Océ Annual Report 2004 - KU Leuven · 2012-10-31 · Océ n.v. Report for the ﬁnancial year December 1, 2003 to November 30, 2004 Océ enables its customers to manage their documents

2004Océ Annual Report

Océ n.v.

Report for the financial year December 1, 2003

to November 30, 2004

Océ enables its customers to manage their documents efficiently

and effectively by offering innovative print and document management

products and services for professional environments

More copies of the English translation of this Annual Report or of the Dutch-language originalversion are available on request from Océ n.v.

Corporate Communications Departmenttelephone [+31] 77 359 4000

The Annual Report as well as other publications suchas press releases, presentations, speeches and otheritems related to the annual report can also be accessedvia the corporate website [http://www.oce.com].

e-mail [email protected]

mailto:[email protected]

http://www.oce.com

Contents

Report of the Board ofExecutive Directors

Annual Financial Statements

Other information

Miscellaneous

4 Océ: innovative by nature6 Océ’s ambitions and strategy

10 Key figures11 Report of the Board of Supervisory Directors14 Report of the chairman of the Board of

Executive Directors

Financial review19 Results20 Dividend20 Prospects22 Finance

Developments in the markets | Digital Document Systems

34 Corporate Printing37 Commercial Printing39 Software & Professional Services40 Océ Business Services

Developments in the markets | Wide Format Printing Systems

42 Technical Document Systems45 Display Graphics Systems46 Imaging Supplies

Critical success factors50 Océ’s core values50 Océ’s employees53 Sustainable development55 Research & Development57 Manufacturing and logistics59 Océ’s partners

Management aspects62 Corporate governance69 Risks and risk management

79 Consolidated Statement of Operations80 Consolidated Balance Sheet82 Consolidated Statement of Cash Flow84 Summary of Significant Accounting

Principles89 Notes to the Consolidated Statement

of Operations 94 Notes to the Consolidated Balance Sheet

112 Company Balance Sheet

112 Company Statement of Operations 114 Notes to the Company Balance Sheet and the

Statement of Operations

117 Proposed net income appropriation118 Authorised capital119 Auditors’ report

120 Board of Supervisory Directors121 Board of Executive Directors122 Senior Executives Central Services123 Principal group companies and their

chief executives125 Supplementary information for

shareholders

128 Océ 2000-2004130 List of terms and abbreviations132 Forward-looking statements

Océ: innovative by nature

Océ is one of the world’s leading suppliers ofhigh-quality and innovative products andservices for use by professionals in print anddocument management processes. The com-pany focuses primarily on professionalenvironments in which large volumes ofdocuments are processed. Océ’s customers aretherefore mainly active in the industrial andprinting sectors as well as in office environ-ments.For this purpose Océ develops and manufac-tures its own advanced machines and systemsfor use in the production, distribution andmanagement of documents. Océ also offers itscustomers innovative services in the areas ofconsultancy, outsourcing and – in cooperationwith partners – financing.Océ has built up a solid reputation as aninnovator, both technologically and commer-cially. Océ’s products and services are renownedfor their high quality, reliability, productivity,durability, ease of use, environmental friend-liness and low total cost of ownership.Most of Océ's products and services are offeredvia the company's own direct sales and serviceorganisations. The Océ organisation is specific-ally tailored to serve the market segments thatare of strategic relevance to the business. Thisgives customers direct access to their supplier; atthe same time it provides Océ with a constantflow of market and customer information,which allows Océ to anticipate and respondquickly and effectively to changing marketneeds. In a number of countries part of theproduct range is made available via specialiseddistributors.

In-house product development and consistentinvestment in Research & Development arecharacteristic features of Océ. They provide Océwith its own unique technology base, whichlargely forms the cornerstone for the success ofthe product range. Océ’s innovative capacity isalso broadened and reinforced via alliances withstrategic partners and via cooperation with co-developers.

Océ operates in eighty countries and has its ownsales companies in some thirty countries. The company has over 21,000 employees, 40 per cent of whom work in sales and service.Océ’s research and manufacturing facilities arelocated in the Netherlands, Germany, Belgium,France, the Czech Republic, the United Statesand Canada. In 2004 Océ achieved revenues of € 2.7 billionand net income of € 78 million.

The table on page 6 briefly outlines the keyelements of Océ’s ambitions and strategicobjectives and also shows the actions taken toachieve these in 2004.

4

Profile

5Board of Supervisory DirectorsJ.L. Brentjens, chairmanF.J. de Wit, vice-chairmanM. ArentsenA. BaanP. BouwJ.V.H. Pennings

Mr. L.J.M. Berndsen was a member of theBoard of Supervisory Directors until the close of the general meeting of shareholders on March 2, 2004.

Board of Executive DirectorsR.L. van Iperen, chairmanJ. van den BeltJ.F. Dix

Mr. R.E. Daly was a member of the Board ofExecutive Directors until September 1, 2004.

Staff Director | Company SecretaryH.J. Huiberts [until January 1, 2005]

Financial year The company’s financial yearruns from December 1 to November 30.

Articles of Association The present Articles ofAssociation were confirmed by a notarial deeddated December 23, 2004. Océ n.v. is aninternational holding company within themeaning of Article 153, para. 3b, Book 2 of theDutch Civil Code.

Registered office and commercial registryThe company has its registered office in Venlo,the Netherlands, and is registered in theCommercial Registry in Venlo under No. 12002283.

Head office The head office is at St. Urbanusweg 43, Venlo, the Netherlands p.o. Box 101, 5900 ma Venlo, the Netherlandstelephone [+31] 77 359 2222fax [+31] 77 354 4700Océ on Internet: http://www.oce.come-mail [email protected]

For general information about Océ: telephone [+31] 77 359 2000

Profile

http://www.oce.com


6 Strategic objectives

To strengthen its leading position in black-and-white wide format printing. | To achieve aleading position in display graphics. | To rise toa top-three position in production printing incorporate and commercial environments. | Tobuild up a substantial position in colour in allrelevant market segments. | To be a strongsupplier of services in the area of documentmanagement and business services. | To play aprominent role in Software & ProfessionalServices for the management of documents inselected market segments.

To be an attractive employer world-wide. | Inthe Netherlands, to be one of the ten most at-tractive companies for graduates and one of thetop-five for technical specialists.

To achieve a long-term return on total assets[roa] of 12% and a return on equity [roe] of18%. | To achieve an average annual growth of10% in revenues, of which at least half isorganic.

To co-operate in the area of technology with thebest specialists in the industry. | To worktogether with high-quality suppliers and tocontract out work to strong partners. | To co-operate with partners in the market who help toensure a wider spread of Océ products andstandards.

To implement the basic principles of the un

Global Compact. | To minimise any unwantedenvironmental effects from Océ products.

Actions taken in 2004

Product portfolio strengthened in all environ-ments through introduction of new products[hardware, software and services]. | Product road-map for next five years updated. | TechnicalDocument Systems expanded in Japan, Chinaand emerging markets. | Stronger market positionof Technical Document Systems in coloursegment in Europe. | Intensified investments inmarketing programmes and in building brandname awareness. | Greater focus on quality of theOcé Business Services portfolio. | Distributivestrength enhanced via expansion of and increasedefficiency in the sales organisations. | Expansionof Imaging Supplies range within the DisplayGraphics segment.

Roll-out of LearnLink as part of the competencemanagement process. | Corporate leadership labslaunched. | Start of Young Océ Professionalsprogramme. | Sales product training coursesintensified. | Core Values programme Focus-on-Professionals implemented.

Savings programme has reduced costs by € 95million. | Various new cost-reduction exercisesinitiated as part of focus on operational excellence[it , purchasing and logistics]. | Outsourcing oflease activities [approx. € 398 million in 2004].| Océ share now included in various sustainabilityindexes.

Co-operation with universities and top-classtechnological institutes. | Further outsourcing ofr&d activities to public and private institutions.| Start made on relocating part of the assemblyactivities to Central Europe and –via outsourcing– to the Far East. | Océ prisma products furtherexpanded and brought into line with partnerproducts [prisma-web]. | Outsourcing of leaseactivities to leading vendor lease partners.

Corporate sustainability report drawn up in ac-cordance with gri recommendations. | Supplierattention for sustainability aspects promoted.

Océ’s ambitions and strategy

Ambitions

Customers Océ aims to be oneof the top-three suppliers in thestrategically relevant marketsegments.

Employees Océ aims to offeran inspiring working environ-ment.

Shareholders Océ aims toachieve returns that give thecompany a top position in itssector of industry.

Partners Océ aims to build upa network of partnerships thatis one of the strongest in itsindustry.

Society Océ aims to do busi-ness in a way that contributesto the sustainable developmentof society.

Short term [1-3 years]

Strengthening of leading positions and im-proving growth and profitability Over thepast year Océ has seen a clear improvement insales of machines. Thanks to its market-focusedorganisation and its new products and services,Océ is in a good position to raise the level of itsprofitability and revenues. Besides this, thegrowth in machine sales will in due course leadto a recovery in revenues from service. To support this development over the shortterm, Océ will continue its efforts to improveoperational efficiency.In the year ahead the emphasis will be onfurther strengthening the efficiency and also thesize of the marketing and sales organisation andprocesses, on improving the purchasing proces-ses and on optimising the it infrastructure andlogistics processes. The outsourcing of leaseactivities will also be completed. The ultimate aim of all these activities is toenable increasingly better products and servicesto be supplied to an ever wider circle ofcustomers.

Medium term [3-5 years]

Safeguarding strong positions in growthmarkets Océ has already initiated a great manyactivities that are focused on safeguardingleading positions in growth markets over themedium term. This involves, for example, thestrengthening of the positions that are currentlyheld in printing-on-demand, business servicesand display graphics as well as the positions thatthe company holds in colour and software. In these activities a key role will be played byvarious forms of cooperation with strong part-ners and also by acquisitions.

Long term [> 5 years]

Expanding the position in document man-agement An increasing demand exists amongstcustomers for integrated document manage-ment solutions. Océ is already providingsupport to its customers by offering a growingnumber of services and solutions for theeffective and efficient handling of paper andelectronic document flows. Responding to thisdemand is one of the key thrusts of the BusinessServices and Software & Professional Servicesbusiness groups. Building a top-three position within selectedsegments of the market for documentmanagement is also one of Océ’s ambitions forthe long term.

7

Strategic perspective

Safeguarding strong positions in growth markets

Strengthening of leading positionsand improving growth and profitability

Expanding the position in document management > 5 years

3-5 years

1-3 years

10 2004 2003 › € million

Total revenues 2,652.5 2,769.3Change on previous year [%] –4.2 –12.8

Change [organically] –0.1 –5.1Non-recurring* 10.6 –9.9Recurring* –3.6 –3.4

Gross margin 1,103.4 1,165.2As % of total revenues 41.6 42.1

Operating income before impairment 118.3 150.0

Operating income [ebit] ** 110.4 124.8Change on previous year [%] –11.6 –44.8As % of total revenues 4.2 4.5As % of average balance sheet total [roa] 4.8 4.7

Net income 78.1 61.5Change on previous year [%] 27.0 –45.4As % of total revenues 2.9 2.2

Balance sheet total 2,233.1 2,421.3Shareholders’ equity 714.1 712.8Net capital expenditure on intangible and tangible fixed assets 122.7 106.4

Cash flow before financing activities 370.5 327.8

Number of employees at November 30 21,315 22,204 employees

Ordinary net income As % of average ordinary shareholders’ equity [roe]*** 11.3 8.5

Per € 0.50 ordinary share Net income 0.89 0.69 euro

Shareholders’ equity 7.87 7.87Dividend 0.58 0.58

Number of € 0.50 ordinary shares Average number outstanding 83,487,576 83,408,783 shares

Potential increase from conversion/options 1,271,054 759,019

Diluted earnings per € 0.50 ordinary share 0.88 0.69 euro

Year’s highest/lowest 16.10/10.60 13.70/6.50Year end 11.25 11.92

Key figures

* Non-recurring revenues: sales from machines, software and professional services.

Recurring revenues: revenues from services, materials, rentals, interest and

business services.

** ebitda 2004 amounted to € 266 million.

*** The definition of roe has changed compared to 2003.

11To the Annual General Meeting of Shareholders ofOcé N.V., Venlo

Annual Report We herewith present to you the Annual Report for 2004 which comprisesthe Annual Financial Statements for 2004 andwas drawn up by the Board of ExecutiveDirectors. The Annual Financial Statementshave been examined by the external auditorsPricewaterhouseCoopers Accountants n.v.

They have issued an unqualified audit opinionthat is set out on page 119 of this AnnualReport.The Annual Report was discussed with theBoard of Executive Directors in the presence ofthe auditors. The discussions and the input ofthose who took part in them have convinced usthat the Annual Report forms a solid basis forthe Supervisory Board’s discharge in respect ofits accountability and its supervisory function.We recommend that you adopt the AnnualFinancial Statements, including the dividendproposal, and that you grant a release anddischarge to the Board of Executive Directorsfor their management and to the Board ofSupervisory Directors for their supervision overthe past financial year.

Results and strategic position Océ closed theyear under review with a net income of € 78.1million which is equivalent to € 0.89 perordinary share. Total revenues were lower thanin 2003, but on an organic basis, i.e. after ad-justment for exchange rate effects, theyremained unchanged.In 2004 much attention was devoted to thestrategic positioning of Océ products in the twocore areas of Digital Document Systems andWide Format Printing Systems. Discussionsfocused on the question of how a leadingposition can be permanently maintained inboth these market segments. To ensure growthand the ongoing healthy development of thecompany over the longer term the achievementof this objective is of essential importance. TheBoard of Supervisory Directors has noted thatthis is being given the highest priority by theBoard of Executive Directors and that, across abroad front, the management in the variouscountries is strongly committed to an alert andeffective implementation of this policy.On the other hand, it has to be acknowledgedthat the economic climate is still disappointing.The provisional absence of a vigorous economicrevival obviously has consequences for a morefar-reaching improvement in results, marginsand shareholder value. However, faced by thesecircumstances, the company has definitely notbeen sitting still. Cost structures have beensubstantially improved and the restructuringplan that was set in motion several years agomade a major contribution in this respect. Onthe other hand there was no lack of investmentin new product developments. In fact, dedicatedwork was done to improve the quality of Océ’shardware and software products. It is veryimportant to note that the recently launchedproducts seem to be meeting market demandand are being well received. These two factors,namely a cost-conscious and efficientorganisation and attractive offerings of newproducts, will have a favourable influence on theresults as soon as the economy starts to pick up.The Board of Supervisory Directors thereforeviews the years ahead with confidence.

Report of the Board of Supervisory Directors

12 Supervision During the year under review theBoard of Supervisory Directors held eightmeetings with the Board of Executive Directors.As mentioned above, the strategy of the com-pany and that of the Strategic Business Units,focused on improving Océ’s position in itsselected countries and market segments, wereextensively discussed. The Supervisory Boardalso held discussions with the Board of Execu-tive Directors about risks and the systemsapplied to control them. These systems werealso the subject of much attention in relation tothe specific requirements of the Sarbanes-OxleyAct in the United States and in relation to thenew Dutch corporate governance code.At regular intervals the Supervisory Boarddiscussed the commercial and technologicaldevelopments as well as the financial position ofOcé. The plans for relocating certain assemblyactivities to Central Europe and the Far Eastwere closely monitored. Just as in other years,consultation took place with the internal andexternal auditors. Other subjects discussed werethe composition and functioning of the Boardof Executive Directors and the managementdevelopment programme for key executiveswithin Océ. The functioning of the Board ofSupervisory Directors and of the individualsupervisory directors was also discussed. Thedevelopments in the area of corporate gover-nance resulted in an alteration of the Articles ofAssociation and in the drawing up or revision ofregulations governing the work of the Board ofSupervisory Directors and of its threecommittees. These regulations are available on the Océcorporate website: http://www.oce.com.

The Audit Committee met six times. Allmeetings were also attended by the internal andexternal auditor. Members of the managementtook part in the meetings when invited to do so.The main tasks of the Audit Committeecomprise an extensive assessment of the finan-cial reporting before this is dealt with at theplenary meeting of the Supervisory Board, thesupervision of the internal control system andan evaluation of the company’s risk profile. Tofulfil these tasks the committee discussed theannual results, the results for the first six monthsand those for the first and third quarters. Thecommittee also discussed the internal manage-ment and control systems, the financial repor-ting, compliance with the recommendationsmade by the auditors, the activities of the inter-nal audit department, the activities, remuner-ation and independence of the external auditor,proposals in the area of tax planning and thecompany’s financing plan.

The Remuneration Committee met five timesduring the year under review. The committeediscussed the remuneration and bonuses of theBoard of Executive Directors and preparedchanges relating to the remuneration policy ofthe Board of Executive Directors in general andthe introduction of the share plan in particular.The remuneration policy was placed on theagenda for the Annual General Meeting ofShareholders on March 2, 2004 and triggeredan extensive discussion with shareholders. It wasdecided at that time to postpone this agendaitem and return to it later in the year. At anExtraordinary Meeting of Shareholders onSeptember 8, 2004 the remuneration policy anda modified management share plan were againdiscussed, this time also taking into accountprevious comments and questions from share-holders. The proposals were adopted by a largemajority of votes and the approvedremuneration policy will therefore be applicablefor the coming years.If major changes are proposed in that remuner-ation policy in the future, these will be submit-ted to the Annual Meeting of Shareholders forits approval. Extensive details about the remunerationpackage can be found in the section oncorporate governance on page 63 and further.


http://www.oce.com

The Selection and Nomination Committee meton four occasions. The main topics dealt withwere the required quality and staffing of topexecutive posts which were discussed within theframework of management development.

Board of Executive Directors During the yearunder review there was a change in the compo-sition of the Board of Executive Directors. With effect from September 1, Mr. R.E. Dalyresigned as a member of the Board of ExecutiveDirectors of Océ n.v. as a result of differences inopinion about strategic policy. The SupervisoryBoard respected this decision and is grateful toMr. Daly for the contribution he made to thebusiness. Mr. J.F. Dix, who has successfullydeveloped the American activities over a periodof eight years, is provisionally fulfilling the roleof ceo in the United States. In the meantimethe desired top management structure for thenext few years is being prepared and moredetailed information on this will follow in thecourse of 2005.

Members of the Board of Supervisory Direc-tors Mr. L. Berndsen made it known during theyear under review that, upon expiry of hisperiod of office, he would no longer be availablefor reappointment. He resigned as a member of the Board of Supervisory Directors at theAnnual General Meeting of Shareholders onMarch 2, 2004. The Supervisory Board is grate-ful to Mr. Berndsen for the major contributionhe made since 1996, most recently as the AuditCommittee’s chairman and financial expert.With effect from March 2, 2004 Mr. M. Arent-sen was appointed by shareholders as thesuccessor to Mr. Berndsen.An extensive overview of the personal details ofthe members of the Board of SupervisoryDirectors, including the year in which they werefirst appointed, their current term of office andmaximum period of office, can be found onpage 120 of the Annual Report.

Océ again performed relatively well in 2004despite an adverse economy. With a view tosafeguarding a permanently healthy positioncutbacks in employee numbers or the transfer ofmanufacturing activities were unavoidable.The Supervisory Board would like to express itsparticular appreciation for the efforts that weremade by all employees towards achieving theresults booked in 2004 and also for the contri-bution they made to the company’s prospectsfor the years ahead.

January 28, 2005

J.L. Brentjens, chairmanF.J. de Wit, vice-chairmanM. ArentsenA. BaanP. BouwJ.V.H. Pennings

13


The year 2004 was a dynamic year for Océ. It was also a successful one in a number of res-pects. This has, however, still not been reflectedin our results.The strong growth in revenues from machinesand systems was a positive signal following aperiod of decline. It underlined the success ofthe radical renewal of our product range. Butour expectation that the growing sales of sys-tems would be followed in 2004 by a recoveryin revenues from service, rental and materialsdid not materialise. These recurring revenues,which represent 72% of total revenues, contin-ued to decline throughout 2004 and thereforehad a negative impact on the results. However,we are convinced that this is merely a temporarypostponement.In the underlying factors we unmistakably sawchanges for the good during the year under re-view; in many cases these were the direct resultof the improvements that we implemented inour company in recent years, which have startedto pay off now and will continue in the nearfuture.

A stronger Océ

In 2004 we again augmented our portfolio byadding many new machines and systems, plushardware and software. They include furtherdevelopments of proven systems, but also com-pletely new and highly promising products. Inits traditional markets Océ has clearly reinfor-ced its leading position in print and outputmanagement systems and has therefore alsoemphasised its candidacy to take up a leadershipposition in a number of major growth markets.To ensure that the success of the renewed rangecan be translated into profitable revenues wehave – in line with our strategy – strengthenedour distribution efforts in terms of both qualityand quantity. Thanks to an expansion of oursales organisations, both centrally and acrossour group companies, backed by intensivetraining and hefty investments in marketing,our commercial strength has been substantiallyboosted. We are seeing the results of this in thesales figures for printing systems.2004 was also the year in which we took the firststeps towards the wider-scale outsourcing of themanufacture of modules and completemachines to the Czech Republic and the FarEast. Lower wage costs and the benefits of localsourcing mean that the cost-price of the ma-chines can be reduced enough to maintain ourcompetitive edge. Initial results are very pro-mising and, although we are handling thisprocess very carefully, we are seeking toaccelerate it.

The lease programmes that Océ agreed on withits lease partners were implemented in ourprincipal operating companies during the pastyear and the partnerships in those countries arenow fully operational. In addition, Océ has solda considerable part of its existing lease portfolioto those same lease partners. More than half ofthe total lease portfolio has now been out-sourced and the result has been an increase inOcé’s financial strength and a further profes-sionalisation of the financial services that we canoffer to our customers.In all our efforts to gear up the company torespond to the latest developments in ourmarkets we are able to build on pillars ofstrength: our employees, our products, ourpartners, our customers and, last but not least,the communities that surround us – the outsideworld in which we aim to do business in asocially responsible way.

14

Report of the chairman of the Board of Executive Directors

Employees

Within the organisation we have completed therestructuring measures of recent years and weare now putting every effort into the furtherprofessionalisation of our employees. The out-sourcing of production and the related joblosses brought some difficult moments, but thisyear we again experienced that the will to makeOcé’s strategy a success can count on broadsupport within the business.The activities aimed at the further professio-nalisation of employees link up with this. Thisinvolves a qualitative strengthening of thepotential of human resources to support thefurther development of the company. Thisprocess cannot be achieved without securingactive commitment from our employees. Theyare therefore being encouraged to take part in asystematic process of ongoing self-developmentso that within the context of their work they canreach a position where they can realise theirpotential to the full. Within the organisationitself seven common core values were identifiedas reference points for this process in terms ofthe objectives, attitude and style we adopt inhow we approach our work. These are theaspects that Océ employees now judge them-selves and each other by and they are also thevalues that we want the outside world to judgeus by. Not one of them is new but in theirmutual relationship they form a clear guidelinefor the direction in which the company has todevelop. Numerous internal activities havemeanwhile been initiated to ensure that every-day work is permeated with the shared corevalues which we have identified and which areexplained in detail elsewhere in this annualreport.

Customers

Finding print solutions for its customers plays akey role in Océ’s business philosophy. Colour isadvancing rapidly within the world of our cus-tomers: an ever greater proportion of printingactivities involves colour and that volume isgrowing rapidly. Océ has a strong range to offer,including for the commercial markets,especially with our new colour machines thatwere developed in-house. Our customers havebeen particularly appreciative of the modularupscalable high speed printers and the machinesthat can print not only in full colour but also inblack-and-white at lower costs.Another important part of our activities is for-med by the provision of outsourcing services tocustomers that have transferred their completedocument and print management processes toOcé. Both quantitatively and qualitatively thisactivity is growing fast and we are able torespond well to the customer’s needs, and alsoby working in partnership with suppliers ofsimilar services within the it sector.Thousands of [potential] customers saw ourproducts in action during the Océ Open Housein Poing, as well as at the world’s biggestprinting industry exhibition, the Drupa inDüsseldorf. For all major market segments thegaps in the range were filled with document andprint management products, all of which metwith a warm welcome. The same also applies tothe software components, many of which wererated as best in their class. To an increasingextent – depending on customer demand –third-party equipment is also being used for thelower-end volume segments.

Partners

An important element of our strength lies in thefact that over the years we have taken as ourbasis our own technology and our own sales andservice channels and have harnessed the ability,which is specific to Océ, to develop exactly theright solutions for important niche markets. Aless obvious element is the fact that we are ableto operate at a high level world-wide. This isalso due to the way in which we incorporate theactivities of others within our businessprocesses. Cooperation at a high level is one ofthe key features of Océ. Though theoutsourcing of production attracted muchpublicity over the past year, some 95% of ourcomponents have already been manufactured

15


by partners for years. The financial lease activi-ties are meanwhile also being undertaken incooperation with financial partners. Both inresearch and in the development of softwareprograms and machine modules cooperation isstandard practice and in the area of sales well-known local distributors supply our equipmentin countless regions all over the world. Thanksto its lengthy experience Océ can work effective-ly with partners and is always receptive to newand challenging forms of cooperation. In thenear future this will prove to be of great impor-tance for the further strengthening of ourmarket position.

Society

In recent years sustainability has been placedever more firmly on the agenda of Dutchcompanies – and rightly so. We, however, takepride in the fact that throughout our company’shistory our care for people and the environmenthas always been a key concern. The themes ofsustainability and corporate social responsibilityhave meanwhile also been given a structuredform in our reporting. Our Corporate Sustaina-bility Report for 2003, which was published lastyear, will be followed in 2005 by a report thatwill also deal with the activities of our biggestEuropean subsidiaries and with the operationsof Océ North America, Inc. Everyone will thenbe able to see the important role that corporatesocial responsibility and specific sustainabilityplay in the conduct of our business.

The right course

As can be clearly seen from the above, we havecompleted numerous successful achievementsin 2004. Others are well on track and areheading for success but obviously developmentsare not moving ahead as fast as we would haveliked. We had much higher expectations aboutthe speed with which the various markets wouldpick up again. But we are confronted withgeographical timing differences in terms ofdistributive strength and the development ofmarkets. We also face lengthy decision-makingprocesses by customers and formidable com-petition when capturing and recapturing ourposition in our selected markets. But we arestrong enough. And we are also convinced ofthe correctness of our strategies, for both theshorter and the longer term. Where necessary,we are making adjustments and refinements, forexample by expanding our activities in the officesegment. Our strategic course, however,remains unchanged.We have the resources and are well placed toplay the prominent role that we aspire to in allour markets. Our range is better and morecomplete than ever before, our distribution hasbeen further strengthened and the skills of ourpeople are increasing by the day. And, mostimportantly, we have a broad and especiallyloyal customer base with which we maintainclose relations, founded on their confidence inand appreciation of our products and services.Even, or perhaps specifically, in economicallyadverse surroundings this means that we possessall the ingredients for success.

Prospects

The year 2004 was not easy and 2005 will notbe either. The absence of growth in recurringrevenues is still likely to have a negative impacton the results for a while yet. We are convinced,however, thatwe can maintain the rate of growthin machine sales. That means that in the forth-coming financial year we will be able to takemajor steps towards achieving our objectives.

In seeking to achieve that position we know thatwe have the support of all parties who worktogether with us: our customers, our employees,our shareholders and our partners. Our sincerethanks go to all of them for that support.

R.L. van Iperen, chairman

16


Report of the Board of Executive Directors

The Board of Executive Directors of Océ n.v.

From left to right: J.F. Dix, J. van den Belt and

R.L. van Iperen, chairman.

18

19Results

In 2004 the results were influenced by factorsthat need to be taken into account when makinga comparison with previous years, but also inthe evaluation of future results:| More than half of the existing lease portfolioat the end of 2003 was sold in 2004, whichresulted in considerably lower interest revenues[€ 29.4 million lower than in 2003]. In the year2004 this structural decrease in revenues, whichalso entailed a substantial reduction of almost € 400 million in lease receivables, was fully offsetby a once-off profit on the sale of the leaseportfolio [€ 30.9 million].| For the areas in which ifrs do not conflictwith Dutch gaap, ifrs have already been fullyimplemented in the annual financial statementsfor 2004. On aggregate the net effect of thesechanges on the statement of operations and thebalance sheet was more or less neutral.| The Euro gained significantly in strength in2004. This had a material impact on incomeand on the balance sheet. As compared to 2003,the negative influence of exchange rate changeson operating income was as follows:

Translation result –4.7 › € million

Transaction result –17.1Net influence of hedging [2003 versus 2004] –15.9

Total influence of exchange rateson operating income –37.7

On the balance sheet the translation result was:

Total assets –62.1 › € million

Total shareholders’equity –25.9

Revenues in 2004 amounted to € 2,652 million[2003: 2,769 million]. On an organic basisrevenues remained practically the same as in2003. The decrease over the past three years wastherefore brought to a halt. Revenues in 2004included the profit on the sale of the leaseportfolio [€ 30.9 million].Revenues from printing systems rose, mainly asa result of the introduction of new hardware andsoftware products. Recurring revenues [services,materials, rentals, interest and business services]decreased compared to 2003.Gross margin [41.6%] was lower than in theprevious year [42.1%]. Operating expenses[excluding impairment] were down by € 30.1million on their 2003 level.Operating income amounted to € 110.4 millionand was thus € 14.4 million lower than in 2003.As a consequence of significantly lower financialexpense [net] and income taxes, net income was€ 16.6 million higher than in 2003. Also afteradjustment for impairment costs, which werehigher in 2003 than in 2004, net income for2004 was higher than in the previous year.Total assets again decreased during the yearunder review and amounted to € 2,233 million[2003: € 2,421 million]. The decrease isprincipally the result of the sale of existing leasereceivables [€ 312 million]. Nevertheless, totalassets did not decrease further due to the factthat the balance of liquid funds increased by € 257 million.Trade accounts receivable decreased by € 51million. Lease receivables decreased by € 398million. Other assets increased by € 4 million.

