— $— $6.4 Mutual funds 78.5 — — 78.5 Common collective trust funds — 11.5 — 11.5 Government debt securities — 7.5 — 7.5 Corporate debt securities — 7.4 — 7.4 Collateralized mortgage obligations — 5.0 — 5.0 Asset-backed securities, mortgage backed securities, and other fixedincome securities — 8.5 — 8.5 Total $84.9 $39.9 $— $124.8 63Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Fair value measurements of our U.S. pension plan assets by asset category at December 31, 2009 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2009 Common stocks $5.6 $— $— $5.6 Mutual funds 69.3 — — 69.3 Common collective trust funds — 9.0 — 9.0 Government debt securities — 7.9 — 7.9 Corporate debt securities — 5.9 — 5.9 Collateralized mortgage obligations — 4.6 — 4.6 Asset-backed securities, mortgage backed securities, and other fixedincome securities — 5.6 — 5.6 Total $74.9 $33.0 $— $107.9 Mutual funds and common stocks: The fair values of mutual fund and common stock fund investments are determined by obtaining quoted prices onnationally recognized securities exchanges (level 1 inputs).Common collective trusts: The fair values of participation units held in common collective trusts are based on their net asset values, as reported by themanagers of the common collective trusts and as supported by the unit prices of actual purchase and sale transactions occurring as of or close to the financialstatement date (level 2 inputs).Debt securities: Fixed income securities, such as corporate and government bonds, collateralized mortgage obligations, asset-backed securities, andother debt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, includingmarket interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).International Pension Plans AssetsFair value measurements of our international pension plans assets by asset category at December 31, 2010 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2010 Cash and cash equivalents $4.8 $— $— $4.8 Equity securities 116.8 — — 116.8 Government debt securities — 19.0 — 19.0 Corporate debt securities — 74.5 — 74.5 Other debt securities — 8.7 — 8.7 Real estate — 9.7 — 9.7 Insurance contracts — 8.8 — 8.8 Total $121.6 $120.7 $— $242.3 64Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Fair value measurements of our international pension plans assets by asset category at December 31, 2009 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2009 Cash and cash equivalents $3.9 $— $— $3.9 Equity securities 114.1 — — 114.1 Government debt securities — 20.6 — 20.6 Corporate debt securities — 69.2 — 69.2 Other debt securities — 6.8 — 6.8 Real estate — 8.7 — 8.7 Insurance contracts — 11.2 — 11.2 Total $118.0 $116.5 $— $234.5 Equity securities: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1inputs).Debt securities: Fixed income securities, such as corporate and government bonds and other debt securities consisting of index linked securities. Thesedebt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including marketinterest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).Real estate: Real estate consists of managed real estate investment trust securities (level 2 inputs).Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximate fairvalue (level 2 inputs).Cash ContributionsThe Company expects to contribute $12.2 million to its pension plans in 2011. This amount includes $6.0 million, which was paid in January, 2011for its U.S. pension plan.The Company sponsors a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plansamounted to $7.0 million, $4.3 million and $9.7 million in 2010, 2009 and 2008, respectively. In January 2009, the Company’s Board of Directors approvedamendments to the Company’s U.S. 401(k) plan to suspend employer matching contributions for all participants effective February 21, 2009. The Companyreinstated its employer matching contributions for all 401(k) plan participants in October, 2009. This action resulted in pre-tax savings of approximately $3.2million during 2009.The following table presents estimated future benefit payments for the next ten fiscal years: (in millions of dollars) PensionBenefits PostretirementBenefits 2011 $18.5 $1.3 2012 $19.2 $1.2 2013 $19.8 $1.2 2014 $20.4 $1.2 2015 $21.1 $1.0 Years 2016—2020 $116.0 $4.6 65Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) 5. Stock-Based CompensationThe Company has two share-based compensation plans under which a total of 6,703,000 shares may be issued under awards to key employees and non-employee directors.The following table summarizes the impact of all stock-based compensation from continuing operations on the Company’s consolidated statements ofoperations for the years ended December 31, 2010, 2009 and 2008. (in millions of dollars) 2010 2009 2008 Advertising, selling, general and administrative expense $4.2 $2.8 $5.3 Restructuring charges — 0.2 0.1 Income from continuing operations before income taxes $4.2 $3.0 $5.4 There was no capitalization of stock based compensation expense.Stock-based compensation by award type (including stock options, stock-settled appreciation rights (“SSARs”), restricted stock units (“RSUs”) andperformance stock units (“PSUs”)) for the years ended December 31, 2010, 2009 and 2008 are as follows: (in millions of dollars) 2010 2009 2008 Stock option compensation expense $0.4 $0.8 $3.8 SSAR compensation expense 0.2 0.2 — RSU compensation expense 2.8 1.8 4.0 PSU compensation expense (income) 0.8 0.2 (2.3) Subtotal 4.2 3.0 5.5 Less discontinued operations — — 0.1 Total stock-based compensation from continuing operations $4.2 $3.0 $5.4 Stock Options and SSAR AwardsThe exercise price of each stock option and SSAR equals or exceeds the market price of the Company’s stock on the date of grant. Options/SSARs cangenerally be exercised over a maximum term of up to seven years. Stock options/SSARs outstanding as of December 31, 2010 generally vest ratably overthree years. For options granted to retirement eligible employees (age 55 with at least 5 years of service) the value of the stock option is expensedimmediately on the date of grant. During 2009, the Company granted only SSAR awards. There were no SSAR or option awards issued during 2010. The fairvalue of each option/SSAR grant is estimated on the date of grant using the Black-Scholes option-pricing model using the weighted average assumptions asoutlined in the following table: Year Ended December 31, 2009 2008 Weighted average expected lives 4.5 years 4.7 years Weighted average risk-free interest rate 2.1% 2.3% Weighted average expected volatility 41.5% 34.6% Expected dividend yield 0.0% 0.0% Weighted average grant date fair value $0.24 $3.57 66Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Company has utilized historical volatility for a pool of peer companies for a period of time that is comparable to the expected life of theoption/SSAR to determine volatility assumptions. The risk-free interest rate assumption is based upon the average daily closing rates during the quarter forU.S. treasury notes that have a life which approximates the expected life of the option/SSAR. The dividend yield assumption is based on the Company’sexpectation of dividend payouts. The expected life of employee stock options/SSARs represents the weighted-average period the stock options/SSARs areexpected to remain outstanding. The weighted average expected lives reflects the application of the simplified method.A summary of the changes in stock options/SSARs outstanding under the Company’s stock compensation plans during the year ended December 31,2010 is presented below: NumberOutstanding WeightedAverageExercisePrice Weighted AverageRemainingContractualTerm AggregateIntrinsicValue Outstanding at December 31, 2009 7,009,011 $10.75 Granted — — Exercised (316,354) $0.81 Lapsed (399,737) $5.88 Outstanding at December 31, 2010 6,292,920 $11.56 3.8 years $18.3 million Exercisable shares at December 31, 2010 4,484,795 $15.55 3.2 years $5.3 million Options/SSARs vested or expected to vest 6,146,961 $11.76 3.7 years $17.4 million The Company received cash of $0.3 million from the exercise of stock options for the year ended December 31, 2008, for which, the aggregate intrinsicvalue of options exercised was $0.1 million. No stock options were exercised in 2010 and 2009. The aggregate intrinsic value of SSARs exercised during theyear ended December 31, 2010 totaled $2.1 million. No SSARs were exercised in 2009 and 2008. The fair value of options and SSARs vested during theyears ended December 31, 2010, 2009 and 2008 was $1.1 million, $1.7 million and $6.0 million, respectively. As of December 31, 2010, the Company hadunrecognized compensation expense related to stock options and SSARs of $0.1 million and $0.3 million, respectively. The unrecognized compensationexpense related to stock options and SSARs will be recognized over a weighted-average period of 0.5 years and 1.4 years, respectivelyStock Unit AwardsThe Amended and Restated Acco Brands Corporation 2005 Incentive Plan provides for stock based awards in the form of RSUs, PSUs, incentive andnon-qualified stock options, and stock appreciation rights, any of which may be granted alone or with other types of awards and dividend equivalents. RSUsvest over a pre-determined period of time, generally three to four years from the date of grant. PSUs also vest over a pre-determined period of time, minimallythree years, but are further subject to the achievement of certain business performance criteria in future periods. Based upon the level of achievedperformance, the number of shares actually awarded can vary from 0% to 150% of the original grant.There were 529,095 RSUs outstanding at December 31, 2010. All outstanding RSUs as of December 31, 2010 vest within four years of the date of grant.Also outstanding at December 31, 2010 were 607,063 PSUs. 532,079 PSUs were cancelled as the performance targets for the performance periods endedDecember 31, 2010 were not achieved. All outstanding PSUs as of December 31, 2010 vest at the end of their respective performance periods subject toachievement of the performance targets associated with such awards. Upon vesting, all of the remaining PSU awards will be converted into the right to receiveone share of common stock of the Company for 67Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) each unit that vests. The cost of these awards is determined using the fair value of the shares on the date of grant, and compensation expense is recognizedover the period during which the employees provide the requisite service to the Company. The Company generally recognizes compensation expense for itsPSU awards ratably over the performance period based on management’s judgment of the likelihood that performance measures will be attained. TheCompany generally recognizes compensation expense for its RSU awards ratably over the service period. A summary of the changes in the stock unit awardsoutstanding under the Company’s equity compensation plans during 2010 is presented below: StockUnits WeightedAverageGrantDate FairValue Unvested at December 31, 2009 1,234,124 $13.72 Granted 875,930 $7.06 Vested (77,051) $16.30 Forfeited and cancelled (896,845) $11.79 Unvested at December 31, 2010 1,136,158 $14.41 The weighted-average grant date fair value of our stock unit awards was $7.06, $7.58, and $12.29 for the years ended December 31, 2010, 2009, and2008, respectively. The fair value of stock unit awards that vested during the years ended December 31, 2010, 2009 and 2008 was $1.3 million, $4.5 millionand $6.2 million, respectively. As of December 31, 2010, the Company had unrecognized compensation expense related to RSUs and PSUs of $1.3 millionand $3.1 million, respectively. The unrecognized compensation expense related to RSUs and PSUs will be recognized over a weighted-average period of 1.1years and 2.0 years, respectively. The Company will satisfy the requirement for delivering the common shares for stock-based plans by issuing new shares.6. InventoriesInventories are stated at the lower of cost or market value. The components of inventories were as follows: December 31, (in millions of dollars) 2010 2009 Raw materials $28.3 $25.1 Work in process 4.5 5.0 Finished goods 183.3 172.3 Total inventories $216.1 $202.4 7. Property, Plant and EquipmentProperty, plant and equipment, net consisted of: December 31, (in millions of dollars) 2010 2009 Land and improvements $13.7 $13.4 Buildings and improvements to leaseholds 116.7 118.2 Machinery and equipment 334.3 336.2 Construction in progress 10.7 7.9 475.4 475.7 Less: accumulated depreciation (311.9) (294.6) Net property, plant and equipment(1) $163.5 $181.1 68Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) (1)Net property, plant and equipment as of December 31, 2010 and 2009 contained $25.6 million and $35.2 million of computer software assets, whichare classified within machinery and equipment. Amortization of software costs was $10.1 million, $9.7 million and $9.3 million for the years endedDecember 31, 2010, 2009 and 2008, respectively.8. Goodwill and Identifiable Intangible AssetsGoodwillChanges in the net carrying amount of goodwill by segment were as follows: (in millions of dollars) ACCOBrandsAmericas ACCOBrandsInternational ComputerProductsGroup Total Balance at December 31, 2008 $86.8 $45.9 $6.8 $139.5 Translation and other 2.2 1.7 — 3.9 Balance at December 31, 2009 89.0 47.6 6.8 143.4 Translation and other 1.2 (0.2) — 1.0 Balance at December 31, 2010 $90.2 $47.4 $6.8 $144.4 Goodwill $221.1 $141.5 $6.8 $369.4 Accumulated impairment losses (130.9) (94.1) — (225.0) Balance at December 31, 2010 $90.2 $47.4 $6.8 $144.4 The authoritative guidance on goodwill and other intangible assets requires that goodwill be tested for impairment at a reporting unit level. TheCompany has determined that its reporting units are its ACCO Brands Americas, ACCO Brands International and Computer Products Group segments basedon its organizational structure and the financial information that is provided to and reviewed by management. The Company tests goodwill for impairmentannually and whenever events or circumstances make it more likely than not that an impairment may have occurred. Goodwill is tested for impairment usinga two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carryingvalue of the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the netassets assigned to a reporting unit exceeds the fair value of a reporting unit, the second step of the impairment test is performed in order to determine theimplied fair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible andintangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting unit’sgoodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. Based upon our most recent annualimpairment test completed during 2010, the fair value of goodwill of each of our reporting units was substantially in excess of its related carrying value.Given the current economic environment and the uncertainties regarding the impact on our business, there can be no assurance that our estimates andassumptions made for purposes of our impairment testing in 2010 will prove to be accurate predictions of the future. If our assumptions regarding forecastedrevenue or margin growth rates are not achieved, we may be required to record additional impairment charges in future periods, whether in connection withour next annual impairment testing in the second quarter of 2011 or prior to that, if any such change constitutes a triggering event outside of the quarter fromwhen the annual impairment test is performed. It is not possible at this time to determine if any such future impairment charge would result or, if it does,whether such charge would be material. 69Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Identifiable IntangiblesThe gross carrying value and accumulated amortization by class of identifiable intangible assets as of December 31, 2010 and December 31, 2009 areas follows: As of December 31, 2010 As of December 31, 2009 (in millions of dollars) GrossCarryingAmounts AccumulatedAmortization NetBookValue GrossCarryingAmounts AccumulatedAmortization NetBookValue Indefinite-lived intangible assets: Trade names $139.4 $(44.5)(1) $94.9 $139.7 $(44.5)(1) $95.2 Amortizable intangible assets: Trade names 58.2 (25.3) 32.9 59.6 (23.6) 36.0 Customer and contractual relationships 27.4 (20.4) 7.0 26.9 (17.3) 9.6 Patents/proprietary technology 10.8 (7.4) 3.4 10.6 (5.6) 5.0 Subtotal 96.4 (53.1) 43.3 97.1 (46.5) 50.6 Total identifiable intangibles $235.8 $(97.6) $138.2 $236.8 $(91.0) $145.8 (1)Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time future amortizationceased.The Company’s intangible amortization was $6.9 million, $7.2 million and $7.7 million for the years ended December 31, 2010, 2009 and 2008,respectively. Estimated amortization for 2011 is $6.4 million, and is expected to decline by approximately $0.8 million for each of the five years following.2009As of the end of the second quarter of 2009, in connection with its annual goodwill impairment test, the Company tested its other indefinite-livedintangibles, consisting of its indefinite-lived trade names. The Company estimated the fair value of its trade names by performing discounted cash flowanalyses based on the relief-from-royalty approach. This approach treats the trade name as if it were licensed by the Company rather than owned, andcalculates its value based on the discounted cash flow of the projected license payments. A key assumption in our fair value estimate is the discount rateutilized. We selected a discount rate of 17.0 percent. The analysis resulted in an impairment charge of $1.8 million, of which $0.9 million was recorded in theACCO Brands Americas segment and $0.9 million was recorded in the ACCO Brands International segment.As discussed further in Note 10, Income Taxes, during the second quarter of 2009, the Company recorded a $108.1 million non-cash charge to establisha valuation allowance on the Company’s U.S. deferred tax assets. In connection with this non-cash charge, the Company reviewed certain of its long-livedtangible and amortizable intangible assets and determined that the forecasted undiscounted cash flows related to these asset groups were in excess of theircarrying values and, therefore, these assets were not impaired.9. Restructuring and Other ChargesRestructuringThe Company had initiated significant restructuring actions which resulted in the closure or consolidation of facilities that were engaged inmanufacturing and distributing the Company’s products, primarily in North America and Europe, or which resulted in a reduction in overall employeeheadcount. During the years ended 70Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) December 31, 2009 and 2008, the Company recorded pre-tax restructuring and asset impairment charges associated with continuing operations of $17.4million and $28.8 million, respectively. The Company’s cost reduction actions are now complete and no additional charges were initiated in 2010. Employeetermination costs included the release of reserves no longer required. However, cash disbursements will continue into 2011 for obligations outstanding as ofDecember 31, 2010.A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2010 is asfollows: (in millions of dollars) Balance atDecember 31, 2009 TotalProvision CashExpenditures Non-cashItems/Currency Change Balance atDecember 31, 2010 Rationalization of operations Employee termination costs $8.0 $(1.5) $(3.9) $(0.4) $2.2 Termination of lease agreements 4.4 0.2 (1.5) (0.1) 3.0 Sub-total 12.4 (1.3) (5.4) (0.5) 5.2 Asset impairments/net loss on disposal ofassets resulting from restructuringactivities — 0.8 — (0.8) — Total rationalization of operations $12.4 $(0.5) $(5.4) $(1.3) $5.2 Management expects the $2.2 million employee termination costs balance to be substantially paid within the next twelve months. Lease costsincluded in the $3.0 million balance are expected to continue until the last lease terminates in 2013.A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2009 is asfollows: (in millions of dollars) Balance atDecember 31, 2008 TotalProvision CashExpenditures Non-cashItems/Currency Change Balance atDecember 31, 2009 Rationalization of operations Employee termination costs $21.8 $11.9 $(26.4) $0.7 $8.0 Termination of lease agreements 3.1 3.3 (2.3) 0.3 4.4 Other(1) — 0.3 (0.1) (0.2) — Sub-total 24.9 15.5 (28.8) 0.8 12.4 Asset impairments/net loss on disposal ofassets resulting from restructuringactivities — 1.9 — (1.9) — Total rationalization of operations $24.9 $17.4 $(28.8) $(1.1) $12.4 (1)Includes $0.2 million of stock-based compensation expense related to terminated employees. 71Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2008 is asfollows: (in millions of dollars) Balance atDecember 31, 2007 TotalProvision CashExpenditures Non-cashItems/Currency Change Balance atDecember 31, 2008 Rationalization of operations Employee termination costs $18.2 $25.0 $(20.6) $(0.8) $21.8 Termination of lease agreements 2.8 2.4 (1.7) (0.4) 3.1 Sub-total 21.0 27.4 (22.3) (1.2) 24.9 Asset impairments/net loss on disposal ofassets resulting from restructuringactivities — 1.4 — (1.4) — Total rationalization of operations $21.0 $28.8 $(22.3) $(2.6) $24.9 Other ChargesIn addition to the recognition of restructuring costs, the Company also recognized other charges, incremental to the cost of its underlying restructuringactions that do not qualify as restructuring. These charges include redundant warehousing or storage costs during the transition to a new distribution center,equipment and other asset move costs, facility overhead and maintenance costs after exit, gains on the sale of exited facilities, certain costs associated withthe Company’s debt refinancing and employee retention incentives. The Company did not incur any other charges, as described above, in 2010. Within costof products sold on the Consolidated Statements of Operations for the years ended December 31, 2009 and 2008, these charges totaled $3.4 million and $7.5million, respectively. Within advertising, selling, general and administrative expenses on the Consolidated Statements of Operations for the years endedDecember 31, 2009 and 2008; these charges totaled $1.2 million and $3.1 million, respectively. Included within the 2008 results, is a charge for $4.2 millionrelated to the exit of the Company’s former CEO, a $3.5 million gain on the sale of a manufacturing facility and net gains of $2.4 million on the sale of threeadditional properties.10. Income TaxesThe components of income (loss) before income taxes from continuing operations are as follows: (in millions of dollars) 2010 2009 2008 Domestic operations $(38.5) $(38.6) $(192.4) Foreign operations 82.2 50.7 (53.7) Total $43.7 $12.1 $(246.1) 72Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The reconciliation of income taxes computed at the U.S. federal statutory income tax rate to the Company’s effective income tax rate for continuingoperations is as follows: (in millions of dollars) 2010 2009 2008 Income tax (benefit) at US statutory rate $15.3 $4.2 $(86.1) State, local other tax net of federal benefit (0.8) (1.0) 0.4 US effect of foreign dividends and earnings 4.9 23.6 11.0 Unrealized foreign currency gain on intercompany debt 8.6 1.0 — Impairment of non deductible goodwill — — 74.7 Foreign income taxed at a lower effective rate (7.0) (5.7) (11.5) Increase in valuation allowance 15.7 109.9 31.0 Correction of deferred tax error at foreign subsidiary (2.8) — — Change in prior year tax estimates (1.3) (1.2) (1.6) Miscellaneous (0.4) (2.9) (1.0) Income taxes as reported $32.2 $127.9 $16.9 For 2010, the Company recorded income tax expense from continuing operations of $32.2 million on income before taxes of $43.7 million. Thiscompares to income tax expense from continuing operations of $127.9 million on income before taxes of $12.1 million for 2009. Included in the results for2010 is an out-of-period adjustment made to correct an error related to inaccurate calculations of deferred taxes at a foreign subsidiary. The correction of theerror increased net income by $2.8 million through an increase in deferred tax assets and a corresponding reduction in income tax expense. The Companydetermined that the impact of the error was not significant to any current or prior individual period, and accordingly a restatement of prior period amountswas not determined to be necessary.The high effective tax rate for 2010 is due to an increase in the valuation allowance of $15.7 million because no tax benefit is being provided on lossesincurred in the U.S. and certain foreign jurisdictions where valuation allowances are recorded against future tax benefits, and because of an $8.6 millionexpense recorded to reflect the income tax impact of foreign currency fluctuations on an intercompany debt obligation, partially offset by the benefit of the$2.8 million out-of-period adjustment recorded in the second quarter.During the second quarter of 2009, the Company established a valuation allowance against its domestic deferred tax assets to reduce them to the valuemore likely than not to be realized with a corresponding non-cash charge of $108.1 million to the provision for income taxes. The lower than-expected taxrate for 2008 was principally due to the goodwill impairment charges of $222.7 million which are not tax deductible, additional taxes on previously untaxedincome from foreign earnings and an increase in the valuation allowance on certain foreign and domestic state deferred tax assets and tax loss carryforwards.The effective tax rate for discontinued operations was a tax rate of 34.4% and (4.2%) in 2010 and 2009, respectively. The lower rate in 2009 reflectedthe absence of income tax benefits in the U.S. and Netherlands due to the tax valuation allowances established for those countries. The effective tax rate fordiscontinued operations was a tax benefit of 13.8% in 2008 and included the impact of charges related to non-deductible goodwill.The U.S. federal statute of limitations remains open for the years 2007 and forward. Foreign and U.S. state jurisdictions have statutes of limitationsgenerally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2005 and forward) andthe United Kingdom (2008 and forward). The Company is currently under examination in certain foreign jurisdictions. 73Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The components of the income tax expense from continuing operations are as follows: (in millions of dollars) 2010 2009 2008 Current expense (benefit) Domestic $0.6 $(0.6) $10.2 Foreign 19.7 15.8 19.1 Total current income tax expense 20.3 15.2 29.3 Deferred expense (benefit) Domestic 4.8 111.6 (17.1) Foreign 7.1 1.1 4.7 Total deferred income tax expense (benefit) 11.9 112.7 (12.4) Total income tax expense $32.2 $127.9 $16.9 The components of deferred tax assets (liabilities) are as follows: (in millions of dollars) 2010 2009 Deferred tax assets Compensation and benefits $10.5 $7.5 Pension 25.1 38.0 Inventory 6.0 6.5 Other reserves 10.5 8.1 Restructuring — 1.7 Accounts receivable 4.5 5.2 Capital loss carryforwards 10.3 10.3 Foreign tax credit carryforwards 20.5 20.5 Net operating loss carryforwards 128.2 116.4 Depreciation 0.4 — Miscellaneous 2.3 1.4 Gross deferred income tax assets 218.3 215.6 Valuation allowance (193.2) (188.9) Net deferred tax assets 25.1 26.7 Deferred tax liabilities Depreciation — (4.5) Identifiable intangibles (70.2) (65.2) Unrealized foreign currency gain on intercompany debt (9.6) (1.0) Miscellaneous (3.3) (1.3) Gross deferred tax liabilities (83.1) (72.0) Net deferred tax assets (liabilities) $(58.0) $(45.3) Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested inthose companies, aggregating approximately $495.1 million at December 31, 2010 and $490.4 million at December 31, 2009. If these amounts weredistributed to the United States, in the form of a dividend or otherwise, the Company would be subject to additional U.S. income taxes. Determination of theamount of unrecognized deferred income tax liabilities on these earnings is not practicable. 74Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) At December 31, 2010, $385.9 million of net operating loss carryforwards and $29.4 million of capital loss carryforwards are available to reduce futuretaxable income of domestic and international companies. These loss carryforwards expire in the years 2011 through 2029 or have an unlimited carryoverperiod.The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes in its results of operations. As ofDecember 31, 2010, the Company had $0.4 million accrued for interest and penalties.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (in millions of dollars) 2010 2009 Balance at January 1 $6.0 $5.4 Additions for tax positions of prior years 0.2 1.8 Settlements (0.5) (1.2) Balance at December 31 $5.7 $6.0 As of December 31, 2010 the amount of unrecognized tax benefits decreased to $5.7 million, of which only $1.5 million would affect the Company’seffective tax rate, if recognized because of valuation allowances in certain jurisdictions. The Company expects the amount of unrecognized tax benefits tochange within the next twelve months, but these changes are not expected to have a significant impact on the Company’s results of operations or financialposition.11. Earnings per ShareThe calculation of basic earnings per common share is based on the weighted average number of common shares outstanding in the year over whichthey were outstanding. The Company’s diluted earnings per common share assume that any common shares outstanding were increased by shares that wouldbe issued upon exercise of those stock units for which the average market price for the period exceeds the exercise price; less, the shares that could have beenpurchased by the Company with the related proceeds, including compensation expense measured but not yet recognized, net of tax. Due to the loss fromcontinuing operations in 2009 and 2008 the denominator in the diluted earnings per share calculation does not include the effects of options as it wouldresult in a less dilutive computation. As a result, 2009 and 2008 diluted earnings per share from continuing operations are the same as basic earnings pershare. (in millions) 2010 2009 2008 Weighted average number of common shares outstanding—basic 54.8 54.5 54.2 Employee stock options 0.1 — — Stock-settled stock appreciation rights 2.1 — — Restricted stock units 0.2 — — Adjusted weighted-average shares and assumed conversions—diluted(1) 57.2 54.5 54.2 (1)The Company has dilutive shares related to stock options, stock-settled appreciation rights and restricted stock units that were granted under theCompany’s stock compensation plans. As of December 31, 2010, 2009 and 2008, approximately 4.1 million, 7.5 million and 5.5 million shares,respectively, were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. 75Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) 12. Derivative Financial InstrumentsThe Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. The Company entersinto financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financialinstruments are major financial institutions. The Company continually monitors its foreign currency exposures in order to maximize the overall effectivenessof its foreign currency hedge positions. Principal currencies hedged include the U.S. dollar, Euro, Australian dollar, Canadian dollar and Pound sterling. TheCompany is subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues to monitor the status of the Company’s counterparties and will takeaction, as appropriate, to further manage its counterparty credit risk. There are no credit contingency features in our derivative financial instruments.On the date in which the Company enters into a derivative, the derivative is designated as a hedge of the identified exposure. The Company measuresthe effectiveness of its hedging relationships both at hedge inception and on an ongoing basis.Forward Currency ContractsThe Company enters into forward foreign currency contracts to reduce the effect of fluctuating foreign currencies, primarily on foreign denominatedinventory purchases and intercompany loans. The majority of the Company’s exposure to local currency movements is in Europe, Australia, Canada, Mexicoand Japan.Forward currency contracts used to hedge foreign denominated inventory purchases are designated as a cash flow hedge. Unrealized gains and losseson these contracts for inventory purchases are deferred in other comprehensive income until the contracts are settled and the underlying hedged transactionsare recognized, at which time the deferred gains or losses will be reported in the “Cost of products sold” line in the consolidated statements of operations. Asof December 31, 2010 and December 31, 2009, the Company had cash flow designated foreign exchange contracts outstanding with a U.S. dollar equivalentnotional value of $92.9 million and $61.9 million, respectively.Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses onthese derivative instruments are recognized within other (income) expense, net in the consolidated statements of operations and are largely offset by thechanges in the fair value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, anddo not extend beyond 2011. As of December 31, 2010 and 2009, the Company had undesignated foreign exchange contracts outstanding with a U.S. dollarequivalent notional value of $92.7 million and $124.6 million, respectively.Cross-Currency SwapOn September 30, 2009, the Company terminated a cross-currency swap agreement which was entered into in September, 2005. The cross-currencyswap was terminated in connection with the issuance of the Company’s senior secured notes and entry into its ABL Facility. The termination of the cross-currency swap resulted in payments of $40.8 million to counterparties representing the fair market value of the cross-currency swap on the termination date. 76Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) The following table summarizes the fair value of the Company’s derivative financial instruments as of December 31, 2010 and 2009, respectively. Fair Value of Derivative Instruments Derivative Assets Derivative Liabilities (in millions of dollars) Balance SheetLocation Dec. 31,2010 Dec. 31,2009 Balance SheetLocation Dec. 31,2010 Dec. 31,2009 Derivatives designated as hedging instruments: Foreign exchange contracts Other currentassets $0.7 $0.2 Other currentliabilities $3.1 $1.0 Derivatives not designated as hedging instruments: Foreign exchange contracts Other currentassets 1.4 1.8 Other currentliabilities 0.8 1.0 Total derivatives $2.1 $2.0 $3.9 $2.0 The following table summarizes the pre-tax effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations forthe years ended December 31, 2010 and 2009, respectively. The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the ConsolidatedStatements of Operations for the Years Ended December 31, 2010 and 2009 Amount of(Gain) LossRecognized inOCI (EffectivePortion) Location of(Gain) LossReclassified fromOCI to Income Amount of(Gain)LossReclassifiedfromAOCI toIncome(EffectivePortion) Location of (Gain) LossRecognized in Income Amount of(Gain) LossRecognizedin Income(IneffectivePortion) (in millions of dollars) 2010 2009 2010 2009 2010 2009 Cash flow hedges: Foreign exchange contracts $3.1 $4.4 Cost of products sold $1.8 $0.3 Cost of products sold $— $— Net investment hedges: Cross-currency swap — 10.0 Other (income) expense — — Interest expense, net — (0.9) Net investment in foreign operations — 15.0 Other (income) expense — — Other (income) expense — — Total $3.1 $29.4 $1.8 $0.3 $— $(0.9) (in millions of dollars) The Effect of DerivativesNot Designated as Hedging Instrumentson the Consolidated Statements of Operations Location of (Gain) LossRecognized inIncome onDerivatives Amount of(Gain) LossRecognized inIncomeYear EndedDec. 31, 2010 2009 Foreign exchange contracts Other (income) expense $(1.8) $(8.8) 77Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) 13. Fair Value of Financial InstrumentsThe authoritative guidance for fair value measurements requires disclosure that establishes a framework for measuring fair value and expandsdisclosure about fair value measurements. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability inan orderly transaction between market participants at the measurement date (exit price). The guidance classifies the inputs used to measure fair value into thefollowing hierarchy: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilitiesLevel 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or Unadjusted quoted prices for identical or similarassets or liabilities in markets that are not active, or Inputs other than quoted prices that are observable for the asset or liabilityLevel 3 Unobservable inputs for the asset or liabilityThe Company utilizes the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on thelowest level of input that is significant to the fair value measurement. The Company has determined that its financial assets and liabilities are Level 2 in thefair value hierarchy. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as ofDecember 31, 2010 and 2009, respectively: December 31, December 31, 2010 2009 Assets: Forward currency contracts $2.1 $2.0 Liabilities: Forward currency contracts $3.9 $2.0 The Company’s forward currency contracts are included in Other Current Assets or Other Current Liabilities and mature within 12 months. The forwardforeign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by the banks or foreign currencydealers. As such, these derivative instruments are classified within Level 2.The fair values of cash and cash equivalents, notes payable to banks, accounts receivable and accounts payable approximate carrying amounts dueprincipally to their short maturities. The carrying amount of total debt was $727.6 million and $725.8 million and the estimated fair value of total debt was$794.5 million and $770.2 million at December 31, 2010 and 2009, respectively. The fair values are determined from quoted market prices, where available,and from investment bankers using current interest rates considering credit ratings and the remaining terms of maturity. 78Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) 14. Accumulated Other Comprehensive Income (Loss)Comprehensive income is defined as net income (loss) and other changes in stockholders’ equity from transactions and other events from sources otherthan stockholders. The components of, and changes in, accumulated other comprehensive income (loss) were: (in millions of dollars) DerivativeFinancialInstruments ForeignCurrencyAdjustments UnrecognizedPension and OtherPostretirementBenefit Costs AccumulatedOtherComprehensiveIncome (Loss) Balance at December 31, 2008 $2.3 $(39.8) $(80.0) $(117.5) Changed during the year (net of taxes of $(1.0)) (3.3) 26.7 (12.9) 10.5 Balance at December 31, 2009 (1.0) (13.1) (92.9) (107.0) Changed during the year (net of taxes of $(3.2)) (0.5) 11.0 10.4 20.9 Balance at December 31, 2010 $(1.5) $(2.1) $(82.5) $(86.1) 15. Information on Business SegmentsThe Company’s business segments are aligned along geographic markets. The Company’s three business segments consist of ACCO Brands Americas,ACCO Brands International and Computer Products Group.ACCO Brands Americas and ACCO Brands InternationalThese two segments manufacture, source and sell traditional office products and supplies and document finishing solutions. ACCO Brands Americascomprises the North, Central and South American markets and ACCO Brands International comprises the rest of the world, principally Europe, Australia andAsia-Pacific.Examples of our traditional office products and supplies are staplers, staples, punches, ring binders, trimmers, sheet protectors, hanging file folders,clips and fasteners, data binders, dry-erase boards, dry-erase markers, easels, bulletin boards, overhead projectors, transparencies, laser pointers and screens.These products are sold under leading brands including Quartet, Rexel, Swingline, Wilson Jones, Marbig, NOBO, ACCO, Derwent and Eastlight.Examples of our document finishing solutions are binding, lamination and punching equipment, binding and lamination supplies, report covers, archivalreport covers and shredders. These products are sold primarily under the GBC brand. We also provide machine maintenance and repair services sold underthe GBC brand. Included in the ACCO Brands Americas segment are personal organization tools, including time management products, primarily sold underthe Day-Timer brand name.The customer base to which our products are sold is made up of large global and regional resellers of our products. It is through these large resellers thatthe Company’s products reach the end consumer. Our customer base includes commercial contract stationers, office products superstores, wholesalers,distributors, mail order and internet catalogs, mass merchandisers, club stores and independent dealers. The majority of sales by our customers are to businessend-users, which generally seek premium office products that have added value or ease of use features and a reputation for reliability, performance andprofessional appearance. Some of our document finishing products are sold directly to high volume end-users and commercial reprographic centers andindirectly to lower-volume consumers worldwide. Approximately two-thirds of the Day-Timer business is sold through the direct channel, which marketsproduct through periodic sales catalogs and ships product directly to our end-user customers. The remainder of the business sells to large resellers andcommercial dealers. 79®®®®®®Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Computer Products GroupThis Group designs, distributes, markets and sells accessories for laptop and desktop computers and Apple iPad, iPod and iPhone products. Theseaccessories primarily include security locks, power adapters, input devices such as mice and keyboards, laptop computer carrying cases, hubs and dockingstations, ergonomic devices and technology accessories for iPods, iPads and iPhones. The Computer Products Group sells mostly under the Kensingtonand Kensington Microsaver brand names, with the majority of its revenue coming from the U.S. and Western Europe.All of our computer products are manufactured to our specifications by third-party suppliers, principally in Asia, and are stored and distributed fromour regional facilities. Our computer products are sold primarily to consumer electronic retailers, information technology value-added resellers, originalequipment manufacturers and office products retailers.Financial information by reportable segment is set forth below.Net sales by business segment for the years ended December 31, 2010, 2009 and 2008 are as follows: (in millions of dollars) 2010 2009 2008 ACCO Brands Americas $688.3 $671.5 $820.8 ACCO Brands International 465.2 438.0 551.5 Computer Products Group 177.0 163.0 205.9 Net sales $1,330.5 $1,272.5 $1,578.2 Operating income (loss) by business segment for the years ended December 31, 2010, 2009 and 2008 are as follows (a): (in millions of dollars) 2010 2009 2008 ACCO Brands Americas(b) $56.3 $38.6 $(134.0) ACCO Brands International(b) 36.8 27.4 (73.8) Computer Products Group(b) 43.0 31.7 30.1 Subtotal 136.1 97.7 (177.7) Corporate (21.1) (17.9) (28.4) Operating income (loss) 115.0 79.8 (206.1) Interest expense 78.2 67.0 63.7 Equity in earnings of joint ventures (8.3) (4.4) (6.5) Other expense (income), net 1.4 5.1 (17.2) Income (loss) from continuing operations before income taxes $43.7 $12.1 $(246.1) (a)Operating income (loss) as presented in the segment table above is defined as i) net sales; ii) less cost of products sold; iii) less advertising, selling,general and administrative expenses; iv) less amortization of intangibles; and v) less restructuring, goodwill and asset impairment charges. (b)The table below summarizes the non-cash goodwill and asset impairment charges during 2009 and 2008. For a further discussion of the impairmentcharges see Note 8, Goodwill and Identifiable Intangible Assets. 80®®®®®®®®Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) (in millions of dollars) 2009 2008 Segment: ACCO Brands Americas $0.9 $160.6 ACCO Brands International 0.9 111.0 Computer Products Group — 2.8 Total Continuing Operations $1.8 $274.4 Segment assets:The following table presents the measure of segment assets used by the Company’s chief operating decision maker. December 31, (in millions of dollars) 2010 2009 ACCO Brands Americas(c) $320.3 $325.0 ACCO Brands International(c) 289.8 270.3 Computer Products Group(c) 82.7 71.0 Total segment assets 692.8 666.3 Unallocated assets 449.8 432.7 Corporate(c) 7.0 7.8 Total assets $1,149.6 $1,106.8 (c)Represents total assets, excluding: goodwill and identifiable intangibles resulting from business acquisitions, intercompany balances, cash, deferredtaxes, prepaid pension assets, prepaid debt issuance costs and joint ventures accounted for on an equity basis.As a supplement to the presentation of segment assets presented above, the table below presents segment assets, including the allocation of identifiableintangible assets and goodwill resulting from business combinations (d). December 31, (in millions of dollars) 2010 2009 ACCO Brands Americas(d) $497.6 $504.6 ACCO Brands International(d) 379.5 363.4 Computer Products Group(d) 98.3 87.5 Total segment assets 975.4 955.5 Unallocated assets 167.2 143.5 Corporate(d) 7.0 7.8 Total assets $1,149.6 $1,106.8 (d)Represents total assets, excluding: intercompany balances, cash, deferred taxes, prepaid pension assets, prepaid debt issuance costs and joint venturesaccounted for on an equity basis. 81Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Property, plant and equipment, net by geographic region are as follows: (in millions of dollars) 2010 2009 United States $86.6 $99.5 United Kingdom 24.2 27.0 Australia 18.6 16.4 Portugal 6.8 7.3 Other countries 27.3 30.9 Property, plant and equipment $163.5 $181.1 Net sales by geographic region are as follows (e): (in millions of dollars) 2010 2009 2008 United States $633.0 $619.6 $760.3 Australia 182.9 159.3 163.5 United Kingdom 107.3 105.7 160.7 Canada 97.8 87.6 108.9 Other countries 309.5 300.3 384.8 Net sales $1,330.5 $1,272.5 $1,578.2 (e)Net sales are attributed to geographic areas based on the location of the selling company.Major CustomersSales to the Company’s five largest customers totaled $496.4 million, $466.4 million and $564.3 million in 2010, 2009 and 2008, respectively. Oursales to Staples were $166.8 million (13%), $159.8 million (13%) and $202.2 (13%) in 2010, 2009 and 2008, respectively. Our sales to Office Depot were$141.0 million (11%), $137.0 (11%) and $174.2 (11%) in 2010, 2009 and 2008, respectively. Sales to no other customer exceeded 10% of annual sales.A significant percentage of the Company’s sales is to customers engaged in the office products resale industry. Concentration of credit risk with respectto trade accounts receivable is partially mitigated because a large number of geographically diverse customers make up each operating companies’ domesticand international customer base, thus spreading the credit risk. At December 31, 2010, 2009 and 2008, the Company’s top five trade account receivablestotaled $124.7 million, $107.9 million and $116.2 million, respectively.16. Joint Venture InvestmentsSummarized below is financial information for the Company’s joint ventures, which are accounted for under the equity method. Accordingly, theCompany has recorded its proportionate share of earnings or losses on the line entitled “Equity in earnings of joint ventures” in the consolidated statementsof operations: Year Ended December 31, (in millions of dollars) 2010 2009 2008 Net sales $151.8 $134.9 $124.3 Gross profit 85.8 71.6 69.4 Operating income 23.0 13.4 17.7 Net income 16.3 8.8 13.7 82Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) December 31, (in millions of dollars) 2010 2009 Current assets $89.6 $78.0 Noncurrent assets 37.9 35.2 Current liabilities 37.6 36.3 Noncurrent liabilities 23.8 25.0 17. Commitments and ContingenciesPending LitigationThe Company and its subsidiaries are defendants in various claims and legal proceedings associated with their business and operations. It is notpossible to predict the outcome of the pending actions, but management believes that there are meritorious defenses to these actions and that these actions ifadjudicated or settled in a manner adverse to the Company, would not have a material adverse effect upon the results of operations, cash flows or financialcondition of the Company.Lease Commitments (in millions of dollars) 2011 $20.0 2012 17.2 2013 12.6 2014 10.7 2015 9.3 Remainder 28.7 Total minimum rental payments $98.5 Total rental expense reported in the Company’s statement of operations for continuing operations for all non-cancelable operating leases (reduced byminor amounts from subleases) amounted to $25.1 million, $26.5 million and $23.9 million in 2010, 2009 and 2008, respectively.Unconditional Purchase CommitmentsFuture minimum payments under unconditional purchase commitments, primarily for inventory purchase commitments at December 31, 2010 are asfollows: (in millions of dollars) 2011 $30.9 2012 1.2 2013 0.4 2014 0.4 2015 0.4 Thereafter — $33.3 83Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) EnvironmentalThe Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty thepotential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company’s subsidiaries mayundertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account any estimatedrecoveries from third parties, will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.18. Discontinued OperationsThe financial statement caption “discontinued operations” includes the results of the Company’s former commercial print finishing business, whichsupplied commercial laminating film and equipment to printers and packaging suppliers and represented approximately $100 million in annual net sales.During the fourth quarter of 2008, the Company’s Board of Directors authorized management to sell its commercial print finishing business and in the firstquarter of 2009, the Company announced it had reached a definitive agreement to sell this business and to exit from selling high volume laminating film andequipment.In June 2009, the Company completed the sale of its commercial print finishing business for final proceeds of $16.2 million, after final working capitaladjustments. As a result of the adjustments, the Company received cash proceeds before expenses of $12.5 million and a $3.65 million note due from thebuyer payable in installments of $1.325 million in June, 2011 and $2.325 million in June, 2012. Interest on the unpaid balance is payable at the rate of 4.9percent per annum. The sale resulted in a pre-tax loss recorded in 2009 of $0.8 million ($1.1 million after-tax), which included a pre-tax pension curtailmentgain of $0.5 million. During 2010, the Company recorded a loss on sale of $0.1 million ($0.2 million after-tax) related primarily to the settlement of litigationaccruals attributable to the wind-down of the discontinued operations.The operating results and financial position of discontinued operations are as follows: (in millions, except per share data) 2010 2009 2008 Operating Results: Net sales $— $29.4 $99.4 Operating income (loss)(1) 1.4 (9.3) (87.4) Other (income) expense, net — (0.3) 1.0 Pre-tax income (loss) 1.4 (9.0) (88.4) Provision (benefit) for income taxes 0.3 0.2 (12.2) Loss on sale, net of tax (0.2) (1.1) — Income (loss) from discontinued operations $0.9 $(10.3) $(76.2) Per share: Basic income (loss) from discontinued operations $0.02 $(0.19) $(1.41) Diluted income (loss) from discontinued operations $0.02 $(0.19) $(1.41) (1)During the fourth quarter of 2010, the Company completed the sale of a property formerly occupied by its commercial print finishing business,resulting in a gain on sale of $1.7 million. During 2009, the Company recorded an impairment charge of $3.3 million ($1.8 million after-tax) to reflecta change in the estimate of fair value less the cost to dispose of its commercial print finishing business. During 2008, the Company recorded non-cashgoodwill and asset impairment charges of $84.8 million. Included in this amount were charges to goodwill of $35.1 million, property, plant andequipment of $22.2 million, identifiable intangible assets of $10.5 million and other current assets of $17.0 million. 84Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) (in millions of dollars) December 31,2010 December 31,2009 Financial Position: Current assets $— $— Long-term assets — — Total assets $— $— Current liabilities(2) $1.5 $5.6 Long-term liabilities — — Total liabilities $1.5 $5.6 (2)Liabilities remaining as of December 31, 2010 consist principally of litigation accruals and severance costs.19. Quarterly Financial Information (Unaudited)The following is an analysis of certain items in the consolidated statements of operations by quarter for 2010 and 2009: (in millions of dollars, except per share data) 1 Quarter 2 Quarter 3 Quarter 4 Quarter 2010 Net sales $310.8 $316.5 $330.7 $372.5 Gross profit 95.2 99.0 102.2 119.0 Operating income 21.6 26.3 31.2 35.9 Income (loss) from continuing operations (4.5) 5.2 5.4 5.4 Income (loss) from discontinued operations (0.2) (0.3) — 1.4 Net income (loss) $(4.7) $4.9 $5.4 $6.8 Basic earnings per common share: Income (loss) from continuing operations $(0.08) $0.10 $0.10 $0.10 Income (loss) from discontinued operations — (0.01) — 0.03 Net income (loss) (0.09) 0.09 0.10 0.12 Diluted earnings per common share: Income (loss) from continuing operations $(0.08) $0.09 $0.09 $0.09 Income (loss) from discontinued operations — (0.01) — 0.02 Net income (loss) (0.09) 0.09 0.09 0.12 2009 Net sales $293.4 $303.8 $322.5 $352.8 Gross profit 82.1 88.8 99.9 108.5 Operating income(1) 13.4 11.0 27.5 27.9 Income (loss) from continuing operations(1,2) (3.7) (116.7) 1.7 2.9 Loss from discontinued operations (3.3) (4.7) (0.4) (1.9) Net income (loss)(1,2) $(7.0) $(121.4) $1.3 $1.0 Basic earnings per common share: Income (loss) from continuing operations(1,2) $(0.07) $(2.14) $0.03 $0.05 Loss from discontinued operations (0.06) (0.09) (0.01) (0.04) Net income (loss)(1,2) (0.13) (2.23) 0.02 0.02 Diluted earnings per common share: Income (loss) from continuing operations(1,2) $(0.07) $(2.14) $0.03 $0.05 Loss from discontinued operations (0.06) (0.09) (0.01) (0.03) Net income (loss)(1,2) (0.13) (2.23) 0.02 0.02 85stndrdthTable of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) (1)During the second quarter of 2009, the Company recorded pre-tax non-cash trade name impairment charges totaling $1.8 million related to the ACCOBrands Americas ($0.9 million) and ACCO Brands International ($0.9 million) reporting units. (2)During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S.deferred taxes. For a further discussion of the valuation allowance see Note 10, Income Taxes.20. Condensed Consolidated Financial InformationThe Company’s 100% owned domestic subsidiaries are required to jointly and severally, fully and unconditionally guarantee the notes issued in 2005(see Note 3, Long-term Debt and Short-term Borrowings). Rather than filing separate financial statements for each guarantor subsidiary with the Securitiesand Exchange Commission, the Company has elected to present the following consolidating financial statements, which detail the results of operations forthe years ended December 31, 2010, 2009 and 2008, cash flows for the years ended December 31, 2010, 2009 and 2008 and financial position as ofDecember 31, 2010 and 2009 of the Company and its guarantor and non-guarantor subsidiaries (in each case carrying investments under the equity method),and the eliminations necessary to arrive at the reported amounts included in the consolidated financial statements of the Company. 86Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Condensed Consolidating Balance Sheets December 31, 2010 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Assets Current assets Cash and cash equivalents $39.5 $(0.4) $44.1 $— $83.2 Accounts receivable, net — 87.5 195.7 — 283.2 Inventories — 100.2 115.9 — 216.1 Receivables from affiliates 235.5 58.5 38.1 (332.1) — Deferred income taxes 3.0 — 9.9 — 12.9 Other current assets 2.5 11.6 11.2 — 25.3 Total current assets 280.5 257.4 414.9 (332.1) 620.7 Property, plant and equipment, net 1.0 85.6 76.9 — 163.5 Deferred income taxes 0.9 — 9.7 — 10.6 Goodwill — 70.5 73.9 — 144.4 Identifiable intangibles, net 57.9 53.8 26.5 — 138.2 Other assets 21.6 6.3 44.3 — 72.2 Investment in, long-term receivable from, affiliates 616.9 711.4 200.0 (1,528.3) — Total assets $978.8 $1,185.0 $846.2 $(1,860.4) $1,149.6 Liabilities and Stockholders’ (Deficit) Equity Current liabilities Current portion of long-term debt $0.1 $0.1 $— $— $0.2 Accounts payable — 60.4 54.4 — 114.8 Accrued compensation 1.6 10.0 14.5 — 26.1 Accrued customer program liabilities — 24.6 48.2 — 72.8 Accrued interest 22.0 — — — 22.0 Other current liabilities 2.2 23.7 64.6 — 90.5 Payables to affiliates 60.9 427.2 277.5 (765.6) — Liabilities of discontinued operations held for sale — 0.6 0.9 — 1.5 Total current liabilities 86.8 546.6 460.1 (765.6) 327.9 Long-term debt 727.1 0.3 — — 727.4 Long-term notes payable to affiliates 178.2 16.4 1.7 (196.3) — Deferred income taxes 59.6 — 21.9 — 81.5 Pension and other post retirement benefit obligations 4.7 39.9 30.3 — 74.9 Other non-current liabilities 2.2 5.6 9.9 — 17.7 Total liabilities 1,058.6 608.8 523.9 (961.9) 1,229.4 Stockholders’ (deficit) equity Preferred stock — — — — — Common stock 0.6 561.3 76.0 (637.3) 0.6 Treasury stock, at cost (1.5) — — — (1.5) Paid-in capital 1,401.1 632.0 336.4 (968.4) 1,401.1 Accumulated other comprehensive income (loss) (86.1) (47.0) (4.4) 51.4 (86.1) Accumulated (deficit) retained earnings (1,393.9) (570.1) (85.7) 655.8 (1,393.9) Total stockholders’ (deficit) equity (79.8) 576.2 322.3 (898.5) (79.8) Total liabilities and stockholders’ (deficit) equity $978.8 $1,185.0 $846.2 $(1,860.4) $1,149.6 87Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Condensed Consolidating Balance Sheets December 31, 2009 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Assets Current assets Cash and cash equivalents $14.2 $(1.5) $30.9 $— $43.6 Accounts receivable, net — 89.4 170.5 — 259.9 Inventories — 106.4 96.0 — 202.4 Receivables from affiliates 314.2 74.3 36.9 (425.4) — Deferred income taxes 2.2 — 7.6 — 9.8 Other current assets 2.7 7.3 11.4 — 21.4 Total current assets 333.3 275.9 353.3 (425.4) 537.1 Property, plant and equipment, net 1.6 97.9 81.6 — 181.1 Deferred income taxes 18.8 — 12.7 — 31.5 Goodwill — 93.4 50.0 — 143.4 Identifiable intangibles, net 58.0 57.8 30.0 — 145.8 Other assets 25.9 4.6 37.4 — 67.9 Investment in, long-term receivable from, affiliates 510.9 854.9 200.0 (1,565.8) — Total assets $948.5 $1,384.5 $765.0 $(1,991.2) $1,106.8 Liabilities and Stockholders’ (Deficit) Equity Current liabilities Notes payable to banks $— $— $0.5 $— $0.5 Current portion of long-term debt — 0.1 0.1 — 0.2 Accounts payable — 54.8 46.2 — 101.0 Accrued compensation 2.6 4.6 11.7 — 18.9 Accrued customer program liabilities — 27.8 46.8 — 74.6 Accrued interest 20.0 — — — 20.0 Other current liabilities 1.9 29.6 46.6 — 78.1 Payables to affiliates 63.9 497.7 293.5 (855.1) — Liabilities of discontinued operations held for sale — 4.5 1.1 — 5.6 Total current liabilities 88.4 619.1 446.5 (855.1) 298.9 Long-term debt 724.7 0.4 — — 725.1 Long-term notes payable to affiliates 178.2 16.4 1.6 (196.2) — Deferred income taxes 67.8 3.8 15.0 — 86.6 Pension and other post retirement benefit obligations 5.1 48.8 40.7 — 94.6 Other non-current liabilities 1.5 5.8 11.5 — 18.8 Total liabilities 1,065.7 694.3 515.3 (1,051.3) 1,224.0 Stockholders’ (deficit) equity Preferred stock — — — — — Common stock 0.5 562.2 76.0 (638.2) 0.5 Treasury stock, at cost (1.4) — — — (1.4) Paid-in capital 1,397.0 661.4 303.9 (965.3) 1,397.0 Accumulated other comprehensive income (loss) (107.0) (50.1) (21.7) 71.8 (107.0) Accumulated (deficit) retained earnings (1,406.3) (483.3) (108.5) 591.8 (1,406.3) Total stockholders’ (deficit) equity (117.2) 690.2 249.7 (939.9) (117.2) Total liabilities and stockholders’ (deficit) equity $948.5 $1,384.5 $765.0 $(1,991.2) $1,106.8 88Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Consolidating Statement of Operations Year Ended December 31, 2010 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Unaffiliated sales $— $632.9 $697.6 $— $1,330.5 Affiliated sales — 18.5 5.2 (23.7) — Net sales — 651.4 702.8 (23.7) 1,330.5 Cost of products sold — 463.2 475.6 (23.7) 915.1 Gross profit — 188.2 227.2 — 415.4 Advertising, selling, general and administrative expenses 22.8 141.9 129.3 — 294.0 Amortization of intangibles 0.1 3.8 3.0 — 6.9 Restructuring income — (0.4) (0.1) — (0.5) Operating income (loss) (22.9) 42.9 95.0 — 115.0 Interest (income) expense from affiliates (1.2) — 1.2 — — Interest expense 67.5 10.2 0.5 — 78.2 Equity in (earnings) losses of joint ventures — 0.3 (8.6) — (8.3) Other (income) expense, net (0.2) (18.1) 19.7 — 1.4 Income (loss) from continuing operations before income taxes andearnings (losses) of wholly owned subsidiaries (89.0) 50.5 82.2 — 43.7 Income tax expense (benefit) 6.5 (0.4) 26.1 — 32.2 Income (loss) from continuing operations (95.5) 50.9 56.1 — 11.5 Income from discontinued operations, net of income taxes — 0.6 0.3 — 0.9 Income (loss) before earnings of wholly owned subsidiaries (95.5) 51.5 56.4 — 12.4 Earnings of wholly owned subsidiaries 107.9 47.8 — (155.7) — Net income $12.4 $99.3 $56.4 $(155.7) $12.4 89Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Consolidating Statement of Operations Year Ended December 31, 2009 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Unaffiliated sales $— $619.6 $652.9 $— $1,272.5 Affiliated sales — 22.7 3.4 (26.1) — Net sales — 642.3 656.3 (26.1) 1,272.5 Cost of products sold — 473.7 445.6 (26.1) 893.2 Gross profit — 168.6 210.7 — 379.3 Advertising, selling, general and administrative expenses 18.6 131.3 123.2 — 273.1 Amortization of intangibles 0.1 4.1 3.0 — 7.2 Restructuring charges 0.1 3.7 13.6 — 17.4 Goodwill and asset impairment charges — 0.8 1.0 — 1.8 Operating income (loss) (18.8) 28.7 69.9 — 79.8 Interest (income) expense from affiliates (0.1) (0.5) 0.6 — — Interest expense 53.3 7.2 6.5 — 67.0 Equity in (earnings) losses of joint ventures — 0.2 (4.6) — (4.4) Other (income) expense, net 4.0 (16.0) 17.1 — 5.1 Income (loss) from continuing operations before income taxesand earnings (losses) of wholly owned subsidiaries (76.0) 37.8 50.3 — 12.1 Income tax expense (benefit) 110.5 (2.4) 19.8 — 127.9 Income (loss) from continuing operations (186.5) 40.2 30.5 — (115.8) Income (loss) from discontinued operations, net of income taxes — (15.1) 4.8 — (10.3) Income (loss) before earnings (losses) of wholly ownedsubsidiaries (186.5) 25.1 35.3 — (126.1) Earnings (losses) of wholly owned subsidiaries 60.4 (13.3) — (47.1) — Net income (loss) $(126.1) $11.8 $35.3 $(47.1) $(126.1) 90Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Consolidated Statement of Operations Year Ended December 31, 2008 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Unaffiliated sales $— $760.2 $818.0 $— $1,578.2 Affiliated sales — 59.7 30.9 (90.6) — Net sales — 819.9 848.9 (90.6) 1,578.2 Cost of products sold — 600.9 584.1 (90.6) 1,094.4 Gross profit — 219.0 264.8 — 483.8 Advertising, selling, general and administrative expenses 27.2 192.7 159.1 — 379.0 Amortization of intangibles 0.1 3.8 3.8 — 7.7 Restructuring charges 0.1 16.0 12.7 — 28.8 Goodwill and asset impairment charges 11.9 142.4 120.1 — 274.4 Operating loss (39.3) (135.9) (30.9) — (206.1) Interest (income) expense from affiliates (3.3) (2.3) 5.6 — — Interest expense 46.6 6.1 11.0 — 63.7 Equity in earnings of joint ventures — (0.1) (6.4) — (6.5) Other (income) expense, net (18.7) (2.8) 4.3 — (17.2) Loss from continuing operations before income taxes andearnings (losses) of wholly owned subsidiaries (63.9) (136.8) (45.4) — (246.1) Income tax expense (benefit) 3.3 (11.8) 25.4 — 16.9 Loss from continuing operations (67.2) (125.0) (70.8) — (263.0) Loss from discontinued operations, net of income taxes — (39.9) (36.3) — (76.2) Income (loss) before earnings (losses) of wholly ownedsubsidiaries (67.2) (164.9) (107.1) — (339.2) Earnings (losses) of wholly owned subsidiaries (272.0) 12.5 — 259.5 — Net Loss $(339.2) $(152.4) $(107.1) $259.5 $(339.2) 91Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2010 (in millions of dollars) Parent Guarantors Non-Guarantors Consolidated Net cash provided by (used by) operating activities: $(87.6) $60.5 $82.0 $54.9 Investing activities: Additions to property, plant and equipment — (5.3) (7.3) (12.6) Assets acquired — (1.1) — (1.1) Proceeds (payments) from sale of discontinued operations — (4.1) 0.4 (3.7) Proceeds from the disposition of assets — 1.7 0.8 2.5 Net cash used by investing activities — (8.8) (6.1) (14.9) Financing activities: Intercompany financing 110.9 (81.9) (29.0) — Net dividends 1.4 31.4 (32.8) — Proceeds from long-term borrowings 1.5 — — 1.5 Repayments of long-term debt — (0.1) (0.1) (0.2) Repayments of short-term debt — — (0.5) (0.5) Cost of debt issuance (0.8) — — (0.8) Exercise of stock options and other (0.1) — — (0.1) Net cash provided by (used by) financing activities 112.9 (50.6) (62.4) (0.1) Effect of foreign exchange rate changes on cash — — (0.3) (0.3) Net increase in cash and cash equivalents 25.3 1.1 13.2 39.6 Cash and cash equivalents at the beginning of the year 14.2 (1.5) 30.9 43.6 Cash and cash equivalents at the end of the year $39.5 $(0.4) $44.1 $83.2 92Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2009 (in millions of dollars) Parent Guarantors Non-Guarantors Consolidated Net cash provided by (used by) operating activities: $(58.1) $94.6 $35.0 $71.5 Investing activities: Additions to property, plant and equipment (0.4) (3.9) (6.0) (10.3) Assets acquired (1.9) (0.9) (0.6) (3.4) Proceeds from sale of discontinued operations — 2.1 7.1 9.2 Proceeds from the disposition of assets — — 0.6 0.6 Net cash provided by (used by) investing activities (2.3) (2.7) 1.1 (3.9) Financing activities: Intercompany financing (17.6) (111.5) 129.1 — Net dividends 3.2 18.9 (22.1) — Proceeds from long-term borrowings 463.1 — 6.2 469.3 Repayments of long-term debt (270.1) — (127.8) (397.9) Repayments of short-term debt (46.0) — (8.2) (54.2) Payment of Euro debt hedge (40.8) — — (40.8) Cost of debt issuance (17.4) — (3.2) (20.6) Exercise of stock options and other (0.3) — — (0.3) Net cash provided by (used by) financing activities 74.1 (92.6) (26.0) (44.5) Effect of foreign exchange rate changes on cash — — 2.4 2.4 Net increase (decrease) in cash and cash equivalents 13.7 (0.7) 12.5 25.5 Cash and cash equivalents at the beginning of the year 0.5 (0.8) 18.4 18.1 Cash and cash equivalents at the end of the year $14.2 $(1.5) $30.9 $43.6 93Table of ContentsACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued) Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2008 (in millions of dollars) Parent Guarantors Non-Guarantors Consolidated Net cash provided by (used by) operating activities: $(65.1) $61.3 $41.0 $37.2 Investing activities: Additions to property, plant and equipment (0.9) (30.3) (12.3) (43.5) Proceeds from the disposition of assets — 7.7 17.1 24.8 Net cash provided by (used by) investing activities (0.9) (22.6) 4.8 (18.7) Financing activities: Intercompany financing 113.6 (180.9) 67.3 — Net dividends — 11.2 (11.2) — Repayments (borrowings) of long-term debt (85.6) 111.0 (88.5) (63.1) Borrowings (repayments) of short-term debt 36.0 — (4.0) 32.0 Cost of debt amendments (6.2) — (0.7) (6.9) Exercise of stock options and other 0.3 — — 0.3 Net cash provided by (used by) financing activities 58.1 (58.7) (37.1) (37.7) Effect of foreign exchange rate changes on cash — — (5.0) (5.0) Net increase (decrease) in cash and cash equivalents (7.9) (20.0) 3.7 (24.2) Cash and cash equivalents at the beginning of the year 8.4 (0.3) 34.2 42.3 Cash and cash equivalents at the end of the year $0.5 $(20.3) $37.9 $18.1 94Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable.ITEM 9A. CONTROLS AND PROCEDURESAs of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with theparticipation of the Company’s Disclosure Committee and the Company’s management, including the Chief Executive Officer and the Chief FinancialOfficer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the ChiefExecutive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.The report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to the Report of Management on Internal Control OverFinancial Reporting included in Part II, Item 8 of this report.The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to the Reports of Independent Registered PublicAccounting Firms, included in Part II, Item 8 of this report.There has been no change in our internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materiallyaffected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNot applicable.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation required under this Item is contained in the Company’s 2011 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2011 and is incorporated herein by reference.Code of Business ConductThe Company has adopted a code of business conduct as required by the listing standards of the New York Stock Exchange and rules of the Securitiesand Exchange Commission. This code applies to all of the Company’s directors, officers and employees. The code of business conduct is published andavailable at the Investor Relations Section of the Company’s internet website at www.accobrands.com. The Company will post on its website anyamendments to, or waivers from, our code of business conduct applicable to any of its directors or executive officers. The foregoing information will beavailable in print to any shareholder who requests such information from ACCO Brands Corporation, 300 Tower Parkway, Lincolnshire, IL 60069, Attn:Office of the General Counsel.As required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the Company’s Chief Executive Officer certified to theNYSE within 30 days after the Company’s 2010 Annual Meeting of Stockholders that he was not aware of any violation by the Company of the NYSECorporate Governance Listing Standards.ITEM 11. EXECUTIVE COMPENSATIONInformation required under this Item is contained in the Company’s 2011 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2011 and is incorporated herein by reference. 95Table of ContentsITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSEquity Compensation Plan InformationThe following table gives information, as of December 31, 2010, about our common stock that may be issued upon the exercise of options, stock-settled appreciation rights (“SSARs”) and other equity awards under all compensation plans under which equity securities are reserved for issuance. Plan category Number ofsecurities to beIssued uponexercise ofoutstandingoptions, warrantsand rights(a) Weighted-averageexercise price ofoutstandingoptions, warrantsand rights(b) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c) Equity compensation plans approved by security holders(1) 6,292,290 $11.56 389,590(2) Equity compensation plans not approved by security holders — — — Total 6,292,290 $11.56 389,590 (1)This number includes 4,302,993 common shares that were subject to issuance upon the exercise of stock options/SSARs granted under the Amendedand Restated 2005 Incentive Plan (the “Plan”), and 1,989,927 common shares that were subject to issuance upon the exercise of stock options/SSARspursuant to the Company’s 2005 Assumed Option and Restricted Stock Unit Plan. The weighted-average exercise price in column (b) of the tablereflects all such options/SSARs. (2)These are shares available for grant as of December 31, 2010 under the Plan pursuant to which the compensation committee of the Board of Directorsmay make various stock-based awards including grants of stock options, stock-settled appreciation rights, restricted stock, restricted stock units andperformance share units. In addition to these shares, the following shares may become available for grant under the Plan and, to the extent such shareshave become available as of December 31, 2010, they are included in the table as available for grant: (i) shares covered by outstanding awards underthe Plan that were forfeited or otherwise terminated and (ii) shares that are used to pay the exercise price of the stock options/SSARs and shares used topay withholding taxes on equity awards generally.Other information required under this Item is contained in the Company’s 2011 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2011, and is incorporated herein by reference.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required under this Item is contained in the Company’s 2011 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 30, 2011 and is incorporated herein by reference.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation required under this Item is contained in the Company’s 2011 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission Prior to April 30, 2011 and is incorporated herein by reference. 96Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESThe following Exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission, as indicated in thedescription of each. We agree to furnish to the Commission upon request a copy of any instrument with respect to long-term debt not filed herewith as towhich the total amount of securities authorized there under does not exceed 10 percent of our total assets on a consolidated basis. (a)Financial Statements, Financial Statement Schedules and Exhibits 1.All Financial StatementsThe following consolidated financial statements of the Company and its subsidiaries are filed as part of this report under Item 8—Financial Statementsand Supplementary Data, as part of this Report on Form 10-K: Page Reports of Independent Registered Public Accounting Firms 44 Management’s Report on Internal Control Over Financial Reporting 46 Consolidated Balance Sheets as of December 31, 2010 and 2009 47 Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 48 Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 49 Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and2008 50 Notes to Consolidated Financial Statements 51 2.Financial Statement Schedule: Schedule II—Valuation and Qualifying Accounts and Reserves, for each of the years ended December 31, 2010, 2009 and 2008.The separate consolidated financial statements of ACCO Brands Europe Holdings LP as of December 31, 2010 and 2009 and for each of the years inthe three-year period ended December 31, 2010 required to be included in this report pursuant to Rule 3-16 of Regulation S-X, are filed as Exhibit 99.1.The separate consolidated financial statements of Pelikan-Artline Pty Ltd, the Company’s 50 percent owned joint venture as of December 31, 2010 and2009 and for each of the years in the three-year period ended December 31, 2010 required to be included in this report pursuant to Rule 3-09 of Regulation S-X, are filed as Exhibit 99.2. 3.Exhibits:See Index to Exhibits on page 98 of this report. 97Table of ContentsEXHIBIT INDEX Number Description of Exhibit3.1 Restated Certificate of Incorporation of ACCO Brands Corporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed by theRegistrant on May 19, 2008 (File No. 001-08454))3.2 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 to the Registrant’sCurrent Report on Form 8-K filed August 17, 2005)3.3 By-laws of ACCO Brands Corporation as amended through December 19, 2008 (incorporated by reference to Exhibit 3.1 to the Form 8-Kfiled by the Registrant on December 24, 2008 (File No. 001-08454))4.1 Indenture, dated as of August 5, 2005, between ACCO Financial, Inc. and Wachovia Bank, National Association, as Trustee (incorporatedby reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))4.2 Supplemental Indenture, dated as of August 17, 2005, among ACCO Brands Corporation, the Guarantors signatory thereto and WachoviaBank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K datedAugust 17, 2005 and filed August 23, 2005 (File No. 001-08454))4.3 Registration Rights Agreement, dated as of August 5, 2005, among ACCO Finance I, Inc., Citigroup Global Markets Inc., Goldman,Sachs & Co., Harris Nesbitt Corp., ABN AMRO Incorporated, NatCity Investments, Inc. and Piper Jaffray & Co. (incorporated by referenceto Exhibit 4.4 to the Registrant’s Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))4.4 Joinder Agreement, dated as of August 17, 2005, among ACCO Brands Corporation, the Guarantors signatory thereto and CitigroupGlobal Markets Inc. and Goldman, Sachs & Co., as representatives of the Initial Purchasers (incorporated by reference to Exhibit 4.2 to theRegistrant’s Current Report on Form 8-K dated August 17, 2005 and filed August 23, 2005 (File No. 001-08454))4.5 Indenture, dated as of September 30, 2009, among ACCO Brands Corporation, the guarantors named therein and U.S. Bank NationalAssociation, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed by the Registrant on October 6, 2009 (File No. 001-08454))4.6 Registration Rights Agreement, dated as of September 30, 2009, among ACCO Brands Corporation, the guarantors named therein andCredit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Banc of America Securities LLC, BMO Capital Markets Corp.,SunTrust Robinson Humphrey, Inc., Barclays Capital Inc., CJS Securities, Inc. and Barrington Research Associates, Inc. (incorporated byreference to Exhibit 4.2 to Form 8-K filed by the Registrant on October 6, 2009 (File No. 001-08454))4.7 Intercreditor Agreement, dated as of September 30, 2009 among ACCO Brands Corporation, the other grantors from time to time partythereto, Deutsche Bank AG New York Branch, as collateral agent under the Syndicated Facility Agreement—ABL Revolving Facility, andU.S. Bank National Association, as collateral trustee under the Senior Secured Notes Indenture (incorporated by reference to Exhibit 4.3 toForm 8-K filed by the Registrant on October 6, 2009 (File No. 001-08454))4.8 Collateral Trust Agreement, dated as of September 30, 2009 among ACCO Brands Corporation, as issuer, the guarantors from time to timeparty thereto, U.S. Bank National Association, as trustee under the indenture, the other secured debt representatives from time to time partythereto and U.S. Bank National Association, as collateral trustee (incorporated by reference to Exhibit 4.4 to Form 8-K filed by theRegistrant on October 6, 2009 (File No. 001-08454)) 98Table of ContentsNumber Description of Exhibit4.9 Pledge Agreement among ACCO Brands Corporation, certain other subsidiaries of ACCO Brands Corporation from time to time party theretoand U.S. Bank National Association, as collateral trustee, dated as of September 30, 2009 (incorporated by reference to Exhibit 4.5 to Form 8-K filed by the Registrant on October 6, 2009 (File No. 001-08454))4.10 Security Agreement among ACCO Brands Corporation, certain other subsidiaries of ACCO Brands Corporation from time to time partythereto and U.S. Bank National Association, as collateral trustee, dated as of September 30, 2009 (incorporated by reference to Exhibit 4.6 toForm 8-K filed by the Registrant on October 6, 2009 (File No. 001-08454))4.11 Rights Agreement dated as of August 16, 2005, between Acco Brands Corporation and Wells Fargo Bank, National Association, as rightsagent (incorporated by reference to Exhibit 4.1 to Form 8-K filed by the Registrant on August 17, 2005).10.1 Distribution Agreement, dated as of March 15, 2005, by and between Fortune Brands, Inc. and ACCO World Corporation (incorporated byreference to Annex B to the proxy statement/ prospectus—information statement included in the Registrant’s Registration Statement onForm S-4 (File No. 333-124946))10.2 Amendment to Distribution Agreement, dated as of August 4, 2005, by and between Fortune Brands, Inc. and ACCO World Corporation(incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (FileNo. 