Financial review

Total revenues

› € million

3500

3150

2800

2450

2100

1750

1400

1050

700

350

000 01 02 03 04

Gross margin

as % of total revenues

00 01 02 03 04

50

45

40

35

30

25

20

15

10

5

0

20 Free cash flow stood at € 370 million and was ata good level for the fourth year in succession[2003: € 328 million]. The sale of the lease port-folio contributed considerably to this result. Interest-bearing loans decreased by € 68 million;after adjustment for liquid funds the decrease innet debt amounted to € 326 million [down from€ 494 million at the end of 2003 to € 168million at the end of 2004].

Group equity amounted to € 752 million, whichwas the same as at the end of the 2003 financialyear.The solvency ratio was 33.7%, which is withinthe target range of 30 to 40%. The Return ontotal Assets [roa] amounted to 4.8% [2003:4.7%] and the Return on Equity [roe] was11.3% [2003: 8.5%]. This was far below thetargets of 12% and 18% respectively. In spite ofthe various positive developments that occurredin 2004, the returns that were achieved areunsatisfactory.In Digital Document Systems [dds] revenuesshowed a slight organic increase after three yearsof decline. The organic growth in non-recurringrevenues continued [+ 13.3%]. Recurringrevenues were organically 3.6% lower than in2003.In Wide Format Printing Systems [wfps]revenues decreased by 1.0% on an organic basis.This decrease is attributable in full to thedecrease in revenues from media [due to pricepressure] and the lower lease revenues. On anorganic basis all other components of wfps

revenues showed an increase.

Dividend

We propose, as in 2003, to distribute a dividendof € 0.58 per ordinary share of € 0.50 nominalfor the 2004 financial year. This dividend invol-ves an amount of € 48.4 million [2003: € 48.4million]. If the General Meeting of Shareholdersadopts this proposal the final dividend willamount to € 0.43; the interim dividend amoun-ted to € 0.15.It is proposed to distribute the final dividendfully in cash. The pay-out ratio, which amountsto 65.0% of net income [2003: 83.5%], ishigher than the standard set in the dividendpolicy [33%].

Prospects

Océ will invest further in raising its distributivestrength in 2005. Supported by the new range,sales of printing systems will show continuedgrowth. This will lead to a turn around in the recurringrevenues, which is expected to take place duringthe course of 2005.Operating income from commercial activities,excluding the book profit on the sale of the leaseportfolio, is expected to be higher than in 2004,provided however that the dollar does not fallfurther in value against the euro.As a result of the lower revenues from leases, netincome will be below that of 2004.

Financial review

1 2 3 4 1 2 3 42003 2004

Changes in quarterly

recurring revenues

compared to the same

quarter of the previous year

organically as %

quarter 1 2 3 4 1 2 3 42003 2004

Changes in quarterly non-

recurring revenues

compared to the same

quarter of the previous year

organically as %

quarter

0

–1

–2

–3

–4

–5

–6

–7

–8

–9

20

15

10

5

0

–5

–10

–15

–20

–25

Table 1 Information by Strategic Wide Format Printing Digital Document Systems total

Business Unit Systems

› € million 2004 2003 2004 2003 2004 2003

Total revenues 818 862 1,834 1,907 2,652 2,769Operating income [ ebit] 55 55 55 70 110 125Assets 617 674 1,616 1,747 2,233 2,421

Table 2 Quarterly revenues 2004 2003

› € million recurring non-recurring total recurring non-recurring total

First quarter 480 142 622 536 141 677Second quarter 496 186 682 525 167 692Third quarter 473 173 646 494 159 653Fourth quarter 468 234 702 525 222 747

Total 1,917 735 2,652 2,080 689 2,769

Table 3 Changes [organically] in 2004 2003quarterly revenues compared to the same quarter of the previous year

as % recurring non-recurring total recurring non-recurring total

First quarter –3.0 +7.9 –0.7 –1.6 –25.5 –7.6Second quarter –1.3 +16.0 +2.9 –5.3 –12.6 –7.1Third quarter –2.7 +10.0 +0.4 –4.5 –5.9 –4.9Fourth quarter –7.5 +8.8 –2.7 –2.2 +3.1 –0.7

Table 4 Total revenues by geographical 2004 2003area

› € million as % › € million as %

United States 925 35 1,046 38Germany 333 13 335 12The Netherlands 291 11 284 10France 191 7 199 7United Kingdom 180 7 183 7Rest of Europe 534 20 519 19Rest of the world 198 7 203 7

Total 2,652 100 2,769 100

21

Financial review

22 Finance

Revenues In 2004 total revenues amounted to € 2,652 million [2003: € 2,769 million]. On anorganic basis revenues including the profit onthe sale of the lease portfolio were the same as in2003.Non-recurring revenues amounted to € 735million, an organic increase of 10.6% on theprevious year [2003: € 689 million]. Recurringrevenues decreased by 3.6% [organically] to€ 1,917 million [2003: € 2,080 million].Interest revenues from financial leases decreasedby € 29.4 million [30%] to € 68.2 million,mainly due to the sale of the lease portfolio. In2004 the [once-off ] profit on this saleamounted to € 30.9 million.

Gross margin The decrease in the gross marginfrom 42.1% in 2003 to 41.6% in 2004 wascaused by the highly negative impact ofexchange rates on the results. However, afterbeing adjusted for this impact, i.e. on an organicbasis, the gross margin percentage is slightlyhigher as a result of volume-mix effects.

Operating expenses Operating expenses[excluding impairment] decreased by € 30.1million. In total, operating expenses on anorganic basis decreased. In view of the emphasisthat Océ is devoting to strengthening itsdistribution and r&d efforts, the developmentof operating expenses can be described assatisfactory. One of the factors that contributedto this was formed by the ultimate results of thecost savings that came through from therestructuring operation in 2001/2002.

Financial expense [net] Financial expense[net] went down by more than 40% from € 30.6million in 2003 to € 18.1 million in 2004. This was the consequence of a further decreasein net debt. Interest-bearing capital [net debt]decreased by € 326 million.The average interest rate on loans amounted to4.7% [2003: 4.4%].

Income taxes In 2004 the effective tax rate waslow, at 13.2%. In 2003 this had still been32.4%. The principal reasons for this low taxcharge are an exceptional release of provisions asa result of the settlement of the tax risks towhich these provisions related and the fact thathigher income was achieved in countries with arelatively low level of taxation.

Financial review

00 01 02 03 04 00 01 02 03 04

Financial lease receivables

[including short term

receivables]

› € million

Total assets

[balance sheet total]

› € million

3500

3150

2800

2450

2100

1750

1400

1050

700

350

0

1250

1125

1000

875

750

625

500

375

250

125

0

23

Financial review

Table 5 Commercial and financial activities 2004 2003 › € million

CommercialRevenues 2,584 2,672Gross margin 1,035 1,068Operating income [ebit] 62 56Financial expense [net] –1 –Result before taxation 63 56Income taxes 8 18Result after taxation 55 38Net income 53 36

Shareholders’ equity 652 590Minority interest 38 39

Group equity 690 629Interest-bearing liabilities 169 –76Provisions and other liabilities 962 1,051

Balance sheet total 1,821 1,604

RatiosOperating income as % of average balance sheet total 3.7 3.2Net income as % of average shareholders’ equity 8.5 5.9Shareholders’ equity as % ofbalance sheet total 35.8 36.8

FinancialInterest from financial leases 68 97General administrative and selling expenses 20 28Operating income [ebit] 48 69Financial expense [net] 19 31Result before taxation 29 38Income taxes 4 13Result after taxation 25 25Net income 25 25

Shareholders’ equity 62 123Interest-bearing liabilities 312 625Provisions and other liabilities 38 69

Balance sheet total 412 817

RatiosOperating income as % of average balance sheet total 7.6 7.5Net income as % of average shareholders’ equity 26.1 18.3Shareholders’ equity as % of balance sheet total 15.0 15.0

24 Net income Net income amounted to € 78.1million. As a percentage of total revenues, netincome amounted to 2.9 % [2003: 2.2%]. Basicearnings per share, calculated on the basis of theaverage number of ordinary shares outstanding,increased to € 0.89 [2003: € 0.69].

Results of commercial and financial activities

As in previous years, the results of the commer-cial and the financial activities in 2003 and2004 are shown separately in table 5 on page 23.Table 8 on page 27 gives a five-year overview ofthese results. The actual results themselves aredescribed below. It is important to give a separate breakdown ofthese results, since more than half of the leaseactivities have been outsourced and this processwill continue further. This implies that revenuesfrom financial activities will decrease further, aswill the related assets. In 2004 operating income from the commercialactivities was positively influenced by the profiton the sale of part of the lease portfolio [€ 30.9million as compared to € 6.0 million in 2003].In the financial activities the interest revenuesfrom leases went down by € 29.4 million to€ 68.2 million.

When assessing the results of Océ the emphasisin the forthcoming years will – in view of theoutsourcing of the lease activities – be on theresults of the commercial activities, excludingthe once-off profit on the sale of the lease port-folio [€ 31.0 million in 2004 as against € 49.7million in 2003].

What are financial results? The revenues fromthe financial activities are formed by the interestfrom financial leases. The costs comprise thecosts of financing the lease portfolio and theadministrative and selling expenses. Where thefinancial activities are financed from interest-bearing capital, it has been assumed that this hasbeen done fully on a fixed-interest basis.The costs of financing are then allocated on thebasis of the average amount of fixed interest-bearing capital. For the administrative andselling expenses, including provisions fordoubtful debtors, a cost level has been appliedthat corresponds to that of external captive leasecompanies with similar activities.For the financing of the financial activities it hasbeen assumed that equity amounts to 15% ofthe balance sheet total. This ratio is likewisederived from captive companies in the financialservices industry which publish their ownannual financial statements. The remaining partof the equity is allocated to the commercialactivities.

Financial review

Free cash flow

› € million

10

9

8

7

6

5

4

3

2

1

0

Return on Assets

as %

00 01 02 03 04 00 01 02 03 04

400

350

300

250

200

150

100

50

0

–50

25Table 6 Geographical spread of assets 2004 2003

› € million as % › € million as %

The Netherlands 855 38 626 26United States 414 19 626 26Germany 347 16 434 18France 115 5 163 6United Kingdom 100 4 140 6Rest of Europe 305 14 333 14Rest of the world 97 4 99 4

Total 2,233 100 2,421 100

Table 7 Statement of cash flow* 2004 2003 › € million

Cash flow from operations 137 340Cash flow from investment activities 233 –12

Free cash flow [before financing activities] 370 328

Financing activities –114 –295Exchange rate effects 1 –15

Change in cash and cash equivalents 257 18

* For details see pages 82 and 83.

Financial review

26 Use of funds and finance

Gross capital expenditure In 2004 Océ’s grosscapital expenditure on property, plant andequipment amounted to € 87 million [2003:€ 97 million]. Depreciation and divestmentstogether amounted to € 98 million [2003: € 109million].

Rental equipment and financial lease receiva-bles The book value of rental equipment de-creased by € 5.4 million to € 57.9 million. The capitalised value of financial lease receiva-bles [including short term accounts receivable]decreased from € 801 million in 2003 to € 403million in 2004. For the greater part this de-crease was due to the sale of a part of the existinglease portfolio [€ 312 million] and the outsour-cing of new leases and the related activities. Theaggregate value of rental equipment and finan-cial lease receivables decreased by 46.6% andrepresented 20.7% of the balance sheet total[2003: 35.7%].The balance sheet value of rental equipment iscalculated on the basis of manufacturing costplus the cost of ensuring that the machine canoperate effectively at the customer’s less straight-line depreciation. Financial lease receivables arevalued at the net present value of the contractedlease instalments plus the residual value.

Interest-bearing capital At the 2004 year endthe interest-bearing capital amounted to € 481million [2003 year end: € 549 million]. As aresult of the sale of the existing lease portfoliothe cash balance was high at November 30,2004 [€ 313 million]. This meant that netinterest-bearing debt was limited to € 168million [2003 year end: € 494 million].

Group equity At € 752 million, Group equitywas the same as in 2003. The composition ofGroup equity was influenced by the distributionof dividends charged to the General reserve [– € 52 million], exchanges rate changes [– € 26 million] and addition from the netincome [+ € 78 million].Group equity as a percentage of the balancesheet total amounted to 33.7% [2003: 31.0%].Due to a decrease in interest-bearingborrowings, the ratio between interest-bearingdebt and Group equity was 64:100 [2003:73:100].Shareholders’ equity per ordinary share, cal-culated on the basis of the number of ordinaryshares outstanding at the end of the financialyear, amounted to € 7.87 [2003: € 7.87].

Cash flow The cash flow from operational acti-vities amounted to € 137 million [2003: € 340million]. The cash flow from investmentactivities amounted to € 233 million positive[2003: € 12 million negative]. The cash outflowfor investments was more than compensated forby the proceeds from the sale of leases. Net in-vestments in tangible and intangible fixed assetsamounted to € 123 million [after proceeds fromdisposals of tangible fixed assets].The cash flow from financing activitiesamounted to € 114 million negative [2003: – € 295 million]. The dividend paid in cash toholders of ordinary shares was € 48.4 million.The dividend paid to holders of preferenceshares amounted to € 3.6 million.

Financial review

27Table 8 Commercial versus 2004 2003 2002 2001* 2000 › € million

financial results

Operating income [ebit]Commercial 62 56 142 135 199Financial 48 69 84 90 83

Total 110 125 226 225 282

Net incomeCommercial 53 36 86 79 128Financial 25 25 27 26 24

Total 78 61 113 105 152

Free cash flow [cash flow before financing activities]Commercial –9 195 247 145 68Financial 379 133 91 28 –87

Total 370 328 338 173 –19

Return on total assets [roa] as %Commercial 3.7 3.2 7.5 6.8 10.5Financial 7.6 7.5 7.6 7.5 7.4

Total 4.8 4.7 7.5 7.1 9.1

Net income as % of averageshareholders’ equityCommercial 8.5 5.9 12.4 10.0 17.4Financial 26.1 18.3 16.1 14.6 14.3

Total 10.9 8.3 13.1 10.9 16.8

* Before exceptional items.

Financial review

28 Credit facilities At the end of the financial yeara total of € 660 million of unused credit facilitiesin the form of multi-year stand-by credit con-tracts were available to the Océ Group. Duringthe year contracts were entered into for newstand-by facilities amounting to a total of € 410million.

Financial leases

An essential element in Océ’s sales concept isthat customers can find the complete solutionfor their needs, including their financingrequirements, via one single point of contact.Lease programmes therefore form – and willcontinue to form – an indispensable componentof Océ’s offerings to its customers. More than50% of the sales of machines are financed viafinancial leases.In 2003 Océ started outsourcing its leaseactivities, largely to specialised lease companies.Via this outsourcing the specialised know-howavailable within the lease partners is used inorder to leverage the commercial potential ofleasing to the full. Together with these partnersnew lease programmes are developed andbrought to market.

The outsourcing of the lease activities also givesOcé the possibility of focusing investments onits core activities and improving the return ontotal assets [roa] and the return on equity[roe].Even after outsourcing, Océ continues to be theface that is presented to the customer. Outsideof the United States, i.e. in Europe and the restof the world, the private label model is thereforeused. The lease partners operate under the name‘Océ Finance’. The one-stop shopping concept ismaintained and Océ’s brand name is used to fulleffect.The outsourcing of lease activities meant thatthe systems of Océ and of its lease partners hadto be harmonised with each other. In the secondhalf of 2004 this harmonisation was achievedand as from that moment there has been a clearacceleration in the outsourcing process.In the Scandinavian countries the lease activi-ties, including the sale of the portfolio, havebeen transferred in full to Telia Finans ab.In the six European countries served by De LageLanden International b.v. implementation ofthe lease partnership was initially slowed downslightly in 2003 due to the above-mentionedharmonisation of systems. In 2004, however,the greater part of the backlog was made good.Most of the new lease contracts are nowconcluded directly in the name of the leasepartner and a substantial part of the existingportfolio in these countries was transferredduring the year under review. In the past yearDe Lage Landen also took over Telia Finans ab,enabling a further simplification andstandardisation of processes. In the year underreview a framework agreement was concludedwith cit [Commercial Investment Trust] forthe outsourcing of the lease activities in Italy,Switzerland, Australia, Central Europe andSouth East Asia. As a result, a lease partnerbecame available for all Océ subsidiaries thathad not yet been included in the vendor leaseprogramme. The partnership with cit is alsobased on the private label concept.

Financial review

In the United States Océ operates via its owncaptive lease company, Océ-Financial Services,Inc. Under this concept new lease contracts areconcluded in the name of the Océ captivefinancing company and are then bundledtogether and sold to an external partner. Océremains responsible for activities such asinvoicing and the collection of accountsreceivable. This model was chosen for theUnited States as sufficient critical mass existsthere for the profitable operation of a captiveand because the operations take place withinone jurisdiction.In Europe this is much more complicated;besides, at the level of the individual operatingcompanies there is not enough critical mass.

Impact In both Europe and the United Statesgood progress has been booked on outsourcingthe lease activities. New lease contracts inEurope were placed direct with the external leasepartners. In the United States the new lease con-tracts were concluded by Océ-Financial Services,Inc.; the lease receivables, the ownership of therelevant machines and all related risks were thensold to funding partners. In total, an amount of€ 312 million of financial lease receivables andthe machines that they related to was sold toexternal lease partners in the 2004 financial year,€ 139 million in the United States and € 173million in Europe. The transfer of the existinglease portfolio led to a book profit of € 30.9million.The proceeds from the sale of the total leaseportfolio would be sufficient to pay off all exist-ing loans and deferred tax liabilities relating tothe leasing activities. However, the resultantfinancial latitude that has been created will beused to strengthen the company. This will bedone in the following order of priority: repay-ment of loans, investing in assets [includingacquisitions] that enable the set financial objec-tives to be achieved, as well as other options,such as the repurchase of the company’s ownshares.

29

Financial review

32 Products and services

Departmental printers, black-and-whiteand colour.[Very] high volume printers/copiers,black-and-white and colour.Production printers, black-and-white andcolour, cutsheet and continuous feed.High speed scanners.Financial services.

[Very] high volume printers/copiers,black-and-white and colour.Production printers, black-and-white andcolour, cutsheet and continuous feed.Financial services.

Taking over and carrying out[outsourcing] by Océ of documentmanagement processes for both wide andsmall format applications.

Integrated document managementsystems: input and output managementsoftware, document workflow software,document archiving software.Professional services: training,consultancy, implementation, support.

Customer segments

Segments in which Océoperates:Data centresCentral repro departmentsExtensive office environments

Specifically in the sectors:Financial institutionsTelecom and utility companiesGovernment and educationTrade, transport, industry andconsultancy

Marketing ServicesDigital Newspaper NetworkPrinting industryDigital print providersReprographic businesses [quickprinters and copy shops]

All customer segments of:Corporate PrintingCommercial PrintingTechnical Document Systems

All customer segments of:Corporate PrintingCommercial PrintingTechnical Document SystemsDisplay Graphics Systems

Corporate Printing

Commercial Printing

Océ Business Services

Software & ProfessionalServices*

Competitors

Canonibm

KodakKonica MinoltaRicohXerox

Canonibm

KodakKonica MinoltaRicohXerox

ikon

Pitney BowesXeroxLocal suppliers

CanonHewlett-Packardibm

plp Digital SystemsSeal SystemsXeroxZeh Software

The world of Océ | Digital Document Systems

* The results of the business group Software & Professional Services are integrated in those

of the business groups Corporate Printing, Commercial Printing, Technical Document

Systems and Display Graphics Systems.

33

The world of Océ | Wide Format Printing Systems

Products and services

Wide format production printers, black-and-white and colour.Wide format scanners.Print management software.Financial services.

Wide format production printers [roll-to-roll and flatbed] for indoor and outdoorapplications.Print workflow software.Financial services.

Wide format media.Specialised display graphics media andinks.Print media.

Customer segments

Print-for-useConstruction companies,architectural and engineeringofficesIndustrial companiesUtility companiesTelecom businessesGovernment

Print-for-payReprographic businessesCopy shops

Print-for-useCorporate and retail in-houseprintingPrinting worksAdvertising and designagencies

Print-for-payDigital print providersReprographic businessesPhoto processing laboratoriesSilkscreen printers

All customer segments of:Technical Document SystemsDisplay Graphics SystemsCorporate PrintingCommercial PrintingOcé Business Services

Technical Document Systems

Display Graphics Systems

Imaging Supplies

Competitors

Fuji XeroxHewlett-Packardkip

RicohXerox

EpsonHewlett-PackardKodakMimakiMutohNurScitexVutek

3m

Hewlett-PackardIntelicoatNeusiedlerPaperlinxSihl

34 Results of Digital Document › € million 2004 2003 changes as % organic as %

SystemsRevenues 1,834 1,907 –3.8 +0.3

Non-recurring 487 444 +9.7 +13.3Recurring 1,347 1,463 –7.9 –3.6

Operating income [ebit] 55 70 –20.8 –

General

The strategic business unit Digital DocumentSystems [dds] concentrates on documentoutput solutions for specific market segmentsand printing activities that require highproductivity. dds comprises four business groups.The Corporate Printing business group servesfinancial institutions, telecom companies,utility companies, government institutions,educational institutions and companies engagedin industry and trade. The focus of this businessgroup is on integral solutions for documentoutput management in high-productionenvironments [print-for-use].The Commercial Printing business group servesmarketing services companies, digital printproviders, the printing industry and repro-graphic businesses. This business group focuseson commercial applications [print-for-pay].The customers of the Software & ProfessionalServices business group are to be found in alltarget groups of both Corporate and Commer-cial Printing and Technical Document Systems.This business group concentrates on customersupport and software products and projectservices for the implementation and use ofdigital solutions.Lastly, the customers of the Océ Business Servicesbusiness group use the products and services ofdds and wfps for the outsourcing of docu-ment management processes. This businessgroup specialises in document handling,printing and copying activities and completedocument management and printing processes.

Corporate Printing

Market position The Corporate Printingbusiness group focuses on print solutions forcustomers in high-production environmentswhere it offers integral solutions for documentoutput management. This relates, for example,to edp environments in big companies, wherelarge numbers of transaction documents areprinted electronically, and to central repro-graphic environments with very high volumesof document production. In addition, Océoffers a series of office applications for use atboth central and departmental level. Océ’sdistinctive feature in this market is that it offersinnovative products and services that alloworganisations to manage their documentsefficiently and effectively. Corporate Printing concentrates on threevertical market segments:| finance, telecommunication and utilitycompanies;| public services: government, health care andeducation;| trade and industry: manufacturingcompanies, retail and wholesale trade, transport,logistics and consultancy.For customers in these segments the primaryfocus is on improving the effectiveness ofdocuments and the information they containand on achieving maximum efficiency and costcontrol.An option that is increasingly in demand is theuse of colour. Océ has a number of outstandingproducts available for such applications. For high production applications the companyoffers the Océ cps800 printer/copier and theOcé cps900 full colour printer, both of whichwere introduced during 2004. The machines inthe Océ VarioStream family for the high andvery high volume segments can print not only inblack but also in any desired spot colour orhouse style colour.


Product

Océ VarioStream 9210 and9220

Océ VarioStream 7000 micr

and CustomTone

Océ VarioPrint 5115 and 5160document printing andconvergence models

Océ VarioPrint 2110

Océ VarioPrint 3070

Océ cps900

Océ cps800

Océ cs230

Océ cs180

Océ prisma-web

Océ Document Designer

Océ prisma-satellite

Océ prisma-productionnew releases

Océ prisma Software bundles

Business group

Corporate and Com-mercial Printing









Software & Profes-sional Services





Application

Very high volume continuous feed printer family, based on a completely new,innovative technology: ‘Colour-on-Demand’. Océ offers users a development routeto move from black-and-white printing via Océ CustomTone to full colour. Thesemachines set a new standard for very high volume printing.

New applications for the Océ VarioStream 7000 family that was launched in 2003.They include a big increase in the number of application speeds for use in micr

[Magnetic Ink Character Recognition] –e.g. for the automated processing ofcheques and bank statements.

New models of the Océ VarioPrint 5000 series which was introduced in 2003 fordocument environments. They feature scanning and copying functionality andadvanced finishing options such as stapling of brochures and high-capacity storageof finished documents.

Highly advanced multifunctional printer/copier/scanner for high-production mid-volume environments.

Production printer for transaction and document printing, especially in officeenvironments.

Full colour production printer for reprographic departments and commercialenvironments.

High production full colour printer/copier for reprographic departments andcommercial environments.

Mid-volume colour printer/copier.

Mid-volume colour printer/copier.

Advanced e-business solution, allowing orders to be placed and processed fullyautomatically via the internet.

Variable document processing software for data centres and direct mailapplications.

Print output management software. Includes new functions that offer morepossibilities for cost-effective print management in office environments.

Output management system with maximum productivity and flexibility benefits.

Comprise all functions that are needed for the following customer environments:prisma for Office, for Printrooms, for Printshops, for Printing-on-Demand, forMailers, for Enterprise Resource Planning [erp], for Transaction.

35

New products introduced by Digital Document Systems in 2004

36 The new Océ VarioStream 9000 family, whichwas expanded by the launch of the Océ 9210and the Océ 9220 early in 2004, has againpositioned Océ as the innovative leader in highvolume printing. The current machines canprint in duplex mode in black-and-white andwith spot colour. The underlying technologyforms the basis for a range of full colour printersthat will be introduced in the years ahead.

In office and printroom environments customersare increasingly realising the importance of thecompany-wide management of their machineestablishment and their document production.Océ’s offerings in this area relate to services foranalysis, implementation and management.These enable the use of installed equipment tobe optimised and also bring about a reductionin the related costs.In printroom environments convergence, or thepossibility of processing various document flowsvia one single printer, is essential. Océ has setthe standard for intelligent software which canefficiently handle the entire document manage-ment process, mostly controlled from one singlelocation.

Developments in 2004 During the year underreview Océ boosted the competitive strength ofits product portfolio in all environments: in thedata-processing centre, the printroom and theadvanced office. Océ therefore supplies com-plete solutions, consisting of hardware, softwareand services, under the names ProfessionalOffice, Professional Printroom and ProfessionalTransaction programs respectively.

The focus on specific market segments has ledto the introduction of products that offer anoptimum combination of innovative printingsystems, output management software andprofessional services. During the Océ OpenHouse held in February 2004 in Poing,Germany, a series of ground-breaking productswere on display. Special attention was also de-voted there to the added value of colour offeredby the Océ cps900 and the Océ VarioStream9000 family.In the corporate environment the digitisation ofdocuments continued to advance. There was afurther decrease in analogue copying during theyear under review. Document processes in theoffice and in document production and trans-action printing are being integrated more andmore. Printing is replacing copying. Thoughpaper continues to be important, it is increas-ingly becoming an intermediate workingmedium. The layout and the use of colour aregrowing in importance because they make theinformation that is presented easier to retain.The distribution and archiving of documentswill, however, take place more and more indigital form. The introduction of the Océprisma-satellite 1.2 now allows Océ’s cor-porate clients to manage office documents,whilst at the same time increasing the printingefficiency and reducing the costs for thecustomer.To meet the growing demand for colour Océhas launched a complete series of colour printersfor the office and the printroom.For the mid-volume and for the high volumeand very high volume segments Océ has expan-ded its product range considerably by adding aseries of new and upgraded printers, both forcut sheet and for continuous feed. The success-ful series of cut sheet printers was completedwith the introduction of the production printer,the Océ VarioPrint 2110. In the high and veryhigh volumes Océ confirmed its position as asupplier of leading-edge technology with thelaunch of the Océ VarioStream 9210, a newcontinuous feed printer. The Océ VarioStream7000 family was also completed during the yearunder review. In this way Océ continues to offerits customers a truly complete range ofproducts.


37Trends Growth in the corporate environment istaking place specifically in high-productioncolour and high volume black-and-white printsolutions. Printing speeds are continually beingincreased and printers that can also print incolour are replacing the mid-volume black-and-white printers and thus paving the way for agreater use of colour in office applications.Many customers realise that the costs involvedin the processing of documents have to bebrought more under control. This gives rise tothe need to replace a large number of decentra-lised printers with a much smaller number ofhigh-production systems that operate at depart-mental or central level, since such systemsenable substantially lower printing costs.Outsourcing is also a solution that is beingchosen more often.

Strategy Océ’s strategy for corporate printing isaimed at achieving and strengthening a topposition in all high-production printingsegments. With this aim in mind Océ offers acomplete range of state-of-the-art printingsystems, for both black-and-white and colour. In addition, Océ can supply excellent outputmanagement software in the form of prisma-

production and prisma-satellite which areefficiently able to control both Océ equipmentand third-party machines. To complete itsportfolio Océ has opted for strategic coopera-tion with partners. In all important marketsOcé is working on a continuous strengtheningof its distribution systems, notably in theUnited States and the United Kingdom.

In the market for continuous feed printingsystems Océ is consolidating its leading positionby further strengthening its distribution systemsand innovation efforts. The introduction of theOcé VarioStream 9000 family has again demon-strated that Océ is the leading innovator in thissegment. In response to the increasing customerdemand for complete solutions – and the resul-tant increase in complexity – Océ is investing inits operational organisation, and in sales andconsultancy services.Océ also offers an extensive range of services viathe Océ Business Services and Software &Professional Services business groups.

Commercial Printing

Market position The Commercial Printingbusiness group serves customers who use theequipment commercially as a production assetto generate income.Within businesses that concentrate on theproduction of direct mail [marketing services]Océ holds a leading position world-wide withits high and very high volume printers. In thismarket Océ also holds a strong positionamongst digital print providers. We haverecently extended our activities into segments of the printing industry market, especially fortime-critical production runs, limited print-runs and personalised mailings or frequentlyupdated instruction manuals. This segment isexpected to show strong growth in the yearsahead.Over the past years Océ has already built up astrong position in the production of books andnewspapers with a limited print-run. Althoughdigital printing is provisionally being used on alimited scale in the printing world, great growthpotential exists alongside offset, whichcontinues to be the appropriate technique forbigger print-runs.

Developments in 2004 Unwillingness to investstill made itself felt in the commercial printingmarket, particularly in this market’s most impor-tant segment: marketing services. The decline inadvertising expenditure also impacted on direct-mail activities. Market conditions were margin-ally better than in the previous financial year.

U n i o n O f f s e t , C a n b e r r a ’ so l d e s t a n d b e s t - k n o w np r i n t i n g c o m p a n y, a c q u i r e dt h e A u s t r a l i a n g o v e r n -m e n t ’ s i n - h o u s e p r i n t i n gd e p a r t m e n t i n 1 9 9 7 a n dr e c h r i s t e n e d i t C a n P r i n tC o m m u n i c a t i o n s . T h e b u s i -n e s s e m p l o y s 1 4 0 p e o p l ea n d h a s a n a n n u a l t u r n o v e ro f m o r e t h a n a u d 2 5 m i l l i o n ;a g r o w i n g p r o p o r t i o n o f i t sa c t i v i t i e s i n v o l v e s d i g i t a lp r i n t i n g .O c é h a v e s h o w n u s q u i t ec l e a r l y t h a t t h e y a r e h e r ea s a p a r t n e r , a n d w a n t t op r o m o t e u s a n d t h e i r o w nc o m p a n y h a n d i n h a n d .T h e i r a p p r o a c h t o h e l p i n gu s b u i l d o u r b u s i n e s s , a n dn o t j u s t s e l l i n g b o x e s ,m a k e s a r e f r e s h i n g c h a n g ei n t h e p r i n t i n g i n d u s t r y.T h e y e v e n p r o v i d e t r a i n i n gi n w h a t d i g i t a l p r i n t i n g i sa l l a b o u t , b e c a u s e u p t on o w o u r s a l e s p e o p l e h a v ej u s t b e e n u s e d t o g o i n go u t a n d s e l l i n g o f f s e tp r i n t i n g . I d o n ’ t b e l i e v et h a t a n y o t h e r c o m p a n yw o u l d p r o v i d e u s w i t hm a r k e t i n g t o o l s . ’

D a v i d D a n i e lm d C a n P r i n tC o m m u n i c a t i o n s - U n i o nO f f s e t p r i n t e r s ,C a n b e r r a , A u s t r a l i a

‘

In the printing market the role of digital print-ing is steadily expanding, despite being sloweddown by economic developments. The numberof machine placements [net] remained at almostthe same level as in the previous year. None-the-less, Océ is gaining more and more ground inthis market, especially thanks to the improvedand expanded product offerings. This was veryclearly demonstrated by the introduction of theOcé VarioStream 9000 family. For Océ openingup this market also entails the development ofnew competencies in the sales organisations.The printing of daily newspapers in limitedprint-runs [Digital Newspaper Network]attracted much attention during the year underreview, notably because of the activities at theAthens Olympic Games, where major dailiesfrom numerous countries were able to supplytheir national delegations with newspapers forthat day freshly printed on Océ-machines. Themost important aspect of this activity, therefore,is that it demonstrates the special possibilitiesthat the equipment has to offer for a specificpart of the printing market. Both by expanding its range and by means of itsvertical market approach Océ has been able togain ground in the commercial printing seg-ments. In these highly demanding marketsegments reliability and productivity are of theutmost importance and Océ machines achievehigh scores in this respect. Besides, Océ hastranslated its lengthy experience of complexprinting processes into the development ofsoftware that can steer the entire process flexiblyand problem-free, even where the system alsoincorporates non-Océ equipment.

Trends The strong growth in the commercialdigital printing segment is being driven on theone hand by the outsourcing of printed matterby the corporate environment to commercialprinters and, on the other, by the migration todigital printing of printed matter that wastraditionally produced on offset presses. Thismigration has become possible because ofdecreasing costs, the ever better quality andproductivity of digital printers and the availa-bility of workflow solutions tailored to the needsof the commercial segment. The shift towardsdigital printing is being boosted by the increa-sing demand for small print-runs and personal-ised documents for which digital printing ismore suitable than offset. The biggest potentialgrowth in colour printing is to be found in thevery high production segments [contract print-ers, book printing and direct mailers]. Inabsolute terms the share of colour is still smalldue to what is still a relatively high ‘total cost ofownership’.

Strategy Océ’s objective is to achieve a furtherstrengthening of the top position that thecompany now holds for continuous feedsolutions in the very high production segmentof digital printing. The Océ VarioStream 9210and the Océ VarioStream 9220, which wereintroduced in 2004, represent the benchmarkfor this part of the market in terms of technolo-gy and innovation, partly due to the fact thatthey can be further developed in phases tobecome highly productive full colour systems.In the printing industry market – one of thegrowth markets for digital printing – Océ aimsto achieve a prominent position by launchingnew technologies. Here, too, a key role will beplayed by the Océ VarioStream 9000 family plusthe advanced cut sheet colour printer, the Océcps900. Océ’s printing industry sales and salessupport organisation is also being strengthenedto ensure that it has the know-how and expertiseneeded to meet the specific requirements,wishes and business processes that exist withinthis sector.Océ aims to become a major supplier of prod-ucts to print shop and copy shop chains. Thenew mid-volume and high volume printingsystems, such as the Océ VarioPrint 2110 andthe full colour Océ cps800 and Océ cps900,are eminently suitable for such applications. A crucial aspect in this market is Océ’s ability tooffer hardware and software bundled together inone package.

T i e r p s Tr y c k e r i i s a f u l l -s e r v i c e p r i n t i n g b u s i n e s st h a t o f f e r s a n e x t e n s i v ev a r i e t y o f r e l a t e d a c t i v i -t i e s r a n g i n g f r o m p r e - p r e s st o m a i l i n g s e r v i c e s . I n 1 9 7 2t h e y w e r e a m o n g s t t h ef i r s t i n S w e d e n t o s t a r tp r i n t i n g i n o f f s e t . I n 1 9 9 2t h e y w e r e a g a i n i n t h ef o r e f r o n t i n t h e c h a n g e -o v e r t o d i g i t a l p r i n t i n g .W e m a d e c o n s i d e r a b l es a v i n g s b y a d o p t i n g t h eO c é c o n c e p t f o r a l l o u re q u i p m e n t a n d m a t e r i a l s ,b o t h b l a c k & w h i t e a n dc o l o u r . T h a t w a s i m p o r t a n t .B u t l e t ’ s n o t f o r g e t t h es u p p o r t w e g e t f r o m O c é .W e d o n ’ t j u s t h a v e ar e l a t i o n s h i p w i t h t h e r e -p r e s e n t a t i v e s w h o v i s i t u sr e g u l a r l y, b u t a l s o w i t h t h et e c h n i c i a n s a n d m a n a g e -m e n t . W e s e t h i g h s t a n d a r d sf o r d o i n g j o b s q u i c k l y a n dd e l i v e r i n g p r o m p t l y. W el i k e t o m e e t o u r d e a d l i n e sa n d O c é m a k e s s u r e w e c a nd o i t . ’

P a u l S a n d b e r gP r e s i d e n t , T i e r p s Tr y c k e r i ,T i e r p , S w e d e n

‘

39Software & Professional Services

Market position The Software & ProfessionalServices business group brings together all ofOcé’s expertise in the area of output and docu-ment management. The group is a centre ofexpertise and comprises Océ specialists who,working closely together with the customer’sspecialists, analyse the customer’s print outputand document processes and formulate propos-als for improvements. The systems, consisting ofhardware and software, are designed andimplemented by Océ’s specialists and consult-ants. Océ structures these activities by applyingits own working method, the Océ SolutionDelivery Process. Over the years Océ has alsobuilt up in-depth experience of processes,systems and software solutions specificallygeared to the needs of each customer sector.In all markets in which Océ operates, paperflows and digital document flows have becomeincreasingly more integrated and more complex.These document processes and workflows needto be managed and controlled. Ever since theintroduction of its first digital printers Océ hasbeen developing software for the managementof printing processes and printing systems. Océ’s customers are seeking ways to add greatervalue to their documents and, at the same time,to reduce the costs of document production intheir businesses. As part of its ProfessionalOffice Programme Océ supplies software andservices that enable printing and documentflows in businesses to be analysed. On the basisof the information from such analyses newprinting configurations are proposed incombination with intelligent software whichchannels each print job to the equipment that ismost suitable and most cost-effective forprocessing that job. In environments where highand very high volumes are printed Océ is able toensure not only the very highest degree ofefficiency but also to add extra functionality totransaction documents. In this way bankstatements or gas or electricity invoices can begiven added value as powerful marketing tools.These programs and others like them have beendeveloped in recent years in close cooperationwith Océ customers.

The entire range of dds output managementprograms and applications is available under theOcé prisma brand name.Océ harnesses its know-how and expertise tooffer businesses and customers solutions in theform of configurations consisting of Océ equip-ment and software, third-party machines andcomplete implementation services. The businessgroup advises its customers on the restructuringand improvement of their document manage-ment processes. The business group alsoprovides support in cases where customersoutsource their entire document and printingprocesses to the Océ Business Services businessgroup.

Developments in 2004 The Software & Profes-sional Services business group has introducedsoftware bundles that are focused on the specificneeds of major customer groups. For corporatecustomers four bundles have been developed:prisma for Office, prisma for Printrooms,prisma for erp [Enterprise Resource Plan-ning] and prisma for Transaction. For thecommercial market three bundles have beendeveloped: prisma for Printshops, prisma forPrinting-on-Demand and prisma for Mailers. Each prisma bundle amalgamates the mostimportant applications and output manage-ment system functions for a specific customersegment within a single, compact and completecombination of programs. The bundles improvethe customer’s working processes and efficiencyand this specifically tailored bundling ofsoftware simplifies its implementation process.Various research institutes have already rankedprisma software as being the best software thatis available within the industry.

S t a b i l i m e n t i T i p o g r a f i c iC a r l o C o l o m b o S . p . a . i s o n eo f t h e m o s t i m p o r t a n tp r i n t i n g f i r m s i n R o m e . I t s c u s t o m e r s a r e m a j o rc o m p a n i e s a n d p u b l i co r g a n i s a t i o n s . T h e y i n -c l u d e t h e C h a m b e r o fD e p u t i e s , f o r w h i c h t h ec o m p a n y p r i n t s t h em i n u t e s o f m e e t i n g s e v e r yd a y [ u s i n g O c é e q u i p m e n t ] .Tr a d i t i o n a l l y w e a l w a y st r i e d t o b e t h e f i r s t t oa d o p t i n n o v a t i v e s o l u t i o n st h a t e n a b l e u s t o e x c e l i nt h e m a r k e t . W i t h t h e n e wO c é s y s t e m s w e c a n o f f e ri n c r e a s i n g l y f a s t a n d c o m -p l e t e s e r v i c e s t o o u r c u s -t o m e r s w i t h o u t a n y r e d u c -t i o n i n p r i n t i n g q u a l i t y.T h o s e s y s t e m s e n a b l e u s t ot r a n s f e r p r o d u c t i o n t h a tw e c u r r e n t l y p r i n t i no f f s e t t o d i g i t a l p r i n t i n g . ’

G i o v a n n i B a t t i s t a C o l o m b oG e n e r a l M a n a g e r ,S t a b i l i m e n t i T i p o g r a f i c iC a r l o C o l o m b o S . p . a . R o m e , I t a l y

‘

Trends The growing volume of information anddocuments needs to be effectively managed.Due to the rapid advance of digitisation theenormous quantity of paper documents is beingsupplemented by an abundance of digital infor-mation. Not only the management but also theprocessing of this information is becomingmore complex, as it is supplied simultaneouslyon paper, by fax, by e-mail or in the form of apdf file.Customers are increasingly asking for completesolutions, or one single package from one singlesupplier. The Software & Professional Servicesbusiness group meets these needs in two ways.On the one hand the prisma products packageis being further developed through the seamlessintegration of partner products and, on theother, Océ can draw on an extensive team of itsown system consultants, engineers and projectmanagers. These professionals are mainly activein the countries where Océ has its own salesestablishments and they are supported in thiswork by specialised teams. Their task is todesign, integrate and implement complexsystems which contain both Océ products andthird-party equipment.

Strategy Océ intends to achieve a substantialstrengthening of its position in the market foroutput management systems by broadening andextending the range and by offering combina-tions of hardware, software and services that aretargeted at specific user environments. With itsOcé prisma output management software thecompany is already one of the most importantplayers in the market today. Océ continues toconcentrate on the integration of partnersystems to supplement the range. The emphasiswill be on job preparation and transmission tothe production locations.During the year under review Océ furtherextended the prisma family by adding partnerproducts such as Océ prisma-web. This pro-duct enables corporate and commercialcustomers to implement web-based orderingand print job management. In addition Océ will, together with partners,steadily expand its output management systemsinto complete document management solutionsin which reliability, productivity, durability, easeof use and a low total cost of ownership will playcentral roles.

Océ Business Services

Market position Océ Business Services opera-tes in a distinct growth market for the outsour-cing of document management processes andprint management activities. Its customers aremedium-sized and big companies which wantto concentrate on their core activities and wishto have other activities handled by the bestprovider of such services on the market. Theactivities comprise all print room processes, the operation and maintenance of completecopier/printer systems, fleet management,electronic and physical archives management,scanning and mailroom activities. Over the pastten years Océ has grown to become one of theleading companies in this field both in theUnited States and in Europe.

F r é q u e n c e P l u s s p e c i a l i s e si n t h e f i e l d o f c u s t o m e rr e l a t i o n s h i p m a n a g e m e n t ,a i m e d a t l o y a l t y p o l i c i e sf o r c l i e n t s s u c h a s A i rF r a n c e a n d k l m f r e q u e n tf l y e r p r o g r a m m e m e m b e r sa s w e l l a s f o r A m e r i c a nE x p r e s s , C r é d i t L y o n n a i s ,H e r t z a n d , i n t h e n e a rf u t u r e , a l s o f o r A c c o r .O c é h a s t r a n s f o r m e d t h ew a y w e m a n a g e o u r c o r eb u s i n e s s d o c u m e n t s f r o m as e r i e s o f m a n u a l p r o c e s s e st o a n i n t e g r a t e d e l e c t r o n i cd a t a m a n a g e m e n t a n d w o r k -f l o w a p p l i c a t i o n i n o u rb a c k o f f i c e a p p l i c a t i o n s ;t h i s e n a b l e s u s t o m i n g l eb o t h f r o n t a n d b a c k o f f i c eo p e r a t i o n s i n a c o n t i n u o u sa n d f l u i d p r o c e s s . T h i s i sa n i n n o v a t i v e a n d u n i q u es o l u t i o n t h a t O c é h a s b e e na b l e t o d e s i g n a n d a p p l y t oo u r d i s t i n c t i v e b u s i n e s s o fc u s t o m e r r e l a t i o n s h i pm a n a g e m e n t . ’

I s a b e l l e Vé t o i sG e n e r a l M a n a g e r F r é q u e n c eP l u s S e r v i c e s ,I v r y - s u r - S e i n e , F r a n c e

‘

Because of its position at the centre of its cus-tomers’ document processes Océ is a partnerthat can offer top-class expertise, not only forthe operational side of the processes but also forintegrated document management. During theentire contract period possible improvementsare constantly investigated, proposed and intro-duced. Océ acts on the one hand as a consultantwho implements ‘best practices’, and on theother as a supplier of hardware and media.Working methods and results are based onservice level agreements that are in line with thecustomer’s wishes and the specific situation. Inthis way the quality, effectiveness and produc-tivity of the document management process areimproved, whilst keeping the costs for thecustomer at the same level or even reducingthem further.

Developments in 2004 The activities wereagain expanded during the year under review,despite what was generally a slower growth-ratefor the outsourcing market. Economic condi-tions are one of the causes of that slowdown.Besides this, a decrease in revenues from existingcontracts slowed down revenue growth duringthe year. Océ continues to focus on the profita-bility of current contracts via cost control andby introducing new types of services thatgenerate higher added value. As before, OcéBusiness Services therefore regards its currentactivities in printrooms and mailrooms ascornerstones but also as launch-pads that willlead to more complex assignments.

Trends The outsourcing market is still growing,despite negative economic influences, particu-larly because of an increasingly wider range inthe activities that are being outsourced.There is a noticeable difference between theUnited States and the United Kingdom com-pared to the rest of Europe. In the United Statesthe character of the market is changing now thatmore and more new suppliers are providingservices that cross the traditional bordersbetween specialised working areas. Since theexisting suppliers are also expanding theirpackage of services, a substantial overlap isbeing created, leading to fiercer competition. InEurope, where outsourcing is still a relativelyyoung development, expansion towards morecomplex activities linked to the management ofcomplete information flows can be accom-plished more quickly.

Strategy Océ is concentrating on boosting theprofitability of its business services activities. Inthe years ahead this will be continued andintensified by improving the contract manage-ment processes and by realizing synergy withother parts of the Océ business. In closecooperation with the Software & ProfessionalServices business group, Océ Business Servicesis developing a series of advanced solutions forthe management of complex information flows.The focus will continue to be on the processesin which printing plays an important role. Océconcentrates primarily on the development ofthose activities which, on the basis of its know-how and expertise and the availability ofexcellent equipment, will generate maximumadded value. This implies a shift of emphasisaway from mailroom and printroom servicesand towards the more complex management ofthe physical and electronic document flowswithin businesses.

41

E m p l o y i n g s o m e 1 0 , 0 0 0p e o p l e , t h e D r ä g e r G r o u p i so n e o f t h e l e a d i n g g l o b a lp l a y e r s i n t h e a r e a o fm e d i c a l t e c h n o l o g y a n ds a f e t y s y s t e m s . H o s p i t a l sa n d f i r e b r i g a d e s a l l o v e rt h e w o r l d u s e D r ä g e rp r o d u c t s e v e r y d a y.O u r D r ä g e r w e r k P r i n t C e n t e r ,n o w t a k e n o v e r b y O c é , i se x t r e m e l y i m p o r t a n t t o u s .I t p r o d u c e s , t o n a m e b u to n e a c t i v i t y, t h e o p e r a t i n gi n s t r u c t i o n s f o r h u n d r e d so f o u r m e d i c a l a n d s a f e t yt e c h n o l o g y p r o d u c t s a n ds y s t e m s i n d i f f e r e n tl a n g u a g e s . T h a t d e m a n d s ah i g h d e g r e e o f r e l i a b i l i t ya n d a n e x t r e m e l y f l e x i b l er e s p o n s e . W e k n e w t h a tO c é , b e i n g a g l o b a l l yo p e r a t i n g c o m p a n y, h a dt h e e x p e r i e n c e t o d o t h ej o b . B u t w e w e r e p l e a s a n t -l y s u r p r i s e d b y t h e p r a g -m a t i c a n d s t r a i g h t f o r w a r dm a n n e r i n w h i c h t h e yo p e r a t e d . T h a t c o n v i n c e du s t h e y w e r e a g o o dm a t c h . ’

S t e f a n D r ä g e rM e m b e r o f t h e B o a r d o fD r ä g e r w e r k a g , L ü b e c k ,G e r m a n y

‘

42 Results of Wide Format › € million 2004 2003 changes as % organic as %

Printing Systems Revenues 818 862 –5.1 –1.0

Non-recurring 248 245 +1.4 +5.7Recurring 570 617 –7.8 –3.7

Operating income [ebit] 55 55 +0.1 –


Market position Océ supplies wide formatprinters and software for use in the scanning,copying, printing, distributing and archiving oftechnical documents. Users are to be found inconstruction companies, in industry, in archi-tectural and engineering offices, in utility andtelecom businesses, in the transport sector andin government as well as in the professionalprint-for-pay environments of reprographicbusinesses. Océ has a strong, leading positionwhich it has also succeeded in maintaining inthe face of today’s difficult economic conditionsand growing competitive pressure, mainlythanks to the quality, productivity and userfriendliness of its systems.In the process of digitisation Océ has alwaysplayed a pioneering role. Time after time Océintroduced the innovations that now form partof everyday processes: the scanning of drawingsfor archiving purposes, electronic distributionand decentralised printing at a location close tothe user. At an early stage Océ also introducedsuch innovations as advanced software for theallocation and management of printing costsand for the supply of print assignments tospecialised reprographic businesses via theinternet. Océ has a unique reputation world-wide as asupplier of innovative solutions, quality andease of use and a high level of service. Océsystems therefore stand out because of theirhigh productivity, both during printing andcopying and in pre-processing and finishing.

General

The strategic business unit Wide Format Prin-ting Systems [wfps] is subdivided into threebusiness groups.The Technical Document Systems business groupserves customers such as construction andindustrial companies, architectural and engi-neering offices, utility and telecom companiesand the government as well as reprographicbusinesses and digital print providers. Thisbusiness group focuses on technical applications[print-for-use] and on commercial applications[print-for-pay].The Display Graphics Systems business groupserves customers in the area of the graphic artindustry and advertising agencies and focuseson indoor and outdoor advertising and otherforms of graphic communication.Lastly, the Imaging Supplies business groupmainly specialises in the supply of print mediafor all customer categories.


43Product

Océ tds300

Océ cs40xx scanners

Océ Account Center

Océ Power Logic Controller

Océ Print Exec Workgroup

Océ Repro Desk Server 1.6

Océ Plan Center 1.6

Océ Arizona 600

Océ cs6060

Océ Arizona t220uv

Business group






Technical Document Systemsand Commercial Printing

Technical Document Systemsand Commercial Printing




Application

Highly productive wide format printer/copier for decentraliseddepartments in industrial environments.

A new line of stand-alone scanners which enable optimumdigitisation of originals [black-and-white and/or colour]. Theaccompanying software offers the possibility for immediateprinting on printers of various makes.

New software version for automatically generating accountinformation that can be printed, copied and scanned on Océtds and tcs systems.

New software version for improved control over and variation indocument production processes, also via the internet.

New software version that controls and manages the printingprocess from the selection of the offerings from internet sitesthrough to the production of physical documents inarchitectural, development and production environments.

Software, accessible via the internet, which enables location-independent digital print jobs to be transmitted via centralservers to print shops.

Software package which is accessible for customers via theinternet and which allows digital print assignments to besupplied to print shops via central servers.

Wide format, high volume colour printer for durable, weather-resistant advertisements.

Wide format, mid-volume colour printer for durable, weather-resistant advertisements.

Wide format, mid-volume colour printer for durable, weather-resistant advertisements using environmentally friendly uv inks.Processes flexible and board materials up to 5 centimetres thickfor advertising signs, exhibition materials and signposting.

New products introduced by Wide Format Printing Systems in 2004

Traditionally, the main thrust of the commercialactivities has been in Europe and the UnitedStates, but in recent years Océ has also shownstrong growth in the Asian region. In Japan,Océ has been successfully active in the wideformat sector for some years. This relates to anextensive market in which there is strong com-petition. Océ concentrates on market segmentsin which the company can excel and it hasadapted its most important hardware andsoftware to the language and specific require-ments of Japanese users. Major contracts withcar manufacturers underline the sound marketposition that Océ has meanwhile acquired inthe home market of its biggest competitors.In China, Océ has its own sales organisation butthe company also operates very successfullythere together with a number of distributors. Inthis buoyant market with its unprecedentedlevel of construction activity and growingindustrial production there is a great need fortechnical documents. Though the transition todigitisation is now under way, the emphasis isstill on smaller volumes.

Developments in 2004 In the black-and-whitesegment an aggressive marketing approach ledto an increase in autonomous revenues fromprinting systems. Despite an increase in theprint volume, revenues from service remainedunchanged, particularly because of exchangerate effects. Generally speaking, Océ succeeded in main-taining the number of black-and-white printerssold in all volume segments at the previousyear’s level. An important role was played in thisby the various innovations aimed at a furtherincrease in productivity and in convenience ofuse. For example, the introduction at the end of2003 of the Océ Power Logic Controller in thetds series was well received in the market. The same also applied to the new versions ofOcé’s print management software which weredeveloped in the company’s r&d centres in theUnited States and France.In the low volume segment Océ introduced theOcé tds300 at the beginning of 2004. TheOcé tds300 makes it easier for smaller com-panies in particular to take the step from ana-logue to digital. With this machine and with theOcé tds400 and the analogue Océ 7050 Océnow has optimum coverage of the low volumesegment. The number of systems sold in the Océ tds800series, the most productive machine in the highvolume segment, remained practically the sameas in the previous year. Specialised reprographicbusinesses in particular used this machine toreplace its successful precursor, the Océ 9800,and to profit from the latest technology andincreased functionality and productivity of thisnew machine. Within industry, by contrast,more and more print volume is beingdistributed to smaller printers such as the Océtds600 and the Océ tds400.

B e i j i n g A r c h i t e c t D e s i g n &R e s e a r c h I n s t i t u t e i s o n e o fC h i n a ’ s l e a d i n g a r c h i -t e c t u r a l b u r e a u s . O n e o ft h e i r m o s t r e c e n t c r e a t i o n si s t h e C h i n e s e N a t i o n a lO p e r a o n T i e n a n m e nS q u a r e .O c é e q u i p m e n t h a s p r o -v i d e d s u p p o r t i n s e v e r a la s p e c t s . F i r s t o f a l l i n t h eq u a l i t y o f t h e p r i n t s . Weo f t e n u s e d t o h a v e d i s p u t e sw i t h o u r c u s t o m e r s a b o u tt h e t y p e o f p r i n t s w e d e -l i v e r e d . S i n c e w e i n s t a l l e dt h e O c é e q u i p m e n t w e h a v ef a r f e w e r p r o b l e m s o f t h i sk i n d . M o r e o v e r , t h e q u a l i t yo f t h e e q u i p m e n t i n c r e a s e do u r p r o f i t f i g u r e s d u e t ot h e l o w m a l f u n c t i o n r a t ea n d l o n g e r e f f i c i e n tw o r k i n g t i m e s o f t h em a c h i n e s . ’

Z h a n g J i a n p i n gM a n a g e r , A r c h i t e c t D e s i g n& R e s e a r c h I n s t i t u t e ,B e i j i n g , C h i n a

‘

45In the colour segment the Océ tcs400, boththe printer and the printer/copier variant, hasalready built a clear market position, especiallyin Europe. Océ has therefore succeeded inbecoming the first supplier to incorporate theproven black-and-white productivity conceptinto a colour system as well. As its populationexpands further, this machine will in the nearfuture make an important contribution torecurring revenues. Although many users ofwide format printers are at the moment stillsticking with black-and-white printing on thegrounds of lower costs and high productivity,there is no doubt that colour will serve as acatalyst for future growth.

In the past year Océ was again officially recog-nised as the supplier with the most completeand best wide format offerings, as regards bothhardware and software and both in black-and-white and in colour. The authoritativeAmerican test institute bertl praised thequality and reliability of the tds series and theOcé tcs400 and pointed to the high standardof Océ service and the high level of customersatisfaction.

Trends In general the tds market will onlyshow very modest further growth in the yearsahead. Moreover, the growing exchange andarchiving of electronic information will in manycases lead to more decentralised printing, whichmeans that the emphasis will shift from big to smaller machines. The black-and-whiteprinting volume in specialised reprographicbusinesses is expected to increase further, so thatreplacement investments will be needed in thatsector. The ongoing advance of digitisation isleading to a decline in the volume of analogueprinting. In smaller organisations, however, theneed for analogue systems will provisionallycontinue to exist. The shift from black-and-white to colour is continuing unabated, bothfor printing, scanning and copying. Manyorganisations use combinations of colour andblack-and-white systems.