001-08454))10.3 ACCO Brands Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report onForm 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))10.4 ACCO Brands Corporation 2005 Assumed Option and Restricted Stock Unit Plan, together with Sub-Plan A thereto (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 3,2005 and filed August 8, 2005 (File No. 001-08454))10.5 ACCO Brands Corporation Annual Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Registrant’sCurrent Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))10.6 Tax Allocation Agreement, dated as of August 16, 2005, between ACCO World Corporation and Fortune Brands, Inc. (incorporated byreference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 12, 2005 and filed August 17, 2005 (File No. 001-08454))10.7 Tax Allocation Agreement, dated as of August 16, 2005, between General Binding Corporation and Lane Industries, Inc. (incorporated byreference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 12, 2005 and filed August 17, 2005 (File No. 001-08454))10.8 Transition Services Agreement, dated as of August 16, 2005, between ACCO World Corporation and Fortune Brands, Inc. (incorporated byreference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-4 (File No. 333-128784))10.9 Employee Matters Agreement, dated as of March 15, 2005, by and among Fortune Brands, Inc., ACCO World Corporation and GeneralBinding Corporation (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.10 Executive Severance/Change in Control Agreement, dated as of August 26, 2000, by and between Steven Rubin and GBC (incorporated byreference to Exhibit 10.15 to General Binding Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004(File No. 001-08454)) 99Table of ContentsNumber Description of Exhibit10.11 Letter Agreement, dated as of September 5, 2003, between ACCO World Corporation and Neal Fenwick (incorporated by reference toExhibit 10.6 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.12 Letter Agreement, dated November 8, 2000, as revised in January 2001, between ACCO World Corporation and Neal Fenwick (incorporatedby reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.13 Letter Agreement, dated September 8, 1999, between ACCO World Corporation and Neal Fenwick (incorporated by reference to Exhibit 10.8to the Registrant’s Registration Statement on Form S-4 (File No. 333-124946))10.14 Amended and Restated ACCO Brands Corporation 2005 Incentive Plan (incorporated by reference to Annex A of the Registrant’s definitiveproxy statement filed April 4, 2006 (File No. 001-08454))10.15 Amendment to the Amended and Restated ACCO Brands Corporation 2005 Incentive Plan (incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on May 19, 2008 (File No. 001-08454))10.16 ACCO Brands Corporation Executive Severance Plan (effective December 1, 2007) (incorporatedby reference to Exhibit 10.1 to Form 8-K filed by the Registrant on November 29, 2007 (File No. 001-08454))10.17 2008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan (incorporated by reference to Exhibit 10.31 to Form10-K filed by the Registrant on February 29, 2008 (File No. 001-08454))10.18 Amendment to the 2008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan (incorporated by reference toExhibit 10.1 to Form 8-K filed by the Registrant on January 22, 2009 (File No. 001-08454))10.19 Retirement Agreement for David D. Campbell effective as of May 1, 2008 (incorporated by reference to Exhibit 10.3 to Form 10-Q filed bythe Registrant on May 7, 2008 (File No. 001-08454))10.20 Retirement Agreement for Neal V. Fenwick effective as of May 1, 2008 (incorporated by reference to Exhibit 10.4 to Form 10-Q filed by theRegistrant on May 7, 2008 (File No. 001-08454))10.21 Letter Agreement and General Release between the Company and David D. Campbell (incorporated by reference to Exhibit 10.1 to Form 8-Kfiled by the Registrant on November 26, 2008(File No. 001-08454))10.22 Letter Agreement dated November 4, 2008, between ACCO Brands Corporation and Robert J. Keller (incorporated by reference to Exhibit10.1 to Form 8-K filed by the Registrant on November 5, 2008 (File No. 001-08454))10.23 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant on December 24, 2008(File No. 001-08454))10.24 Form of Stock-settled Stock Appreciation Rights Agreement under the ACCO Brands Corporation Amended and Restated 2005 Long-TermIncentive Plan, as amended (incorporated by reference to Exhibit 10.46 to Form 10-K filed by the Registrant on March 2, 2009 (File No. 001-08454))10.25 Letter agreement, dated October 11, 2007, from ACCO Brands Corporation to David A. Kaput (incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on March 3, 2009 (File No. 001-08454)) 100Table of ContentsNumber Description of Exhibit10.26 Syndicated Facility Agreement-ABL Revolving Facility, dated as of September 30, 2009, among ACCO Brands Corporation, certain directand indirect subsidiaries of ACCO Brands Corporation party thereto, Deutsche Bank AG New York Branch, as administrative agent for thesecured parties and in such capacity, a co-collateral agent, Bank of America, N.A., and General Electric Capital Corporation, as co-collateralagents, and the other agents and lenders named therein (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Registrant onOctober 6, 2009 (File No. 001-08454))10.27 Amended and Restated ACCO Brands Deferred Compensation Plan for Non-Employee Directors, effective December 14, 2009 (incorporatedby reference to Exhibit 10.41 to Form 10-K filed by the Registrant on February 26, 2010 (File No. 001-089454))10.28 Letter agreement, dated November 4, 2008, from ACCO Brands Corporation to Christopher M. Franey (incorporated by reference to Exhibit10.42 to Form 10-K filed by the Registrant on February 26, 2010 (File No. 001-08454))10.29 Letter agreement, dated March 6, 2009, from ACCO Brands Corporation to Thomas H. Shortt (incorporated by reference to Exhibit 10.43 toForm 10-K filed by the Registrant on February 26, 2010 (File No, 001-08454))10.30 Form of 2010-2012 Cash Based Award Agreement under the ACCO Brands Corporation Amended and Restated 2005 Incentive Plan(incorporated by reference to Exhibit 10.1 to Form 10-Q filed by the Registrant on May 7, 2010 (File No. 001-08454))10.31 Form of 2010-2012 Performance Stock Unit Award Agreement under the ACCO Brands Corporation Amended and Restated Incentive Plan(incorporated by reference to Exhibit 10.2 to Form 10-Q filed by the Registrant on May 7, 2010 (File No. 001-08454))10.32 Description of changes to compensation arrangements for Messrs. Keller, Fenwick and Elisman (incorporated by reference to Item 5.02 ofRegistrant’s Form 8-K filed on December 12, 2009 (File No. 001-08454))10.33 Description of certain compensation arrangements with respect to the Registrant’s named executive officer’s (incorporated by reference toItem 5.02 of Registrant’s Form 8-K filed on March 1, 2010 (File No. 001-08454))10.34 Description of changes to compensation arrangements for Christopher M. Franey (incorporated by reference to Item 5.02 of Registrant’s Form8-K filed on September 21, 2010 (File No. 001-08454))10.35 Description of changes to compensation arrangements for Boris Elisman (incorporated by reference to Item 5.02 of Registrant’s Form 8-Kfiled on December 14, 2010 (File No. 001-08454))16.1 Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission dated May 21, 2009 (incorporated by reference toExhibit 16.1 to Form 8-K filed by the Registrant on May 22, 2009 (File No. 001-08454))21.1 Subsidiaries of the registrant*23.1 Consent of KPMG LLP*23.2 Consent of PricewaterhouseCoopers LLP*23.3 Consent of PKF*23.4 Consent of KPMG LLP*24.1 Power of attorney* 101Table of ContentsNumber Description of Exhibit31.1 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*99.1 ACCO Brands Europe Holding LP Audited Financial Statements as of December 31, 2010*99.2 Pelikan-Artline Pty Ltd Audited Financial Statements as of December 31, 2010* Filed herewith. 102*Table of ContentsSIGNATURESPursuant 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 onits behalf by the undersigned thereunto duly authorized. REGISTRANT:ACCO BRANDS CORPORATIONBy: /s/ ROBERT J. KELLER Robert J. Keller Chairman of the Board and Chief Executive Officer(principal executive officer) By: /s/ NEAL V. FENWICK Neal V. Fenwick Executive Vice President and Chief Financial Officer(principal financial officer) By: /s/ THOMAS P. O’NEILL, JR. Thomas P. O’Neill, Jr. Senior Vice President, Finance and Accounting(principal accounting officer) February 24, 2011Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on its behalf by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated. Signature Title Date/S/ ROBERT J. KELLERRobert J. Keller Chairman of the Board andChief Executive Officer(principal executive officer) February 24, 2011/S/ NEAL V. FENWICKNeal V. Fenwick Executive Vice President andChief Financial Officer(principal financial officer) February 24, 2011/S/ THOMAS P. O’NEILL, JR.Thomas P. O’Neill, Jr. Senior Vice President, Finance and Accounting(principal accounting officer) February 24, 2011/S/ KATHLEEN S. DVORAK*Kathleen S. Dvorak Director February 24, 2011 103Table of ContentsSignature Title Date/S/ G. THOMAS HARGROVE*G. Thomas Hargrove Director February 24, 2011/S/ ROBERT H. JENKINS*Robert H. Jenkins Director February 24, 2011/S/ THOMAS KROEGER*Thomas Kroeger Director February 24, 2011/S/ MICHAEL NORKUS*Michael Norkus Director February 24, 2011/S/ SHEILA TALTON*Sheila Talton Director February 24, 2011/S/ NORMAN H. WESLEY*Norman H. Wesley Director February 24, 2011/S/ NEAL V. FENWICK* Neal V. Fenwick as Attorney-in-Fact 104Table of ContentsACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE IIAllowances for Doubtful AccountsChanges in the allowances for doubtful accounts were as follows: Year EndedDecember 31, (in millions of dollars) 2010 2009 2008 Balance at beginning of year $7.1 $7.1 $6.9 Additions charged to expense 3.4 4.0 3.1 Deductions—write offs (5.4) (4.3) (2.3) Foreign exchange changes 0.2 0.3 (0.6) Balance at end of year $5.3 $7.1 $7.1 Allowances for Sales Returns and DiscountsChanges in the allowances for sales returns and discounts were as follows: Year EndedDecember 31, (in millions of dollars) 2010 2009 2008 Balance at beginning of year $10.0 $14.9 $20.2 Additions charged to expense 31.9 40.8 52.7 Deductions—returns (32.1) (46.7) (57.1) Foreign exchange changes (0.2) 1.0 (0.9) Balance at end of year $9.6 $10.0 $14.9 Allowances for Cash DiscountsChanges in the allowances for cash discounts were as follows: Year EndedDecember 31, (in millions of dollars) 2010 2009 2008 Balance at beginning of year $1.2 $1.1 $1.7 Additions charged to expense 11.3 11.6 14.6 Deductions—discounts taken (11.1) (11.7) (15.1) Foreign exchange changes (0.2) 0.2 (0.1) Balance at end of year $1.2 $1.2 $1.1 105Table of ContentsACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE II (Continued)Warranty ReservesChanges in the reserve for warranty claims were as follows: Year EndedDecember 31, (in millions of dollars) 2010 2009 2008 Balance at beginning of year $2.8 $3.0 $3.5 Provision for warranties issued 3.2 2.5 2.2 Settlements made (in cash or in kind) (2.9) (2.7) (2.7) Balance at end of year $3.1 $2.8 $3.0 Income Tax Valuation AllowanceChanges in the deferred tax valuation allowances were as follows: Year Ended December 31, (in millions of dollars) 2010 2009 2008 Balance at beginning of year $188.9 $63.8 $54.1 Additions charged to expense 15.7 123.1 20.3 Deductions — — (10.6) Other (11.4) 2.0 — Balance at end of year $193.2 $188.9 $63.8 See accompanying report of independent registered public accounting firm. 106Exhibit 21.1SUBSIDIARIESACCO Brands Corporation, a Delaware corporation, had the domestic and international subsidiaries shown below as of December 31, 2010. Certaindomestic and international subsidiaries are not named because they were not significant in the aggregate. ACCO Brands Corporation has no parent. Name of Subsidiary Jurisdiction of OrganizationU.S. Subsidiaries: ACCO Brands USA LLC DelawareDay-Timers, Inc. DelawareGeneral Binding Corporation DelawareGBC International, Inc. NevadaACCO International Holdings, Inc. DelawareACCO Brands International, Inc. DelawareACCO Europe Finance Holdings, LLC DelawareACCO Europe International Holdings, LLC DelawareInternational Subsidiaries: ACCO Brands Canada Inc. CanadaACCO Mexicana S.A. de C.V. MexicoGBC Europe AB SwedenACCO Europe Finance LP EnglandACCO Brands Europe Holding LP EnglandACCO Nederland Holding B.V. NetherlandsACCO Brands Benelux B.V. NetherlandsACCO Deutschland Beteiligungsgesellschaft mbh GermanyACCO Brands Italia S.r.L. ItalyACCO Brands Europe Ltd. EnglandGBC United Kingdom Holdings. EnglandACCO Brands Australia Holding Pty Ltd. AustraliaGBC Australia Pty. Ltd. AustraliaGBC/Fordigraph Pty. Ltd. AustraliaGBC (United Kingdom) Limited EnglandACCO Europe Ltd. EnglandACCO-Rexel Group Services Limited EnglandACCO Australia Pty. Limited AustraliaACCO Eastlight Limited EnglandACCO-Rexel Limited IrelandACCO-Rexel (N.I.) Limited Northern IrelandACCO UK Limited EnglandACCO Deutschland GmbH & Co. KG (Limited Partnership) GermanyNOBO Group Limited EnglandACCO Brands France France EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-153157, 333-127626, 333-127750, 333-127631,333-157726 and 333-136662) of ACCO Brands Corporation of our report dated February 24, 2011, with respect to the consolidated balance sheets of ACCOBrands Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity (deficit)and comprehensive income (loss), and cash flows for the two-year period ended December 31, 2010, the related financial statement schedules, and theeffectiveness of internal control over financial reporting, which report is included in the December 31, 2010 annual report on Form 10-K of ACCO BrandsCorporation./s/ KPMG LLPChicago, IllinoisFebruary 24, 2011EXHIBIT 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-153157, 333-127626, 333-127750, 333-127631, 333-157726 and 333-136662) of ACCO Brands Corporation of our report dated March 2, 2009 relating to the financial statements and financialstatement schedule which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPChicago, IllinoisFebruary 24, 2011EXHIBIT 23.3CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the inclusion of our audit report dated February 10, 2011 relating to our audit of the Financial Statements of Pelikan Artline JointVenture for the year ended September 30, 2010, which is included in this Form 10-K of ACCO Brands Corporation./s/ PKFSydney, AustraliaFebruary 15, 2011EXHIBIT 23.4Consent of Independent Registered Public Accounting FirmThe Board of Directors ACCO Brands Corporation:We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-153157, 333-127626, 333-127750, 333-127631, 333-157726 and 333-136662) of ACCO Brands Corporation of our report dated February 24, 2011 with respect to the consolidated balance sheets of ACCOBrands Europe Holding LP as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash flows, and partners’ equity(deficit) and comprehensive income (loss) for each of the years in the three-year period ended December 31, 2010 which report is included in theDecember 31, 2010 annual report on Form 10-K of ACCO Brands Corporation./s/ KPMG LLPChicago, IllinoisFebruary 24, 2011Exhibit 24.1LIMITED POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Robert J. Keller, NealV. Fenwick, and Thomas P. O’Neill, Jr. and each of them, as his true and lawful attorneys-in-fact and agents, with power to act with or without the others andwith full power of substitution and re-substitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agentsand each of them may deem necessary or desirable to enable the registrant to comply with the U.S. Securities and Exchange Act of 1934, as amended, and anyrules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder in connection with the registrant’s Annual Report on Form10-K for the fiscal year ended December 31, 2010 (the “Annual Report”), including specifically, but without limiting the generality of the foregoing, powerand authority to sign the name of the registrant and the name of the undersigned, individually and in his capacity as a director or officer of the registrant, tothe Annual Report as filed with the United States Securities and Exchange Commission, to any and all amendments thereto, and to any and all instruments ordocuments filed as part thereof or in connection therewith; and each of the undersigned hereby ratifies and confirms all that said attorneys and agents andeach of them shall so or cause to be done by virtue hereof. Signature Title Date/s/ Robert J. KellerRobert J. Keller Chairman of the Board and Chief Executive Officer (principalexecutive officer) February 24, 2011/s/ Neal V. FenwickNeal V. Fenwick Executive Vice President and Chief Financial Officer (principalfinancial officer) February 24, 2011/s/ Thomas P. O’Neill, JrThomas P. O’Neill, Jr. Senior Vice President, Finance and Accounting (principalaccounting officer) February 24, 2011/s/ Kathleen S. DvorakKathleen S. Dvorak Director February 24, 2011/s/ G. Thomas HargroveG. Thomas Hargrove Director February 24, 2011/s/ Robert H. JenkinsRobert H. Jenkins Director February 24, 2011/s/ Thomas KroegerThomas Kroeger Director February 24, 2011/s/ Michael NorkusMichael Norkus Director February 24, 2011/s/ Sheila TaltonSheila Talton Director February 24, 2011/s/ Norman H. WesleyNorman H. Wesley Director February 24, 2011Exhibit 31.1CERTIFICATIONSI, Robert J. Keller, certify that: 1.I have reviewed this annual report on Form 10-K of ACCO Brands Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. /S/ ROBERT J. KELLERRobert J. KellerChairman of the Board andChief Executive OfficerDate: February 24, 2011Exhibit 31.2CERTIFICATIONSI, Neal V. Fenwick, certify that: 1.I have reviewed this annual report on Form 10-K of ACCO Brands Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. /S/ NEAL V. FENWICKNeal V. FenwickExecutive Vice President and Chief Financial OfficerDate: February 24, 2011Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2010 as filed with the Securitiesand Exchange Commission on the date hereof, (the “Report”), I, Robert J. Keller, Chief Executive Officer of ACCO Brands Corporation, hereby certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ACCOBrands Corporation. By: /S/ ROBERT J. KELLER Robert J. Keller Chairman of the Board and Chief Executive OfficerFebruary 24, 2011Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2010 as filed with the Securitiesand Exchange Commission on the date hereof, (the “Report”), I, Neal V. Fenwick, Chief Financial Officer of ACCO Brands Corporation, hereby certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ACCOBrands Corporation. By: /S/ NEAL V. FENWICK Neal V. Fenwick Executive Vice President and Chief Financial OfficerFebruary 24, 2011Exhibit 99.1Financial Statements of ACCO Brands Europe Holding LPThe accompanying consolidated financial statements of ACCO Brands Europe Holding LP (“ABEH”), a wholly-owned subsidiary of ACCO BrandsCorporation (“ACCO”), are being provided pursuant to Rule 3-16 of the Securities and Exchange Commission’s Regulation S-X. The purpose of thesefinancial statements is to provide information about a portion of the assets and equity interests that collateralize ACCO’s Senior Secured Notes due March,2015.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 1 Consolidated Balance Sheets as of December 31, 2010 and 2009 2 Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 3 Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 4 Consolidated Statements of Partners’ Equity (Deficit) and Comprehensive Income (Loss) for the years ended December 31, 2010, 2009 and 2008 5 Notes to Consolidated Financial Statements 6 Report of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ACCO Brands Europe Holding LP:We have audited the accompanying consolidated balance sheets of ACCO Brands Europe Holding LP and subsidiaries as of December 31, 2010 and2009, and the related consolidated statements of operations, partners’ equity (deficit) and comprehensive income (loss), and cash flows for each of the yearsin the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ACCO Brands EuropeHolding LP and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-yearperiod ended December 31, 2010, in conformity with U.S. generally accepted accounting principles./s/ KPMG LLPChicago, IllinoisFebruary 24, 2011 1ACCO Brands Europe Holding LP and SubsidiariesConsolidated Balance Sheets December 31,2010 December 31,2009 (in millions of dollars, except share data) Assets Current assets: Cash and cash equivalents $32.8 $24.7 Accounts receivable less allowances for discounts, doubtful accounts and returns; $4.3 and $4.0,respectively 130.9 117.7 Receivable from affiliates 14.3 18.1 Inventories 81.0 63.9 Deferred income taxes 6.5 4.3 Other current assets 8.5 7.9 Total current assets 274.0 236.6 Property, plant and equipment, net 57.4 60.1 Deferred income taxes 9.9 12.8 Goodwill 37.7 38.6 Identifiable intangibles, net of accumulated amortization of $20.5 and $19.8, respectively 19.4 22.2 Investment in joint venture 37.7 30.2 Other assets 5.0 5.4 Total assets $441.1 $405.9 Liabilities and Partners’ Deficit Current liabilities: Current portion of long-term debt $— $0.1 Accounts payable 40.2 33.4 Payable to affiliates 179.5 226.0 Accrued compensation 11.1 9.3 Accrued customer program liabilities 31.3 32.9 Other current liabilities 50.6 35.3 Liabilities of discontinued operations held for sale 0.9 1.1 Total current liabilities 313.6 338.1 Deferred income taxes 18.0 8.2 Pension and postretirement benefit obligations 30.3 40.8 Long-term payable to affiliates 234.0 271.6 Other non-current liabilities 7.3 8.6 Total liabilities 603.2 667.3 Partners’ deficit: Partnership interests 333.6 302.5 Accumulated other comprehensive loss (26.8) (64.4) Accumulated deficit (468.9) (499.5) Total partners’ deficit (162.1) (261.4) Total liabilities and partners’ deficit $441.1 $405.9 See notes to consolidated financial statements. 2ACCO Brands Europe Holding LP and SubsidiariesConsolidated Statements of Operations Year Ended December 31, (in millions of dollars) 2010 2009 2008 Net sales $445.9 $426.7 $548.1 Net sales to related parties 39.3 28.3 29.4 Total net sales 485.2 455.0 577.5 Cost of products sold (including $9.0, $7.9 and $3.4 of expenses charged by related parties) 346.1 322.1 400.6 Gross profit 139.1 132.9 176.9 Operating costs and expenses: Advertising, selling, general and administrative expenses (including $3.4, $5.3 and $3.3 of expenses charged back torelated parties) 86.1 80.7 110.5 Amortization of intangibles 1.6 1.7 2.1 Restructuring (income) charges (0.3) 12.6 9.4 Goodwill and asset impairment charges — 0.8 82.4 Total operating costs and expenses 87.4 95.8 204.4 Operating income (loss) 51.7 37.1 (27.5) Non-operating expense (income): Interest expense, net (including $7.6, $10.3 and $18.9 of expenses to related parties) 8.0 16.3 27.5 Equity in earnings of joint ventures (8.6) (4.7) (6.5) Other (income) expense, net (including $1.1 of gain from sale of Hetzel GmbH to a related party in 2008) 1.0 0.6 (0.9) Income (loss) from continuing operations before income taxes 51.3 24.9 (47.6) Income tax expense 21.0 17.3 12.9 Income (loss) from continuing operations 30.3 7.6 (60.5) Income (loss) from discontinued operations, net of income taxes 0.3 (3.6) (31.6) Net income (loss) $30.6 $4.0 $(92.1) See notes to consolidated financial statements. 3ACCO Brands Europe Holding LP and SubsidiariesConsolidated Statements of Cash Flows Year Ended December 31, (in millions of dollars) 2010 2009 2008 Operating activities Net income (loss) from continuing operations $30.3 $7.6 $(60.5) Net gain (loss) from discontinued operations 0.3 (3.6) (31.6) (Gain) loss on sale of assets (0.5) 2.4 (6.7) Depreciation 7.6 7.8 10.5 Goodwill and asset impairment charges and other non-cash charges 0.7 0.1 110.5 Amortization of debt issuance costs 0.6 1.0 1.3 Loss on retirement of bank debt — 0.5 — Amortization of intangibles 1.6 1.7 2.5 Stock based compensation 0.7 0.5 0.6 Deferred income tax (benefit) expense 7.8 6.9 1.0 Changes in balance sheet items: Accounts receivable (9.8) 16.5 11.9 Affiliates receivable and payable, net (5.0) (10.6) 12.3 Inventories (14.7) 25.7 5.2 Other assets 1.4 3.3 (10.5) Accounts payable 7.0 (25.0) (7.6) Accrued expenses and other liabilities 0.4 (9.3) (4.7) Accrued taxes 8.1 (3.3) 1.4 Other operating activities, net (3.2) (4.4) 3.0 Net cash provided by operating activities 33.3 17.8 38.6 Investing activities Additions to property, plant and equipment (5.5) (4.9) (11.0) Proceeds from the sale of discontinued operations 0.4 3.4 — Proceeds from the disposition of assets 0.6 0.3 7.4 Other investing activities, net — (0.6) 0.3 Net cash used by investing activities (4.5) (1.8) (3.3) Financing activities Repayments of long-term debt (0.1) (72.0) (33.0) Repayments of short-term debt, net — (2.1) (1.7) Cost of debt amendments — (2.6) (0.1) Dividends paid to affiliates — (1.1) — Capital contributions from affiliates 31.1 12.5 56.3 Borrowings (repayments) from affiliate loans (51.3) 59.6 (65.8) Net cash used by financing activities (20.3) (5.7) (44.3) Effect of foreign exchange rate changes on cash (0.4) 2.1 (3.5) Net increase (decrease) in cash and cash equivalents 8.1 12.4 (12.5) Cash and cash equivalents Beginning of year 24.7 12.3 24.8 End of period $32.8 $24.7 $12.3 Cash paid during the year for: (External interest only) Interest $0.1 $6.1 $7.8 Income taxes $6.4 $11.7 $10.0 See notes to consolidated financial statements. 4ACCO Brands Europe Holding LP and SubsidiariesConsolidated Statements of Partners’ Equity (Deficit) and Comprehensive Income (Loss) PartnershipInterests AccumulatedOtherComprehensiveIncome (Loss) AccumulatedDeficit Total ComprehensiveIncome (Loss) (in millions of dollars) Balance at December 31, 2007 $233.7 $(11.1) $(410.3) $(187.7) Net loss — — (92.1) (92.1) $(92.1) Income on derivative financial instruments, net of tax — 3.0 — 3.0 3.0 Translation impact — (40.7) — (40.7) (40.7) Pension and postretirement adjustment, net of tax — (12.6) — (12.6) (12.6) Total comprehensive loss $(142.4) Contributed capital 56.3 — — 56.3 Balance at December 31, 2008 290.0 (61.4) (502.4) (273.8) Net income — — 4.0 4.0 $4.0 Loss on derivative financial instruments, net of tax — (2.8) — (2.8) (2.8) Translation impact — 21.8 — 21.8 21.8 Pension and postretirement adjustment, net of tax — (22.0) — (22.0) (22.0) Total comprehensive income $1.0 Dividends paid to affiliates — — (1.1) (1.1) Contributed capital 12.5 — — 12.5 Balance at December 31, 2009 302.5 (64.4) (499.5) (261.4) Net income — — 30.6 30.6 $30.6 Loss on derivative financial instruments, net of tax — (0.2) — (0.2) (0.2) Translation impact — 30.6 — 30.6 30.6 Pension and postretirement adjustment, net of tax — 7.2 — 7.2 7.2 Total comprehensive income $68.2 Contributed capital 31.1 — — 31.1 Balance at December 31, 2010 $333.6 $(26.8) $(468.9) $(162.1) See notes to consolidated financial statements. 5ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements1. Background and Basis of PresentationThe management of ACCO Brands Corporation (ACCO or Parent) is responsible for the accuracy and internal consistency of the preparation of theconsolidated financial statements and notes contained in this annual report.ACCO Brands Europe Holding LP, a limited partnership (ABEH, we, us, our, the Partnership) is a wholly-owned subsidiary of ACCO. ABEH isprimarily involved in the manufacturing, marketing and distribution of office products—including paper fastening, document management, computeraccessories, time management, presentation and other office products—selling primarily to large resellers. The Partnership’s subsidiaries operate principallyin Europe, Australia and Asia-Pacific.The consolidated financial statements include the accounts of ABEH and its subsidiaries. Intercompany accounts and transactions have beeneliminated in consolidation. Our investments in companies that are between 20% and 50% owned are accounted for as equity investments. The Partnership’sshare of earnings from equity investments is included on the line entitled, “Equity in earnings of joint ventures” in the consolidated statements of operations.The Partnership’s former commercial print finishing business is reported in discontinued operations in the consolidated financial statements andrelated notes for all periods presented. Additional information regarding discontinued operations is discussed in Note 15.The financial statements of ABEH are presented to comply with the requirement of Rule 3-16 of Regulation S-X of the Securities and ExchangeCommission to provide financial statements of affiliates whose securities collateralize registered securities if certain significance tests are met. ABEH isreliant upon ACCO Brands to provide the necessary funding to support its activities. ACCO Brands has issued to ABEH a letter evidencing its ability andintent to provide ABEH with the necessary financial support through at least January 1, 2012.2. Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilitiesat the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from theseestimates.Cash and Cash EquivalentsHighly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.Allowances for Doubtful Accounts, Discounts and ReturnsTrade receivables are stated net of discounts and allowances for doubtful accounts and returns. The allowance for doubtful accounts representsestimated uncollectible receivables associated with potential customer non-payment on contractual obligations, usually due to customers’ potentialinsolvency. The allowances include amounts for certain customers where a risk of non-payment has been specifically identified. In addition, the 6ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) allowances include a provision for customer non-payment on a general formula basis when it is determined the risk of some non-payment is probable andestimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer non-payment is based on various factors,including the length of time the receivables are past due, historical experience and existing economic conditions.The allowance for sales returns represents estimated uncollectible receivables associated with the potential return of products previously sold tocustomers, and is recorded at the time that the sales are recognized. The allowance includes a general provision for product returns based on historical trends.In addition, the allowance includes a reserve for currently authorized customer returns which are considered to be abnormal in comparison to the historicalbasis.InventoriesInventories are priced at the lower of cost (principally first-in, first-out) or market. A reserve is established to adjust the cost of inventory to its netrealizable value. Inventory reserves are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability ofproducts, the impact of new product introductions and specific identification of items, such as product discontinuance or engineering/material changes.These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levelsor competitive conditions differ from expectations.Property, Plant and EquipmentProperty, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of theassets. Gains or losses resulting from dispositions are included in operating income. Betterments and renewals that improve and extend the life of an asset arecapitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software’s useful life. Thefollowing table shows estimated useful lives of property, plant and equipment: Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or 10 yearsMachinery, equipment and furniture 3 to 10 yearsLong-Lived AssetsIn accordance with the authoritative guidance on the impairment or disposal of long-lived assets, a long-lived asset (including amortizable identifiableintangibles) or asset group is tested for recoverability wherever events or changes in circumstances indicate that its carrying amounts may not be recoverable.When such events occur, the Partnership compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of theasset or asset group to the carrying amount of a long-lived asset or asset group. If this comparison indicates that there is an asset impairment, the amount ofthe impairment is typically calculated using discounted expected future cash flows. The discount rate applied to these cash flows is based on thePartnership’s weighted average cost of capital, computed by selecting market rates at the valuation dates for debt and equity that are reflective of the risksassociated with an investment in the Partnership’s industry as estimated by using comparable publicly traded companies.Intangible AssetsIntangible assets are comprised primarily of indefinite-lived intangible assets acquired and purchased intangible assets arising from the application ofpurchase accounting. The authoritative guidance on goodwill and 7ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) other intangible assets requires purchased intangible assets, other than goodwill, to be amortized over their useful lives unless these lives are determined tobe indefinite. Indefinite-lived intangible assets are not amortized, but are required to be evaluated annually to determine whether the indefinite useful life isappropriate. Indefinite-lived intangibles are tested for impairment on an annual basis and written down where impaired. Certain of the Partnership’s tradenames have been assigned an indefinite life as these trade names are currently anticipated to contribute cash flows to the Partnership indefinitely.The Partnership reviews indefinite-lived intangibles for impairment annually, and whenever market or business events indicate there may be apotential impact on that intangible. The Partnership considers the implications of both external (e.g., market growth, pricing, competition, and technology)and internal factors (e.g., product costs, margins, support expenses, capital investment) and their potential impact on cash flows for each business in both thenear and long term, as well as their impact on any identifiable intangible asset associated with the business. Based on recent business results, consideration ofsignificant external and internal factors, and the resulting business projections, indefinite lived intangible assets are reviewed to determine whether they arelikely to remain indefinite lived, or whether a finite life is more appropriate. Finite lived intangibles are amortized over 15, 23 or 30 years.GoodwillGoodwill has been recorded on the Partnership’s balance sheet and represents the excess of the cost of an acquisition when compared to the fair valueof the net assets acquired. ACCO Brands tests goodwill for impairment at least annually and on an interim basis if an event or circumstance indicates that it ismore likely than not that an impairment loss has been incurred. ACCO Brands has determined that its reporting units are its operating segments, based on itsorganizational structure and the financial information that is provided to and reviewed by management. ABEH and its consolidated subsidiaries make up asubstantial portion of the goodwill and the cash flows associated with the ACCO Brands’ International segment. Recoverability of goodwill is evaluatedusing a two-step process. In the first step, the entity’s estimated fair value is compared to its recorded carrying value. If the fair value exceeds the carryingvalue, goodwill is considered not impaired and no further testing is required. If the carrying value of the entity’s net assets exceeds the fair value, the secondstep of the impairment test is performed in order to determine the implied fair value of goodwill. Determining the implied fair value of goodwill requiresvaluation of the entity’s tangible and intangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. If thecarrying value of goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. Similar to thereview for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future sales and profitabilitylevels for the Partnership’s products, capital needs, economic trends and other factors.Employee Benefit PlansThe Partnership and its subsidiaries provide a range of benefits to their employees and retired employees, including pension, postretirement, post-employment and health care benefits. The Partnership records annual amounts relating to these plans based on calculations that include various actuarialassumptions, including discount rates, assumed rates of return on plan assets, compensation increases, turnover rates and health care cost trend rates. ThePartnership reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it isdeemed appropriate to do so. The effect of the modifications are generally recorded and amortized over future periods. 8ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Income TaxesDeferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted toreflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets toan amount that is more likely than not to be realized.The amount of income taxes that we pay is subject to ongoing audits by non-U.S. tax authorities. Our estimate of the potential outcome of anyuncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we haveadequately provided for our best estimate of the expected outcomes related to these matters. However, our future results may include favorable or unfavorableadjustments to our estimated tax liabilities in the period the assessments are revised or resolved.Revenue RecognitionWe recognize revenue from product sales when earned, net of applicable provisions for discounts, return and allowances. We consider revenue to berealized or realizable and earned when all of the following criteria are met: title and risk of loss have passed to the customer, persuasive evidence of anarrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. We also provide for our estimate ofpotential bad debt at the time of revenue recognition.Customer Program CostsCustomer program costs include, but are not limited to, sales rebates, which are generally tied to achievement of certain sales volume levels, in-storepromotional allowances, shared media and customer catalog allowances and other cooperative advertising arrangements, and freight allowance programs.The Partnership generally recognizes customer program costs as a deduction to gross sales at the time that the associated revenue is recognized. Certaincustomer incentives that do not directly relate to future revenues are expensed when initiated.In addition, accrued customer programs liabilities principally include, but are not limited to, sales volume rebates, promotional allowances, sharedmedia and customer catalog allowances and other cooperative advertising arrangements, and freight allowances as discussed above.Shipping and HandlingThe Partnership reflects all amounts billed to customers for shipping and handling in net sales and the costs incurred from shipping and handlingproduct (including costs to ship and move product from the seller’s place of business to the buyer’s place of business, as well as costs to store, move andprepare products for shipment) in cost of products sold.Warranty ReservesThe Partnership offers its customers various warranty terms based on the type of product that is sold. Estimated future obligations related to productssold under these warranty terms are provided by charges to operations in the period in which the related revenue is recognized.Advertising CostsAdvertising costs amounted to $23.5 million, $19.5 million and $46.4 million for the years ended December 31, 2010, 2009 and 2008, respectively.These costs include, but are not limited to, cooperative advertising and promotional allowances as described in “Customer Program Costs” above, and areprincipally expensed as incurred. 9ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Research and DevelopmentResearch and development expenses, which amounted to $0.1 million, $0.3 million and $2.9 million for the years ended December 31, 2010, 2009 and2008, respectively, are classified as general and administrative expenses and are charged to expense as incurred.Stock-Based CompensationABEH participates in ACCO Brands Corporation’s stock plans with an allocation of the cost for ABEH employees for those plans consideredcompensatory. Equity compensation expenses recognized for the years ended December 31, 2010, 2009 and 2008 were $0.7 million, $0.5 million and $0.6million, respectively.Foreign Currency TranslationForeign currency balance sheet accounts are translated into U.S. dollars at the rates of exchange at the balance sheet date. Income and expenses aretranslated at the average rates of exchange in effect during the period. The related translation adjustments are made directly to a separate component of theAccumulated Other Comprehensive Loss caption in partners’ deficit. Some transactions are made in currencies different from an entity’s functional currency.Gains and losses on these foreign currency transactions are included in income as they occur.Derivative Financial InstrumentsThe Partnership records all derivative instruments in accordance with the authoritative guidance on derivative instruments and hedging activities. Thisguidance requires recognition of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value. If thederivative is designated as a fair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedgedrisk are recognized in earnings in the same period. If the derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of thederivative is recorded in other comprehensive income and is recognized in the statement of operations when the hedged item affects earnings. The ineffectiveportion of changes in the fair value of cash flow hedges is recognized in earnings.Certain forecasted transactions, assets and liabilities are exposed to foreign currency risk. The Partnership continually monitors its foreign currencyexposures in order to maximize the overall effectiveness of its foreign currency hedge positions. Principal currencies hedged include the U.S. dollar, Euro andPound sterling.Recent Accounting PronouncementsIn January 2010, the Financial Accounting Standards Board issued an update to existing standards on fair value measurements. The guidance requiresadditional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements. The new guidance is effective forinterim and annual reporting periods beginning after December 15, 2009. The Partnership adopted this guidance in the first quarter of 2010, the impact ofwhich concerns disclosure only, and its adoption did not impact the Partnership’s consolidated financial statements.3. Long-term Debt and Short-term BorrowingsThe Partnership’s financing needs are met through a combination of intercompany loans through the Parent, as described in Note 14, Related PartyTransactions, and/or through the Asset-Based Revolving Credit Facility as described below. 10ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Asset-Based Revolving Credit Facility (ABL Facility)On September 30, 2009, ACCO Brands Corporation, and certain domestic and foreign subsidiaries (collectively, the “Borrowers”) entered into a four-year senior secured asset-based revolving credit facility maturing in September 2013 with Deutsche Bank AG, as administrative agent, co-collateral agent anda lender, and five other lenders, providing for revolving credit financing of up to $175.0 million, including a $40.0 million sub-limit for letters of credit andan optional $50.0 million additional credit capacity using an accordion feature. Amounts borrowed under the ABL Facility by ACCO Brands Corporationand its domestic subsidiaries are guaranteed by each of ACCO Brands domestic subsidiaries, and amounts borrowed under the ABL Facility by ACCO Brandsforeign subsidiaries are guaranteed by each of the ACCO Brands Corporation, its domestic subsidiaries and certain foreign subsidiaries. As of December 31,2010, there were no borrowings outstanding under the ABL Facility.The Borrowers’ ability to borrow under the ABL Facility is limited to a borrowing base equal to 85% of eligible accounts receivable plus up to thelesser of (1) 65% of the lower of cost or fair market value of eligible inventory and (2) 85% of the net orderly liquidation value of eligible inventory minusavailability reserves, and is subject to other conditions, limitations and reserve requirements.Interest rates under the ABL Facility are based on the London Interbank Offered Rate (LIBOR). Pricing is subject to quarterly adjustment based on theaverage availability under the ABL Facility during the prior quarter. The range of borrowing costs under the pricing grid is LIBOR plus 3.75% to LIBOR plus4.25% with a LIBOR rate floor of 1.50%. ACCO Brands Corporation is required to pay a quarterly commitment fee on the unused portion of the ABL facilityranging from 0.5% to 1.0%.Borrowings under the ABL Facility are secured on a first priority basis by all accounts receivable, inventory and cash of ACCO Brands and itssubsidiaries organized in the U.S. and certain foreign subsidiaries, and on a second priority basis by all property, plant, equipment of ACCO Brands and itssubsidiaries organized in the U.S. and any other assets which are pledged as collateral under the Senior Secured Notes.The ABL Facility contains customary terms and conditions, including, limitations on liens and indebtedness, asset sales, repurchase of SeniorSubordinated Notes, and intercompany transactions. A springing fixed charge financial covenant would be triggered if the excess availability under the ABLFacility falls below $20.0 million or 15% of total commitments. The ABL Facility also contains bank account restrictions that apply in the event that theborrowers’ excess availability fails to meet certain thresholds. As of December 31, 2010, the amount available for borrowings under the ABL Facility was$168.1 million (allowing for $6.9 million of letters of credit outstanding on that date) of which the amount available for borrowing by the Partnership was$83.8 million as limited by their borrowing base calculation.CollateralIn September 2009, ACCO Brands Corporation entered into a series of transactions to refinance its existing indebtedness. In connection with thesetransactions, ACCO issued an aggregate principal amount of $460.0 million of senior secured notes due March, 2015. One of the guarantees of the seniorsecured notes is secured in part by a pledge of 65% of the voting equity interests and 100% of the non-voting equity interests in ABEH.Compliance with Loan CovenantsAs of and for the year ended December 31, 2010, ACCO Brands was in compliance with all applicable loan covenants.ACCO Brands ABL Facility would not be affected by a change in its credit rating. 11ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) 4. Pension and Other Retiree BenefitsThe Partnership has a number of pension plans, principally in Europe. The plans provide for payment of retirement benefits, mainly commencingbetween the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires avested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee’s length of service and earnings.Cash contributions to the plans are made as necessary to ensure legal funding requirements are satisfied.The Partnership provides postretirement health care and life insurance benefits to certain employees and retirees.The following table sets forth the Partnership’s defined benefit pension plans and other postretirement benefit plans funded status and the amountsrecognized in the Partnership’s consolidated balance sheets: Pension Benefits Postretirement 2010 2009 2010 2009 (in millions of dollars) Change in projected benefit obligation (PBO) Projected benefit obligation at beginning of year $271.1 $203.4 $4.9 $4.2 Service cost 2.3 2.4 0.1 — Interest cost 14.6 13.7 0.3 0.3 Actuarial loss 5.1 40.9 0.4 0.1 Participants’ contributions 1.0 1.3 — — Benefits paid (11.2) (11.2) (0.3) (0.2) Curtailment gain — (1.1) — — Foreign exchange rate changes (12.0) 21.7 (0.2) 0.5 Other items (2.6) — — — Projected benefit obligation at end of year 268.3 271.1 5.2 4.9 Change in plan assets Fair value of plan assets at beginning of year 234.5 190.2 — — Actual return on plan assets 24.3 27.6 — — Employer contributions 6.5 5.7 0.3 0.2 Participants’ contributions 1.0 1.3 — — Benefits paid (11.2) (11.2) (0.3) (0.2) Foreign exchange rate changes (10.2) 20.9 — — Other items (2.6) — — — Fair value of plan assets at end of year 242.3 234.5 — — Funded status (fair value of plan assets less PBO) $(26.0) $(36.6) $(5.2) $(4.9) Amounts recognized in the consolidated balance sheet consist of: Other current liabilities $0.6 $0.6 $0.3 $0.2 Accrued benefit liability 25.4 36.0 4.9 4.7 Components of accumulated other comprehensive income, net of tax: Unrecognized prior service cost 0.5 0.5 — — Unrecognized actuarial (gain) loss 48.4 56.6 (2.4) (3.4) All plans have projected benefit obligations in excess of plan assets. 12ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Of the amounts included within accumulated other comprehensive income, the Partnership expects to recognize the following pre-tax amounts ascomponents of net periodic benefit cost during 2011: (in millions of dollars) Pension Benefits Postretirement Prior service cost $0.2 $— Actuarial (gain) loss 3.7 (0.3) $3.9 $(0.3) The accumulated benefit obligation for all defined benefit pension plans was $258.2 million and $256.3 million at December 31, 2010 and 2009,respectively.The following table sets out information for pension plans with an accumulated benefit obligation in excess of plan assets: (in millions of dollars) 2010 2009 Projected benefit obligation $62.1 $268.5 Accumulated benefit obligation 60.3 253.5 Fair value of plan assets 46.0 231.8 The following table sets out the components of net periodic benefit cost: Pension Benefits Postretirement (in millions of dollars) 2010 2009 2008 2010 2009 2008 Service cost $2.3 $2.4 $3.9 $— $— $0.1 Interest cost 14.6 13.7 16.2 0.3 0.3 0.4 Expected return on plan assets (15.1) (12.8) (19.8) — — — Amortization of prior service cost 0.1 0.2 0.2 — — — Amortization of net loss (gain) 4.8 3.4 0.5 (0.5) (0.6) (0.5) Curtailment — (0.5) (0.2) — — — Net periodic benefit cost (income) $6.7 $6.4 $0.8 $(0.2) $(0.3) $— Other changes in plan assets and benefit obligations that were recognized in other comprehensive income during the year ended December 31, 2010,2009 and 2008 were as follows: Pension Benefits Postretirement (in millions of dollars) 2010 2009 2008 2010 2009 2008 Current year actuarial (gain) loss $(4.2) $26.1 $34.4 $0.4 $0.2 $(1.7) Amortization of actuarial (gain) loss (4.8) (3.6) (1.0) 0.5 0.6 0.5 Current year prior service cost — — 0.4 — — — Amortization of prior service credit (0.1) (0.3) (0.4) — — — Foreign exchange rate changes (3.2) 5.8 (14.9) 0.1 (0.4) 1.3 Other — — (0.1) — — 0.1 Total recognized in other comprehensive income $(12.3) $28.0 $18.4 $1.0 $0.4 $0.2 Total recognized in net periodic benefit cost and other comprehensive income $(5.6) $34.4 $19.2 $0.8 $0.1 $0.2 13ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) AssumptionsWeighted average assumptions used to determine benefit obligations for years ended December 31, 2010, 2009 and 2008 were: Pension Benefits Postretirement 2010 2009 2008 2010 2009 2008 Discount rate 5.4% 5.8% 6.5% 5.4% 5.8% 6.6% Rate of compensation increase 4.4% 4.5% 3.6% — — — Weighted average assumptions used to determine net periodic benefit cost for years ended December 31, 2010, 2009 and 2008 were: Pension Benefits Postretirement 2010 2009 2008 2010 2009 2008 Discount rate 5.8% 6.5% 5.8% 5.8% 6.6% 5.8% Expected long-term rate of return 6.8% 6.3% 6.7% — — — Rate of compensation increase 4.5% 3.6% 4.4% — — — Weighted average health care cost trend rates used to determine postretirement benefit obligations and net periodic benefit cost at December 31, 2010,2009 and 2008 were: Postretirement Benefits 2010 2009 2008 Health care cost trend rate assumed for next year 5.3% 5% 5% Rate that the cost trend rate is assumed to decline (the ultimate trend rate) 5.3% 5% 5% Year that the rate reaches the ultimate trend rate 2020 2020 2020 Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-point change inassumed health care cost trend rates would have the following effects: (in millions of dollars) 1-Percentage-Point Increase 1-Percentage-Point Decrease Effect on total of service and interest cost $0.2 $(0.2) Effect on postretirement benefit obligation 0.7 (0.6) Plan AssetsThe investment strategy for the Partnership is to optimize investment returns through a diversified portfolio of investments, taking into considerationunderlying plan liabilities and asset volatility. Each plan has a different target asset allocation which is reviewed periodically and is based on the underlyingliability structure. The target asset allocation for our plans is set by the local plan trustees. 14ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Partnership’s pension plan weighted average asset allocations at December 31, 2010 and 2009 were as follows: 2010 2009 Asset category Equity securities 48% 48% Fixed income 42 41 Real estate 4 4 Other(1) 6 7 Total 100% 100% (1)Cash and cash equivalents and insurance contracts.Fair value measurements of our pension plans assets by asset category at December 31, 2010 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2010 Cash and cash equivalents $4.8 $— $ — $4.8 Equity securities 116.8 — — 116.8 Government debt securities — 19.0 — 19.0 Corporate debt securities — 74.5 — 74.5 Other debt securities — 8.7 — 8.7 Real estate — 9.7 — 9.7 Insurance contracts — 8.8 — 8.8 Total $121.6 $120.7 $ — $242.3 Fair value measurements of our pension plans assets by asset category at December 31, 2009 are as follows: (in millions of dollars) Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Fair Valueas ofDecember 31,2009 Cash and cash equivalents $3.9 $— $— $3.9 Equity securities 114.1 — — 114.1 Government debt securities — 20.6 — 20.6 Corporate debt securities — 69.2 — 69.2 Other debt securities — 6.8 — 6.8 Real estate — 8.7 — 8.7 Insurance contracts — 11.2 — 11.2 Total $118.0 $116.5 $ — $234.5 Equity securities: The fair values of equity securities are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1inputs). 15ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Debt securities: Fixed income securities, such as corporate and government bonds and other debt securities consisting of index linked securities. Thesedebt securities are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including marketinterest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable (level 2 inputs).Real estate: Real estate consists of managed real estate investment trust securities (level 2 inputs).Insurance contracts: Valued at contributions made, plus earnings, less participant withdrawals and administrative expenses, which approximate fairvalue (level 2 inputs).Cash ContributionsThe Partnership expects to contribute $6.0 million to its pension plans in 2011.The Partnership sponsors a small number of defined contribution plans. Contributions are determined under various formulas. Costs related to suchplans amounted to $2.3 million, $2.2 million and $2.6 million in 2010, 2009 and 2008, respectively.The following table presents estimated future benefit payments for the next ten fiscal years: (in millions of dollars) PensionBenefits PostretirementBenefits 2011 $9.7 $0.3 2012 $10.1 $0.3 2013 $10.5 $0.3 2014 $11.0 $0.3 2015 $11.4 $0.3 Years 2016—2020 $64.5 $2.0 5. InventoriesInventories are stated at the lower of cost or market value. The components of inventories were as follows: December 31, (in millions of dollars) 2010 2009 Raw materials $7.3 $6.2 Work in process 1.7 1.4 Finished goods 72.0 56.3 Total inventories $81.0 $63.9 16ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) 6. Property, Plant and EquipmentProperty, plant and equipment, net consisted of: December 31, (in millions of dollars) 2010 2009 Land and improvements $7.3 $6.9 Buildings and improvements to leaseholds 44.7 44.4 Machinery and equipment 98.6 105.2 Construction in progress 4.9 2.2 155.5 158.7 Less: accumulated depreciation (98.1) (98.6) Net property, plant and equipment(1) $57.4 $60.1 (1)Net property, plant and equipment as of December 31, 2010 and 2009 contained $2.5 million and $3.6 million of computer software assets, which areclassified within machinery and equipment. Amortization of software costs was $1.1 million, $0.9 million and $1.8 million for the years endedDecember 31, 2010, 2009 and 2008, respectively.7. Goodwill and Identifiable Intangible AssetsGoodwillChanges in the net carrying amount of goodwill allocated to ABEH were as follows: (in millions of dollars) Total Balance at December 31, 2008 $36.8 Translation and other 1.8 Balance at December 31, 2009 38.6 Translation and other (0.9) Balance at December 31, 2010 $37.7 Goodwill $108.6 Accumulated impairment losses (70.9) Balance at December 31, 2010 $37.7 The Partnership tests goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment mayhave occurred. Goodwill is tested for impairment using a two-step process. In the first step, the entity’s estimated fair value is compared to its recordedcarrying value. If the fair value exceeds the carrying value, goodwill is considered not impaired and no further testing is required. If the carrying value of theentity’s net assets exceeds the fair value, the second step of the impairment test is performed in order to determine the implied fair value of goodwill.Determining the implied fair value of goodwill requires valuation of the entity’s tangible and intangible assets and liabilities in a manner similar to theallocation of purchase price in a business combination. If the carrying value of goodwill exceeds its implied fair value, goodwill is deemed impaired and iswritten down to the extent of the difference. Based upon our most recent annual impairment test completed during 2010, the fair value of goodwill wassubstantially in excess of its related carrying value. 17ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Identifiable IntangiblesThe gross carrying value and accumulated amortization by class of identifiable intangible assets as of December 31, 2010 and December 31, 2009 areas follows: As of December 31, 2010 As of December 31, 2009 (in millions of dollars) GrossCarryingAmounts AccumulatedAmortization NetBookValue GrossCarryingAmounts AccumulatedAmortization NetBookValue Indefinite-lived intangible assets: Trade names $9.5 $— $9.5 $10.0 $— $10.0 Amortizable intangible assets: Trade names 25.8 (17.1) 8.7 27.3 (16.8) 10.5 Customer and contractual relationships 4.0 (3.0) 1.0 4.1 (2.7) 1.4 Patents/proprietary technology 0.6 (0.4) 0.2 0.6 (0.3) 0.3 Subtotal 30.4 (20.5) 9.9 32.0 (19.8) 12.2 Total identifiable intangibles $39.9 $(20.5) $19.4 $42.0 $(19.8) $22.2 The Partnership’s intangible amortization was $1.6 million, $1.7 million and $2.1 million for the years ended December 31, 2010, 2009 and 2008,respectively. Estimated amortization for 2011 is $1.7 million, and is expected to decline by approximately $0.1 million for each of the five years following.In 2009, in connection with its annual goodwill impairment test, the Partnership also tested its other indefinite-lived intangibles, consisting of itsindefinite-lived trade names. The Partnership estimated the fair value of its trade names by performing discounted cash flow analyses based on the relief-from-royalty approach. This approach treats the trade name as if it were licensed by the Partnership rather than owned, and calculates its value based on thediscounted cash flow of the projected license payments. The analysis resulted in an impairment charge of $0.8 million.8. Restructuring and Other ChargesThe Partnership had initiated significant restructuring actions that resulted in the closure or consolidation of facilities that were engaged inmanufacturing and distributing the Partnership’s products, or which resulted in a reduction in overall employee headcount. The Partnership recorded pre-taxrestructuring and asset impairment charges associated with continuing operations of $12.6 million and $9.4 million during the years ended December 31,2009 and 2008, respectively. The Partnership’s cost reduction actions are now substantially complete and no additional charges were initiated in 2010.Employee termination costs included the release of reserves no longer required. However, cash disbursements will continue into 2011 for obligationsoutstanding as of December 31, 2010. 18ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2010 is asfollows: (in millions of dollars) Balance atDecember 31,2009 TotalProvision CashExpenditures Non-cashItems/CurrencyChange Balance atDecember 31,2010 Rationalization of operations Employee termination costs $4.8 $(1.2) $(1.6) $(0.3) $1.7 Termination of lease agreements 2.7 0.1 (0.9) (0.1) 1.8 Sub-total 7.5 (1.1) (2.5) (0.4) 3.5 Asset impairments/net loss on disposal of assets resulting fromrestructuring activities — 0.8 — (0.8) — Total rationalization of operations $7.5 $(0.3) $(2.5) $(1.2) $3.5 Management expects the $1.7 million employee termination costs balance to be substantially paid within the next twelve months. Lease costsincluded in the $1.8 million balance are expected to continue until the last lease terminates in 2013.A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2009 is asfollows: (in millions of dollars) Balance atDecember 31,2008 TotalProvision CashExpenditures Non-cashItems/CurrencyChange Balance atDecember 31,2009 Rationalization of operations Employee termination costs $7.6 $9.2 $(12.3) $0.3 $4.8 Termination of lease agreements 1.0 2.1 (0.5) 0.1 2.7 Other — 0.1 (0.1) — — Sub-total 8.6 11.4 (12.9) 0.4 7.5 Asset impairments/net loss on disposal of assets resulting fromrestructuring activities — 1.2 — (1.2) — Total rationalization of operations $8.6 $12.6 $(12.9) $(0.8) $7.5 A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2008 is asfollows: (in millions of dollars) Balance atDecember 31,2007 TotalProvision CashExpenditures Non-cashItems/CurrencyChange Balance atDecember 31,2008 Rationalization of operations Employee termination costs $14.3 $7.9 $(13.8) $(0.8) $7.6 Termination of lease agreements 1.1 0.8 (0.6) (0.3) 1.0 Sub-total 15.4 8.7 (14.4) (1.1) 8.6 Asset impairments/net loss on disposal of assets resulting fromrestructuring activities — 0.7 — (0.7) — Total rationalization of operations $15.4 $9.4 $(14.4) $(1.8) $8.6 19ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Other ChargesIn addition to the recognition of restructuring costs, the Partnership also recognized other charges, incremental to the cost of its underlyingrestructuring actions, which do not qualify as restructuring. These charges include redundant warehousing or storage costs during the transition to a newdistribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilitiesand employee retention incentives. The Partnership did not incur any other charges, as described above, in 2010. Within cost of products sold on theConsolidated Statements of Operations for the years ended December 31, 2009 and 2008, these charges totaled $1.6 million and $4.1 million, respectively.Within advertising, selling, general and administrative expenses on the Consolidated Statements of Operations for the years ended December 31, 2009 and2008; these items totaled income of $0.3 million and $2.6 million, respectively. Included within these results, in 2008, the Partnership recognized a $3.5million gain on the sale of a manufacturing facility and a gain of $1.6 million on the sale of one additional property.9. Income TaxesIncome taxes presented for the Partnership comprise the consolidation of its taxable subsidiaries. The reconciliation of income taxes computed at theU.S. federal statutory income tax rate to the Partnership’s effective income tax rate for continuing operations is as follows: (in millions of dollars) 2010 2009 2008 Income tax (benefit) expense computed at U.S. statutory income tax rate $18.0 $8.7 $(16.7) Increase (decrease) in valuation allowance (0.7) 4.1 14.6 Equity earnings in subsidiaries (1.2) (0.8) (1.0) Impairment of non-deductible goodwill — — 20.5 Foreign income taxed at higher (lower) effective tax rate (3.4) (2.2) 4.3 Effect of dividends 0.9 0.7 0.6 Unrealized foreign currency translation gain 8.6 8.3 (7.3) Tax rate change on deferred items — — (2.6) Prior year adjustments (1.4) (1.2) (1.1) Other 0.2 (0.3) 1.6 Income taxes as reported $21.0 $17.3 $12.9 The higher than expected tax rate for 2010 was principally due to the foreign exchange impact of $8.6 million relating to foreign currency fluctuationson intercompany debt denominated in the local entity’s functional currency, which differs from the currency in which taxes are paid. The higher thanexpected rate for 2008 was principally due to the increase in the valuation allowance of $14.6 million, and the effect of non-deductible goodwill impairmentof $20.5 million, partially offset by the $7.3 million tax benefit related to the impact of foreign currency fluctuations relating to intercompany debtobligations discussed above. The higher than expected tax rate for 2009 was principally due to the increase in the valuation allowance of $4.1 million andthe foreign exchange impact of $8.3 million relating to foreign currency fluctuations on intercompany debt denominated in the local entity’s functionalcurrency, which differs from the currency in which the taxes are paid. The higher than expected rate for 2008 was principally due to the increase in thevaluation allowance of $14.6 million, and the effect of non-deductible goodwill impairment of $20.5 million, partially offset by the $7.3 million tax benefitrelated to the impact of foreign currency fluctuations relating to the intercompany debt obligation discussed above. 20ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) The effective tax rate for discontinued operations was 25.5% in 2010, 0.0% in 2009 and a tax benefit 3.1% in 2008.Jurisdictions in which we operate have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by tax authorities inmajor jurisdictions include Australia (2005 forward) and the United Kingdom (2005 forward). The Partnership is currently under examination in variousjurisdictions.The components of the income tax expense from continuing operations are as follows: (in millions of dollars) 2010 2009 2008 Current expense Non—U.S. $13.2 $10.4 $12.0 Total current income tax expense 13.2 10.4 12.0 Deferred expense Non—U.S 7.8 6.9 0.9 Total deferred income tax expense 7.8 6.9 0.9 Total income tax expense $21.0 $17.3 $12.9 The components of deferred tax assets (liabilities) are as follows: (in millions of dollars) 2010 2009 Deferred tax assets Compensation and benefits $1.7 $0.6 Pensions and other retiree benefits 6.6 9.8 Other reserves 2.0 0.7 Restructuring 0.1 0.2 Accounts receivable 0.4 0.5 Net operating loss carryforwards 42.4 46.5 Deferred maintenance contracts 2.7 2.3 Depreciation 6.1 6.2 Other — — Gross deferred income tax assets 62.0 66.8 Valuation allowance (46.8) (52.7) Net deferred tax assets 15.2 14.1 Deferred tax liabilities Identifiable intangibles 4.3 2.8 Unrealized foreign currency translation gain 9.9 1.0 Other 2.6 1.4 Gross deferred tax liabilities 16.8 5.2 Net deferred tax assets (liabilities) $(1.6) $8.9 At December 31, 2010, $179.8 million of net operating loss carryforwards are available to reduce future taxable income. These loss carryforwardsexpire in the years 2011 through 2030 or have an unlimited carryover period. A valuation allowance has been provided for certain of the net operating losscarryforwards and other deferred tax assets in those jurisdictions where the Partnership has determined that it is more likely than not that the deferred taxassets will not be realized. 21ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Partnership recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes in its results of operations. As ofDecember 31, 2010, the Partnership had no net amount accrued for interest and penalties. The Partnership recorded no increase in the liability forunrecognized tax benefits and the balance of unrecognized tax benefits was zero as of December 31, 2010 and 2009. The Partnership does not anticipate anysignificant change within 12 months of the most current balance sheet date in its uncertain tax positions.Income Tax Valuation AllowanceChanges in the deferred tax valuation allowances were as follows: Year EndedDecember 31, 2010 2009 2008 (In millions of dollars) Balance at beginning of year $52.7 $38.9 $26.6 (Income) expense (0.7) 4.1 14.6 Other changes (5.2) 9.7 (2.3) Balance at end of year $46.8 $52.7 $38.9 10. Derivative Financial InstrumentsThe Partnership is exposed to various market risks, including changes in foreign currency exchange rates. The Partnership enters into financialinstruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparty to these financial instruments is ACCOBrands Corporation, the ultimate parent, and ACCO transfers the risk by entering into financial instruments with major financial institutions with exactly thesame terms. The Partnership continually monitors its foreign currency exposures in order to maximize the overall effectiveness of its foreign currency hedgepositions. Principal currencies hedged include the U.S. dollar, Euro, Pound sterling and the Australian dollar. The Partnership is subject to credit risk, whichrelates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financialinstrument contracts. Management continues to closely monitor the status of the Partnership’s counterparties and will take action, as appropriate, to furthermanage its counterparty credit risk. There are no credit contingency features in the Partnership’s derivative financial instruments.On the date in which the Partnership enters into a derivative, the derivative is designated as a hedge of the identified exposure. The Partnershipmeasures the effectiveness of its hedging relationships both at hedge inception and on an ongoing basis.Forward Currency ContractsThe Partnership enters into forward foreign currency contracts to reduce the effect of fluctuating foreign currencies, primarily on foreign denominatedinventory purchases and intercompany loans. The majority of the Partnership’s exposure to local currency movements is in Europe, Australia, Japan andCanada.Forward currency contracts used to hedge foreign denominated inventory purchases are designated as a cash flow hedge. Unrealized gains and losseson these contracts for inventory purchases are deferred in other comprehensive income until the contracts are settled and the underlying hedged transactionsare recognized, at which time the deferred gains or losses will be reported in the “Cost of products sold” line in the Consolidated 22ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Statements of Operations. As of December 31, 2010 and December 31, 2009, the Partnership had cash flow designated foreign exchange contractsoutstanding with a U.S. dollar equivalent notional value of $57.8 million and $35.9 million, respectively.Forward currency contracts used to hedge foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses onthese derivative instruments are recognized within other (income) expense, net in the Consolidated Statements of Operations and are largely offset by thechanges in the fair value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, anddo not extend beyond 2011. As of December 31, 2010 and December 31, 2009, the Partnership had undesignated foreign exchange contracts outstandingwith a U.S. dollar equivalent notional value of $42.4 million and $43.4 million, respectively.The following table summarizes the fair value of the Partnership’s derivative financial instruments as of December 31, 2010 and December 31, 2009,respectively. Fair Value of Derivative Instruments Derivative Assets Derivative Liabilities (in millions of dollars) Balance SheetLocation Dec. 31,2010 Dec. 31,2009 Balance SheetLocation Dec. 31,2010 Dec. 31,2009 Derivatives designated as hedging instruments: Foreign exchange contracts Other current assets $0.7 $0.1 Other current liabilities $2.1 $0.8 Derivatives not designated as hedging instruments: Foreign exchange contracts Other current assets 1.0 — Other current liabilities — 0.8 Total derivatives $1.7 $0.1 $2.1 $1.6 The following table summarizes the pre-tax effect of the Partnership’s derivative financial instruments on the Consolidated Statements of Operationsfor the twelve months ended December 31, 2010 and December 31, 2009, respectively. The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Statementsof Operations for the Twelve Months Ended December 31, 2010 and 2009 (in millions of dollars) Amount of (Gain)Loss Recognized inOCI (EffectivePortion) Location of(Gain) LossReclassified fromOCI to Income Amount of (Gain)Loss Reclassifiedfrom AOCI toIncome (EffectivePortion) Location of (Gain)Loss Recognized inIncome Amount of (Gain)Loss Recognized inIncome (IneffectivePortion) 2010 2009 2010 2009 2010 2009 Cash flow hedges: Foreign exchange contracts $1.7 $4.3 Cost of products sold $1.1 $0.6 Cost of products sold $— $— Net investment hedges: Net investment in foreign operations — 15.0 Other (income) expense — — Other (income) expense — — Total $1.7 $19.3 $1.1 $0.6 $— $— 23ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) The Effect of DerivativesNot Designated as Hedging Instrumentson the Consolidated Statements of Operations (in millions of dollars) Location of (Gain) LossRecognized inIncome onDerivatives Amount of (Gain) LossRecognized in IncomeTwelve Months EndedDecember 31, 2010 2009 Foreign exchange contracts Other (income) expense $2.5 $5.0 11. Fair Value of Financial InstrumentsThe authoritative guidance for fair value measurements requires disclosure that establishes a framework for measuring fair value and expandsdisclosure about fair value measurements. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability inan orderly transaction between market participants at the measurement date (exit price). The guidance classifies the inputs used to measure fair value into thefollowing hierarchy: Level1 Unadjusted quoted prices in active markets for identical assets or liabilities Level2 Unadjusted quoted prices in active markets for similar assets or liabilities, orUnadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, orInputs other than quoted prices that are observable for the asset or liability Level3 Unobservable inputs for the asset or liabilityThe Partnership utilizes the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based onthe lowest level of input that is significant to the fair value measurement. The Partnership has determined that its financial assets and liabilities are Level 2 inthe fair value hierarchy. The following table sets forth the Partnership’s financial assets and liabilities that were accounted for at fair value on a recurring basisas of December 31, 2010 and December 31, 2009: (in millions of dollars) December 31,2010 December 31,2009 Assets: Forward currency contracts $1.7 $0.1 Liabilities: Forward currency contracts $2.1 $1.6 The Partnership’s forward currency contracts are included in Other Current Assets or Other Current Liabilities and mature within 12 months. Theforward foreign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by the banks or foreigncurrency dealers. As such, these derivative instruments are classified within Level 2.The fair values of cash and cash equivalents, notes payable to banks, accounts receivable and accounts payable approximate carrying amounts dueprincipally to their short maturities. The carrying amount and fair value of total debt was $0.0 million and $0.1 million at December 31, 2010 andDecember 31, 2009, respectively. The fair values are determined from quoted market prices, where available, and from investment bankers using currentinterest rates considering credit ratings and the remaining terms of maturity. 24ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) 12. Accumulated Other Comprehensive LossComprehensive income is defined as net income (loss) and other changes in partners’ deficit from transactions and other events from sources other thanpartners. The components of, and changes in, accumulated other comprehensive loss were: (in millions of dollars) DerivativeFinancialInstruments ForeignCurrencyAdjustments UnrecognizedPension andOtherPostretirementBenefit Costs AccumulatedOtherComprehensiveLoss Balance at December 31, 2008 $2.1 $(31.9) $(31.6) $(61.4) Changed during the year (net of taxes of $7.1) (2.8) 21.8 (22.0) (3.0) Balance at December 31, 2009 (0.7) (10.1) (53.6) (64.4) Changed during the year (net of taxes of $(3.6)) (0.2) 30.6 7.2 37.6 Balance at December 31, 2010 $(0.9) $20.5 $(46.4) $(26.8) 13. Commitments and ContingenciesPending LitigationThe Partnership and its subsidiaries are defendants in various claims and legal proceedings associated with their business and operations. It is notpossible to predict the outcome of the pending actions, but management believes that there are meritorious defenses to these actions and that these actions ifadjudicated or settled in a manner adverse to the Partnership, would not have a material adverse effect upon the results of operations, cash flows or financialcondition of the Partnership.Lease Commitments (in millions of dollars) 2011 $7.5 2012 5.9 2013 4.9 2014 4.5 2015 5.7 Remainder 13.3 Total minimum rental payments $41.8 Total rental expense reported in the Partnership’s statement of operations for continuing operations for all non-cancelable operating leases (reduced byminor amounts from subleases) amounted to $9.7 million, $10.5 million and $9.1 million in 2010, 2009 and 2008, respectively. 25ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) Unconditional Purchase CommitmentsFuture minimum payments under unconditional purchase commitments, primarily for inventory purchase commitments at December 31, 2010 are asfollows: (in millions of dollars) 2011 $16.6 2012 0.3 2013 0.2 2014 0.2 2015 0.2 Thereafter 0.0 $17.5 EnvironmentalThe Partnership is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty thepotential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Partnership’s subsidiaries mayundertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account any estimatedrecoveries from third parties, will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Partnership.14. Related Party TransactionsThe Partnership has transactions in the normal course of business with its parent, ACCO Brands Corporation, and its affiliates. The following tablessummarize related party transactions and balances with the Partnership’s parent and affiliates as of and for the years ended December 31. (in millions of dollars) 2010 2009 Balances Short-term receivable from affiliates $14.3 $18.1 Short-term payable to affiliates 179.5 226.0 Long-term payable to affiliates 234.0 271.6 (in millions of dollars) 2010 2009 2008 Summary of Operations Net sales $39.3 $28.3 $29.4 Cost of products sold 48.3 36.2 33.9 Advertising, selling, general and administrative expenses (3.4) (5.3) (3.3) Interest expense 7.6 10.3 18.9 Other income—gain on sale to related party — — (1.1) Short-term amounts due to and from affiliates principally represents balances owed to or from the Partnership for sales or purchases occurring in thenormal course of business and notes payable due on demand to affiliated entities. Long-term debt to affiliates consists of one long-term discount note. Basedupon commitments from the lenders that repayment will not be required within 12 months from the most recent balance sheet date, these notes have beenclassified as long-term. 26ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) 15. Discontinued OperationsThe financial statement caption “discontinued operations” includes the results of the commercial print finishing business which supplies commerciallaminating film and equipment to printers and packaging suppliers. In January of 2009, ACCO Brands Corporation announced it had reached a definitiveagreement to sell its commercial print finishing business and to exit from selling high volume laminating film and equipment.In June 2009, ACCO Brands completed the sale of its commercial print finishing business for final proceeds of $16.2 million, after final workingcapital adjustments. As a result of the adjustments, ACCO Brands Corporation received cash proceeds of $12.5 million, and a $3.65 million note due from thebuyer with installments due in June 2011 and June 2012. Of this, ABEH received $3.4 million, net of selling costs, for the sale of its working capital assets.The sale resulted in a pre-tax loss recorded in 2009 of $2.3 million, which included a pension curtailment gain of $0.5 million. During 2010, thePartnership recorded a gain on sale of $0.5 million ($0.4 million after-tax) related to the recovery of receivables that were fully reserved at the end of the prioryear.The total consideration, including the net proceeds received or receivable, was allocated to each legal entity that contributed assets to the sale basedon that entity’s working capital assets relative to the total sold by all entities. This method was expected to best approximate the gain or loss to be includedfor income tax reporting.The operating results and financial position of discontinued operations are as follows: (in millions of dollars) Operating Results: 2010 2009 2008 Net sales $— $11.9 $40.9 Operating loss (1) (0.1) (1.8) (31.5) Other (income) expense, net — 0.5 (1.1) Pre-tax loss (0.1) (1.3) (32.6) Benefit from income taxes — — (1.0) Gain (loss) on sale, net of tax 0.4 (2.3) — Income (loss) from discontinued operations $0.3 $(3.6) $(31.6) (1)During January, 2009, ABEH recorded a benefit of $1.3 million to reflect a change in the estimate of fair value less the cost to dispose of its commercialprint finishing business. 2008 includes non-cash goodwill and asset impairment charges of $26.7 million. Included in this amount were charges togoodwill of $10.0 million, property, plant and equipment of $6.2 million, identifiable intangible assets of $3.7 million and other current assets of $6.8million. (in millions of dollars) Financial Position: 2010 2009 Current assets $— $— Long-term assets — — Total assets $— $— Current liabilities $0.9 $1.1 Long-term liabilities — — Total liabilities $0.9 $1.1 27ACCO Brands Europe Holding LP and SubsidiariesNotes to Consolidated Financial Statements (Continued) (2)Liabilities remaining at December 31, 2010 consist principally of litigation accruals.16. Allowances for Doubtful AccountsChanges in the allowances for doubtful accounts were as follows: Year EndedDecember 31, 2010 2009 2008 (In millions of dollars) Balance at beginning of year $2.1 $2.8 $3.1 Additions charged to expense 1.4 1.0 0.9 Deductions—write offs (2.2) (1.8) (0.9) Foreign exchange changes 0.2 0.1 (0.3) Balance at end of year $1.5 $2.1 $2.8 17. Allowances for Sales Returns and DiscountsChanges in the allowances for sales returns and discounts were as follows: Year EndedDecember 31, 2010 2009 2008 (In millions of dollars) Balance at beginning of year $1.9 $2.6 $2.3 Additions charged to expense 4.8 8.6 16.2 Deductions—returns (4.0) (9.4) (15.5) Foreign exchange changes 0.1 0.1 (0.4) Balance at end of year $2.8 $1.9 $2.6 28Exhibit 99.2Financial Statements of Pelikan Artline Joint Venture and Controlled EntitiesThe accompanying consolidated financial statements of Pelikan Artline Joint Venture and Controlled Entities, a 50% owned joint venture investment ofACCO Brands Corporation (“ACCO”), are being provided pursuant to Rule 3-09 of the Securities and Exchange Commission’s (“SEC”) Regulation S-X. These financial statements are audited as of September 30, 2010 and are prepared in accordance with accounting principles generally accepted rules inAustralia and as permitted by the SEC Regulations.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesA.B.N. 51 084 958 556FINANCIAL REPORT—30 SEPTEMBER 2010CONTENTS Independent Auditor’s Report 1 Directors’ Declaration 2 Statement of Comprehensive Income 3 Statement of Financial Position 4 Statement of Changes in Equity 5 Statement of Cash Flows 6 Notes to the Financial Statements 7 Chartered Accountants& Business AdvisersReport of Independent Registered Public Accounting FirmTo the members of Pelikan Artline Joint VentureWe have audited the accompanying financial statements of Pelikan Artline Joint Venture (the “parent entity”), which comprises the statement offinancial position as at September 30, 2010, and the related statement of comprehensive income, statement of changes in equity and statement of cash flowsfor the year then ended for both the parent entity and the consolidated entity. The consolidated entity comprises the parent entity and the entities itcontrolled at the year’s end or from time to time during the year. These financial statements are the responsibility of the parent entity’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the auditing standards generally accepted in the United States of America . Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We did not audit theparent entity’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designingaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent entity’s internalcontrol over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the parent entity and theconsolidated entity at September 30, 2010, and the results of their operations and cash flows for the year then ended in conformity with accounting principlesgenerally accepted in Australia on the basis as described in note 1.The financial statements for 2009 and 2008 (refer to note 32) are presented for comparative purposes only and have not been audited by us inaccordance with auditing standards generally accepted in the United States of America.PKF Paul Bull SydneyPartner 10 February 2011Tel: 61 2 9251 4100 | Fax: 61 2 9240 98211 | www.pkf.com.auPKF | ABN 83 236 985 726Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | AustraliaDX 10173 | Sydney Stock Exchange | New South WalesThe PKF East Coast Practice is a member of the PKF international Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF AustraliaLimited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not acceptresponsibility or liability for the actions or inactions on the part of any other individual member firm or firms.Liability limited by a scheme approved under Professional Standards Legislation.