Strategy Despite limited market growth Océaims to grow further by means of productinnovation and greater distributive strength.This will allow Océ to further expand its alreadystrong position in Europe and the United Statesand to continue its expansion in Japan andChina and in various emerging markets.Marketing programmes focusing on customersatisfaction and on expanding the range ofproducts in combination with further intensivetraining of the sales and service organisationsshould result in an increase in market share.Océ is continuing, as before, to invest in prin-ters and scanners and in the software required toguarantee their best possible operation. A seriesof new systems and system and software optionsare scheduled for release in 2005. They includenew print management software versions forspecialised reprographic businesses and fororganisations which produce wide format printsin-house.


Market position Driven by the increasingdynamism in the advertising market, theDisplay Graphics Systems [dgs] business groupfocuses on the flexible and fast digital printingof posters, banners, billboards and numerousother wide format graphics products. In thismarket digital technologies were introducedonly a comparatively short time ago as areplacement for highly developed techniquessuch as silkscreen printing, photographicprinting, offset and traditional lettering. Sincethe value of digital products is becomingincreasingly apparent, this market is expected togrow fast. In Europe and the United States Océis one of the foremost suppliers, offering a rangeof advanced printers. In Japan Océ successfullystarted its display graphics business during theyear under review. In addition, via OnyxGraphics, Océ holds a leading position world-wide for the software-based control of displaygraphics printing systems.


Developments in 2004 On an organic basis,revenues of the dgs business group increasedslightly during the year. The main cause is thestill slow recovery of the advertising marketwhich was badly hit by the stagnation. Theintroduction of new products has strengthenedthe range but these only contributed to theresult in the second half of the year. Océ ismeanwhile concentrating on a furtheroptimisation of the portfolio with the emphasison offering complete applications in the form ofa combination of hardware, media, inks andexpertise.Over the past year Onyx Graphics again bookedexcellent results.

Trends The growth of the display graphics mar-ket as a whole is dependent on the developmentof advertising expenditure. Within the marketthe growth of the digital segment is compara-tively stronger, as digitisation is increasinglygiving rise to more productive, flexible and cost-effective production methods. Even though themarket is again beginning to grow slightly, thewillingness of customers to invest in completelynew digital production equipment is still low.The market is also highly fragmented both onthe customer side and on the side of the hard-ware manufacturers. Further consolidationtherefore seems likely.

Strategy Océ has built up a strong position indisplay graphics in recent years. dgs is focusingin full on expanding this position further. Theworld-wide sales and service organisations willmake a strong contribution to these efforts.Offerings to customers include a well-balancedpackage of hardware and software productsfeaturing the right ink-media combinations forspecific applications.The business group targets those segments inwhich the highest rate of growth is expected,notably in the mid-volume segment and in thearea of flatbed printers. Product offerings willalso be completed by adding strong partnerproducts.Synergy with the tds activities will be optimal-ly utilised, especially in the areas of sales andservice organisation and in technology.

Imaging Supplies

Market position Media for printers and copy-ing machines form an essential part of Océ’soverall product offerings. That close linkagedates back to the period when images were stillformed using chemicals. Since that time,however, Océ’s r&d has constantly concentra-ted on achieving the best possible interactionbetween hardware and media. That same exper-tise also forms the basis for a wide range ofspecialised media, for example for cad anddisplay graphics applications on Océ productsand on machines from third-party suppliers.The Imaging Supplies business group is activein the entire field of wide format and smallerformats [a3 and a4], both in plain paper and inspecialised papers and films. Right from theirlaunch Océ’s offerings of small format colourprinters [the Océ cps700, 800 and 900] werecompleted by a full range of specialisedmaterials. As a supplier of white bulk paper Océalso holds a relatively strong position in Europe.In the United States the business group is themarket leader in the black-and-white wideformat sector, which includes cad materials,whilst it is also strongly positioned in the [wideformat] colour market and in the market fordisplay graphics. Both in Europe and in theUnited States the business group is a leadingperformer in the areas of logistics and salessupport.

N o r d o s t s c h w e i z e r i s c h eK r a f t w e r k e a g [ n o k ] i s t h el e a d i n g e l e c t r i c i t y c o m -p a n y i n S w i t z e r l a n d . I t h a si t s o w n e x t e n s i v e d i s t r i -b u t i o n g r i d t h a t s u p p l i e s2 4 , 0 0 0 m i l l i o n k W h t o 2 . 8m i l l i o n p e o p l e e v e r y y e a r .I n h e l p i n g u s t o f i n d t h er i g h t s o l u t i o n , O c é e v e ns u p p o r t e d u s w i t h a w o r k -s h o p t h a t i n v o l v e d b o t h i ta n d e n d - u s e r s r i g h t f r o mt h e s t a r t . O c é a l s o p l a y e da d e c i s i v e r o l e a s f a r a st h e e n d - u s e r s a r ec o n c e r n e d , a s w e l l a sh a v i n g a m a j o r i n f l u e n c eo n o u r o w n i n t e r n a l i td e p a r t m e n t . T h a n k s t o t h eE n g i n e e r i n g E x e c p a c k a g ew e n o w h a v e a s o l u t i o nt h a t i s h i g h l y c u s t o m e r -f r i e n d l y, a s w e l l a s o n et h a t g r e a t l y s t r e n g t h e n sc u s t o m e r l o y a l t y. A n d t h a tp r o v i d e s u s w i t h b i gc o m p e t i t i v e a d v a n t a g e s . ’

A d r i a n B a u m a n nR e p r o M a n a g e r ,N o r d o s t s c h w e i z e r i s c h eK r a f t w e r k e a g ,B a d e n , S w i t z e r l a n d

‘

Developments in 2004 During the year underreview the sluggish recovery of the economy andanother fall in paper prices on the world marketwere factors that affected the revenues andprofitability of this sector. Against this back-ground the business group performed well,principally because of the investments that weremade in recent years and the continuedstrengthening of logistics systems. Despitelower revenues, the profitability of Océ’s acti-vities was not impaired.Though the volume of wide format plain paperand cad materials showed a world-wide decline,Océ grew its paper sales in terms of squaremetres. This growth in market share is largelyattributable to higher sales of materials for useon Océ’s own population of machines. Pro-active promotion of machine sales and pro-active sales support efforts helped to contributeto this. The quality of the materials and thelogistic performances also caused a number ofmajor trade partners in Europe and the UnitedStates to include Océ materials in their rangeunder their own name.

In the display graphics segment the expansionof the range resulted in a direct growth inrevenues, with double-digit growth in Europe.Supply coverage for both Océ machines andthird-party equipment increased substantially.The range of media and inks [also oil-based andsolvent-based] is now one of the most completein the industry.In the a4 segment the volumes in white bulkgrew marginally as compared to the previousyear. The range of media for the Océ cps700also proved to be a particular success. For thenew Océ cps900 a line of Machine Coated [mc]paper is being developed in close cooperationwith r&d and paper mills. The Océ cps900 isspecifically targeted at the printing industry,where this machine is expected to find wide-spread use in the printing of brochures insmaller print-runs.In the United States there has been a furtherexpansion of the activities in the area of smallformat specialities [including inkjet photopaper and overhead sheets] that are produced bythe company’s own Arkwright plant.

Trends The market for imaging supplies iscompetitive and fragmented. In view of thecurrent difficult economic conditions this willinevitably lead to consolidation, whilst theparties that are left will be forced to optimisetheir logistics process even further. The growthof the market will be stimulated by the ongoingprocess of digitisation, which is steadily gainingmore ground on the traditional printingtechniques. Technological know-how, but alsoexpertise in the area of sourcing, are vitalelements to ensure a good performance in thisenvironment. Océ possesses both of these.

Strategy The strategy of the Imaging Suppliesbusiness group is primarily focused on main-taining its prominent position as a supplier ofhigh-quality, specialised media for wide formatprinters in the tds and the dgs segments. Inaddition, the business group seeks to providemaximum support to the dds activities byoffering a complete and competitive range ofsmall format media. Thanks to its extensiverange of imaging supplies Océ is able toenhance the value of its integrated solutions forits customers.

47


50 A company’s success is governed by many fac-tors: for example, by the quality of the markets,by economic conditions and by the tradingclimate. Of the three factors just mentioned,not one can be influenced by the people whorun the business. Equally crucial for a company’s success, how-ever, are several factors that are often placedsomewhat less in the limelight: motivated andwell-trained personnel, a strong position withinsociety, unique technology, an efficient manu-facturing process and dedicated partners. Theseare factors that can be influenced and they aretherefore the elements within the businesswhich constantly receive maximum attentionand whose importance cannot be easily ignored. Naturally, a sound financial position belongs inthe list of these critical success factors, but thatis dealt with in ample detail elsewhere in thisreport.

Core values

Océ applies seven core values which are firmlyanchored within the business and which to-gether form the genetic code for Océ: the dna

that maps out how the company conducts itsactivities, not only in how its employees worktogether but also in its contacts with the outsideworld.

They serve as a benchmark for assessing thecompetencies of employees, and also for parts ofthe business operations. In all their contactswith the market, with partners, with customersbut also with their colleagues, Océ employeesare expected to adhere to these core values as thebasis for their day-to-day activities. Although the seven core values are in themselvesnot unique to Océ, they have not been chosenat random: they were selected by Océ employeesthemselves as the most important commonlyshared values for their business. They do nottherefore constitute rules or regulations, eventhough they can be used as such, but rather howour employees think what the character of Océshould be: putting the customer first, beingresult-driven, being quality-driven,entrepreneurial, innovative, behaving ethicallyand acting with respect for human values.If the customer is also systematically able torecognise these values, then the circle iscomplete and the objective has been achieved.

Employees

In the two years prior to the year to which thisreport relates a number of radical changes hadalready been implemented in the compositionand numbers of personnel as part of therestructuring of the business. During the yearunder review a start was made on relocating partof the assembly and manufacturing operationsto Central Europe and the Far East, which ledto the discontinuation of 175 jobs at themanufacturing facilities in Venlo. The processwas virtually completed during the past year.

Critical success factors

Put the customer firstBe result-driven

Be quality-drivenBe entrepreneurialBe innovative

Behave ethicallyShow regard for human value

Océ core values Focus

Style

Attitude

51


Table 9 Distribution of employees 2004 2003by geographical area

number as % number as %

United States 8,340 39 8,969 40The Netherlands 3,922 18 4,061 18Germany 3,028 14 3,063 14France 1,160 5 1,203 6United Kingdom 1,016 5 1,041 5Rest of Europe 2,879 14 2,903 13Rest of the world 970 5 964 4

Total 21,315 100 22,204 100

Table 10 Distribution of employees 2004 2003by type of function

number as % number as %

Business Services 6,693 31 7,149 32Sales 4,192 20 4,140 19Service 4,013 19 4,327 19Manufacturing & Logistics 2,512 12 2,514 11Accounting and other 2,037 9 2,146 10Research & Development 1,868 9 1,928 9

Total 21,315 100 22,204 100

52 In close consultation with trade unions and theworks council Océ acted energetically, but alsocarefully and with consideration for the interestsof the employees involved.Within the framework of Océ’s strategicobjective of boosting its sales and distributivestrength, last year saw a great emphasis onexpanding the marketing and sales organisation.In addition, the training of the sales organisa-tion was greatly intensified world-wide, in boththe wfps and the dds organisations. Almostall sales employees have taken part in trainingprogrammes aimed at boosting their ability togive advice and improving their market andproduct know-how and their insight into thecustomers’ document processes.Last year also brought the start of preparationsfor harmonizing the it support for Europe. For that reason a central support group will beestablished. This will have consequences for theit specialists who are currently active within thegroup companies.

Human resources policy

The Corporate Human Resources policyfocuses on three main tasks: on the develop-ment of leadership potential, on competencemanagement and on anchoring the Océ corevalues within the organisation.

Leadership The aims of the corporate leader-ship programme are to strengthen the leader-ship abilities, to retain critical skills within thebusiness and to train new management talent.As an initial step towards strengthening theleadership abilities ‘leadership labs’ were held inthe year. These are intensive [self-]assessmentprogrammes that serve as a basis for furtherpersonal development. During the past year theentire executive management took part in theselabs, as did a substantial proportion of themanagement teams. In 2005 the remainingmanagement teams and some of the middlemanagement will be taking part in a ‘leadershiplab’. In parallel with this, programmes havemeanwhile also been initiated for high poten-tials. Océ’s leadership programme is universallyrecognised as unique and expectations aretherefore high regarding the results it will bring.

Competence management Competencemanagement is aimed at raising the level ofprofessional performances, but also at accelera-ting professional development and at identify-ing and retaining [young] talent. It is foundedon identifying the specific roles required for aparticular working environment and the typesof behaviours, professional skills and competen-cies that are needed to fulfil these roles.Competence management has in recent yearsbeen introduced in the areas of sales, service andconsultancy via the Solution Delivery Process.During the year under review major initiativeswere launched to introduce the competencemanagement concept in other areas as well, forexample in purchasing, it and the financialdepartments. As from 2005 it will form a fullpart of the day-to-day activities.

The Young Océ Professionals programme wasalso launched during the year. As part of thisprogramme young and highly talented employ-ees work together [on a multidisciplinary basis]on future-oriented projects.

Océ’s core values The core values of Océ, asdescribed earlier in this chapter, were intensivelybrought to the attention of Océ employeesduring the year and were embedded within theirdaily working practices. Under the motto Focuson Professionals a wide variety of media andcommunication channels were used for thispurpose, including e-mail and web-video as wellas a dedicated website on which activities and‘best practices’ were posted. A newsletter wasalso published and regular meetings were heldwith the core values as their main theme. Thecore values are increasingly also forming part ofthe targets that managers set for themselves.Another thrust that has attracted attentionworld-wide is the Océ Corporate Core ValueAward, which is presented every quarter to theemployee who performs best in this area.


53Sustainable development

Océ and sustainable development Care forpeople, the environment and society is firmlyrooted in the Océ culture. Health, ergonomics,working conditions, product safety and thereduction of negative environmental impacthave traditionally played a prominent role andare therefore anchored in [policy] regulationsand control instruments. Océ is fully aware ofits social responsibility in an international wor-king environment that comprises a multitude ofcultural principles and customs. The formulation of policy principles and theprogress achieved in their implementation wereset out in the past year in the company’sCorporate Sustainability Report for the year2003. This report dealt with the activities of thetwo most important product manufacturingcentres in Venlo and Poing. For the 2004 repor-ting period the scope of the Océ CorporateSustainability Report will be extended toinclude the main international operationswithin the business. The basis for sustainabilityreporting is formed by the Global ReportingInitiative recommendations. For a number ofyears Océ has also subscribed to the principlesthat are laid down in the Global Compact of theUnited Nations. Another basic principle is thatOcé applies its own code of ethics, even wherethis goes beyond local standards and customs.The organisation of the company’s sustainablebusiness practices was further strengthened lastyear by raising the Corporate SustainabilityForum to an international level.

Human rights Throughout the world Océapplies high standards and values that stemfrom its deeply rooted tradition of respect forpeople. Within the framework of the un GlobalCompact these have also been explicitly formu-lated in a human rights policy that has beenpublished in the Océ Corporate SustainabilityReport. This policy, which comprises a decla-ration of human rights and the company’sresponsibilities in this area and a description ofhow compliance with the policy is monitored,clearly communicates Océ’s position on humanrights to people both inside and outside thebusiness. In the next few years this policy willgradually be structured further by anchoringwithin the organisation concrete proceduresand compliance rules for activities in the entiresupply chain.

The environment In various ways Océ protectsthe environment against the possible adverseeffects of its production processes or the use ofOcé products. A wealth of expertise has beengathered with regard to all relevant environ-mental aspects. As far as its products areconcerned, Océ uses a life cycle analysis as itsguiding principle during their development,manufacture and use and also in the processingand recycling of waste and residual materials.For example, Océ applies the concept of designfor re-use when developing its products, Océuses safe materials and processes and Océ giveshigh consideration to environmental aspectswhen making its choice of packaging materialsand means of transport. During the phase inwhich the products are used much attention isdevoted to minimising energy consumptionand to the processing of used consumables and,after completing their life cycle, machines areoften taken back by Océ and their componentsand durable parts are re-used.Environmental performances are measured onthe basis of environmental performance indica-tors. Each year these are analysed and comparedwith the objectives set out in the long termstrategy. These are strategic objectives, such asmaking efficient use of raw materials andenergy, increasing the percentage of materialsrecycled, cutting down on the amount ofpackaging and reducing emissions in the formof dusts, vapours and gases.


54 Working conditions and labour relations Océprovides a safe and proper workplace. Thisapplies to the company’s own employees but,because of the nature of the products, it appliesjust as much to the employees of customers whooperate Océ machines. Intrinsic product safetyis an important element in the lengthy list ofrequirements that Océ sets for its products, rightfrom the very first design stage. In most casesthese requirements go beyond the standards setin the [increasingly stricter] regulations ofvarious local governments. Monitoring groupskeep track of [local] legislation, identify futureregulatory developments at an early stage andforecast how Océ is placed to respond to these.Océ machines are designed to deliver constantlyoptimum performances in the hands of thosewho operate them. The basis is therefore formedby human factors because these are crucial tothe success of the most complicated processes. Itis no coincidence, therefore, that Océ machinesreceive awards at very regular intervals for theirergonomic design and ease of use. This, combi-ned with important aspects such as reliabilityand productivity, ensures that Océ machines aregiven high marks by their direct users. Océproducts are suitable for a broad group of users,and also for those with a physical handicap. Océproducts comply in full with the criteria set inthe u.s. Government’s Section 508 AccessibilityStandards.Océ provides equal opportunities for all em-ployees and makes clear agreements on workinghours and salary. Through training and educa-tion Océ ensures that employees are able todevelop themselves further and can thereforeplay their part in achieving the company’sstrategic objectives. Océ is an advocate of opencommunication with employees, as is forexample demonstrated via the European WorksCouncil. Océ does not tolerate forced labour orchild labour, also not on the part of its suppliers.

Society Océ’s basic principles with regard tosociety are set out in the Océ Policy Principles.All employees have been given a copy of thesePrinciples and are expected to comply withthem in full. The Principles include guidelineson integrity and social responsibilities and linkup with two of the seven core values identifiedby the Océ organisation: behaving ethically andshowing respect for human value.Océ provides support at both central and locallevel to a large number of cultural, charitableand sporting initiatives via a series of large andsmall official sponsorships, purchases of worksof art and donations. This emphasises Océ’scommitment towards the communities inwhich it operates.

Progress During the year under review Océ wasthe subject of studies by sustainability analystsfrom Triodos Bank and sns Asset Management.On the basis of these studies asn Bank, awholly owned subsidiary of sns Bank n.v.,added Océ to its list of preferred stocks forsocially responsible investment. Triodos Bankaccorded Océ the status of approved and eligiblefor ethical investment. During the past year Océwas also included in the Dow Jones sustainabili-ty index.

More details about Océ and corporate socialresponsibility can be found in the CorporateSustainability Reports for 2003 and 2004.


55Research & Development

Océ has a broad and robust technology port-folio and modern, well equipped r&d facilities.This enables Océ to develop products andservices of a high technological standard whichoffer great added value to the user. The needs ofthe user form the backbone of product develop-ment, which is also fuelled by the practicalexperiences of the thousands of sales staff andservice technicians who provide the productdevelopers with day-to-day feedback of what ishappening in the market. The developersoperate in centrally managed project groups inwhich all relevant disciplines are represented. In this way Océ can optimally harness all theknow-how, experience and skills available with-in the business to innovate its range of offerings. In 2004 Océ spent € 207 million on r&d. Thisis equivalent to 7.8% of revenues [2003: 7.7%].About 1,900 employees work in r&d, 500 ofwhom are involved in the development ofsoftware.

Organisation Océ’s r&d activities are locatedin six countries. The facilities in Venlo focus onthe development of cutsheet and wide formatprinters and scanners, strategic materials [tonersand photoconductors] and software. In Poing[Germany] the r&d activities concentrate onthe development of high volume printers andsoftware. North America is the home of ther&d facilities for display graphics wide formatcolour printers, which are headquartered in SanJosé [California] and in Vancouver [Canada],whilst Arkwright’s r&d department inFiskeville [Rhode Island] focuses on thedevelopment of specialised imaging media. InCréteil [France], Namur [Belgium], Konstanz[Germany] and in the us cities of Cleveland,Salt Lake City and Phoenix the company hasr&d centres for the development of specialisedsoftware.

Technology Océ’s technology portfolio, whichcomprises a great many of the company’s owninventions and developments, is efficientlydeployed to develop products and services thatlink up closely with the needs and wishes ofusers in the company’s selected markets. A goodbalance is always maintained between shortterm and long term development work. Whilstvaluable basic technology is further developedand applied in new machines, work is simulta-neously conducted to advance the [oftenlengthy] development of new and pioneeringtechnologies that will form the basis for futuregrowth.One example of these proven, but continuouslyupdated technologies is the CopyPress printingtechnique. In this the toner image is ‘pressed’directly into the paper; this is a reliable tech-nique that creates a crisp image. CopyPress isapplied in combination with the organic photo-conductor [opc] for monochrome prints but itis also used in combination with the DirectImaging Process [dip] technique for colourprinting. Both these processes were developedin Océ’s own r&d laboratories. dip is the keytechnology that is incorporated in the Océcps700 and its successors, the Océ cps800 andthe Océ cps900, a series that is still beingfurther expanded.In the development of colour printers for thewide format segment Océ is working togetherwith partners in the area of thermal inkjettechnology. Océ is also booking good progresswith its own unique variant.


56 For the very high volume continuous feedproducts Océ holds a leading technologicalposition, notably thanks to the quality andreliability that it offers. These systems can beflexibly used for spot colour applications and forthe printing of magnetically readable informa-tion. A new and unique technology [ColourBelt] has been built into a series of high volumemachines that were introduced during 2004and this technology improves the print qualityeven further. The addition of extra modules tothe existing machine also allows users to upgradeto full colour applications.Amongst the many specific applications thatOcé offers to its customers, a special position isoccupied by the systems for advanced datarecognition technology for applications such asbulk invoice processing.

Strategic materials Strategic materials form anessential aspect of Océ’s own technology. Thesematerials comprise black-and-white and colourtoners, organic photoconductors, processdrums and silicone materials. In combinationwith the machines in which they operate andthe related software, these materials createunique capabilities which clearly distinguishOcé’s products from those of its competitors.

Machines When developing new machines,Océ applies a number of key values:productivity, quality, ease of use, low total costof ownership, reliability and environmentalfriendliness. The graphic design of all softwareproducts is based on an integrated philosophy.This shortens the learning curve for the usersand substantially reduces the risk of errorsduring operation. In the area of man-machineinteraction Océ has therefore built up anexcellent reputation. In systems developmentthe primary focus is also on creating integratedoperational designs [Single Point of Operation].This allows the user to make sure that thevarious elements in a document process areefficiently managed.

Software Software plays a key role in the worldof digital technologies. Here, a distinction ismade between embedded software, whichgoverns how the machines operate, and appli-cation software, which gives the machines addedvalue for the customer. Software applicationsbasically constitute the link between themachine and its performances and the wishesand requirements of the user. With its strongemphasis on output management, Océ has inrecent years brought together an extensivecollection of software applications to form asingle integrated software package [prisma],tailored to the needs of specific users. In the yearunder review these programs were further har-monised. Océ holds a leading position in thearea of output management software.On the basis of the way in which customers useits machines, Océ focuses on two groups ofcustomers. One group of customers uses themachines as part of – and as a cost item in –their own [production] process: print-for-use.They are interested above all in a far-reachingreduction of the costs related to their coreactivities. Software is the key here because itallows them to concentrate as much volume aspossible on a single flexible printer which can becontrolled in a simple way. The essential aim isto achieve a simple, transparent workflow.


57For another group printing is the core activityand it has to generate maximum profit [print-for-pay]. For these customers Océ offerssoftware that enables them to supply a competi-tive and flexible product that helps them tostand out from their direct competitors. Thisrelates, for example, to the optimisation of theworkflow so that maximum high-quality outputcan be produced within a given period of time,even when this involves many separate jobsfrom different clients.

Océ’s software comprises workflow managementapplications [post-press, but also archiving anddata recognition and data capture], print serversand controllers. This software is not only extre-mely efficient at achieving the set objectives, butalso works together excellently with existinghardware and software systems from othersuppliers that are already installed in thecustomer’s premises. In practice this means aconsiderable cost saving in addition to asimplification of the working processes. Besidesthis, Océ software can function without havingto intervene in the operation of third-partysoftware.

Manufacturing and logistics

Manufacturing Over the past years the manu-facturing of machines at Océ, especially in theproduction facilities in Venlo, has undergone agreat change in character. The emphasis hasincreasingly been to shift from in-house manu-facturing towards outsourcing. Initially thisonly involved components but in recent yearscomplete modules have also been manufacturedexternally by a selected group of suppliers. Inessence, Océ’s actual machine productionbasically consists of high-grade assembly work.The step towards the outsourcing of a completemachine, as was initiated during the year underreview, is therefore not a very big one. The cru-cial element here is that the manufacturing ofmachines has to retain the same status withinOcé: in a single interrelated process that invol-ves r&d on the one hand and the sales andservice organisation on the other. This safe-guards the linkage and cooperation betweenr&d, manufacturing and service, which isessential for a fast and efficient production start-up but also of great importance for productimprovements.

A major development during the past year wasthe actual start of the outsourcing of completemodules and machines to partners in the FarEast. By having its manufacturing activitiescarried out in lower-wage countries, Océ canbring its manufacturing costs to the same lowerlevel as those of its competing suppliers in therelevant markets.When outsourcing, Océ makes use of the exper-tise and the networks of contract manufacturerswhich for quite some time now have alreadybeen supplying printer modules direct to thecompany’s assembly lines in Venlo. They alsohandle the manufacturing and sourcing ofrequired components and some of these compo-nents are already being manufactured in theregion. The quality is good and, despite thehigher transport costs, the cost price is substan-tially lower. The activities in the Czech opera-tion have also been expanded and more andmore components are being sourced in CentralEurope.


Outsourcing at this level obviously takes placewith the greatest care. For example, the modulesand machines whose manufacturing has beenoutsourced will still continue to be produced inVenlo for a certain period of time.Parallel to the outsourcing process an extensiveprogramme has also been started to achieve afurther streamlining of the supplier base forcomponents. In this case, too, considerations ofcost control will mean that a significant propor-tion of components will be sourced from low-wage countries. For numerous components,which can be regarded as commodities, this ispossible without any loss of quality.

Océ will continue, as before, to produce strate-gic materials such as process drums, toners andsilicone materials, mainly in its own factories in Venlo. These materials are becomingincreasingly more knowledge-intensive andcapital-intensive but, thanks to continuousimprovements in the Venlo operations, not onlyhas the useful lifetime of the products beenextended but there has also been an increase inmanufacturing efficiency. In 2004 a new plantfor the production of toner for the very highvolume VarioStream printers was constructedand came on stream in Venlo.Océ’s own manufacturing facilities are locatedin Venlo [the Netherlands], in Poing[Germany], Prague and Pardubice [CzechRepublic], in San José and Fiskeville [UnitedStates] and in Vancouver [Canada].

Logistics In the manufacture and supply ofmachines, service components and supplies Océhas to manage various internal and externallogistics processes that have considerable finan-cial consequences, for example the build-up ofinventories. Inventories are, to the extent thatthey are still needed, being concentrated inregional supply centres, which cover large areas[United States, Europe, Asia]. In the past yearsome of the strategic inventories were relocatedto the United States, leading to greater reliabili-ty of deliveries, which also has an extremelypositive effect on the reputation of Océ. To alarge extent the supply chain for servicecomponents is now centrally managed. In asubsequent step the smaller local inventorieswill also be brought within the group system.Thanks to centralised management [whichmeanwhile covers more than half of all inven-tories] local inventories can be smaller. Thisbrings a corresponding cost reduction andreduces the risk of products becoming unmar-ketable. The further development of this istaking place in parallel with the renewal of thesystems in the various countries and will take afurther two to three years to complete.Transport is the next step on the road towardsimproved efficiency. Océ’s total logistics costsare being accurately charted, as are the variouslogistics routes and the transport patterns thatare expected in the near future. Certainly in thesomewhat further future, fluctuations in marketdemand may have substantial consequences forlogistics, all the more so in cases where modulesand machines are assembled in various locationsaround the world. These complex logistics flowscan be managed by means of an even betterintegration of internal systems, especially wherethere is a need to bring the logistics andmanufacturing systems more rapidly into linewith market developments.

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Non-product related costs Apart from savingson the costs of transport and logistics services itis also possible to achieve sizeable savings onmany other non-product related costs viacentral purchasing, as was revealed in a world-wide survey. This applies in particular to itcosts, mobility and accommodation, but also tonumerous other smaller cost items. The yearunder review saw the start of a project that isaimed at achieving substantial cost savings inthis area over the next years.

Océ’s partners

Cooperation with partners is an integral part ofthe Océ business model. Reliable partnersenable the business to continue to concentrateon its core capabilities and core activities andthus keep pace with its, mostly bigger,competitors. Océ’s numerous partners make animportant contribution to the company’ssuccess.