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesFINANCIAL REPORT -30 SEPTEMBER 2010DIRECTORS’ DECLARATIONThe directors of Pelikan Artline Pty Limited, the agent for the joint venture, declare that: 1.The financial statements, which comprise the statement of comprehensive income, statement of financial position, statement of changes inequity, statement of cash flows and notes to the financial statements: a)comply with Australian Accounting Standards; and b)give a true and fair view of the financial position as at 30 September 2010 and of the performance for the year ended on that date of thejoint venture and consolidated entity. 2.In the directors’ opinion there are reasonable grounds to believe that the joint venture will be able to pay its debts as and when they become dueand payable.This declaration is made in accordance with a resolution of the board of directors and is signed for and on behalf of the directors by:A.G. Kaldor DirectorB.R. Haynes DirectorSydney, 10 February 2011PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 SEPTEMBER 2010 Consolidated Parent Note 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Revenue 2 131,308,301 122,520,989 135,727,057 123,263,514 131,308,301 122,520,989 135,727,057 123,263,514 Expenses Purchases, distribution & selling (89,466,083) (94,171,886) (81,829,984) (83,834,592) Marketing (12,663,744) (11,582,511) (12,655,998) (11,419,743) Administration, IT & other expenses (2,163,752) (866,735) (25,058,679) (18,375,427) Finance costs (1,878,429) (1,731,901) (3,209,695) (3,731,221) (106,172,008) (108,353,033) (122,754,356) (117,360,983) Profit before income tax 25,136,293 14,167,956 12,972,701 5,902,531 Income tax expense 1,5 (4,922,678) (2,768,432) — — Profit for the year 20,213,615 11,399,524 12,972,701 5,902,531 Other Comprehensive Income Available for sale financial assets 33,179 48 — — Other comprehensive income for the year, net of tax 33,179 48 — — Total comprehensive income for the year 20,246,794 11,399,572 12,972,701 5,902,531 Profit attributable to: Owners of the parent entity 18,181,165 9,976,669 12,972,701 5,902,531 Minority interest 2,032,450 1,422,855 — — 20,213,615 11,399,524 12,972,701 5,902,531 Total comprehensive income attributable to: Owners of the parent entity 18,207,766 9,976,708 12,972,701 5,902,531 Minority interest 2,039,028 1,422,864 — — 20,246,794 11,399,572 12,972,701 5,902,531 The above statement of comprehensive income should be read in conjunction with the accompanying notes 3PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF FINANCIAL POSITIONAS AT 30 SEPTEMBER 2010 Consolidated Parent Note 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) ASSETS Current Assets Cash and cash equivalents 6 27,205,691 18,562,716 2,527,774 12,158,955 Trade and other receivables 7 36,205,486 35,252,523 35,807,318 34,932,632 Inventories 8 22,503,626 20,850,503 22,503,626 20,850,503 Prepayments 727,708 772,097 671,674 714,660 Total current assets 86,642,511 75,437,839 61,510,392 68,656,750 Non-Current Assets Receivables 9 — — 9,926,160 8,745,050 Financial assets 10 409,245 361,846 40,853,792 40,853,792 Property, plant and equipment 11 2,297,720 2,624,797 1,388,650 1,330,346 Deferred tax assets 12 897,520 1,446,465 n/a n/a Intangible assets 13 30,467,403 30,471,275 48,243 52,115 Total non-current assets 34,071,888 34,904,383 52,216,845 50,981,303 Total assets 120,714,399 110,342,222 113,727,237 119,638,053 LIABILITIES Current Liabilities Trade and other payables 14 30,371,498 26,568,268 34,682,832 32,066,846 Provisions 15 1,121,980 1,257,201 687,518 607,201 Short-term borrowings 16 4,000,000 4,000,000 4,000,000 4,000,000 Current tax liabilities 2,351,731 1,202,445 — — Total current liabilities 37,845,209 33,027,914 39,370,350 36,674,047 Non-Current Liabilities Trade and other payables 17 — — 23,935,547 31,628,488 Long-term borrowings 18 19,000,000 23,000,000 19,000,000 23,000,000 Deferred tax liabilities 19 171,492 66,440 n/a n/a Provisions 20 274,786 210,710 46,247 79,710 Total non-current liabilities 19,446,278 23,277,150 42,981,794 54,708,198 Total liabilities 57,291,487 56,305,064 82,352,144 91,382,245 Net assets 63,422,912 54,037,158 31,375,093 28,255,808 EQUITY Capital introduced 21 1,652,804 1,652,804 1,652,804 1,652,804 Reserves 22 119,425 92,824 — — Retained earnings 23 53,016,747 44,688,998 29,722,289 26,603,004 Outside equity interest 24 8,633,936 7,602,532 — — Total equity 63,422,912 54,037,158 31,375,093 28,255,808 The above statement of financial position should be read in conjunction with the accompanying notes 4PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 SEPTEMBER 2010 Consolidated Parent Note 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Total equity at the beginning of the financial year 54,037,158 53,804,162 28,255,808 32,598,331 Total comprehensive income attributable to: Owners of the parent entity 18,207,766 9,976,708 12,972,701 5,902,531 Minority interest 2,039,028 1,422,864 — — Distribution of profit during the year (9,853,416) (10,245,054) (9,853,416) (10,245,054) Dividends provided for or paid 4 (1,007,624) (921,522) — — 9,385,754 232,996 3,119,285 (4,342,523) Total equity at the end of the financial year 63,422,912 54,037,158 31,375,093 28,255,808 The above statement of changes in equity should be read in conjunction with the accompanying notes 5PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 SEPTEMBER 2010 Consolidated Parent Note 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Cash Flows From Operating Activities Receipts from customers (inclusive of GST) 146,235,117 138,177,055 143,331,735 123,011,940 Payments to suppliers and employees (inclusive of GST) (118,083,956) (124,435,064) (130,051,010) (126,021,019) Dividend received 4,855 5,796 — 3,732,183 Interest received 745,012 437,342 1,239,016 787,752 Finance costs (1,764,260) (1,693,966) (4,037,190) (3,002,454) Income tax paid (3,225,568) (5,287,633) — — Net cash inflow (outflow) from operating activities 29 23,911,200 7,203,530 10,482,551 (1,491,598) Cash Flows From Investing Activities Purchase of property, plant and equipment (440,006) (219,861) (440,006) (220,174) Proceeds from sale of property, plant and equipment 32,821 7,255 23,980 7,163 Purchase of subsidiary — (19,245,050) — (10,500,000) Loans to related party — — (1,181,110) (8,745,050) Net cash outflow from investing activities (407,185) (19,457,656) (1,597,136) (19,458,061) Cash Flows From Financing Activities Proceeds from borrowings — 21,000,000 — 21,000,000 Repayment of borrowings (4,000,000) (4,000,000) (4,000,000) (4,000,000) Loans from (to) related parties (net) — — (4,663,180) 9,480,393 Profit distributions paid (9,853,416) (10,245,054) (9,853,416) (10,245,054) Dividends paid (1,007,624) (921,522) — — Net cash inflow (outflow) from financing activities (14,861,040) 5,833,424 (18,516,596) 16,235,339 Net increase (decrease) in cash and cash and cash equivalents 8,642,975 (6,420,702) (9,631,181) (4,714,320) Cash and cash equivalents at the beginning of the year 18,562,716 24,983,418 12,158,955 16,873,275 Cash and cash equivalents at the end of the year 1,6 27,205,691 18,562,716 2,527,774 12,158,955 The above statement of cash flows should be read in conjunction with the accompanying notes 6PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010NOTE 1—SIGNIFICANT ACCOUNTING POLICIESThis financial report is a general purpose financial report prepared in order to satisfy Pelikan Artline Joint Venture’s (referred to in this report as theparent entity) financial report preparation requirements under the Joint Venture Agreement dated 24 December 1998.The financial report covers Pelikan Artline Joint Venture as an individual parent entity and Pelikan Artline Joint Venture and controlled entities as aconsolidated entity.The financial report was authorised for issue by the directors of Pelikan Artline Pty Limited, the agent for the Joint Venture, on 10 February 2011.Basis of preparationThese general purpose financial statements have been prepared in accordance with Australian Accounting Standards—Reduced DisclosureRequirements, other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Interpretations.Compliance with Australian Accounting Standards—Reduced Disclosure RequirementsThe financial statements of Pelikan Artline Joint Venture comply with Australian Accounting Standards - Reduced Disclosure Requirements as issuedby the Australian Accounting Standards Board (AASB).Early adoption of standardsThe consolidated entity has elected to apply the following pronouncements to the annual reporting periodbeginning 1 October 2009: AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arisingfrom Reduced Disclosure RequirementsHistorical cost conventionThe financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement atfair value of selected non-current assets, financial assets and financial liabilities.Principles of ConsolidationA controlled entity is any entity controlled by Pelikan Artline Joint Venture. Control exists where Pelikan Artline Joint Venture has the capacity todominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Pelikan Artline JointVenture to achieve the objectives of Pelikan Artline Joint Venture.The financial statements of controlled entities are included from the date control commences to the date control ceases.Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation. 7PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income TaxThe parent entity is not a legal entity subject to Australian or New Zealand income tax. Its income is taxable in the hands of the Joint Venture parties.The controlled entities are subject to Australian or New Zealand income tax and the tax balances disclosed in this report relate to these controlledentities.The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or non-allowable items. It is calculatedusing tax rates that have been enacted or are substantively enacted by the statement of financial position date.Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising between the tax basesof assets and liabilities and their carrying amounts in the financial statements.Deferred tax is calculated at the tax rates that are expected to apply to the year when the asset is realised or liability is settled. Deferred tax is credited inthe statement of comprehensive income except where it relates to items that may be credited direct to equity, in which case the deferred tax is adjusteddirectly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against whichdeductible temporary differences can be utilised.The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur inincome tax legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised andcomply with the conditions of deductibility imposed by the law.Revenue RecognitionSale of goods revenueRevenue from the sale of goods is recognised upon the delivery of goods to customers.Interest revenueInterest revenue is recognised on an accruals basis taking into account the interest rates applicable to the financial assets.Dividend revenueDividend revenue is recognised when the right to receive a dividend has been established.Promotional ExpenditureAdvertising and promotional expenditure (primarily catalogue expenditure) is recognised when incurred. The expenditure is incurred when the entityenters into a binding commitment with the service provider.Foreign Currency Transactions and BalancesThe functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entityoperates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s presentation currency. 8PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Foreign Currency Transactions and Balances (continued) 9Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreigncurrency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchangerate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income. Exchange differencearising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwisethe exchange difference is recognised in the statement of comprehensive income.Cash and Cash EquivalentsCash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments withoriginal maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes invalue and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.Trade and Other Current ReceivablesTrade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment.Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provisionfor impairment is established when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to theoriginal terms of receivables.The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted atthe effective interest rate. The amount of the provision is recognised in the statement of comprehensive income.InventoriesInventories are measured at the lower of cost and net realisable value. Costs are assigned to inventory on hand by the method most appropriate to eachparticular class of inventory, with the majority being valued on a first in first out or average cost basis.Investments and Other Financial AssetsThe parent entity accounts for investments in subsidiaries at cost less impairment. The consolidated entity classifies its investments as available forsale financial assets. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reportingdate.Available for sale financial assets, comprising marketable equity securities, are non-derivatives that are either designated in this category or notclassified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months ofthe statement of financial position date.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments and Other Financial Assets (continued) 10Purchases and sales of investments are recognised on trade date—the date on which the consolidated entity commits to purchase or sell the asset.Investments are initially recognised at fair value plus transaction costs for all financial assets. Financial assets are derecognised when the rights to receivecash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards ofownership.Available for sale financial assets are subsequently carried at fair value. Unrealised gains and losses arising from changes in the fair value of nonmonetary securities classified as available for sale are recognised in equity in the available for sale financial assets revaluation reserve. When securitiesclassified as available for sale are sold or impaired, the accumulated fair value adjustments are included in the statement of comprehensive income as gainsand losses from investment securities.The consolidated entity assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired.In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered indetermining whether the security is impaired. If any such evidence exists for available for sale financial assets, the cumulative loss—measured as thedifference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss—isremoved from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income onequity instruments are not reversed through the statement of comprehensive income.Impairment of Financial AssetsFinancial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each statement of financial positiondate. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of thefinancial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of theimpairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effectiveinterest rate.The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivableswhere the carrying amount is reduced through the use of a provision account. When a trade receivable is uncollectible, it is written off against the provisionaccount. Subsequent recoveries of amounts previously written off are credited against the provision account. Changes in the carrying amount of the provisionaccount are recognised in profit or loss.Property, Plant and EquipmentEach class of property, plant and equipment is carried at cost, less where applicable, any accumulated depreciation and impairment losses. Costincludes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised asa separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and thecost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financialperiod in which they are incurred.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property, Plant and Equipment (continued) 11Plant and equipmentPlant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by the directors to ensure that itis not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will bereceived from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determiningrecoverable amounts.DepreciationThe depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, are depreciated on a straightline basis over their useful lives to the consolidated entity commencing from the time each asset is held ready for use. Leasehold improvements aredepreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Depreciation Rate Plant and equipment 7.50% - 66.77% Motor vehicles 15.00% - 20.00% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimatedrecoverable amount.Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement ofcomprehensive income.LeasesLeases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferredto entities in the consolidated entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present valueof minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful liveswhere it is likely that the consolidated entity will obtain ownership of the asset over the term of the lease. Lease payments are allocated between thereduction of the lease liability and the lease interest expense for the year.Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the year in whichthey are incurred.IntangiblesIntangibles – Trademark LicencesTrademark licences are initially recognised at cost of acquisition. They have an indefinite useful life because they are subject to a written trademarkagreement which does not limit the period over which they are expected to generate cash inflows. They are not subject to amortisation.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Intangibles (continued) 12Trademark licences are tested for impairment annually and are subsequently carried at cost less any accumulated impairment losses. An impairmentloss is recognised for the amount by which the trademark licence’s carrying amount exceeds its recoverable amount.GoodwillGoodwill and goodwill on consolidation are initially recorded as an intangible asset at the amount by which the purchase price for a business or for anownership interest in a controlled entity exceeds the fair value attributed to its net assets at the date of acquisition. Goodwill has an indefinite life on thebasis there is no foreseeable limit to the period over which the asset is expected to generate cash inflows. They are not subject to amortisation.Goodwill is tested annually for impairment and carried at a cost less accumulated impairment losses.Impairment of AssetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Other assets are reviewed forimpairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for theamount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to selland value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgenerating units).Trade and Other PayablesThese amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of financial year which are unpaid. Theamounts are unsecured and are usually paid within 30 days of recognition, with the exception of certain liabilities to employees that are usually paid within12 months of the statement of financial position date.BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Anydifference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the periodof the borrowings using the effective interest method. Fees paid on the establishment of the loan facilities are recognised in the statement of comprehensiveincome when they are incurred.Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least12 months after the statement of financial position date.Employee BenefitsWages and salaries, annual leave and sick leaveLiabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 monthsof the reporting date are recognised in other payables in respect ofPELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Employee Benefits (continued) 13employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.Long service leaveThe liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future paymentsto be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels,experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on nationalgovernment bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.Retirement Benefit ObligationsSuperannuation contributions are made by the consolidated entity to employee superannuation funds and are charged as expenses when incurred.ProvisionsProvisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that anoutflow of economic benefits will result and that outflow can be reliably measured. Provisions recognised represent the best estimate of the amounts requiredto settle the obligation at the end of the reporting period.Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from theAustralian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from or payable to theAustralian Taxation Office is included with other receivables or payables in the statement of financial position.Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from,or payable to, the Australian Taxation Office, are presented as operating cash flow.Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the Australian Taxation Office.Financial InstrumentsInitial recognition and measurementFinancial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financialassets, this is equivalent to the date that the economic entity commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted).PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments (continued) 14Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit orloss’ in which case transaction costs are expensed to the statement of comprehensive income immediately.Classification and subsequent measurementFinancial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method or cost. Fair value represents theamount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an activemarket are used to determine fair value. In other circumstances, valuation techniques are adopted.Amortised cost is calculated as: • the amount at which the financial asset or financial liability is measured at initial recognition; • less principal repayments; • plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculatedusing the effective interest method; • less any reduction for impairment.The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactlydiscounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or whenthis cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability.Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense inthe statement of comprehensive income.The consolidated entity does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements ofAccounting Standards specifically applicable to financial instruments. (i)Financial assets at fair value through profit or loss Financial assets are classified at ‘fair value through profit or loss’ when they are held for trading forthe purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accountingmismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis inaccordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carryingvalue being included in profit or loss. (ii)Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an activemarket and are subsequently measured at amortised cost. Loansand receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reportingperiod, which will be classified as non-current assets.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments (continued) 15(iii)Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinablepayments, and it is the consolidated entity’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Held-to-maturityinvestments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reportingperiod, which will be classified as current assets. If during the period the consolidated entity sold or reclassified more than an insignificantamount of the held-to-maturity investments before maturity, the entire category of held-to-maturity investments would be tainted and would bereclassified as available-for-sale. (iv)Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either not capable of being classifiedinto other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity ofother entities where there is neither a fixed maturity nor fixed or determinable payments. Available-for-salefinancial assets are included in non-current assets, except for those which are expected to be disposed of within 12 months after the end of thereporting period, which will be classified as current assets. (v)Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.Fair valueFair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for allunlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.ImpairmentAt the end of each reporting period, the consolidated entity assesses whether there is objective evidence that a financial instrument has been impaired.In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether animpairment has arisen. Impairment losses are recognised in the statement of comprehensive income.DerecognitionFinancial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby theentity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised wherethe related obligations are discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred toanother party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in the statement ofcomprehensive income.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ComparativesWhere required by Accounting Standards and/or for improved presentation purposes comparative figures have been adjusted to conform with changesin presentation for the current year.Critical Accounting Estimates and AssumptionsThe directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available currentinformation. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally andwithin the consolidated entity.Key Estimates – Impairment of Goodwill and Trademark LicencesThe consolidated entity tests annually whether goodwill and other intangible assets that have an indefinite useful life have suffered any impairment, inaccordance with the accounting policy stated in note 1.In assessing goodwill for impairment, sensitivity analysis was applied to key assumptions (being the growth and discount rates) used in value in usecalculations. As a result of this sensitivity analysis, there were no changes in key assumptions that were considered reasonably possible, which would causethe carrying amount of goodwill to exceed its recoverable amount and therefore no impairment has been recognised in respect of goodwill amounting to$28,490,751 or trademark licences amounting to $1,976,652 for the year ended 30 September 2010.Adoption of New and Revised Accounting StandardsDuring the current year, the consolidated entity has adopted all of the new and revised Australian Accounting Standards and Interpretations applicableto its operations which became mandatory.The adoption of these Standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation ofthe impact the adoption of these Standards and Interpretations has had on the financial statements the consolidated entity.AASB 101: Presentation of Financial StatementsIn September 2007, the Australian Accounting Standards Board revised AASB 101, and as a result there have been changes to the presentation anddisclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the consolidated entity’sfinancial statements.Disclosure impactTerminology changes—the revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of theprimary financial statements.Reporting changes in equity—the revised AASB 101 requires all changes in equity arising from transactions with owners in their capacity as owners tobe presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of changes in equity, with non-owner changes in equity presented in the statement of comprehensive income. The previous version of AASB 101 required that owner changes in equity andother comprehensive income be presented in the statement of changes in equity. 16PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Adoption of New and Revised Accounting Standards (continued) 17Statement of comprehensive income—the revised AASB 101 requires all income and expenses to be presented in either one statement—the statementof comprehensive income, or two statements—a separate income statement and a statement of comprehensive income. The previous version of AASB 101required only the presentation of a single income statement. The consolidated entity has elected to use a single combined statement. The consolidatedentity’s financial statements now contain a statement of comprehensive income.Other comprehensive income—the revised version of AASB 101 introduces the concept of ‘other comprehensive income’ which comprises of incomeand expense that are not recognised in profit or loss as required by other Australian Accounting Standards. Items of other comprehensive income are to bedisclosed in the statement of comprehensive income. Entities are required to disclose the income tax relating to each component of other comprehensiveincome. The previous version of AASB 101 did not contain an equivalent concept.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 18 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 2 Revenue Revenue Sales net of discounts and rebates allowed 130,163,227 121,870,757 130,309,235 118,551,554 Other revenue Dividend received 4,855 5,796 4,074,561 3,726,387 Interest received 1,013,514 468,900 1,216,731 810,037 Other operating revenue 126,705 175,536 126,530 175,536 1,145,074 650,232 5,417,822 4,711,960 Total revenue 131,308,301 122,520,989 135,727,057 123,263,514 Note 3 Expenses Depreciation—property, plant & equipment 671,172 729,565 350,860 329,151 Bad and doubtful debts expense Bad debts 30,433 4,615 30,433 4,615 Provision for impairment — — — — Total bad and doubtful debts 30,433 4,615 30,433 4,615 Foreign currency translation losses 21,571 26,752 16,286 — Loss on disposal of property, plant and equipment 63,090 82,995 6,862 11,848 Rental expenses relating to operating leases 5,559,663 6,514,379 3,033,062 3,999,364 Note 4 Dividends Fully franked dividends—franked at tax rate of 30% 1,007,624 921,522 — — Balance of franking account at year end adjusted for franking credits arisingfrom payment of provision for income tax, franking debits arising frompayment of dividends recognised as a liability at reporting date and frankingcredits arising from receipt of dividends recognised as receivable at reportingdate. 20,991,213 18,332,890 — — PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 19 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 5—Income tax (a) The components of income tax expense comprise Current income tax 4,291,118 3,172,675 n/a n/a Deferred income tax—recoupment of (increase in) tax losses 394,083 (656,099) n/a n/a Deferred income tax—other items 229,553 311,894 n/a n/a Deferred income tax—changes in tax rates 10,971 — n/a n/a Under (over) provision in respect of prior years (3,047) 204,568 n/a n/a Initial recognition of deferred tax assets and liabilities — (264,606) n/a n/a Total income tax expense 4,922,678 2,768,432 n/a n/a Deferred income tax expense included in income tax expense Decrease (increase) in deferred tax assets (note 12) 532,804 (347,981) n/a n/a Increase (decrease) in deferred tax liabilities (note 19) 90,832 3,776 n/a n/a 623,636 (344,205) n/a n/a (b) Income tax reconciliation The prima facie tax on profit before income tax is reconciled to the income tax as follows:- Prima facie tax payable on profit before income tax at 30% (2009: 30% for Australian operations and 33% forNew Zealand operations) 7,540,888 4,257,922 n/a n/a Add (less) tax effect of:- Non allowable items 43,317 183,680 n/a n/a Non assessable items (680) (960,398) n/a n/a Change in tax rates 10,971 — n/a n/a Over (under) provision in respect of prior years (3,047) 204,568 n/a n/a Increase in tax losses not recognised 671 109 n/a n/a Initial recognition of deferred tax assets and liabilities — (264,606) n/a n/a Income tax not payable by parent entity—non taxable entity (2,669,442) (652,843) n/a n/a Income tax expense 4,922,678 2,768,432 n/a n/a The applicable weighted average effective tax rates are as follows: 20% 20% n/a n/a Tax effect relating to other comprehensive income: Deferred tax 14,220 21 n/a n/a Note 6 Current Assets—Cash and Cash Equivalents Cash at bank 3,302,852 2,903,104 146,491 2,096,570 Cash on deposit 23,902,839 15,659,612 2,381,283 10,062,385 27,205,691 18,562,716 2,527,774 12,158,955 Note 7 Current Assets—Trade and Other Receivables Trade receivables 35,265,481 34,316,761 35,265,481 34,019,364 Less provision for impairment (100,000) (100,000) (100,000) (100,000) 35,165,481 34,216,761 35,165,481 33,919,364 Current tax assets 91,953 — — — Other receivables 948,052 1,035,762 641,837 1,013,268 36,205,486 35,252,523 35,807,318 34,932,632 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 20 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 8 Current Assets—Inventories Stock on hand (note 1) 22,503,626 20,850,503 22,503,626 20,850,503 Note 9 Non-Current Assets—Receivables Loan to controlled entity—unsecured — — 9,926,160 8,745,050 In the 2009 financial statements the non-current receivable of $8,745,050 was included aspart of the investment in Spirax Holdings Pty Limited (also a non-current asset) given itrelated to the acquisition in 2009 (refer to note 10). There is a formalised loan agreement inplace and interest is being accrued on the receivable balance. On this basis the receivablebalance has been reclassified from financial assets to receivables, impacting theclassification of comparatives in 2009 (refer to note 1) only. There is no change to totalassets, net assets or profit in 2009 or 2010. Note 10 Non-Current Assets—Financial Assets Other Financial Assets Unlisted investments Shares in subsidiary companies (at cost) — — 40,853,792 40,853,792 Shares in unlisted corporations (at fair value) 409,245 361,846 — — 409,245 361,846 40,853,792 40,853,792 Parent Entity—Shares in other controlled corporationsOn 29 April 2005 the joint venture acquired 80.17% of the share capital of Geoff Penney(Australia) Pty Limited, which is also the 100% holding company of Custom XstamperAustralia Pty Limited, Stampmakers Australia Pty Limited, Colop Products Pty Limited,Pelikan Quartet Pty Limited, Pelikan Artline Limited, S. Smith & Son (Australia) PtyLimited, The Penney Group Pty Limited and Estamp Australia Pty Limited. On 14 January 2009 the joint venture acquired 100% of the share capital of SpiraxHoldings Pty Limited, which is also the 100% holding company of Spirax Industries PtyLimited, Spirax Office Products Pty Limited, Spirax Holdings NZ Limited and Spirax NewZealand Limited. Consolidated Entity—Shares in unlisted corporationsShares in other corporations represent an investment in Shachihata (Malaysia) Sdn. Bhd., aprivate company incorporated in Malaysia that manufactures certain products sold by theConsolidated Entity. The percentage owned is 2.38% and is carried at fair value. PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 21 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 11 Non-Current Assets—Property, Plant and Equipment Plant and equipment (at cost) 11,557,469 11,423,801 2,811,757 2,464,049 Less accumulated depreciation (9,259,749) (8,799,004) (1,423,107) (1,133,703) 2,297,720 2,624,797 1,388,650 1,330,346 Motor vehicles (at cost) — 43,182 — 43,182 Less accumulated depreciation — (43,182) — (43,182) — — — — Total property, plant and equipment 2,297,720 2,624,797 1,388,650 1,330,346 Movements in carrying amountsConsolidated Entity Plant andequipment$ Motorvehicles$ Total$ At 1 October 2009 Cost 11,423,801 43,182 11,466,983 Accumulated depreciation and impairment (8,799,004) (43,182) (8,842,186) Net carrying amount 2,624,797 — 2,624,797 Year ended 30 September 2010 Net carrying amount at 1 October 2009 2,624,797 — 2,624,797 Additions 440,006 — 440,006 Disposals (95,911) — (95,911) Depreciation and amortisation charge (671,172) — (671,172) Net carrying amount at 30 September 2010 2,297,720 — 2,297,720 At 30 September 2010 Cost 11,557,469 — 11,557,469 Accumulated depreciation and impairment (9,259,749) — (9,259,749) Net carrying amount 2,297,720 — 2,297,720 Parent Entity Plant andequipment$ Motorvehicles$ Total$ At 1 October 2009 Cost 2,464,049 43,182 2,507,231 Accumulated depreciation and impairment (1,133,703) (43,182) (1,176,885) Net carrying amount 1,330,346 — 1,330,346 Year ended 30 September 2010 Net carrying amount at 1 October 2009 1,330,346 — 1,330,346 Additions 440,006 — 440,006 Disposals (30,842) — (30,842) Depreciation and amortisation charge (350,860) — (350,860) Net carrying amount at 30 September 2010 1,388,650 — 1,388,650 At 30 September 2010 Cost 2,811,757 — 2,811,757 Accumulated depreciation and impairment (1,423,107) — (1,423,107) Net carrying amount 1,388,650 — 1,388,650 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 22 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 12 Non-Current Assets—Deferred Tax Assets Deferred tax assets 897,520 1,446,465 n/a n/a Deferred tax assets—movement Opening balance 1,446,465 827,106 n/a n/a Change in tax rates (11,323) — n/a n/a Initial recognition of deferred tax assets — 271,378 n/a n/a Unrealised currency gains and losses (8,414) (2,299) n/a n/a Provisions (35,400) (496,112) n/a n/a Accruals (101,411) 178,819 n/a n/a Property, plant and equipment 1,686 11,474 n/a n/a Tax losses (394,083) 656,099 n/a n/a Closing balance 897,520 1,446,465 n/a n/a Deferred tax assets comprise Provisions 376,001 329,333 n/a n/a Accruals 259,503 431,906 n/a n/a Property, plant and equipment — 29,127 n/a n/a Tax losses 262,016 656,099 n/a n/a 897,520 1,446,465 n/a n/a PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 23 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 13 Non-Current Assets—Intangible Assets Trademark licence (at cost) 1,976,652 1,976,652 — — Goodwill (at cost) 28,490,751 28,494,623 48,243 52,115 30,467,403 30,471,275 48,243 52,115 Trademarklicence Movements in carrying amounts Goodwill Total Consolidated Entity $ $ $ At 1 October 2009 Cost 1,976,652 28,494,623 30,471,275 Accumulated amortisation and impairment — — — Net carrying amount 1,976,652 28,494,623 30,471,275 Year ended 30 September 2010 Net carrying amount at 1 October 2009 1,976,652 28,494,623 30,471,275 Currency fluctuations — (3,872) (3,872) Net carrying amount at 30 September 2010 1,976,652 28,490,751 30,467,403 At 30 September 2010 Cost 1,976,652 28,490,751 30,467,403 Accumulated amortisation and impairment — — — Net carrying amount 1,976,652 28,490,751 30,467,403 Trademarklicence Goodwill Total Parent Entity $ $ $ At 1 October 2009 Cost — 52,115 52,115 Accumulated amortisation and impairment — — — Net carrying amount — 52,115 52,115 Year ended 30 September 2010 Net carrying amount at 1 October 2009 — 52,115 52,115 Currency fluctuations — (3,872) (3,872) Net carrying amount at 30 September 2010 — 48,243 48,243 At 30 September 2010 Cost — 48,243 48,243 Accumulated amortisation and impairment — — — Net carrying amount — 48,243 48,243 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 24 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 14 Current Liabilities—Trade and Other Payables Trade payables 15,088,224 11,645,009 15,488,730 11,779,486 Liabilities to employees 4,994,504 3,759,868 4,033,258 2,787,577 Other payables 10,288,770 11,163,391 9,787,328 10,253,972 Loans—unsecured — — 5,373,516 7,245,811 30,371,498 26,568,268 34,682,832 32,066,846 Note 15 Current Liabilities—Provisions Employee benefits—long service leave 1,121,980 1,257,201 687,518 607,201 Note 16 Current Liabilities—Short-term Borrowings Loans—Westpac (secured) 4,000,000 4,000,000 4,000,000 4,000,000 Note 17 Non-Current Liabilities—Trade and Other Payables Loans—unsecured — — 23,935,547 31,628,488 Note 18 Non-Current Liabilities—Long-term Borrowings Loans—Westpac (secured) 19,000,000 23,000,000 19,000,000 23,000,000 Note 19 Non-Current Liabilities—Deferred Tax Liabilities Deferred tax liabilities 171,492 66,440 n/a n/a Deferred tax liabilities—movement Opening balance 66,440 55,871 n/a n/a Initial recognition of deferred tax liabilities — 6,772 n/a n/a Receivables 91,069 (2,810) n/a n/a Prepayments (237) 6,586 n/a n/a Revaluation of available for sale financial assets charged directly to othercomprehensive income 14,220 21 n/a n/a Closing balance 171,492 66,440 n/a n/a Deferred tax liabilities comprise Receivables 91,451 382 n/a n/a Prepayments 16,202 16,438 n/a n/a Revaluation of available for sale financial assets 63,839 49,620 n/a n/a 171,492 66,440 n/a n/a Note 20 Non-Current Liabilities—Provisions Employee benefits—long service leave 274,786 210,710 46,247 79,710 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 25 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 21 Joint Venture Equity Columbia Pelikan Pty Limited Capital introduced 826,402 826,402 826,402 826,402 Share of joint venture profits—prior years 22,344,499 22,478,691 13,301,502 15,472,763 Share of joint venture profits—current year 9,090,583 4,988,335 6,486,351 2,951,266 Share of transfers to reserves—prior year 46,412 46,393 — — Share of transfers to reserves—current year 13,301 20 — — Distribution of profit (4,926,708) (5,122,527) (4,926,708) (5,122,527) Joint venture interest at the end of the financial year 27,394,488 23,217,313 15,687,547 14,127,904 GBC Fordigraph Pty Limited Capital introduced 826,402 826,402 826,402 826,402 Share of joint venture profits—prior years 22,344,499 22,478,691 13,301,502 15,472,763 Share of joint venture profits—current year 9,090,583 4,988,335 6,486,351 2,951,266 Share of transfers to reserves—prior year 46,412 46,393 — — Share of transfers to reserves—current year 13,301 20 — — Distribution of profit (4,926,708) (5,122,527) (4,926,708) (5,122,527) Joint venture interest at the end of the financial year 27,394,488 23,217,313 15,687,547 14,127,904 Total joint venture interests Capital introduced 1,652,804 1,652,804 1,652,804 1,652,804 Share of joint venture profits—prior years 44,688,998 44,957,382 26,603,004 30,945,526 Share of joint venture profits—current year 18,181,165 9,976,670 12,972,701 5,902,532 Share of transfers to reserves—prior year 92,824 92,785 — — Share of transfers to reserves—current year 26,601 39 — — Distribution of profit (9,853,416) (10,245,054) (9,853,416) (10,245,054) Joint venture interest at the end of the financial year 54,788,976 46,434,626 31,375,093 28,255,808 Outside equity interests in controlled entities (note 24) 8,633,936 7,602,532 — — Total equity as per the statement of financial position 63,422,912 54,037,158 31,375,093 28,255,808 Note 22 Reserves Available for sale financial assets revaluation reserve Opening balance 92,824 92,785 — — Movement during the year 26,601 39 — — Closing balance 119,425 92,824 — — The available for sale financial assets revaluation reserve records revaluations of available for sale financial assets.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 26 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 23 Retained Earnings Movements in retained earnings were as follows: Balance at the beginning of the year 44,688,998 44,957,383 26,603,004 30,945,527 Profit attributable to owners of the parent for the year 18,181,165 9,976,669 12,972,701 5,902,531 Distribution of profit during the year (9,853,416) (10,245,054) (9,853,416) (10,245,054) Dividends paid or provided (1,007,624) (921,522) — — Dividends attributable to outside equity interest 1,007,624 921,522 — — Balance at the end of the year 53,016,747 44,688,998 29,722,289 26,603,004 Distribution to joint venture partners Columbia Pelikan Pty Limited 26,508,374 22,344,499 14,861,145 13,301,502 GBC Fordigraph Pty Limited 26,508,374 22,344,499 14,861,145 13,301,502 53,016,747 44,688,998 29,722,289 26,603,004 Note 24 Outside Equity Interests in Controlled Entities Outside equity interest comprises: Share capital 141,562 141,562 — — Reserves 642,055 635,477 — — Retained earnings 7,850,319 6,825,493 — — 8,633,936 7,602,532 — — Note 25 Commitments (a) Operating lease commitments Aggregate amount contracted for but not capitalised in the financial statementsand payable: Not later than 1 year 2,843,651 2,419,333 1,225,858 902,141 Later than 1 year but not later than 5 years 3,332,209 1,975,051 2,226,954 1,346,153 Greater than 5 years 377,382 — 377,382 — 6,553,242 4,394,384 3,830,194 2,248,294 Operating lease commitments relate to: (i) Controlled entities lease property, equipment and motor vehicles underoperating leases expiring from one to ten years. Leases generally providecontrolled entities with a right of renewal at which all terms are negotiated.Lease payments comprise a base amount plus an incremental contingent rental.Contingent rentals are based on either movements in the Consumer Price Indexor operating criteria. PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 27 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 26 Assets Pledged as Security The parent entity has a bank overdraft, letter of credit, bill facilities and bankloan which are secured by a registered mortgage by Pelikan Artline PtyLimited over all its assets and uncalled capital and over all the assets of thejoint venture and the consolidated entity. The overdraft was unused at30 September 2010 but an interest rate of 10.41% was chargeable onoverdrawn balances. The carrying amounts of assets pledged as security for the registered mortgagedebenture are: Cash and cash equivalents assets 27,205,691 18,562,716 2,527,774 12,158,955 Trade and other receivables 36,205,486 35,252,523 35,807,318 34,932,632 Inventories 22,503,626 20,850,503 22,503,626 20,850,503 Prepayments 727,708 772,097 671,674 714,660 Receivables — — 9,926,160 8,745,050 Financial assets 409,245 361,846 40,853,792 40,853,792 Property, Plant & Equipment 2,297,720 2,624,797 1,388,650 1,330,346 Deferred tax assets 897,520 1,446,465 n/a n/a Intangible assets 30,467,403 30,471,275 48,243 52,115 Total assets 120,714,399 110,342,222 113,727,237 119,638,053 Note 27 Economic DependenceA significant portion of the consolidated entity’s trading products are supplied by Shachihata, Inc., Japan.Note 28 Events after Balance DateSince the end of the year cash distributions of $520,200 in total have been made to the joint venture parties.Apart from the matter referred to above, no matters or circumstances have arisen since the end of the year which significantly affected or maysignificantly affect the operations of the joint venture, the results of those operations or the state of affairs of the joint venture in future financial years.PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 28 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 29 Cash Flow Information Reconciliation of profit after income tax to net cash inflow from operatingactivities: Profit after income tax 20,213,615 11,399,524 12,972,701 5,902,531 Adjustments for: Depreciation 671,172 729,565 350,860 329,151 Net loss on disposal of plant and equipment 63,090 82,995 6,862 11,848 Impairment provision—receivables — (253,212) — (253,212) Employee benefits—provision (71,145) 355,114 46,854 105,114 Changes in assets and liabilities Decrease (increase) in trade and other receivables (952,963) (161,116) (874,686) (8,584,824) Decrease (increase) in inventories (1,653,123) 4,036,879 (1,653,123) (415,121) Decrease (increase) in prepayments 44,389 456,498 42,986 372,980 Decrease (increase) in deferred tax assets 548,945 (1,112,359) — — Increase (decrease) in trade and other payables 3,807,102 (6,923,516) (409,903) 1,039,935 Increase (decrease) in current tax liabilities 1,149,286 (1,417,390) — — Increase (decrease) in deferred tax liabilities 90,832 10,548 — — Net cash inflow (outflow) from operating activities 23,911,200 7,203,530 10,482,551 (1,491,598) PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 29 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 30 Related Party Transactions Parent and controlled entities The consolidated entity consists of the parent entity, Pelikan Artline Joint Venture andits controlled entities Spirax Holdings Pty Limited, Spirax Industries Pty Limited,Spirax Office Products Pty Limited, Spirax Holdings NZ Limited, Spirax New ZealandLimited, Geoff Penney (Australia) Pty Limited, Custom Xstamper Australia PtyLimited, Stampmakers Australia Pty Limited, Colop Products Pty Limited, PelikanQuartet Pty Limited, Pelikan Artline Limited, S. Smith & Son (Australia) Pty Limitedand Estamp Australia Pty Limited. Loans from related parties Aggregate amounts payable to related parties at reporting date:- Loans unsecured (current)—controlled entities 5,741,344 7,473,271 Loans unsecured (non-current)—controlled entities 23,935,548 31,628,488 Other receivables unsecured (current)—controlled entities 454,507 957,393 30,131,399 40,059,152 Loans to related parties Aggregate amounts receivable from related parties at reporting date:- Loans unsecured (non-current)—controlled entities 9,926,160 8,745,050 9,926,160 8,745,050 Transactions with related parties Transactions between related parties are on normal commercial terms and conditionsno more favourable than those available to other parties unless otherwise stated. Transactions between the parent entity and its controlled entities during the yearconsisted of:- Payment of interest on the above loans (1,445,435) (2,029,882) Receipt of interest on the above loans 719,370 461,740 Purchase of inventory — (2,161,766) Receipt of dividends 4,074,561 3,726,387 Recovery of overheads (10,081,537) (9,782,860) Distribution fee (15,070,348) (9,622,281) Key management personnel compensation 2,869,670 2,260,846 2,869,670 2,260,846 Purchase of inventory from joint venture partner related parties (2,051,014) (1,987,015) Recovery of administration and accounting services provided to a joint venturepartner 60,000 60,000 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 30 Consolidated Parent 2010$ 2009$ 2010$ 2009$ (unaudited) (unaudited) Note 30 Related Party Transactions (continued) Guarantees provided to related parties Refer to note 26 for assets pledged as security by related parties Note 31 Financial Risk Management The consolidated entity’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, loansto and from subsidiaries and leases. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financialstatements, are as follows: Financial assets Cash and cash equivalents (refer note 6) 27,205,691 18,562,716 2,527,774 12,158,955 Trade and other receivables (refer note 7) 36,205,486 35,252,523 45,733,478 43,677,682 Other financial assets (refer note 10) 409,245 361,846 40,853,792 40,853,792 63,820,422 54,177,085 89,115,044 96,690,429 Financial Liabilities Trade and other payables (refer note 14 & 17) 30,371,498 26,568,268 58,618,379 63,695,334 Other loans and borrowings (refer note 16 & 18) 23,000,000 27,000,000 23,000,000 27,000,000 53,371,498 53,568,268 81,618,379 90,695,334 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 31Note 32 Additional Information—UnauditedThe following additional financial data is in accordance with the books and records of the consolidated entity which have been subjected to theauditing procedures applied by the auditors of the consolidated entity’s financial report for the year ended 30 September 2008.The audit of the financial report for the year ended 30 September 2008 did not cover all details of this additional financial data, which does not formpart of the financial report. Accordingly, the auditor of the company’s financial report does not express an audit opinion on such financial data and nowarranty of accuracy or reliability is given. (a) Statement of Comprehensive Income for the year ended 30 September 2008 Consolidated Parent 2008$ 2008$ Revenue Revenue Sales net of discounts and rebates allowed 111,469,069 111,469,069 Other revenue Dividend received 5,097 1,906,809 Interest received 1,116,481 525,248 Other operating revenue 473,945 472,113 1,595,523 2,904,170 Total revenue 113,064,592 114,373,239 Expenses Purchases, distribution & selling (73,168,682) (68,439,547) Marketing (12,804,657) (12,794,004) Administration, IT & other expenses (4,021,304) (19,642,791) Finance costs (911,623) (1,873,787) (90,906,266) (102,750,129) Profit before income tax 22,158,326 11,623,110 Income tax expense (3,728,946) — Profit for the year 18,429,380 11,623,110 Other Comprehensive Income Available for sale financial assets 32,302 — Other comprehensive income for the year, net of tax 32,302 — Total comprehensive income for the year 18,461,682 11,623,110 Profit attributable to: Owners of the parent entity 16,701,873 11,623,110 Minority interest 1,727,507 — 18,429,380 11,623,110 Total comprehensive income attributable to: Owners of the parent entity 16,727,771 11,623,110 Minority interest 1,733,911 — 18,461,682 11,623,110 PELIKAN ARTLINE JOINT VENTUREand Controlled EntitiesNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 SEPTEMBER 2010 Note 32 Additional Information—Unaudited (continued) (b) Statement of Cash Flows Consolidated Parent for the year ended 30 September 2008 2008$ 2008$ Cash Flows From Operating Activities Receipts from customers (inclusive of GST) 131,826,601 126,741,029 Payments to suppliers and employees (inclusive of GST) (104,545,165) (110,665,272) Dividend received 5,097 1,906,809 Interest received 1,116,481 525,248 Finance costs (911,623) (911,623) Income tax paid (1,644,197) — Net cash inflow from operating activities (note 32(c)) 25,847,194 17,596,191 Cash Flows From Investing Activities Purchase of property, plant and equipment (458,725) (458,725) Proceeds from sale of property, plant and equipment 23,202 11,930 Net cash outflow from investing activities (435,523) (446,795) Cash Flows From Financing Activities Repayment of borrowings (4,000,000) (4,000,000) Loans from related parties (net) — 12,919,688 Profit distributions paid (13,281,068) (13,281,068) Dividends paid (471,547) — Net cash outflow from financing activities (17,752,615) (4,361,380) Net increase in cash and cash and cash equivalents 7,659,056 12,788,016 Cash and cash equivalents at the beginning of the year 17,324,362 4,085,259 Cash and cash equivalents at the end of the year 24,983,418 16,873,275 (c) Reconciliation of profit after income tax to net cash inflow from operating activities: Profit after income tax 18,429,380 11,623,110 Adjustments for: Depreciation 560,657 273,234 Net gain on disposal of plant and equipment (3,329) (3,329) Impairment provision—receivables (110,989) (84,351) Employee benefits—provision 61,184 2,184 Changes in assets and liabilities Decrease in trade and other receivables 3,648,806 3,685,422 Increase in inventories (1,101,289) (1,101,289) Increase in prepayments (521,615) (478,660) Increase in deferred tax assets (25,314) — Increase in trade and other payables 2,799,640 3,679,870 Increase in current tax liabilities 2,103,771 — Decrease in deferred tax liabilities 6,292 — Net cash inflow from operating activities 25,847,194 17,596,191 32

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