Distribution In regions in which Océ does nothave its own sales channels the company workstogether intensively with independent localdistributors. In by far the majority of cases theseare energetic entrepreneurs who know the localmarkets better than anyone and position Océ’sofferings optimally in the market. Venlo andPoing therefore maintain close contacts withthese distributors and value added resellers toenable them to carry out their work in the bestpossible way. As they frequently also take care ofall the maintenance and servicing work, theyalso take part in the training and instructioncourses for the machines that they sell. Howevermuch Océ believes in the value of having itsown sales organisation, there are big areas in theworld in which Océ would not succeed in sel-ling its products in so many niche markets andremote areas without the help of its distributors.In a number of instances their activities havealso proved crucial in capturing a share of themarket. China and Japan are good examples.

Manufacturing Océ sources almost 95% of itscomponents, machine modules and, in theyears ahead an increasing proportion of itsmachines from a group of selected suppliers.These suppliers are involved in productdevelopment at an early stage. Océ provides theproduct specification; the partner is responsiblefor ensuring that the product can be manufac-tured on an industrial scale as quickly as pos-sible, and is also responsible for setting the rightprice, for quality and for on-time delivery.

Product development In the earliest stage ofproduct development Océ works intensivelywith universities and other knowledge centres.Because of this close contact Océ has continualaccess to new knowledge and, conversely, thescientific world is given insight at first hand intothe latest technological developments.In later stages of product development Océworks together with technological and systemspecialists and with suppliers of printer techno-logy and software. r&d assignments are alsocontracted out to public and private knowledgeinstitutes, such as tno in the Netherlands, theFraunhofer-Gesellschaft in Germany andvarious universities throughout the world. Thedevelopment of complete modules is alsooutsourced.

Leasing For the outsourcing of lease activitiesoutside of the United States Océ uses theservices of vendor lease partners. The partner in Scandinavia, Telia Finans ab, hasbeen acquired by De Lage Landen Internationalb.v. As a result, the cooperation with De LageLanden – which was already Océ’s partner inthe Netherlands, Belgium, Germany, theUnited Kingdom, France and Spain – has nowbeen further strenghtened.In 2004 a framework agreement was concludedwith cit for the outsourcing of the leaseactivities under a private label programme inSwitzerland, Australia, Italy, Central Europeand South East Asia.In the United States dll Financial Services, KeyEquipment Finance, Bank of America VendorFinance and CitiCorp are our funding partnersfor sales of lease activities.

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62 Corporate governance

Structure, policy and compliance Océ n.v. isan international holding company within themeaning of Article 153, para. 3b, Book 2 of theDutch Civil Code. This implies that share-holder rights are not restricted by the rules thatare applicable in the Netherlands with regard towhat is known as the ‘structure regime’.An alteration of the Articles of Association,which was approved at the ExtraordinaryMeeting of Shareholders held on September 8,2004, brought the company’s Articles ofAssociation into line with the ‘structure regime’and with the regulations on corporategovernance.Corporate governance is structured within Océby the legislation, jurisdiction and codes of bestpractices in the countries in which the companyperforms its activities.As a result the consequences of the implementa-tion of the Sarbanes-Oxley Act also made them-selves felt in 2004. This implementation isbased on regulations issued by the sec and onthe adaptation of the corporate governance codethat is applicable to companies listed onAmerican stock exchanges.Compliance with these regulations is hamperedby the fact that they were primarily drawn upfor American companies within the Americanjurisdiction.In the Netherlands the Dutch CorporateGovernance Code, which was published inDecember 2003 and which consists of 21principles and 113 best practice provisions, isapplicable. This code [the Dutch Code] cameinto force as from the financial year that com-mences on or after January 1, 2004 and wasgiven legal status with effect from January 1,2005. Publicly listed companies are thereforeobliged to include a paragraph in their annualreport indicating the way in which the companyapplies the Dutch Code.

Océ had already included this paragraph in itsannual report for the 2003 financial year andthe subject was dealt with at the Annual GeneralMeeting of Shareholders on March 2, 2004 andat the Extraordinary Meeting of Shareholderson September 8, 2004. This information isavailable on the Océ website [www.oce.com].

The Board of Executive Directors and theSupervisory Board of Océ subscribe to the basicprinciple that was applied when drawing up theDutch Code: a company is a long-term form ofcollaboration between the various parties invol-ved. These parties, the stakeholders, are thegroups and individuals that directly or indirectlyinfluence [or are influenced by] the achieve-ment of the company’s objectives and includesemployees, shareholders and other providers ofcapital, suppliers and customers, but alsogovernment and civil society. The Board of Executive Directors and theSupervisory Board have overall accountabilityfor achieving the right balance between theseinterests, with a view to ensuring the continuityof the company.An explanation is given below of the areas inwhich the principles and best practice provisi-ons of the Dutch Code are departed from asregards those that refer to the Board ofExecutive Directors and the Supervisory Board.This relates to the following provisions in theDutch Code:ii.1.1 Appointment period of a maximum offour years for executive directors.ii.2.3 Shares granted to executive directorsshould be retained for a period of at least fiveyears.ii.2.7 Severance pay for executive directors issubject to a maximum amount.iii.3.4 Maximum number of supervisorydirectorships per person.iv.1.1 Limitation of the right to make a bindingnomination in cases of appointment anddismissal of executive directors and supervisorydirectors.iv.1.2 Linking the voting right on financingpreference shares to the fair value of the capitalcontribution. iv.3.1 Prior announcement of all presentationsto [institutional] investors, whilst offering allshareholders the possibility of taking part inthese in real time.

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With regard to the other principles and bestpractice provisions of the Dutch Code that areaddressed to the Board of Executive Directorsand the Supervisory Board, Océ has noted thatthese were already being applied or Océ hastaken steps to adopt these to the extent that theyare applicable to Océ, subject to allowancebeing made for existing and future legislation.Last year’s report mentioned a departure frombest practice provisions ii .2.1 and ii .2.2 con-cerning the granting of unconditional optionsto directors and the related performance criteria.This departure no longer applies, as the optionplan has been replaced by a share plan [see page64]. The departure from provision iii .3.4 concernsone member of the Board of SupervisoryDirectors who will reduce the number ofsupervisory directorships in the course of the2005 financial year.With regard to departures from the provisionsiv.2.2 and iv.2.8 of the Dutch Code that relateto the issue of depositary receipts for shares, seepage 67 of this annual report, where anexplanation is given about depositary receiptsfor financing preference shares that do not havea stock exchange listing.

Compliance with and application of theDutch Code Each year Océ will explain themain outlines of its corporate governancestructure in the annual report and will submitany substantial changes in this to the GeneralMeeting of Shareholders for discussion.More information on corporate governance andon the related rules and regulations is availableon the Océ website [www.oce.com] undercorporate governance.

Board of Executive Directors

The Board of Executive Directors consists ofthree members who are appointed by theGeneral Meeting of Shareholders. In the case ofeach appointment the holders of the priorityshares have the right to draw up a bindingnomination, which can be cancelled by a resolu-tion of the General Meeting of Shareholdersthat has been adopted by a majority of at leasttwo-thirds of the votes cast, provided that suchvotes represent at least one-half of the issuedshare capital. If no binding nomination hasbeen drawn up, the General Meeting is free inits choice. The Supervisory Board appoints thechairman of the Board of Executive Directorsand decides on the allocation of the tasks of theExecutive Board members in consultation withthe Board of Executive Directors. Regardless ofthe allocation of tasks the Board of ExecutiveDirectors acts as a body with collectiveresponsibility.Best practice provision ii .1.1 introduces the four-year appointment period for executive directors.This regulation does not correspond to the contract-ual situation of the executive directors currently inoffice. Océ will respect this contractual situationand will await future legislation in this area. Forseverance payments made in the event of involun-tary dismissal as meant in ii .2.7 Océ has to dateapplied a policy of paying an amount of compen-sation that is reasonable on the grounds of the con-tractual situation, social developments and caselaw. For such time as no change is made in thestatutory regulation of the employment conditionsfor executive directors Océ also intends to continueto apply this policy in future.

Remuneration of the Board of ExecutiveDirectors The Supervisory Board fixes theremuneration of the members of the Board ofExecutive Directors on the basis of the advice ofthe Remuneration Committee.The remuneration policy is aimed at attractingand retaining the best executives needed tomanage a publicly listed company that operateson an international scale in the area of techno-logical activities. This policy was dealt with atthe Annual General Meeting of Shareholdersheld on March 2, 2004 and at the ExtraordinaryGeneral Meeting held on September 8, 2004.Shareholders approved this policy including theshare plan. This remuneration policy, which isaimed at supporting both the short term andthe long term objectives of the company, was

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implemented with effect from January 1, 2004.The basis is formed by a remuneration which,on balance, corresponds to the median remune-ration level of a reference group of companieswhich are listed on the aex or Midkap indexand which, in terms of size and complexity, arecomparable to Océ. This reference group con-sists of asml, Buhrmann, dsm, Getronics,vnu, Wolters Kluwer and asmi.The remuneration package is made up of thefollowing components: base salary, variable pay[i.e. short and long term bonus] and pensionscheme. For Dutch members of the Board ofExecutive Directors the Dutch labour market isused as the frame of reference and for non-Dutch members the market conditions of therelevant country.

The total package [base salary, variable pay andpension scheme] is determined on the basis ofthe median level in the reference group. Variablepay is considered by the company to be an im-portant part of the total package. The perform-ance criteria to which short term and long termbonus are linked are focused on value creationand on increasing shareholder value over theshort and longer term respectively.

The remuneration package of the members ofthe Board of Executive Directors is structured asfollows:| Base salaryThe level is at the median of the above-mentioned reference group of comparablecompanies. In 2004 the individual remunera-tion of the members of the Board of ExecutiveDirectors remained the same as in 2003.| Variable payShort term bonus For the 2004 financial year thebonus scheme was one in which the perform-ance targets for the Board of ExecutiveDirectors were related partly to the Group’sfinancial results, such as net income and returnon total assets [roa], and partly to individualtargets, such as defining and implementingstrategy, industrial policy and restructuringoperations. With effect from 2005 the bonusscheme will be linked solely to financialperformance criteria, i.e. net income and roa.The maximum level of the bonus that can beearned has been fixed at 50% of base salary. The

extent to which the set targets have beenachieved is partly determined on the basis of theannual financial statements as verified by theexternal auditor.Long term bonus With effect from 2005 theexisting annual Stock Option Plan will bereplaced by a Share Plan that will be linked toperformance criteria. These are focused in fullon creating shareholder value, i.e. share pricegains plus dividend. Each year a three-year cyclewill start, whilst performances will be measuredeach time at the end of the period by compari-son with the following peer group of Europeantechnology companies that have a comparablebusiness model: Agfa, Akzo Nobel, asml,asmi, dsm , Heidelberger Druck, Infineon,Philips and Stork. The position that Océoccupies in the peer group will in each casedetermine the number of shares awarded. Theshares awarded at the end of a three-year cycleshould be retained for a maximum period ofthree years.Océ considers that this period, which is shorterthan that recommended in best practice provisionii .2.3, is justified because of the fact that the sharesthat have been awarded can only be sold six yearsafter the commencement of a plan.

For an overview of the individual remunerationof the members of the Board of ExecutiveDirectors see pages 90 and 91 of the annualreport. As at the end of the financial year themembers of the Board of Executive Directorsheld no ordinary shares in Océ and, apart fromthe options they would be eligible to receiveunder the Stock Option Plan, no rights tooptions listed on the Euronext OptionsExchange. As regards the duration of employmentcontracts of members of the Board of ExecutiveDirectors, company policy is that these areentered into for an indefinite period or for aspecific period until the customary retirementdate. The existing contracts are subject to aperiod of notice of six months.

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Pension scheme With effect from January 1,2003 the pension scheme for the Dutchmembers of the Board of Executive Directors,which was based on a defined-benefit system,was modified. It was replaced by a combinationof a defined-benefit system, which offers amaximum pension salary of € 237,952, and adefined-contribution system for the salary inexcess of that amount, which means that thecompany no longer has any back service liabili-ties. For non-Dutch members of the Board ofExecutive Directors the pension system of therelevant country will be applicable.An overview of the accrued pension entitle-ments can be found on page 91.The related financing costs are shown on page90. For members of the Board of ExecutiveDirectors the contractual retirement age is 62years and for the chairman 60 years. No con-tractual arrangements have been made inrespect of early retirement.

Supervisory Board

The Board of Supervisory Directors currentlycomprises six members who are appointed inthe same way as the members of the Board ofExecutive Directors. The Supervisory Boardsupervises the policy of the Board of ExecutiveDirectors and the course of business in thecompany and the activities relating thereto. TheSupervisory Board is supplied in a timelyfashion by the Board of Executive Directorswith all information that it requires for theperformance of its task.The Supervisory Directors appoint a chairmanfrom their membership.

Profile of the Supervisory Board In consulta-tion with the Board of Executive Directors, theSupervisory Board has drawn up the followingprofile for its own composition: The Boardconsists of at least three and at most eightmembers. The members should operate inde-pendently of and critically with regard to eachother, based on a good relationship of mutualtrust. They should be experienced in themanagement of an international, publicly listedcompany. The members should have sufficienttime available to fulfil the function of Super-visory Director. As to ensure continuity a spreadin ages is aimed at.

Endeavours are made to ensure a broad repre-sentation of know-how and experience in one ormore of the disciplines that are relevant to Océ,in particular: r&d, the production of advancedmachines and materials, international mar-keting of high-value products and services, theenvironment, finance, government policy,human resources and social policy. This outlineprofile is periodically evaluated and adaptedwhere necessary. In doing so, the factors that aretaken into account include developments in thenature and the size of the company and itsbusiness activities, the degree of internationali-sation, and the extent of the specific risks overthe medium and long term.

Supervisory Board committees In practice thefollowing committees operate at Océ:

Selection and Nomination Committee This selectsand nominates candidates for appointment as amember of the Board of Executive Directorsand as a member of the Supervisory Board.At periodic intervals this committee also assessesthe functioning of individual supervisorydirectors and executive directors.This committee consists of Mr. J.L. Brentjens,chairman, Mr. F.J. de Wit and Mr. J.V.H.Pennings and, as an advisory member, thechairman of the Board of Executive Directorssupported by the director Corporate Personnel& Organisation.

66 Remuneration Committee This committeeadvises the Supervisory Board on mattersrelating to the remuneration of the members ofthe Board of Executive Directors, draws up theremuneration report as referred to in bestpractice provision ii .2.9. of the Dutch Codeand monitors and evaluates the remunerationpolicy for the managing directors of the OcéGroup. It consists of Mr. F.J. de Wit, chairman,Mr. J.L. Brentjens and Mr. J.V.H. Pennings. It is supported and assisted in its work by thechairman of the Board of Executive Directorsand by the director Corporate Personnel &Organisation. Decisions on the level of remu-neration including the Océ Share Plan and thegranting of shares fall within the competenciesof the entire Board of Supervisory Directors.

Audit Committee This committee has asupervisory task as regards monitoring theintegrity of the company’s financial reportingand as regards risk management. Thecommittee was formally established in October2002 and has its own charter which complieswith the requirements set by both the DutchCode and the American Sarbanes-Oxley Act.The members of this committee are Mr. M. Arentsen, chairman and financialspecialist, Mr. P. Bouw and Mr. F.J. de Wit.

The role and powers of these committees arefurther defined in regulations for these commit-tees which have been published on the Océwebsite.

Remuneration of the Supervisory Board In1998 the General Meeting of Shareholders fixedthe remuneration of the Supervisory Board at € 40,840 for its chairman and € 27,227 for itsmembers. The remuneration for any financialyear is automatically increased if the cbs PriceIndex figure for household consumption inSeptember of the preceding year is at least 10%higher than the index figure that was last used asa criterion. This increase corresponds to thepercentage increase in the most recentlypublished index figure. No further payments aremade to persons who are members ofcommittees. For 2004 the remuneration amounted to€ 46,355 for the chairman and € 30,903 for themembers. The total remuneration for the 2004 financialyear of the present and former members of theSupervisory Board amounts to € 222,281[2003: € 221,374]. As at the end of the financialyear the members of the Supervisory Board held2,969 ordinary Océ shares [2003: 2,969] andheld no rights arising from options listed on theEuronext Options Exchange.

Transactions involving a conflict of interests

During the financial year no transactions asreferred to in best practice provisions ii .3.4,ii .6.3 and ii .6.4 took place involving a conflictof interests between directors, supervisorydirectors or natural and/or legal persons holdingat least 10% of the shares in the company.

General Meeting of Shareholders

A General Meeting of Shareholders is held eachyear. Other meetings of shareholders may beheld at the request of the Board of ExecutiveDirectors, the chairman of the SupervisoryBoard or two Supervisory Directors.Shareholders who represent at least 10% of thecompany’s issued capital may also convene ameeting.

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67The agenda for the meeting is drawn up by theparty that convenes the meeting. Shareholderswho individually or jointly represent 1% or avalue of € 50 million of the issued capital maysubmit proposals up to thirty days prior to themeeting. All shares carry a voting right pro ratato the nominal value of such shares.Resolutions are adopted by an absolute majorityof votes, except in those cases where a qualifiedmajority is prescribed by law or in the com-pany’s Articles of Association.

Capital and shares The company’s authorisedcapital consists of ordinary shares, priorityshares and preference shares. For details of thecomposition of the authorised capital and anexplanation of the various classes of shares inissue, see page 118 of this annual report.In best practice provision iv .1.1 it is proposed thatthe right of the priority shareholder to draw up abinding nomination for the appointment of execu-tive directors and supervisory directors should belimited. Océ does not intend to apply this provision.The right to draw up a binding nomination formsan essential part of Océ's protective structure. Theaim of this structure is to enable the company toprotect itself against a hostile takeover, i.e. atakeover on which no agreement has been reachedwith the Board of Executive Directors and theSupervisory Board. Océ can only operate optimally in a market inwhich a level playing field exists between theplayers. The players come from various jurisdic-tions, such as the European Union, where theabsence of a level playing field in the area of anti-takeover measures became clear during the discus-sions on the introduction of the 13th Directive. In addition, they come from the United States,Central Europe and the Far East. Companies fromthese countries, too, generally have effective meansof protection at their disposal.

In order to continue operating in this market, Océwants to maintain its protective structure, whichwas built up carefully in the past and with theapproval of shareholders, so that the interests of allstakeholders can be scrupulously kept in balance.For such time as the legal framework permits this,Océ will continue to make use of this .Unlisted depositary receipts for financing pre-ference shares form part of Océ’s capital. Upon theintroduction of these shares careful attention waspaid to the matter of the dilution of voting rights ascompared to the ordinary shares. In connectionwith this it was decided at the time to opt for theissue of depositary receipts [certification] and tostructure the composition of the board of the TrustOffice in such a way that one director is appointedby the meeting of the holders of depositary receipts,one by the Board of Executive Directors of thecompany, and three by the General Meeting ofShareholders.This tailor-made construction was introduced atthe time with the approval of the shareholders’meeting and was in line with the corporategovernance recommendations that were applicableuntil recently. Consultation has been held with theholders of depositary receipts for these financingpreference shares and also with the Trust Office onthe application of best practice provisions iv .1.2[voting right on the basis of fair capitalcontribution] and iv .2.1 to iv .2.8 [compositionof the Trust Office and the granting of votingproxies to holders of depositary receipts]. None ofthe parties concerned can currently see the need tomake any changes in the existing construction.Another aspect that plays a role in the case of thefinancing preference shares is the introduction ofifrs, as a result of which the capital contributionmade via these shares is classed as borrowings. Thisis at odds with the legal status of share capital andwith its related risk profile. Talks are being heldwith the holders of depositary receipts to find anacceptable solution for this problem.

Management aspects

68 Proxy solicitation Since the 1980s Americaninstitutional investors have been activelymaking wide-scale use of proxies to participatein the decision-making at the General Meeting.As from December 1999 it has been legallypossible in the Netherlands to use a record date,which brings a considerable reduction in theperiod during which shareholders do not havetheir shares at their disposal because those shareshave to be placed in deposit up to and includingthe date of the General Meeting.The General Meeting of Shareholders had givenauthorisation for the use of this record dateuntil March 7, 2006. The ExtraordinaryMeeting of Shareholders that was held onSeptember 8, 2004 approved the inclusion ofthis authorisation in the company’s Articles ofAssociation, which means that it is valid for anindefinite period.

Dividend policy The dividend policy appliedby Océ – as approved by the General Meeting ofShareholders on March 2, 2004 – is todistribute about one-third of the net incomeattributable to holders of ordinary shares to thisclass of shareholders.The resultant retention of two-thirds of netincome then ensures that the required rate ofgrowth can be achieved by the company, whilstsimultaneously maintaining the requiredbalance-sheet ratios. In addition, Océ’s policy isthat a reduction in the dividend per ordinaryshare will not be made in the event that the netincome is not sufficient to implement thedividend policy. The latter has been the case inrecent years. The dividend policy will be re-evaluated after the sale of the existing leaseportfolio and after the resultant actions havebeen completed.

Issuing policy Each year the General Meetingof Shareholders has given its authorisation forthe issue of shares and for the limiting or preclu-sion of the related statutory pre-emptive right.This item on the agenda is accompanied eachyear by an explanation of the purposes andrestrictions that the Board of ExecutiveDirectors and the Supervisory Board will abideby if they make use of the authorisation that hasbeen granted.

Investor Relations [ir] policy and commu-nication with shareholders Océ pursues anactive ir policy aimed at providing shareholderswith regular and extensive information aboutdevelopments within the company. The ceo

and the cfo have primary responsibility forrelations with shareholders, other providers ofcapital, their intermediaries and financialjournalists. For more detailed informationabout Océ’s ir policy see page 125 of the annualreport.Chapter iv.3 of the Dutch Code deals with theprovision of information to and the logistics of theGeneral Meeting of Shareholders.In line with the regulations relating to price-sensitive information, Océ shareholders and allother parties in the financial market, alsoincluding potential shareholders, are providedwith information simultaneously and on the basisof equality.Contacts with the media and with financial ana-lysts are handled carefully and the independence ofanalysts is respected. Important publication datesfor results are announced in advance whereverpossible. Presentations given during the explana-tory comments on the six-monthly and annualresults and tele-conferencing meetings on the firstand third quarter results are posted on the Océwebsite.These presentations are made available viawebcasting for wider groups of interested parties.

Management aspects

69Risks and risk management

Market risks

The economic cycle Océ’s revenues originatefrom machine sales, software and professionalservices [non-recurring] and from service,materials, rental, interest and business services[recurring].The split between non-recurring and recurringrevenues in 2004 was 28:72.The relationship between non-recurring andrecurring revenues, which in the past showed atime-lag of six to twelve months [before recur-ring revenues followed the trend in non-recurring revenues], was less marked in 2004.Whereas the growth in revenues from sales ofmachines, software and professional services hasbeen positive since the fourth quarter of 2003,the aggregate revenues from maintenance,supplies, rental, interest and business servicesremained below those of the previous year.

In Wide Format Printing Systems, whererecurring revenues declined organically by3.7%, the decrease was attributable in full tosales of media and to the lower interest fromlease activities. It should be noted here that media, specificallypaper, is focused on profit and not on revenues.Revenues from maintenance and toner wereorganically higher than in the previous year. Inwfps, therefore, the relationship [non-recur-ring/recurring] is intact.In Digital Document Systems recurringrevenues were organically 3.6% lower than inthe previous year. In dds different factors play arole than in wfps. These factors have an impacton recurring revenues, especially with regard tomaintenance:| Since 2002 the number of machines installedin the low volume segment has decreasedsharply [–25,000 machines].| The population of analogue machines isdecreasing rapidly and this decrease has not yetbeen fully compensated for by the growth indigital products.

The renewed product portfolio in DigitalDocument Systems and the expected growth inthe sales of printing systems will lead to agrowing population of digital machines andhigher print volumes. This forms the basis forour confidence that the trend in recurring reve-nues will be turned around in a positivedirection. We expect this to take place in thecourse of 2005.

On the cost side susceptibility to the impact ofthe economic cycle is limited by contracting outthe manufacture of components and modules tothird parties.The outsourcing of activities to the Far East alsolimits the foreign exchange risk, as the servicessupplied are paid for in us dollars. In addition,some of the personnel in the manufacturinglocations are temporarily hired, which providesgreater flexibility. The logistics activities are alsolargely outsourced.On the other hand, r&d activities will not bedecreased, even in a declining economy.The marketing and sales costs will also increasebecause Océ is continuing to invest in distri-butive strength. The general administrativeexpenses are only flexible to a limited extentwithin the Océ business model. The foregoing meant that, on balance, goodresults were achieved in most sales companies in2004. In the manufacturing locations under-utilisation losses were still incurred, albeit to alesser extent than in 2003 thanks to the growthin machine sales.For Océ, therefore, revenues growth is one ofthe most important elements in the achieve-ment of its financial objectives.

Management aspects

70 Competitive position In terms of size Océ is arelatively small player compared to its directcompetitors. In various sub-markets, however,Océ holds a leading position. The difference insize between Océ and its main competitors has adirect influence on the company’s competitiveposition. Bigger companies with a larger r&d

budget are, in theory, more resilient in the eventof setbacks in product developments and inview of Océ’s size, investments and acquisitionssoon have a major impact on the results.The answer to the above risks is to maintain astrong focus. Océ concentrates on those areasand activities in which, given the know-howand capabilities it possesses, it has the biggestchance of success. In the markets in which thecompany operates, endeavours are made toachieve a top-three position. In segments wherethis does not seem attainable, Océ only partici-pates if this will also be possible on a profitablebasis over the long term.Océ's competitive strength hinges on its abilityto put distinctive systems on the market andthis is the reason why Océ concentrates mainlyon professional markets that set high require-ments in terms of quality. It does this principal-ly by offering technological concepts that it hasdeveloped itself. The most important elementsof these are reliability, productivity, durability,ease of use, environmental friendliness and alow total cost of ownership. As in 2003, the year2004 was a very successful one in terms of newproducts, which are described in this annualreport under the activities of the StrategicBusiness Units.

The Océ business model is founded on adifferentiated, in-house technology portfolio incombination with the company’s own directsales and service organisation. Almost 10% ofall company personnel work within r&d . Inaddition, about 15,000 Océ employees are inconstant contact with customers: 4,200 in sales,4,000 in service and 6,700 in business services.The interaction between r&d and the directsales and service organisation is crucial for thequality of the products and services.

Operational risks

Partners For Océ, working together with thirdparties is an essential part of company strategy.In the case of manufacturing Océ fulfils anoverall management function. Selected partnerssupply components and modules in accordancewith specifications that have been preciselydefined by Océ and these partners are involvedin product development at an early stage. Some95% of the components used in Océ productsare manufactured in this way and an intensiveinteraction with the suppliers provides aguarantee of quality.Strategic components such as process drums,organic photoconductors, silicone materials andtoners are manufactured by Océ itself.During the year under review part of the manu-facturing activities for complete machines andmodules was transferred to the Far East butinitially this has remained limited to the placingof production work with contract manufac-turers. These partners have shown that they canachieve the sought-after reduction in manu-facturing costs without any loss of productquality. As a result of this relocation of activitiesgreater attention has been focused on logisticsand cooperation with external logisticsspecialists has been further intensified. Deliveryreliability, delivery speed and costs will continueto be kept under control thanks to this closecooperation.

Management aspects

71Health, safety and the environment Océ setsthe highest demands as regards the safety andenvironmental aspects of its products. Before aproduct is released for manufacture and sale, itmust amply comply with the internationalrequirements that are in force in the areas ofsafety and the environment. The safety andenvironmental risks during the production ofmachines and supplies are kept to a minimumin their size and nature. The company regularlyconducts risk assessments and evaluationsaimed at identifying potential risks and takingappropriate measures in good time. Priority isalways given to the health and safety of Océemployees and of its customers.The sustainability report that was issued in2004 deals in further detail with how these risksare minimised.

Technological risks

Research & Development [r&d] r&d is oneof the critical success factors for the company.The development of new technologies andproducts can take between five and ten yearsand this involves high levels of investment and alow tolerance for failures or for the lateintroduction of new products.In recent years Océ has spent about 7% ofrevenues each year [2004: 7.8%] on r&d . In absolute terms this is still a substantiallylower amount than a number of the company’scompetitors spend on r&d . Océ must thereforemaintain a tight focus on developing technolo-gies that will be successful in the future and onentering into effective alliances with thirdparties. The interaction between hardware and softwareis one of the major preconditions for ensuring amanageable document flow and consequentlyin r&d about 25% of the employees arecurrently working on software solutions thatlink up closely with developments in hardware.In 2004 this resulted in a software portfolio thatis in a class of its own.

Product portfolio Océ’s product portfolioconsists of black-and-white and colour printersand copiers for small and wide formats,scanners and software. The market for black-and-white printers has reached maturity interms of technology and as a result productdevelopment focuses on aspects such as cost-price, total cost of ownership, operationalreliability, environmental friendliness, ease ofuse and productivity. Major technologicaladvances are not called for in the black-and-white sector; it is more a matter of optimisingthe existing technologies. Océ invests sufficientr&d resources to maintain and improve itscompetitive position in black-and-white.The most important future trends are the shifttowards colour applications, high volumeproduction printing and document manage-ment software. Most of the r&d resources aretherefore devoted to these technologies.The challenges for Océ are to optimise theeffective timing of product launches, to improvethe functionality and cost-price of machinesand to offer advanced application software. Incombination with business services andprofessional services, Océ is in the best possibleposition to offer total solutions for documentmanagement problems thanks to its range ofhardware and software.

Financial risks

Leasing In 2004 the outsourcing of the leaseactivities was further accelerated. Outsourcing is done by placing new leasecontracts direct with third parties, whilst theexisting lease portfolio is being sold on a non-recourse basis. In the United States this is takingplace via a captive lease company, Océ-FinancialServices, Inc., which itself carries out theadministration and collection of accountsreceivable on behalf of the funding partners.In Europe and the rest of the world it is beingdone by using vendor lease partners via a privatelabel concept in which the vendor leasecompany takes over all the related activities.

Management aspects

72 The return on assets [roa] of the lease activitiesis between 7 and 8% and in view of Océ’s ob-jective of 12% roa, this is structurally too low.The transfer of the lease activities will have theeffect of depressing the net results but this effectwill have to be offset by making effective use ofthe funds that are released.As a result of the outsourcing of the leaseportfolio, profitability [roa/roe] will in duecourse increase because the balance sheet will beshortened and capacity will be created forfinancing new activities that bring a higherreturn. The debtors risk linked to the transferred leaseactivities will no longer exist and part of thelease activities [approximately € 225 million]will not be sold. The debtors risk in respect ofthese retained leases is expected to be higher,which means that the provision for doubtfuldebtors for financial leases will increase inpercentage terms.Leasing generates a very stable flow of revenuesand the volatility of Océ’s results will thereforeincrease as a result of the outsourcing of thelease activities.In 2005 the effect of the lower lease revenueswill still be made good in part by book profitson the sale of existing lease contracts.

Foreign exchange risks/interest risks Océachieves some 40% of its revenues within theEuro-zone and 60% outside it. Competingsuppliers of relevance for Océ are mainly basedin the United States and Japan. The prices thatOcé charges its customers for products andservices are denominated in the customers’ localcurrency and the biggest possible proportion ofrelated costs is also incurred in that local curren-cy. Since the manufacture and development ofnew products mainly takes place in the Euro-zone, a foreign exchange risk arises in respect ofthe flow of goods from the Euro-zone tocountries outside it.Because of the transfer of part of the manufac-turing activities to the Far East the net level ofthe dollar exposure will decrease, since paymentfor these goods will take place in dollars. At Océ net currency flows [transaction expo-sure] are the subject of an active foreignexchange management policy implemented inclose consultation with the Board of ExecutiveDirectors.For many years it has been company policy toalways manage the 12-months position of theus dollar and the pound sterling on a roll-overbasis, with hedging being applied up to amaximum of 80% of the net transactionexposure. At the balance sheet date the contract value ofthe forward foreign exchange contracts was € 225 million. The policy that is pursuedprovides effective cover for the transaction riskover the coming 12 months, but a continuedstrong euro will have a negative effect on Océ’sresults in view of the limitation of the periodduring which hedging takes place.Currency translation exposures are not hedged,neither for local income nor for equity positionsoutside the Euro-zone. This risk is regarded asbeing an inherent part of doing business as amultinational company.

Management aspects

73Interest risks relate to the possible mismatch inexposures to fixed interest rates. Fixed interestrevenues are generated by lease and rental con-tracts, whilst fixed-interest charges arise fromthe financing of these contracts. The extent towhich this risk is hedged depends on the desiredrisk profile.Due to the outsourcing of the lease activities theinterest risk has been significantly reduced.The interest policy was the subject of a thoroughanalysis in 2004 against the background of thesale of the lease contracts during the year. Theinterest policy with regard to leases on thebalance sheet has remained unchanged and thechanges made in the interest policy are focusedin particular on the newly created situation inwhich a large proportion of the interest risk ishedged by equity and liquid funds.

International Financial Reporting Standards[ifrs] For financial years commencing on orafter January 1, 2005, all European publiclylisted companies have to report on the basis ofifrs.Starting in the 2006 financial year Océ willtherefore draw up its annual financial state-ments and quarterly reports on the basis of ifrs

and therefore the ifrs opening balance sheetwill be drawn up as at December 1, 2004.

Because of Océ’s listing on nasdaq and itsfiling with the sec in the United States, asmuch convergence as possible will be soughtwith the American accounting principles [us

gaap] in those cases where ifrs allows a choiceto be made.Océ is well on schedule with the introduction ofifrs: the relevant standards that do not conflictwith the current Dutch accounting principles[Dutch gaap] were implemented as much aspossible in the 2004 financial year relating inparticular to balance sheet classifications. Inaddition, existing rules have been tightened upbut the impact of this was limited.Thanks to this strategy it is possible to minimisethe number of reconciliation items needed tomove from Dutch gaap to the ifrs openingbalance sheet. None the less this ifrs openingbalance sheet will include a number of itemswhich conflict with Dutch gaap and whoseeffect may be material. This relates in particularto the valuation of pension liabilities [reset], thevaluation of option and share plans and finan-cial instruments. At the moment it is not pos-sible to give an indication of what the impact ofthis will be.In the 2005 financial year Océ will publish theifrs opening balance sheet as well as restatedquarterly figures under ifrs.

Management aspects

Influence of principal risk factors on the results operating income net income balance sheet total

for 2005 [changes compared to 2004] › € million › € million › € million

Foreign exchange effect [€ 1 = 2004: $ 1.23; 2005: $ 1.40] –13 –7 –50Lease receivables at end of 2005: € 225 million *–29 *–14 –178Increase of 5% in revenues of dds and wfps +29 +19 +34

* The book profit on the sale of the existing lease portfolio in 2004 has not

been included in these results. The size of this book profit will partly

compensate for these results.

Internal management and control system

To provide as much certainty as possible of thefinancial reporting and the operational controls,Océ applies the following internal controlframework:

Océ policy principles These policy principles,which are reviewed at regular intervals, providea high-level indication of the objectives of theOcé Group, how these have to be achieved, andthe ethical criteria that should be observed. AllOcé employees are obliged to comply with theseprinciples.

Ethical code for senior financial officers Thiscode, which is addressed to all members of theBoard of Executive Directors and to all seniorfinancial executives within the Océ Group, wasdrawn up in 2003. It is more detailed than theOcé policy principles and focuses mainly onfinancial reporting.

Information Manual [im] This manualcontains a detailed description of the guidelinesfor financial reporting.Both the accounting principles for annualreporting [Dutch gaap] and the ifrs standards[‘non conflicting standards’] that have alreadybeen introduced by Océ are included in theInformation Manual. Starting from the 2006financial year Océ will report entirely in accor-dance with ifrs, but the above-mentioned ‘nonconflicting standards’ [i.e. not in conflict withDutch gaap] were already implemented in2004.In connection with its filing with the sec in theUnited States, Océ also has to comply with us

gaap by submitting the 20-F Statement.

Strategic Plans These are drawn up for all partsof the Océ organisation [operational and non-operational] and converted into budgets whichare evaluated in detail on a monthly basis by theStrategic Business Units and by the Board ofExecutive Directors and are compared with theresults actually achieved.

Internal and external audits Within theframework of control mechanisms andassurance processes an audit plan is drawn upeach year by both the external and the internalauditor. The internal audit plan is focused onthe most important business processes and therelated risks and the audits relate to the internalfinancial reporting and to the existence andfunctioning of operational policy andprocedures. The external auditor carries out theactivities involved in the issue of an auditopinion on the annual financial statements. Theexternal auditor concentrates on the financialreporting and also takes into consideration thesystems that are intended to ensure reliablereporting. Together, the activities of the internaland external auditor represent a very importantevaluation of the internal control framework.The internal auditor makes a formal report onthe effectiveness of the internal controlframework. The external auditor reports onmatters relating to the internal control measuresto the extent that these have been identifiedduring the auditing of the annual financialstatements. The findings of the internal auditorand also the observations of the external auditorare discussed in the central and local AuditCommittees.

Audit Committee [ac] This committeeconsists of 3 members of the Supervisory Boardand ensures the independent monitoring of theprocess of risk management on the basis of thesupervisory role fulfilled by the SupervisoryBoard. The Audit Committee focuses on thequality of internal and external reporting, onthe effectiveness of internal controls, and on thefunctioning of the external and internal audi-tors and meets at least four times a year.The responsible financial officers and the exter-nal and internal auditors are generally invited tothese meetings and the Audit Committee alsoholds periodic consultations with the externalauditor at which the Océ officers are notpresent.

74

Management aspects

Internal Audit Committee [iac] The InternalAudit Committee consists of the Board ofExecutive Directors together with the opera-tional directors, the Secretary of the Company,the Group Controller and the Group InternalAuditor, and normally the external auditors arealso invited to join this committee. The InternalAudit Committee focuses in detail on thestructure of the internal control framework, onhow it functions and on the follow-up to thematerial observations that result from audits.This committee also discusses specificaccounting issues and monitors the progresstowards implementation of the Sarbanes-OxleyAct and ifrs accounting principles. In view ofthe size of the operations in the United States anInternal Controls Committee [icc] has been setup there as an extension of it. The members ofthe icc are the ceo and cfo of Océ-usa

Holding, Inc. as well as the Presidents of themain operations, the General Counsel and theInternal Audit Director in the United States,plus the cfo of Océ n.v. [who also chairs theicc].

Disclosure Committee [dc] The DisclosureCommittee consists of the Group Controller[chairman], representatives of all operationaland non-operational parts of Océ, the Secretaryof the Company and the Chief InformationOfficer [cio] of Océ n.v., the Group InternalAuditor, the Manager Investor Relations andthe head of the Group Consolidation de-partment. It advises the ceo and cfo of Océn.v. on the quality of the internal controls andthe financial reporting. The process that pre-cedes this involves in-depth scrutiny and is alsodiscussed in the Audit Committee [see above].The committee also coordinates the implemen-tation of Section 404 of the Sarbanes-Oxley Actwhich relates to the quality of the financialreporting and of the processes on which it isbased [effectiveness of controls over financialreporting]. As from the 2005 financial year aseparate statement in respect of this will beissued by the ceo and cfo of Océ n.v. and bythe external auditors, and for this purpose anextensive programme has been drawn up toensure that the required support activities are inplace in all operations in time.

Letter of Representation [lor] All ManagingDirectors and Controllers of the Group com-panies as well as all officers who report directlyto the cfo of Océ n.v. sign a detailed declara-tion every quarter with regard to financial re-porting, internal controls and ethical principles.Any observations made in the lors arereported to and discussed by the Board ofExecutive Directors and the Audit Committee.

Whistleblowing Procedure This was formallyapproved in the Audit Committee in 2004 andwill be introduced in the United States in thefirst quarter of 2005. The procedure serves toensure that any infringement of the existingpolicy and procedures can be reported withoutthe person who made the report experiencingany negative consequences as a result. During2005 the procedure will be introduced inEurope.

The above control framework has already beenevaluated for 3 years against the requirements ofSarbanes-Oxley Section 302. In 2005, underthe terms of Sarbanes-Oxley Section 404, anevaluation and certification will take place ofthe quality of the control framework withrespect to the financial reporting and both theseactions will be repeated each year. For thisreason the report for the 2005 financial year willstate the extent to which the internal riskmanagement and control system is adequateand effective, as well as the way in which theBoard of Executive Directors safeguards thesesystems.

Venlo, January 28, 2005

The Board of Executive Directors

R.L. van Iperen, chairmanJ. van den BeltJ.F. Dix

75

Management aspects

Annual Financial Statements

79The figures [ ] refer to the notes 2004 2003 › € 1,000

Total revenues [1] 2,652,453 2,769,263

Cost-price 1,549,058 1,604,050

Gross margin 1,103,395 1,165,213

Selling expenses 614,969 623,660Research and development expenses [2] 208,105 208,321General and administrative expenses 162,044 183,226Impairment [3] 7,888 25,175

993,006 1,040,382

Operating income 110,389 124,831

Financial expense [net] [4] 18,089 30,552

Income before income taxes, equity in income of unconsolidated companies and minority interest 92,300 94,279

Income taxes [5] 12,196 30,522

Income before equity in income of unconsolidatedcompanies and minority interest 80,104 63,757

Equity in income of minority interests 507 90

Income before minority interest 80,611 63,847

Minority interest in net income of subsidiaries 2,535 2,385

Net income 78,076 61,462

Earnings per share [6] Net income per ordinary share 0.89 0.69 euro

Diluted net income per ordinary share 0.88 0.69

Consolidated Statement of Operations

80 Before net income appropriation Assets 2004 2003 › € 1,000

Intangible fixed assets [7] 37,207 48,721

Tangible fixed assets Property, plant and equipment [8] 423,490 430,527Rental equipment [9] 57,891 63,279

481,381 493,806

Financial fixed assets Minority interests in associates [10] 1,553 2,535Financial lease [11] 230,962 451,848Other long term financial assets [12] 126,654 106,503

359,169 560,886

Current assets Inventories [13] 317,335 310,404Accounts receivable [14] 707,910 927,406Prepaid expenses 17,025 24,330Cash and cash equivalents [15] 313,060 55,709

1,355,330 1,317,849

Total 2,233,087 2,421,262

Consolidated Balance Sheet November 30

81

Consolidated Balance Sheet November 30

Liabilities 2004 2003 › € 1,000

Group equity Ordinary shares [16] 43,634 43,631Priority shares [17] 2 2Financing preference shares [18] 10,000 10,000Paid-in capital [19] 511,445 511,408Legal reserve [20] 2,441 592Translation differences [21] –140,391 –114,477Other reserves [22] 208,863 200,147Net income 78,076 61,462

Total shareholders’ equity 714,070 712,765

Minority interest [23] 38,209 38,822

752,279 751,587

Long term liabilities [provisions] [24] 515,977 596,104

Long term debt [25] 438,409 380,793

Current liabilities Short term debt [26] 42,842 168,421Other liabilities [27] 219,066 242,402Accrued liabilities [28] 219,359 236,125Deferred income 45,155 45,830

526,422 692,778

Total 2,233,087 2,421,262

82 2004 2003 › € 1,000

Cash flow from operating Net income 78,076 61,462activities Adjustments for:

Depreciation 147,626 173,370Impairment 7,888 25,175Installed in rental equipment –116,797 –83,025Divestments in rental equipment 77,268 67,747Movements in financial lease 74,337 45,347Equity in income of minority interests –402 271Result minority interest 2,535 2,385Long term liabilities [provisions] –104,640 –41,241Provisions for financial lease, inventories and trade accounts receivable 42,470 52,140Trade accounts receivable and other receivables 30,938 70,786Inventories –63,003 5,458Trade accounts payable 1,806 –31,342Net change in other working capital accounts* –41,329 –8,992

Cash flow from operatingactivities 136,773 339,541

Cash flow from investing Capital expenditure:activities Intangible fixed assets –9,354 –11,497

Property, plant and equipment –86,738 –97,129Other long term financial assets 3,340 –1,925

Divestments:Intangible fixed assets – 94Property, plant and equipment 12,910 16,599

Acquisition of minority interests – –17Disposal of minority interests 1,305 5Sale financial lease portfolio 312,254 79,768Disposals/acquisitions [net of cash] – 2,379

Cash flow from investingactivities 233,717 –11,723

Consolidated Statement of Cash Flow

* See page 83 for the specification of net change in other working capital accounts.

83


2004 2003 › € 1,000

Cash flow from Long term debt:financing activities Proceeds from long term debt 141,476 9,116

Repayment of long term debt –76,524 –329,623Borrowings and current portion of long term debts –124,822 81,727Movement repurchased shares Option Plan 1,074 –924Dividend –51,971 –51,963Minority interest –3,099 –3,361

Cash flow from financing activities –113,866 –295,028

Translation differences 727 –14,466

Changes in cash and cash equivalents 257,351 18,324

Cash and cash equivalents at start of financial year 55,709 37,385

Cash and cash equivalents at end of financial year 313,060 55,709

Specification of net change in other 2004 2003 › € 1,000

working capital accounts:Prepaid expenses 6,360 5,138Income taxes –31,173 12,205Other taxes and social security payable 1,823 2,929Pension liabilities –586 –2,395Other liabilities –8,665 –3,229Accrued liabilities –9,764 –17,037Deferred income 676 –6,603

Balance –41,329 –8,992

84 Introduction

The following summary of significantaccounting principles is intended as a guide ininterpreting the financial statements. The accounting principles are unchanged com-pared to the previous financial year, except forthe modifications made to balance sheetclassifications. These changes had no impact onincome and equity and have been made in orderto ensure a better link-up with the InternationalFinancial Reporting Standards [ifrs] that willbecome applicable to Océ as from the 2006financial year. The principal changes relate tothe reclassification of showroom machines frominventories to property, plant and equipmentand the classification of all software, which waspreviously included partly under property, plantand equipment, under intangible fixed assets.The Group’s financial year commences onDecember 1 and closes on November 30 of thesubsequent year.

Principles of consolidation

The consolidated financial statements comprisethe financial data for Océ n.v. and its Groupcompanies. The financial data of Group com-panies are fully consolidated; the minority inte-rest is stated separately. A company is consideredto be a Group company if Océ directly or in-directly holds a majority controlling interest init. As from the date of control the financialposition of the relevant company is included inthe consolidation.With effect from December 1, 2000 intangiblefixed assets have been capitalised in those caseswhere the original cost of the acquired assetsand liabilities exceeds the fair value. Previouslythe intangible fixed assets were charged directlyto Shareholders’ equity.The principal companies affiliated to the Groupare listed on pages 123 and 124 of this report. A number of affiliated companies of minorimportance have been omitted by virtue of theprovisions of Article 379, par. 2c, Book 2 of theDutch Civil Code.Balance sheet items of Group companies aretranslated into euro. As the opening share-holders’ equity and movements in equity duringthe year are recalculated on the basis of theclosing exchange rate at the end of the reportingperiod, differences arise as compared to the cal-culation based on the exchange rate used for theprevious period. Such differences are chargedagainst or added to Shareholders’ equity under‘Translation differences’.Statements of Operations items of Group com-panies are translated into euro at the averageexchange rate during the reporting period. The result calculated on this basis differs fromthat calculated on the basis of the closing ex-change rate for the end of the period. This dif-ference is debited or credited directly to Share-holders’ equity under ‘Translation differences’.Unrealised gains on transactions betweenGroup companies are eliminated. Unrealisedlosses are eliminated unless it is clear that nomargin has been realised on inventoriestransferred.

Summary of Significant Accounting Principles

85


The preparation of the annual financial state-ments requires the management to make as-sumptions and estimates. In doing so, themanagement uses past experiences as its basis,whilst making the best possible assessment offuture developments.

Consolidated Statement of Operations

Foreign currencies Transactions denominatedin foreign currencies are included at theexchange rate applicable at the moment whenthe transactions take place.

Total revenues Revenues comprise the proceedsfrom the sale of goods and services to thirdparties excluding the taxes levied on revenuesand discounts granted. Revenues are recognisedas follows:

Machines Revenues are recognised after deliveryand installation on the customer’s premises. If asales contract contains an acceptance clause, thecustomer should have confirmed acceptance. Ifthe customer has been offered financing by Océin the form of a financial lease arrangementwhich qualifies as a sales transaction, thenfinancial lease receivables are likewise accountedfor after acceptance, with allowance being madefor the unrealised interest and the residual valueof the machines. Unrealised interest is shown as‘Interest from financial lease’ for the duration ofthe lease, giving rise to fixed periodic interestproceeds on the net investment.When machines are sold to a distributor therevenues are accounted for at the moment oftransfer.Proceeds from the rental of machines areincluded in revenues in case they relate to therelevant reporting period.

Service Service proceeds are mostly obtainedfrom maintenance contracts that have beenconcluded for the machines sold and arerecognised pro rata over the period of thecontract. If service contracts have been invoicedin advance, these amounts are included in thebalance sheet under ‘Deferred income’.

Supplies Revenues are recognised at the momentof delivery.

Costs Consumption of raw materials and othercost items are based on historical costs.Depreciation on fixed production assets ischarged at a fixed percentage of the acquisitionvalue of the relevant asset. Depreciation ofrental equipment amounts to a fixed percentageof the all-in manufacturing cost plus the cost ofensuring that the equipment can operate ef-fectively at the customer. Government contri-butions to operating costs are deducted directlyfrom these costs.

Research and development expenses Researchcosts are charged direct to the statement ofoperations. Product development costs arecapitalised if they comply with the relevantcriteria.

Development credits and subsidies Develop-ment credits received from the government aresubject to a contingent repayment liability. This contingent liability, to which a contractualmark-up is applied each year, is not included inthe balance sheet. According as the relevantprojects prove successful, the liability ceases tobe contingent in nature and a real liabilityarises.

Financial expense [net] Besides interestreceived and interest paid, expenses relating tothe raising of loan capital are also included here.The effects of interest rate instruments are alsoincluded under this heading.

86


Income taxThis is calculated on the commercialresults at the rates applicable in the variouscountries. This method implies that provisionsare made for deferred income taxes. The entitle-ment to loss compensation is taken into con-sideration in so far as there is a reasonable ex-pectation that it can be realised. Allowance ismade for non-offsettable dividend withholdingtax at the moment of dividend distribution byan affiliated company.

Earnings per share Earnings per ordinary shareare calculated by dividing the net income at-tributable to holders of ordinary shares by theaverage number of ordinary shares outstandingduring the year. In making this calculation theordinary shares bought in by the company arededucted from the number of ordinary sharesoutstanding.The calculation of the diluted earnings per shareis based on the weighted average number ofshares in issue and the potential increase as aresult of conversion and outstanding options.The assumption applied for the conversionarising from convertible debenture loans is thatthese are converted in full. An adjustment is alsomade to net income to eliminate interest charges,whilst allowing for the effect of taxation.The calculation of the increase arising fromoptions is based on the value of the optionsgranted, i.e. the number of options times theexercise price, divided by the average share priceduring the financial year. This increase is onlyapplied if the average share price is higher thanthe exercise price of the options upon grant. Inmaking this calculation no adjustment is madeto net income.

Consolidated Balance Sheet

Assets and liabilities are included at face values,unless stated otherwise.

Foreign currencies Receivables and payablesdenominated in a foreign currency are trans-lated into local currency at the exchange rateruling at year end. The exchange rate differ-ences, including results on foreign exchangecontracts relating to loan exposures [inter-company], are recorded direct on the Statementof Operations. The differences relating tooperational cash flows, including those arisingon the relevant foreign exchange contracts, arealso included in the Statement of Operations.

Intangible fixed assets Intangible fixed assetsare valued at acquisition or manufacturing cost,less cumulative depreciation and any impair-ments. Goodwill and other intangible fixedassets arising upon the acquisition of parti-cipations are written off on a straight-line basisover their estimated economic lifetime, subjectto a maximum of twenty years. The costs of thedevelopment and purchase of software for in-ternal use which generates economic benefits forseveral years are capitalised. The developmentcosts consist of the direct personnel costs on thebasis of an hourly rate in which allowance ismade for a mark-up for overhead costs, to theextent that these relate to manufacturing, andthird-party costs.Intangible fixed assets are reviewed periodicallyto assess whether any impairment has occurred;if the latter is the case, they are included at theirnet realisable value. The net realisable value isthe higher of the direct or indirect market value.Product development costs are capitalised ifthey comply with the relevant criteria and areclassified under the category ‘Technology’.The estimated useful lives of the various classesof intangible fixed assets are as follows:goodwill: 10 to 20 years;software: 3 to 5 years;technology: 5 to 10 years;customer base: 6 years;trade marks: 10 years;other: 3 years.

87


Property, plant and equipment Property,plant and equipment are valued at acquisitionor manufacturing cost, less cumulative depre-ciation and any impairments. Depreciation isprovided for according to the straight-linemethod based on the expected useful lifetime ofthe relevant asset. Depreciation of specificpieces of equipment used for the manufactureof machines takes place pro rata to the expectednumber of units to be manufactured. Property,plant and equipment are assessed as to a possibleimpairment; if the latter is the case they arevalued at their net realisable value. The netrealisable value is the higher of the direct orindirect market value.The estimated useful lives of the various classesof fixed assets are as follows:property and plant: 20 to 50 years;production machines: 8 to 10 years;equipment: 3 to 10 years;vehicles: 4 or 5 years.

Rental equipment These are valued at the all-incost, plus the cost of ensuring that the equip-ment can operate effectively at the customer, lesscumulative depreciation on a straight-line basis. The estimated useful life of the various types ofmachines ranges from 3 to 5 years.

Minority interests in associates These are in-cluded at the attributable net asset value, cal-culated where possible on the basis of thevaluation principles applied in these FinancialStatements.

Financial lease This comprises the long termreceivables and residual values in respect offinancial lease contracts. They are valued at thepresent value of the contracted receivables,taking into account the risk of non-collectability.

Other long term financial assets These com-prise assets such as mortgage debtors, cash ad-vances and guarantee deposits as well as deferredtax assets. These are included at nominal value,after taking into account the risk of non-collectability.

Inventories Purchased inventories are valued atpurchase price, plus any additional costs, by theFirst-in-First-out method. Inventories offinished and semi-finished products and spareparts are valued at manufacturing cost inclusiveof a surcharge for indirect costs related to themanufacturing, no interest being charged. Therisk of obsolescence is allowed for.

Accounts receivable Trade debtors, financialleases, other debtors and amounts receivablefrom minority interests are shown at face valueless an allowance for bad and doubtful accounts.

Minority interest The minority interest inGroup companies is included at the attributablenet asset value determined in accordance withthe valuation principles used in these FinancialStatements.

Long term liabilities [provisions] The pro-vision for deferred income tax liabilities iscalculated on the differences between valuationof assets and liabilities for commercial and taxpurposes, based on the effective rate of incometax in the various countries and is stated at facevalue.Deferred tax assets are included to the extentthat they are considered to be realisable.

Pension liabilities exist both under ‘defined con-tribution’ plans and under ‘defined benefit’plans. Both in the Netherlands and in mostother countries the latter schemes are mostlyinsured by external funds.In the case of a defined contribution plan thecontribution is booked as a charge in the year towhich it relates.In defined benefit plans the entitlements arecalculated according to the ‘projected unit credit’method. All actuarial gains and losses, above athreshold of 10% of the [highest of the] pensionliabilities or fair value of the pension assets, arecharged to the Statement of Operations over theemployees’ remaining periods of service.Changes in pension plans and back service costsare charged direct to the Statement of Operationsprovided that they are unconditional in nature.These calculations are made each year byqualified actuaries.The pension liabilities asrecognised in the balance sheet are shown at thenet present value of the promised pensionentitlements at balance sheet date, less the fairvalue of the pension assets and after adding ordeducting the actuarial gains or losses that havenot yet been incorporated in the result and theback service costs.

Early retirement liabilities relate to specificmostly individual agreements.

The provisions shown hereafter are included atthe nominal value of the costs that are expectedto be needed to settle the liabilities; in caseswhere the time value of money has a significantimpact, valuation takes place on the basis of thenet present value.

Liabilities arising from the termination of em-ployment contracts relate in most cases tostatutory liabilities, whereby an amount relatedto the salary is payable for each year of service.Payment takes place upon leaving companyservice. These also include liabilities in respectof long-service awards.

The reorganisation provision relates to costsconnected with the reorganisation of businessactivities.

Other long term liabilities [provisions] relateamong other things to [legal] proceedings andguarantee commitments.

Long term debt This relates to liabilities thatfall due after more than one year.

Current liabilities These commitments com-prise liabilities falling due within one year.

Commitments and contingent liabilities notstated in the balance sheet These are commit-ments and contingent liabilities arising fromcontracts, mostly of more than one year [leasingcontracts, rental contracts, capital expenditurecommitments, repayable development credits,financial instruments, etc.].


The Consolidated Statement of Cash Flow hasbeen drawn up on the basis of the indirectmethod. This statement is derived from themovements in the Consolidated Balance Sheet.In the event of a major acquisition, however, theacquired net asset value, net of cash, is shownseparately. Foreign currency translations havebeen eliminated from the changes in the balancesheet items as they do not give rise to a cashflow. As a result, the changes in the cash flowstatement cannot be derived directly from thechanges in the relevant balance sheet items.The movement in the portions of long termdebt falling due within one year is shown under‘Long term debt: repayment of long term debt’.

88


89Segmental information

Business segmentation › € million Wide Format Printing Systems Digital Document Systems total

2004 2003 2004 2003 2004 2003

[1] Total revenues 818 862 1,834 1,907 2,652 2,769Operating income 55 55 55 70 110 125Net income 43 30 35 31 78 61

Assets 617 674 1,616 1,747 2,233 2,421Liabilities 328 391 1,153 1,279 1,481 1,670Group equity 289 283 463 468 752 751

Expenditure* 24 24 99 82 123 106Depreciation 31 32 98 125 129 157Amortisation 11 6 8 11 19 17Impairment 8 11 – 14 8 25

Geographical segmentation › € million total revenues assets expenditure*

2004 2003 2004 2003 2004 2003

United States 925 1,046 414 626 19 23Germany 333 335 347 434 18 17The Netherlands 291 284 855 626 53 39France 191 199 115 163 6 5United Kingdom 180 183 100 140 4 5Rest of Europe 534 519 305 333 18 14Rest of the world 198 203 97 99 5 3

Total 2,652 2,769 2,233 2,421 123 106

Development of total revenues › € million total revenues cost–price gross margin

and gross margin2004 2003 2004 2003 2004 2003

Proceeds from sales 1,564 1,553 939 944 625 609Proceeds from rental and service 1,020 1,119 610 660 410 459Interest from financial leases 68 97 – – 68 97

Total 2,652 2,769 1,549 1,604 1,103 1,165

In total revenues and grossmargin the result of € 30.9million on the sale of the leaseportfolio is shown under‘Proceeds from sales’.

Notes to the Consolidated Statement of Operations

* Net expenditure in intangible and tangible fixed assets.

90


Exchange rates of a number of average rate in euro balance sheet rate in euro

currencies of importance to Océ2004 2003 2004 2003

Pound sterling 0.68 0.68 0.70 0.70us dollar 1.23 1.11 1.32 1.20Australian dollar 1.68 1.75 1.72 1.65Swiss franc 1.55 1.51 1.52 1.55Japanese yen 133.73 130.14 136.64 131.25

Expenses 2004 2003 › € 1,000

Depreciation costs Intangible fixed assets 19,045 16,542Property, plant and equipment 85,489 91,977Rental equipment 43,092 64,851

Total 147,626 173,370

Payroll expenses Wages and salaries 966,595 999,474Social security 193,638 201,239Pension costs for:

defined contribution plans 13,969 12,725defined benefit plans 53,377 57,477

Total 1,227,579 1,270,915

The individual remuneration of the members ofthe Board of Executive Directors in function thisyear is:

periodic pay performance related total pension in euro

pay over 2004 contributions

R.L. van Iperen 612,676 60,000 672,676 338,711J. van den Belt 411,590 45,000 456,590 122,871R.E. Daly 319,264 – 319,264 9,852J.F. Dix 461,321 45,000 506,321 161,395

The costs incurred upon termination of theemployment contract of Mr. R.E. Daly were€ 851,373.The remuneration costs and pension scheme con-tributions of former Executive Board membersare nil [2003: nil]. The performance related payis established as set forth on page 64.Under the Océ Stock Option Plan 2005 nooptions were granted to the members of theBoard of Executive Directors [Option Plan2004: 81,000 unconditional options]. In 2004it was decided that the Option Plan for theBoard of Executive Directors would be replaced

by a Share Plan to be introduced in 2005.A table showing the interests of the ExecutiveBoard members in the option plans can befound on page 109 of this annual report. At theend of the financial year the members of theBoard of Executive Directors held no ordinaryshares in Océ [2003: nil] and no rights tooptions listed on the Euronext OptionsExchange.

91


amounts in euro age on 30-11-2004 final pension age increase in accrued accrued pension capital build-up in

entitlements 2004 rights as at defined contribution

30-11-2004 plan as at

30-11-2004

R.L. van Iperen 51 60 20,001 222,336 182,229J. van den Belt 58 62 4,260 36,126 142,666J.F. Dix 58 62 7,448 190,986 143,648

Pension entitlements The table above shows theaccrued pension entitlements of the members ofthe Board of Executive Directors currently inoffice and the pension amounts that would bepaid to them annually on the basis of their yearsof service as at the end of 2004. With effect fromJanuary 2003 the pension scheme for members ofthe Board of Executive Directors was convertedfrom a defined benefit plan into a hybrid scheme[defined benefit plus defined contribution plan].

The remuneration for the 2004 financial year ofthe present and former members of the Board ofSupervisory Directors amounted to € 222,281[2003: € 221,374]. The remuneration for theBoard of Supervisory Directors is fixed at€ 46,355 for the chairman and at € 30,903 for themembers, in conformity with the scheme set outon page 66. At the end of the financial year the members ofthe Board of Supervisory Directors held 2,969ordinary shares in Océ [2003: 2,969] and norights to options listed on the Euronext OptionsExchange.

2004 2003 › € 1,000

[4] Financial expense [net] Interest and similar income items –6,440 –5,753Interest charges and similar expenses 22,103 34,589Other financial expenses 2,426 1,716

Total 18,089 30,552

[5] Income taxes A reconciliation of the Dutch statutory income tax rate to the effective income tax rate is set out below:Dutch statutory tax rate 34.5 34.5 per cent

Non-deductible expenses 2.2 6.6Foreign tax rate deviatingfrom the Dutch tax rate –12.5 –4.8Tax credits –2.2 –3.3Movement in unrecognised deferred income tax assets –6.7 –1.7Other –2.1 1.1

Effective income tax rate 13.2 32.4

The ‘Movement in unrecognised deferred incometax assets’ includes a release of € 7.0 million. Thisrelease is the result of the final settlement of thetax risks to which these provisions related. As aconsequence the effective income tax ratedecreased.

92


2004 2003 › € 1,000

[2] Research and development Total expenditure on research andexpenses development 206,555 212,276

Development credits repayableand net subsidies received 1,550 –3,955

Total 208,105 208,321

[3] Impairment Impairment of intangible and tangible fixed assets 7,888 25,175

In the Statement of Operations impairmentcosts are shown as a separate item so as toprovide a clearer picture.Assessment of possible impairment takes placeat the level of the business groups that form partof a business unit. A goodwill impairment hasbeen booked for the Display Graphics Systems

business group. In addition there was a limitedimpairment of tangible fixed assets. Since thepositive cash flow is lower than previouslyexpected, the value of the intangible assets hasbeen reduced to the expected lower indirectmarket value. The discount rate applied is 8%.

93


2004 2003 › € 1,000

[6] Earnings per share Net income attributable to holders of ordinary shares 74,525 57,911Weighted average number of sharesoutstanding [› 1,000] 83,488 83,409 shares

Net income per ordinary share 0.89 0.69 euro

Net income attributable to holders ofordinary shares 74,525 57,911Interest costs of convertible loans [net] 322 300

Net income based on full conversion 74,847 58,211

Weighted average number of ordinaryshares outstanding [› 1,000] 83,488 83,409 shares

Adjustment for assumed conversion [› 1,000] 728 729Adjustment for options [› 1,000] 543 30

Weighted average number of ordinary shares outstanding on the basis of full conversion [› 1,000] 84,759 84,168

Net income per ordinary share on the basis of full conversion 0.88 0.69 euro

Employees by category 2004 2003 number

Business Services 6,693 7,149Sales 4,192 4,140Service 4,013 4,327Manufacturing and Logistics 2,512 2,514Accounting and other 2,037 2,146Research and Development 1,868 1,928

Number of employees at November 30 21,315 22,204

Of whom, employed in the Netherlands 3,922 4,061

Average number of employees 21,760 22,346

94 [7] Intangible fixed assets goodwill software technology customer trade marks total

› € 1,000 base and other

At December 1, 2002

Acquisition value 31,687 41,709 8,112 13,324 5,731 100,563Accumulated amortisation 3,181 6,866 1,544 2,238 596 14,425

Book value 28,506 34,843 6,568 11,086 5,135 86,138

Movements in book value in 2003:Expenditure – 10,212 696 589 – 11,497Divestments – 94 – – – 94

Net expenditure – 10,118 696 589 – 11,403

Amortisation 2,701 10,189 1,468 1,650 534 16,542Impairment 13,530 – 900 8,351 – 22,781Foreign currency translations –2,893 –3,639 –978 –1,153 –834 –9,497

At November 30, 2003 9,382 31,133 3,918 521 3,767 48,721

Acquisition value 28,087 47,312 7,399 11,669 4,756 99,223Accumulated amortisation 18,705 16,179 3,481 11,148 989 50,502

Book value at November 30, 2003 9,382 31,133 3,918 521 3,767 48,721

Movements in book value in 2004:Expenditure 756 6,608 1,990 – – 9,354Reclassifications – 7,891 –73 268 – 8,086Amortisation 1,063 15,749 1,588 201 444 19,045Impairment 7,207 – – 280 – 7,487Foreign currency translations –264 –1,560 –271 – –327 –2,422

At November 30, 2004 1,604 28,323 3,976 308 2,996 37,207

Acquisition value 11,652 71,859 8,737 10,969 4,305 107,522Accumulated amortisation 10,048 43,536 4,761 10,661 1,309 70,315

Book value at November 30, 2004 1,604 28,323 3,976 308 2,996 37,207

Recognition for amortisation costs 2004 2003 › € 1,000

in the Statement of Operations:Cost-price 3,225 1,580Selling expenses 8,059 6,383Research and development expenses 1,611 157General and administrative expenses 6,150 8,422

Total 19,045 16,542

Notes to the Consolidated Balance Sheet

95


Tangible fixed assets property and production other fixed under not in total

› € 1,000 plant equipment assets construction production

and process and

prepayments investment

property

[8] Property, plant and At December 1, 2002equipment

Acquisition value 326,226 432,621 417,387 46,781 19,978 1,242,993Accumulated depreciation 142,813 321,595 304,376 83 15,274 784,141

Book value 183,413 111,026 113,011 46,698 4,704 458,852

Movements in book value in 2003:Expenditure 17,663 38,384 64,693 –24,529 918 97,129Divestments 518 2,721 9,496 2,933 931 16,599

Net expenditure 17,145 35,663 55,197 –27,462 –13 80,530

Divestment of companies – –21 –112 – – –133Depreciation 10,061 33,221 48,310 – 385 91,977Impairment 600 1,794 – – – 2,394Foreign currency translations –3,094 –4,368 –5,873 –944 –72 –14,351

At November 30, 2003 186,803 107,285 113,913 18,292 4,234 430,527

Acquisition value 338,104 434,134 431,341 18,292 19,048 1,240,919Accumulated depreciation 151,301 326,849 317,428 – 14,814 810,392

Book value at November 30, 2003 186,803 107,285 113,913 18,292 4,234 430,527

Movements in book value in 2004:Expenditure 1,936 23,111 44,413 16,592 686 86,738Divestments 1,410 911 10,589 – – 12,910

Net expenditure 526 22,200 33,824 16,592 686 73,828

Reclassifications 3,688 4,040 3,878 – –947 10,659Depreciation 10,202 32,848 42,223 – 216 85,489Impairment 85 206 110 – – 401Foreign currency translations –1,354 –1,934 –2,164 –138 –44 –5,634

At November 30, 2004 179,376 98,537 107,118 34,746 3,713 423,490

Acquisition value 349,396 428,331 420,489 34,746 13,018 1,245,980Accumulated depreciation 170,020 329,794 313,371 – 9,305 822,490

Book value at November 30, 2004 179,376 98,537 107,118 34,746 3,713 423,490

96


The book value of ‘Other fixed assets’ contains anamount of € 4.7 million for financial leases [2003:€ 9.3 million].The reclassifications of € 10,659,000 consist of anaddition of showroom machines amounting to€ 18,745,000 and a decrease of primarily softwareamounting to € 8,086,000.

Recognition for depreciation costs in the 2004 2003 › € 1,000

Statement of Operations:Cost-price 49,945 51,945Selling expenses 16,871 17,425Research and development expenses 12,630 14,829General and administrative expenses 6,043 7,778

Total 85,489 91,977

[9] Rental equipment At December 1, 2003/2002Cost 364,469 469,131Accumulated depreciation 301,190 350,189

Book value 63,279 118,942

Movements in book value:Installed on rental 116,797 83,025Divestments 77,268 68,590Depreciation 43,092 64,851Foreign currency translations –1,825 –5,247

At November 30 57,891 63,279

Cost 302,798 364,469Accumulated depreciation 244,907 301,190

Book value at November 30 57,891 63,279

In the Statement of Operations depreciation isincluded in full under ‘Cost-price’.

97


Financial fixed assets 2004 2003 › € 1,000

[10] Minority interests Book value at December 1, 2003/2002 2,535 2,902in associates

Changes in the value of minority interests due to:Equity in income 507 90Increase in/acquisition of companies – 17Divestments –1,305 –5Dividend –105 –361Foreign currency translations –79 –108


[11] Financial lease Financial lease receivables comprise thefollowing components:Financial lease receivables [gross] 490,806 974,470Unrealised interest –71,528 –149,428Residual values 3,190 5,015

422,468 830,057Provision for lease receivables –19,011 –29,298

Financial lease receivables [net] 403,457 800,759To short term lease receivables –172,495 –348,911

Long term financial lease receivables 230,962 451,848

The gross financial lease receivables canbe subdivided into the following durations:Less than one year 172,495 348,911More than one year but less than five years 316,071 617,401More than five years 2,240 8,158

Total 490,806 974,470

[12] Other long term Book value at December 1, 2003/2002 106,503 99,109financial assets New amounts receivable 31,284 13,365

Repayments –7,608 –2,850Foreign currency translations –3,525 –3,121


‘Other long term financial assets’ includes thedeferred tax assets of € 106.6 million [2003:€ 82.8 million]. This item also includes anamount of € 0.4 million [2003: € 0.4 million]for loans provided to the Board of ExecutiveDirectors. The specification of this amount is asfollows: R. van Iperen € 0.2 million, J. van denBelt € 0.1 million and J. Dix € 0.1 million.These loans are interest-free and were made

available prior to November 30, 2002.Repayment takes place upon exercise of theannual tranche of options in respect of whichthe loan was provided.An amount of € 1.1 million [2003: € 1.8million] was provided to personnel in the formof loans.

98


Current assets 2004 2003 › € 1,000

[13] Inventories Raw and other materials 35,723 39,733Semi-finished products and spare parts 135,087 107,048Finished products and trade inventories 146,525 163,623

Total 317,335 310,404

[14] Accounts receivable Trade accounts receivable 451,911 502,555Discounted trade bills –11 –324Lease receivables 172,495 348,911Income taxes 25,555 9,256Other receivables 57,960 67,008

Total 707,910 927,406

Trade debtors have been reduced by a provisionfor bad debt amounting to € 54 million [2003:€ 53.7 million]. During the financial year € 15.5million [2003: € 22.0 million] in respect of baddebt was charged to the Statement of Operationsas selling expenses.

[15] Cash and cash equivalents Cash and bank balances 26,401 44,307Time deposits 286,659 11,402

Total 313,060 55,709

The effective interest rate on the deposits is2.09% [2003: 1.0%]. These deposits have anaverage duration of 5.8 days.

99


Group equity 2004 2003 › € 1,000

Authorised capital* Ordinary shares 72,500 72,500Priority shares 2 2Financing preference shares 15,000 15,000Protective preference shares 87,500 87,500

Total 175,002 175,002

Paid-up share capital [16] Ordinary sharesAmount at December 1, 2003/2002 43,631 43,631Conversion of convertible loans 3 –

At November 30 43,634 43,631

[17] Priority sharesAt November 30 2 2

[18] Financing preference sharesAt November 30 10,000 10,000

[19] Paid-in capital At December 1, 2003/2002 511,408 511,400Conversion of convertible loans 37 8

At November 30** 511,445 511,408

[20] Legal reserve Reserve for non-distributed income of minority interests and capitalised development costsAt December 1, 2003/2002 592 1,295Movement in reserve of non-distributed income 357 –703Movement in reserve of capitalised development costs 1,492 –

At November 30 2,441 592

[21] Translation differences At December 1, 2003/2002 –114,477 –47,879Foreign currency translations –25,914 –66,598

At November 30 –140,391 –114,477

* For further information about the authorised capital see page118.

** If distributed in the form of shares, this amount is available to

shareholders without attracting the Dutch dividend withholding tax.

100


2004 2003 › € 1,000

[22] Other reserves Retained earningsAt December 1, 2003/2002 253,698 192,459Movement in Legal reserve –1,849 703Net income previous financial year 61,462 112,531Result on shares purchased via exercise of options –192 –32Dividend –51,971 –51,963

At November 30 261,148 253,698

Repurchased shares relating to the Stock Option PlanAt December 1, 2003/2002 –53,551 –52,659Repurchased – –1,064Exercise of options 1,266 172

At November 30 –52,285 –53,551

Repurchased shares are valued at cost; the averagepurchase price amounts to € 13.94 [2003: € 13.88].

Total other reserves 208,863 200,147

Overview of movements number at conversion repurchase exercise of number at

in number of shares outstanding 1-12-2003 options 30-11-2004

Ordinary shares 87,263,488 5,074 – – 87,268,562Repurchased shares relating to the Stock Option Plan 3,856,942 – – 106,500 3,750,442

Number of ordinary shares 83,406,546 5,074 – 106,500 83,518,120

Priority shares 30 – – – 30

Financing preference shares 20,000,000 – – – 20,000,000

2004 2003 › € 1,000

[23] Minority interest At December 1, 2003/2002 38,822 39,798Capital distribution –3,099 –3,252Share in income 2,535 2,385Foreign currency translations –49 –109

At November 30 38,209 38,822

101


[24] Long term liabilities as at addition release to withdrawals differences in as at

[provisions] 1-12-2003 charged to Statement of exchange 30-11-2004

› € 1,000 Statement of Operations rates

Operations

Provisions for:Deferred income tax liabilities 29,325 – – –22,422 15 6,918Pension liabilities 431,727 53,160 – –75,408 –2,233 407,246Early retirement provision 12,122 5,580 – –1,504 –3 16,195Liabilities termination employment contracts 30,502 2,988 – –983 –51 32,456Reorganisation 52,035 11,351 –14,709 –23,734 –142 24,801Other 40,393 7,905 –9,865 –9,983 –89 28,361

Total 596,104 80,984 –24,574 –134,034 –2,503 515,977

The short term part of theseprovisions is approximately € 85million [2003: € 80 million].

2004 2003 › € 1,000

assets liabilities assets liabilities

Provision for deferred The composition of deferred income income tax liabilities tax assets and liabilities is as follows:

Intangible fixed assets 19,917 – 30,837 –Leasing – 37,942 – 69,021Other fixed assets 45,490 714 24,797 12,055Current assets 44,136 – 38,617 487Long term liabilities and provisions 71,115 – 83,191 –Current liabilities 130 20,264 318 14,136

Total deferred assets/liabilities 180,788 58,920 177,760 95,699

Deferred assets/liabilities netted byfiscal entity 128,786 6,918 111,386 29,325Carry forward losses 14,377 – 14,222 –Non-recognised deferred income tax assets –36,604 – –42,819 –

Provision for deferred income tax assetsand liabilities 106,559 6,918 82,789 29,325

Deferred tax assets form part of thebalance sheet caption ‘Other long termfinancial assets’. [12]

The claim for carry forward losses as at 2008 2009 after 2009 unlimited total

November 30, 2004 falls due as follows:› € million 0.9 1.0 2.5 10.0 14.4

102


The changes in deferred income tax assets 2004 2003 › € 1,000

and liabilities were as follows:At December 1, 2003/2002 –53,464 –48,972Exchange rate differences –3,262 –484Statement of Operations –42,915 –3,999Disposals/acquisitions – –9

At November 30 –99,641 –53,464

Pension liabilities With effect from 2003 the pension accountingstandard ‘ias 19’ has been applied.

The principal actuarial assumptions are:Discount rate 4.87 5.29 per cent

Expected return on pension assets 6.62 6.59Expected increase in salaries 2.70 2.78Expected increase in benefits 2.05 2.00

The amounts charged to the Statement ofOperations are as follows:Service costs 42,663 45,058Interest costs 65,285 66,227Expected return on pension assets –54,322 –53,090Other –249 –718

Pension costs 53,377 57,477

The amounts included in the balance sheet are shown below:Present value of funded obligations –1,169,973 –1,017,321Fair value of plan assets 896,934 788,404

–273,039 –228,917Present value of unfunded obligations –216,981 –186,747

Status of the funds –490,020 –415,664Actuarial losses/gains not yet included 83,515 –15,286Back service not yet included 161 –177

Pension provisions included in the balance sheet –406,344 –431,127

An amount of € 902,000 [2003: € 600,000] hasbeen included under ‘Other long term financialassets’.

103


Movements in pension liabilities: 2004 2003 › € 1,000

Pension liabilities at December 1, 2003/2002 –1,204,068 –1,181,643Service costs –42,663 –45,058Interest costs –65,285 –66,227Employee contributions –12,478 –12,523Amendments 684 896Actuarial losses/gains –109,712 32,957Benefits paid 33,193 30,702Exchange rate differences 13,375 36,828

Pension liabilities at November 30 –1,386,954 –1,204,068

Changes in pension assets:Fair value of pension assets at December 1, 2003/2002 788,404 743,185Actual return on investments 62,456 34,656Employer contributions 76,221 55,414Employee contributions 12,478 12,523Benefits paid –33,193 –30,702Exchange rate differences –9,432 –26,672

Fair value of pension assets at November 30 896,934 788,404

[25] Long term debt 2004 2003 › € 1,000

Convertible debentures to Company personnel 10,360 10,796Loans 424,650 368,497Capitalised lease obligations 3,399 1,500

Total 438,409 380,793

Convertible debentures to Employees may opt for convertible personnel Company personnel debentures under the annual profit-sharing

scheme. The duration is 6.5 or 7.5 years. Theaverage interest rate is 4.3% and the averageconversion price is € 14.66 [2003: € 15.67].

104


Loans principal average interest redemption amounts due after

amount rate [%] at more than five years

› € 1,000 November 30 › € 1,000

Euro debenture loan 97,381 6.20 2006 –Euro debenture loan 128,431 6.13 2007 –Euro 54,907 6.46 2006 –Euro 4,538 5.84 2013 4,538Euro 35,000 2.88 2005/2006 –us dollar 37,765 2.57 2006 –us dollar 46,450 2.83 2005/2007 –Other 20,178 2.54 2005/2007 –

Total 424,650 5.07 4,538

The fixed interest rates of theeuro [debenture] loans havebeen fully swapped into vari-able interest rates. The heading‘Loans’ also includes multi-yearstand-by credit facilities. Thetotal fair value of the aboveloans is € 26.5 million higherthan the principal amount[2003: € 31.6 million].

Capitalised lease obligations Redemption of the capitalised lease obligations will take placefrom 2006 up to and including2009. The short term portionis shown under ‘Currentportion of long term debt’. The interest rate amounts to6%.

105


Current liabilities 2004 2003 › € 1,000

[26] Short term debt Borrowings under bank lines of credit 15,052 1,638Current portion of long term debt 27,790 165,895Short term borrowings – 888

Total 42,842 168,421

[27] Other liabilities Trade accounts payable 126,579 125,077Notes payable 5,832 7,516Income taxes 10,622 25,569Other taxes and social security payable 57,999 56,528Pension liabilities 1,699 2,365Preference dividend 3,551 3,551Other 12,784 21,796

Total 219,066 242,402

[28] Accrued liabilities Salary expenses and payroll taxes 144,949 149,624Other costs 74,410 86,501

Total 219,359 236,125

106


Financial instruments

Financial instruments are used to hedge againstthe financial risks that are inherent to the Group’sunderlying commercial activities. For an ex-planation of the foreign exchange managementpolicy, see page 72.

Foreign exchange risks The policy for themanagement of foreign exchange risks is aimedat protecting the operating income and [inter-company] loans held in foreign currencies.Foreign exchange contracts are entered into tocontrol these foreign exchange risks. The con-tract value and the result of foreign exchangecontracts at balance sheet date are as follows [in millions]:| in respect of cash flows: € 225.0 and € 7.9[2003: € 187.1 and € 8.2];| in respect of [inter-company] loans: € 79.8and € 1.3 [2003: € 148.0 and € 1.7].

Interest rate risks Interest rate instruments areused to achieve the desired risk profile in termsof fixed and variable interest rate exposures. A central objective of the policy is to prevent amismatch between the portfolio of rentals andleases and the financing of the Group. Effortsare made to achieve a ratio of 60 to 80% be-tween the above fixed-interest assets and therelated liabilities. At balance sheet date the con-tract value/notional amount and the fair valueof interest rate instruments [interest rate swaps]are as follows [in millions]: € 431.5 and € 21.0[2003: € 835.7 and € 21.0].

Credit risks These risks are reduced by doingbusiness solely with financial institutions whichhave a high credit rating, with fixed limits beingapplicable to each institution.

Commitments and contingent liabilities notstated in the Balance Sheet

Operational lease receivables These are leasereceivables arising from contracts for themachines rented out to third parties. The futureminimum rental revenues from non-terminablecontracts amount to:

› € million 2004 2003

Less than one year 66 83More than one year but less than 5 years 87 110

153 193

Contingent liabilities

› € million 2004 2003

Guarantee commitments 2.8 3.9Government development credits 49.2 48.3

Guarantee commitments include guaranteesgiven in respect of import duties and loans fromthird parties.

107

Notes to the Consolidated Balance Sheet In 2004 the option plan for the members of theBoard of Executive Directors was replaced by ashare plan. At the beginning of 2005 shares willbe conditionally granted to the members of theBoard of Executive Directors for the first time.During 2005 the option plan for the otherparticipants will also be replaced by a share plan,under which shares will first be granted in 2006.

Unconditional option rights/SSAARRs During thefinancial year an aggregate of 500,000unconditional options and 17,000 sars weregranted to a total of 167 participants under theOcé Stock Option Plan 2005.For participants in the Netherlands and Belgiumthe unconditional options have a duration ofnine years, whilst their duration for participantsin other countries is eight years. The sars weregranted to the Swiss participants and likewisehave a duration of eight years.Participants who hold unconditional options orsars are required to abide by a code of conductand observe a waiting period, which means thatthey must not exercise any rights within two andthree years after grant if their rights have theduration of eight and nine years respectively.

Conditional option rights A limited categoryof participants has been awarded conditionaloption rights in addition to unconditional optionrights. In cases where conditional options aregranted, the number of unconditional optionsawarded is reduced pro rata. The duration of theconditional option rights is likewise nine yearsfor Dutch participants and eight years for nonDutch participants. The conditions attaching tothese option rights are that exercise is onlypossible three years after granting the optionsand provided that a performance criterion has been met. For the Océ Stock Option Plan 2002the basis for the performance criterion is theincrease of Earnings Per Share [eps], whilst thebasis for the Océ Stock Option Plan 2003, 2004and 2005 is formed by the increase of OperatingIncome Per Share [oips].In the Océ Stock Option Plan 2005 conditionaloption rights were granted to 65 participants. Ifthis criterion is achieved, 246,000 option rightswill become unconditional. The maximumpossible number of option rights that maybecome unconditional is 492,000.

Other commitments Repurchase commitmentsof € 7.9 million [2003: € 6.2 million] exist onlease contracts with third parties. Of thisamount, the expected amount to be paid withinone year is nil [2003: nil] and € 7.9 millionwithin five years [2003: € 6.2 million]. As aresult of these commitments the machines canbe sold again upon their return. The estimatedmarket value upon return is higher than therepurchase commitment. Recourse liabilities inrespect of bills discounted amount to nil [2003:€ 0.3 million].Total contracted operational lease commitmentsamount to € 313 million [2003: € 320 million].These commitments fall due over the next 20years. The maturity dates over the next years areas follows:

2005 76 › € million

2006 552007 452008 342009 29after 2009 74

Total 313

Other commitments, such as buying contractsetc., have been entered into solely as part ofnormal business operations.

Option Plan

To encourage the long term achievement of theCompany’s objectives Océ operates a StockOption Plan under which decisions are takeneach year on the granting to certain seniorcompany executives of option rights and/orShare Appreciation Rights [sars] in respect ofordinary shares in Océ. A sar is the right toreceive payment of the share price gain, wherebythe share price gain is the difference between thestock market price of the share on the day ofexercise and the exercise price that was fixed onthe day of granting the options. Instead of receiving payment of the share pricegain, a participant may also request delivery ofshares.A limited number of participants have also beengranted conditional options.

108


Exercise price For the conditional and uncon-ditional options or sars granted in the financialyear to participants outside the Netherlands theexercise price is equal to the opening share priceof the Océ share on Euronext Amsterdam on thedate of grant and amounts to € 11.25.When participants in the Netherlands weregranted the unconditional option rights, theywere offered a choice between an exercise priceof € 11.25, € 12.38, € 13.50 or € 15.19. Thehigher the exercise price compared to the priceof the Océ share upon grant, the lower theamount that has to be added to taxable incomefor Dutch participants. Against this, however,the potential result upon exercise will also belower. Since 2001, as a consequence of the newtax legislation in the Netherlands, it has alsobeen possible to opt not to pay wages tax upongrant, but to pay tax upon exercise over theentire benefit actually received as a result of theexercise of the option rights.

Regulations Participation in the Océ StockOption Plan is subject to regulations so as toprevent the misuse of inside information.Participants are prohibited from trading in Océoptions on the Euronext Options Exchange inAmsterdam and are not allowed to dispose of orpledge the options that they have been granted.Participants have to transfer the exercise of theiroptions to an independent Trustee designatedby the company. This Trustee will then exercisethe options according to the instructions givenby the participants. Participants can only givesuch instructions if they are not in possession ofinside information during the designatedexercise periods. A designated period is a periodof at most 9 stock exchange trading days afterpublication of the quarterly results.

Total number of options/SSAARRs As atNovember 30, 2004 a total of 3,675,500 un-conditional option rights or sars in respect ofordinary shares were outstanding at an averageexercise price of € 13.17, whilst a total of1,280,000 conditional option rights, based onan eps norm or oips norm of at least 10%, hadbeen granted at an average exercise price of€ 11.39. The average remaining duration ofthese options is five years.

Purchase of shares The company’s policy is topurchase the shares required to satisfy the OcéStock Option Plan either before or upon exer-cise. Shares may also be issued to cover commit-ments under existing stock option plans. For the delivery of ordinary shares as a result ofthe exercise of options, nil shares were pur-chased in 2004 [2003: nil shares] and nil shares[2003: nil shares] were issued at the moment ofexercise.The table on the next page gives an overview ofthe information relating to the outstandingoptions and sars in respect of shares as atNovember 30, 2004. During 2004 nil shares were bought in [2003:100,000] to cover commitments under theexisting Stock Option Plans and 106,500 shares[2003: 12,000] were used, which means that thetotal number of shares purchased amounts to3,750,442 [2003: 3,856,942].

109Stock Option number of options exercise price options exercised outstanding at expiration date

Plan of year granted in euro forfeited number of November 30,

options 2004

2000 791,000 16.85-22.98 424,000 – 367,000 26-11-20052001 847,500 18.10-24.44 99,000 – 748,500 29-11-2005/20062002 unconditional 716,000 9.77-13.19 24,000 95,500 596,500 28-11-2009/20102002 conditional 392,000 9.77 392,000 – – 28-11-2009/20102003 unconditional 793,000 10.75-14.51 5,000 29,000 759,000 27-11-2010/20112003 conditional 470,000 10.75 78,000 – 392,000 27-11-2010/20112004 unconditional 692,500 12.21-16.48 2,000 3,000 687,500 26-11-2011/20122004 conditional 446,000 12.21 50,000 – 396,000 26-11-2011/20122005 unconditional 517,000 11.25-15.19 – – 517,000 30-11-2012/20132005 conditional 492,000 11.25 – – 492,000 30-11-2012/2013

Total 6,157,000 1,074,000 127,500 4,955,500

The table below shows the rights granted under this option plan to themembers of the Executive Board.

Stock Option number of options exercise price outstanding at expiration date

Plan of year granted in euro November 30, 2004

R.L. van Iperen 2000 42,000 17.02 42,000 26-11-20052001 42,000 18.10 42,000 29-11-20062002 unconditional 21,000 9.77 21,000 28-11-20102003 unconditional 21,000 10.75 21,000 27-11-20112003 conditional 42,000 10.75 42,000 27-11-20112004 unconditional 21,000 12.21 21,000 26-11-20122004 conditional 42,000 12.21 42,000 26-11-2012

J. van den Belt 2000 25,000 16.85 25,000 26-11-20052001 35,000 18.10 35,000 29-11-20062002 unconditional 17,500 9.77 17,500 28-11-20102003 unconditional 17,500 10.75 17,500 27-11-20112003 conditional 35,000 10.75 35,000 27-11-20112004 unconditional 17,500 12.21 17,500 26-11-20122004 conditional 35,000 12.21 35,000 26-11-2012

J.F. Dix 2001 35,000 18.10 35,000 29-11-20062002 unconditional 17,500 9.77 17,500 28-11-20102003 unconditional 17,500 10.75 17,500 27-11-20112003 conditional 35,000 10.75 35,000 27-11-20112004 unconditional 17,500 12.21 17,500 26-11-20122004 conditional 35,000 12.21 35,000 26-11-2012


110


2004 2003 › € million

Net income as reported in the ConsolidatedStatement of Operations 78.1 61.5

us gaapadjustments Amortisation of goodwill –2.3 –0.9Reorganisation [integration] costs –12.4 –5.3Product development costs –1.5 –Pension costs –14.2 –15.0Realised translation adjustment – –1.8Derivatives/financial instruments 4.2 8.2Option plan –1.3 0.2Sale lease portfolio –13.9 –Deferred income taxes on above adjustments 22.6 3.8

Net income under us gaap 59.3 50.7

Earnings per ordinary share Based on average number of shares of € 0.50 nominal outstanding [basic] 0.67 0.57 euro

Based on increase upon conversion/options [diluted] 0.66 0.56 euro

Shareholders’ equity as included in the consolidated balance sheet 714.1 712.8

us gaapadjustments Intangible fixed assets 195.3 197.6Reorganisation provision 22.2 34.6Product development costs –1.5 –Pension provision 274.7 289.6Additional minimum pension liability –163.8 –111.1Derivatives/financial instruments 28.9 25.4Option plan – –0.4Sale lease portfolio –13.9 –Deferred income taxes on above adjustments –28.6 –69.2

Shareholders’ equity under us gaap 1,027.4 1,079.3

Net income and shareholders’equity based on United Statesaccounting principles

United States generally accepted accountingprinciples [us gaap]

Océ’s consolidated financial statements are drawnup on the basis of the accounting principlesapplied in the Netherlands, which differ in anumber of respects from United States generallyaccepted accounting principles [us gaap].

The statements below give an approximate indi-cation of the effect that application of us gaap

would have on net income, earnings per shareand shareholders’ equity. This information willbe presented in more detail in the 20-f statementwhich will be submitted to the Securities andExchange Commission and which will be avail-able on request by amidst March 2005.

111


Balance sheet items under Under us gaap the Consolidated Balance 2004 2003 › € million

us gaap Sheet items set out below would be:Intangible fixed assets 233.6 249.3Provision for deferred income taxes 35.4 98.5Other long term liabilities [provisions] 212.2 242.5Other liabilities 164.1 110.9

The main differences between the accountingprinciples applied by Océ [Dutch gaap] and us

gaap are summarised below:| Amortisation of goodwill Goodwill paid hasbeen capitalised by Océ since December 1,2000. Previously this goodwill was chargeddirectly to shareholders’ equity. Under us gaap

goodwill is capitalised and with effect fromDecember 1, 2002, upon adoption of fas 142,it is no longer amortised, rather it is subject toan annual impairment test. Prior to December1, 2002 goodwill was amortised on a straight-line basis over a period of 10 to 40 years.Goodwill related to acquisitions after June 15,2000 is no longer amortised but is subject to theimpairment test as described above.| Reorganisation provision Under us gaap theformation of a provision is subject to morestringent criteria. For this reason often a part ofa provision is not yet recognised in us gaap. | Product development costs Under us gaap

these costs are not allowed to be capitalised.| Pension costs Under us gaap, pension costsare calculated according to fas 87.

Upon transition to ias 19 in the 2003 financialyear all unrecognised actuarial losses have beencharged to shareholders’ equity while under us

gaap these losses maintain to be amortised overthe average remaining service period.| Realised translation adjustments Under us

gaap on disposal of investments the cumulativetranslation adjustment related to that invest-ment is recognised in the income statement.| Derivatives/financial instruments Under Dutchgaap, receivables and liabilities, denominatedin a foreign currency, including derivative con-tracts, are in principle carried at cost, convertedinto euros at the exchange rates prevailing at theend of the year. us gaap requires valuation ofderivatives at fair value.| Option Plan Under us gaap the Option Planis subject to ‘variable option plan accounting’,which implies that up to the moment when theentitlement becomes final [two or three years]the difference between the fair value of the shareand the exercise price is charged as costs.| Sale lease portfolio The assets relating to exis-ting financial lease contracts transferred to abuyer can be split into financial lease receivablesand the equipment residual value. Under us

gaap different rules are applicable to achievesales type treatment for these assets, which havenot been met for the equipment residual value.

112 Before net income appropriation Assets 2004 2003 › € 1,000

Financial fixed assets Consolidated companies [29] 469,272 491,338Amounts receivable from consolidatedcompanies [30] 530,406 639,218Minority interests in associates [31] 1,467 2,301Other long term financial assets 673 402

1,001,818 1,133,259

Current assets Amounts receivable from consolidatedcompanies 71,407 182,662Other amounts receivable 13,696 17,808Cash and cash equivalents [32] 293,826 37,069

378,929 237,539

Total 1,380,747 1,370,798

Océ n.v. | Statement of Operations

2004 2003 › € 1,000

Income of consolidated companies 40,870 49,676Other net income 37,206 11,786

Net income 78,076 61,462

Océ n.v. | Balance Sheet November 30

113

Océ n.v. | Balance Sheet November 30

Liabilities 2004 2003 › € 1,000

Shareholders’ equity Ordinary shares 43,634 43,631Priority shares 2 2Financing preference shares 10,000 10,000Paid-in capital 511,445 511,408Legal reserve 2,441 592Translation differences –140,391 –114,477Other reserves 208,863 200,147Net income 78,076 61,462

714,070 712,765

Long term liabilities Provision for deferred income tax liabilities 1,410 1,815

Long term debt Amounts payable to consolidated companies 18,844 18,844Long term liabilities [33] 333,382 375,376

352,226 394,220

Current liabilities Amounts payable to consolidated companies 296,784 240,331Short term debt [34] 8,968 8,611Other liabilities [35] 3,555 3,558Accrued liabilities 3,734 9,498

313,041 261,998

Total 1,380,747 1,370,798

114 Summary of Significant Accounting Principles

The accounting principles are the same as thoseused for the consolidated financial statements.The Statement of Operations has been drawn upin accordance with the provisions of Article 402,Book 2, of the Dutch Civil Code.

Financial fixed assets 2004 2003 › € 1,000

Affiliated companies For a list of companies affiliated to the Group inthe Netherlands and elsewhere see pages 123 and124. Principal affiliated companies are included atthe pro rata value of Océ’s share in their net assetvalue.

[29] Consolidated companies Book value at December 1, 2003/2002 491,338 666,479

Changes in the value of consolidated companies due to:Equity in income 40,870 49,676Capital increase 24 21,930Capital decrease –15,080 –107,450Dividend –22,832 –77,074Foreign currency translations –25,048 –62,223


[30] Amounts receivable from At December 1, 2003/2002 639,218 891,307consolidated companies Payment 14,369 46,276

Repayments –107,606 –222,146Foreign currency translations –15,575 –76,219

At November 30 530,406 639,218

[31] Minority interests Book value at December 1, 2003/2002 2,301 2,680in associates

Changes in the value of minority interests due to:Equity in income 494 60Dividend –104 –331Other –1,144 –Foreign currency translations –80 –108


Océ n.v. | Notes to the Balance Sheet and the Statement of Operations

115


Current assets 2004 2003 › € 1,000

[32] Cash and cash equivalents Cash and bank balances 12,431 37,069Time deposits 281,395 –

Total 293,826 37,069

Shareholders’ equity

For specifications see pages 99 and 100.

Long term debt

[33] Long term liabilities Convertible debentures to Company personnel 10,360 10,796Loans 323,022 364,580

Total 333,382 375,376

Convertible debentures to Employees may opt for convertible personnel Company personnel debentures under the annual profit-sharing

scheme. The duration is 6.5 or 7.5 years. Theaverage interest rate is 4.3% and the averageconversion price is € 14.66 [2003: € 15.67].

Loans principal amount average interest redemption amounts due after

› € 1,000 rate [%] at more than five years

November 30 › € 1,000

Euro debenture loan 97,381 6.20 2006 –Euro debenture loan 128,431 6.13 2007 –Euro 54,907 6.46 2006 –Euro 4,538 5.84 2013 4,538us dollar 37,765 2.57 2006 –

Total 323,022 5.79 4,538

The fixed interest rates of theeuro [debenture] loans have beenfully swapped into variableinterest rates.The total fair value of the aboveloans is € 26.4 million higherthan the principal amount[2003: € 31.6 million].

116


Current liabilities 2004 2003 › € 1,000

[34] Short term debt Borrowings under bank lines of credit 7,711 3,362Current portion of long term debt 1,257 5,249

Total 8,968 8,611

[35] Other liabilities Dividend 3,551 3,551Other 4 7

Total 3,555 3,558

Commitments and contingent liabilities 2004 2003 › € million

not stated in the balance sheet

Contingent liabilities Government development credits 49.2 48.3

Other commitments Bank guarantees for Group companies 104.5 110.7Collateral security provided for Group companies 52.1 51.6

For an explanation of the financialinstruments see page 106.

117Proposed net income appropriation 2004 2003 › € 1,000

Preference dividend 3,551 3,551

Cash dividend interim 12,527 12,511Cash dividend final 35,913 35,865

Added to Retained earnings:To Retained earnings 26,085 9,535

Total net income 78,076 61,462

Other information

Upon adoption of this proposed net incomeappropriation, the dividend for the 2004 finan-cial year will be: € 2 per priority share of € 50,€ 0.18 [rounded] per financing preference shareof € 0.50 and € 0.58 per ordinary share of € 0.50.The final dividend per ordinary share for the2004 financial year will be € 0.43, as a paymentof € 0.15 per ordinary share was made onOctober 25, 2004 on account of the expecteddividend. It is proposed to make the final divi-dend available fully in cash. This proposed netincome appropriation is in conformity withArticle 36 of the Company’s Articles ofAssociation.

Extract from the Articles of Association re-lating to net income appropriation The rulesfor net income appropriation as laid down inthe Articles of Association can – where of rele-vance at the present time – be summarised asfollows [for literal text see Article 36 of theArticles of Association]. Where possible, thefollowing dividends shall be distributed in turnfrom the net income: first, on the protectivepreference shares: a percentage of the paid-up

amount equal to the average three-montheuribor percentage, weighted according tothe number of days during which it was applic-able, increased or reduced where necessary by atmost two percentage points; then on the finan-cing preference shares: 6.26% of the paid-upamount including share premium, which per-centage was adapted on December 1, 2004 andsubsequently each time eight years thereafter;then on the priority shares: 4% of the nominalvalue. Out of the remainder of the profit that isavailable for distribution, dividend shall bedistributed on the ordinary shares.Subsequently, of the net income then re-maining, as much shall be reserved as may bedeemed necessary by the Executive Board,subject to approval of the Supervisory Board. In so far as the net income has not been set asidein the form of reserves, it shall be at the disposalof the holders of ordinary shares.

118

Other information

Authorised capital

The authorised capital amounts to€ 175,001,500 and is subdivided into:| 145,000,000 ordinary shares of € 0.50 each;| 30 priority shares of € 50 each;| 30,000,000 cumulative financing preferenceshares of € 0.50 each; and| 175,000 cumulative protective preferenceshares of € 500 each.

Ordinary shares During the year under reviewthe total number of shares outstanding de-creased by 111,574 to 83,518,120 as atNovember 30, 2004. The main reason for thisdecrease was the exercise of options in connec-tion with the Stock Option Plan.

Priority shares All priority shares are issued.They are held by Foundation Fort Ginkel,Venlo, the directors of which are: J.L. Brentjens,chairman, R.L. van Iperen and F.J. de Wit. The Articles of Association grant certain rightsto the holders of priority shares, including thefollowing: | they determine the number of members of theSupervisory and Executive Boards;| they draw up a binding nomination list forshareholders for the appointment ofSupervisory and Executive Directors;| alteration of the Articles of Association ispossible only if proposed by them;| their approval is required for the issue ofshares as yet not issued.In any one year not more than € 60 may be dis-tributed as a dividend on all the priority sharestogether. The Board of Executive Directors ofOcé n.v. and the directors of Foundation FortGinkel are jointly of the opinion that, as regardsthe exercise of the voting rights attaching to thepriority shares, Foundation Fort Ginkel hascomplied with the requirements set in respecthereof in Appendix x to the SecuritiesRegulations of the Euronext Amsterdam stockexchange.

Preference shares Since 1979 the Company hasbeen under the irrevocable obligation to issueprotective preference shares to the LodewijkFoundation, Venlo, on the latter’s first request.As to the nominal value of the said issue, the

Company’s obligation has since February 1997related to at most an amount equal to the totalnominal value of the ordinary and financingpreference shares of the Company issued at thetime of the request.The directors of the LodewijkFoundation are: N.J. Westdijk, chairman, S.D. de Bree and M.W. den Boogert.The Board of Executive Directors of Océ n.v.and the directors of the Lodewijk Foundationare jointly of the opinion that, as regards theindependence of the directors of the LodewijkFoundation, the requirements set in respecthereof in Appendix x to the SecuritiesRegulations of the stock exchange EuronextAmsterdam have been complied with.In 1996 5,000,000 financing preference shareswere placed with the Foundation ‘StichtingAdministratiekantoor Preferente Aandelen Océ’in return for the issue to a number of institu-tional investors of registered depositary receiptswith limited cancellability. As a result of theshare split the number of financing preferenceshares currently placed amounts to 20,000,000.The directors of the Foundation ‘StichtingAdministratiekantoor Preferente Aandelen Océ’are: H. de Ruiter, chairman, S. Bergsma, J.M.Boll, L. Traas and D.M.N. van Wensveen.

Subsequent events

On December 10, 2004 Océ in Americaannounced that the business activities of OcéDisplay Graphics Systems, Inc., which isheadquartered in San José, usa, will be takenover by the Océ business in Canada. The relatedrestructuring costs will amount toapproximately € 2.5 million.

Signatures to the financial statements and otherinformation set out on pages 79 to 118:

January 28, 2005

The Supervisory The Executive Directors Directors

J.L. Brentjens R.L. van IperenM. Arentsen J. van den BeltA. Baan J.F. DixP. BouwJ.V.H. PenningsF.J. de Wit

To the Annual General Meetingof Shareholders of Océ N.V.,Venlo

119

Other information

Auditors’ report

Introduction In accordance with your instruc-tions we have audited the financial statements asincluded in the annual report for the year endedNovember 30, 2004 of Océ n.v., Venlo. Thesefinancial statements are the responsibility of thecompany’s management. Our responsibility isto express an opinion on these financial state-ments based on our audit.

Scope We conducted our audit in accordancewith auditing standards generally accepted inthe Netherlands. Those standards require thatwe plan and perform the audit to obtain reason-able assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclo-sures in the financial statements. An audit alsoincludes assessing the accounting principlesused and significant estimates made by manage-ment, as well as evaluating the overall presen-tation of the financial statements. We believethat our audit provides a reasonable basis forour opinion.

Opinion In our opinion, the financial state-ments give a true and fair view of the financialposition of the company as at November 30,2004 and of the result for the year then ended inaccordance with accounting principles generallyaccepted in the Netherlands and comply withthe financial reporting requirements included inPart 9 of Book 2 of the Netherlands Civil Code.

Amsterdam, January 28, 2005

PricewaterhouseCoopers Accountants n.v.

J.L. [Joep] Brentjens, chairman [1940],Bloemendaal

Post[s] held former chairman of theBoard of Directors of vnu n.v.

Nationality Dutch.Appointed in 2001.Current term of office until 2005.Maximum period of office until 2013.Supervisory directorships chairman ofthe Supervisory Board of Heijmans n.v.,vice-chairman of the Supervisory Board ofRoto Smeets De Boer n.v. and member ofthe Supervisory Board of vnu n.v., Fortisobam n.v. and HoldingmaatschappijP. Bakker Hillegom b.v.

Other posts vice-chairman of Van LeerGroup Foundation, chairman of the Boardof the Nijmegen Catholic UniversityFoundation and board member of severalother foundations.

F.J. [Frank] de Wit, vice-chairman[1939], Lanaken [Belgium]

Post[s] held former chairman of theBoard of Directors of n.v. knp b.t.

Nationality Dutch.Appointed in 1997.Current term of office until 2005.Maximum period of office until 2009.Supervisory directorships member of theSupervisory Board of PontMeyer n.v.

Other posts member of the AdvisoryBoard of Keyser & Mackay [International]c.v., and board member of severalfoundations.

M. [Rinus] Arentsen [1939], Reeuwijk

Post[s] held former chairman of theBoard of Executive Directors of csm n.v.

Nationality Dutch.Appointed in 2004.Current term of office until 2008.Maximum period of office until 2016.Supervisory directorships chairman of theSupervisory Board of csm Nederland b.v.,Klaverblad Onderlinge Verzekeringsmaat-schappij u.a. and Koninklijke Frans MaasGroep n.v. and member of the Super-visory Board of Zuivelcoöperatie Campinau.a., Incotec b.v. and Van der MoolenHolding n.v.

Other posts board member of severalfoundations.

A. [Adri] Baan [1942], Eindhoven

Post[s] held former member of the Boardof Management of Royal PhilipsElectronics n.v. and a former member ofthe Group Management Committee ofRoyal Philips Electronics n.v.

Nationality Dutch.Appointed in 2003.Current term of office until 2007.Maximum period of office until 2015.Supervisory directorships non-executivedirector of Imperial Chemical Industriesici plc and International Power plc

[London], member of the SupervisoryBoard of Royal Volker Wessels Stevin n.v.,asm International n.v. and WoltersKluwer n.v.

Other posts director Port of SingaporeAuthority Europe and member of theSupervisory Board of the NetherlandsAuthority for Financial Markets [afm].

120

Board of Supervisory Directors as at January 28, 2005 P. [Pieter] Bouw [1941], Amsterdam

Post[s] held former chairman ofKoninklijke Luchtvaart Maatschappij n.v.

[klm].Nationality Dutch.Appointed in 1998.Current term of office until 2006.Maximum period of office until 2010.Supervisory directorships chairman ofthe Supervisory Board of csm n.v. andSwiss International Airlines a.g. [Switzer-land] and member of the SupervisoryBoard of nuon n.v.

Other posts part-time professor in Busi-ness Administration at Twente University,chairman of the Board of Trustees ofAmsterdam Free Reformed University,chairman of the Banking Council andboard member of several foundations.

J.V.H. [Harry] Pennings [1934],Maaseik [Belgium]

Post[s] held former chairman of theBoard of Executive Directors of Océ n.v.

Nationality Dutch.Appointed in 1998.Current term of office until 2006.Maximum period of office until 2010.Supervisory directorships chairman ofthe Supervisory Board of azl n.v., Essent n.v. and n.v. Industriebank Liof,vice-chairman of the Supervisory Board ofWolters Kluwer n.v. and member of theSupervisory Board of Berenschot Groep b.v.

Other posts board member of severalfoundations.

R.L. [Rokus] van Iperen [1953], Venlo

Post chairman Board of ExecutiveDirectors.Nationality Dutch.Appointed as member of the Board ofExecutive Directors in May 1995 and aschairman of the Board of ExecutiveDirectors in September 1999.Functional responsibilities Strategy,Corporate Personnel and Organisation,Research & Development, Manufacturing& Logistics, Secretariat of the Companyand Legal Affairs, Corporate Communi-cations.Geographical The Netherlands, UnitedStates [chairman], Germany, Belgium andJapan.Other posts member of the AdvisoryBoard Technical University Eindhoven,member of the Advisory Board of Rabo-bank Nederland and member of the Boardof Foundation Marketing and Technique.Post[s] held employed by Océ since 1978.After several posts within r&d, appointedassistant director in 1986. Since 1989responsible for the Printing Systems busi-ness unit. Managing Director of Océ-Belgium n.v. from 1992 until his appoint-ment as member of the Executive Board.

J. [Jan] van den Belt [1946], Venlo

Post member Board of ExecutiveDirectors.Nationality Dutch.Appointed March 2001.Functional responsibilities Finance andAdministration, Treasury, Tax, InternalAudit, Information Technology, InvestorRelations and financing companies.Geographical France, Spain and Portugal.Post[s] held from 1970 employed byUnilever in the Netherlands and theUnited Kingdom. Since 1977 employedby n.v. Koninklijke NederlandsePetroleum Maatschappij [Shell]. Until1997 several management posts with Shellin the field of treasury and controlling andas Chief Financial Officer [cfo] in variouscountries in Latin America, the United

Kingdom and the Netherlands. From1997 until 2000 cfo of Shell in Brazil.Since September 1, 2000 employed byOcé as cfo .

J.F. [Jan] Dix [1946], Schoten[Belgium]

Post member Board of ExecutiveDirectors.Nationality Dutch.Appointed May 1998.Functional responsibilities United States[ceo], Direct Export, Emerging Marketsand Marketing Communications.Geographical United States, Canada,Mexico, United Kingdom, Nordic,Switzerland, Italy, Australia, CentralEurope, Far East and Brazil.Post[s] held from 1970 until 1972 direc-tor of the family business TrappenfabriekDix b.v., Utrecht. Joined Douwe Egbertsn.v. in 1972; from 1973 until 1977 asdirector in Denmark. Employed by Océsince March 1, 1977. After severalmanagement posts, appointed ManagingDirector of Océ-Belgium n.v. in 1985.Mr. Dix worked for Océ in the UnitedStates from 1988 until 1998, since 1992 asPresident of Océ-usa , Inc. until hisappointment as member of the ExecutiveBoard. He has been a member of theExecutive Board of Océ n.v. since 1998and with effect from September 15, 2004he was also appointed ceo of Océ-usa

Holding, Inc.

121

Board of Executive Directors as at January 28, 2005

122 Strategic Business Units Digital Document Systems M.J.A. FrequinWide Format Printing Systems T. Egelund

Digital Document Systems Corporate Printing M.W. DrontmannCommercial Printing H. WürgesSoftware & Professional Services K. SommerOcé Business Services M.C. Kingmans

Wide Format Printing Systems Technical Document Systems G. RongenDisplay Graphics Systems W.J. VerheyenImaging Supplies A.P. Langendoen

Research and Development [r&d] Wide Format Systems en Cutsheet Systems W.H.M. OrbonsContinuous Feed Systems P. FeldwegSoftware M. Pracchi

Manufacturing and Logistics N.J. Koole

Central Operating Company Executive Committee H.J. Blekman, chairmanVenlo P.H.G.M. Creemers

T. EgelundP. HagedoornH.J. Huiberts [until January 1, 2005]N.J. KooleW.H.M. OrbonsE.E.C. VandoninckG.C. Wilbrink

Central Operating Company Executive Committee P. FeldwegPoing [Germany] M.J.A. Frequin

M. Meyer

Corporate Staff Secretariat of the Company, Legal Affairs H.J. Huiberts [until January 1, 2005]Corporate Personnel and Organisation P.H.G.M. CreemersGroup Controlling E.E.C. VandoninckChief Information Officer P. HagedoornCorporate Finance P.M. Vincent

Senior Executives Central Services

January 2005

123Europe

Belgium Océ-Belgium n.v./s.a. J. van Boerdonk Brussels 2 7294811OcéSoftwareLaboratoriesNamur s.a. B. Hucq Gembloux 81 876710

Denmark Océ-Nordic Holding ApS J. Bjørkmann Copenhagen 43 297000Océ-Danmark a/s H. Risør Copenhagen 43 297000

Germany Océ Holding Deutschland P. Feldweg and Mülheim/Ruhr 208 48450Verwaltungsgesellschaft m.b.H. S. Landesberger Océ-Deutschland G.m.b.H. S. Landesberger and Mülheim/Ruhr 208 48450

D. PottOcé Printing Systems G.m.b.H. P. Feldweg, Poing 8121 724031

M.J.A. Frequin andM. Meyer

OcéDocumentTechnologiesG.m.b.H. M. Mertgen Konstanz 75 31874010Finland Océ-Finland Oy J.P. Koskenmies Helsinki 9 6859110France Océ-France s.a. N. Debargue Noisy-le-Grand 1 45925000

Océ Print Logic Technologies s.a. R. Balmès Créteil 1 48988000Hungary Océ-Hungária Kft. G. Németh Budapest 1 2361040Ireland Océ-Ireland Ltd. N. Kooij Dublin 1 4039100Italy Océ-Italia S.p.A. G. Seno Milan 02 927261Netherlands Océ-Technologies b.v. H.J. Blekman Venlo 77 3592222

Océ-Nederland b.v. J.W.C. Verschaeren ’s-Hertogenbosch 73 6815815Arkwright Europe b.v. J. Heath Venlo 77 3209020Océ-America, Inc. R.P.M.J. van Loenen Venlo 77 3592222

and P.M. VincentOcé General Partnership R.P.M.J. van Loenen Venlo 77 3592222

and P.M. VincentNorway Océ-Norge a.s. J. Bjørkmann Oslo 2 2027000Austria Océ-Österreich Ges.m.b.H. G. Schennet Vienna 1 86336Poland Océ-Poland Limited, Sp. Z o.o. M. Kozlowski Warsaw 22 5002100Portugal Océ-Portugal Equipamentos F. Calvache Lisbon 21 4125700

Gráficos s.a.Spain Océ-Iberia Holding Valores s.l. I. Esteve Barcelona 93 4844800

Océ-España s.a. I. Esteve Barcelona 93 4844800Czech Republic Océ-Czeska republika s.r.o. I. Konecny Prague 2 44010111United Kingdom Océ [uk] Limited N. Kooij Brentwood 870 6005544Sweden Océ Svenska ab J. Bjørkmann Stockholm 8 7034000Switzerland Océ [Schweiz] a.g. Ph. Convents Glattbrugg 1 8291111

Principal group companies and their chief executives*

January 2005

* Where holdings are less than 95% of total equity, the percentage of capital held is

stated. A list of affiliated companies is available for public inspection at the Commercial

Registry, Venlo, in conformity with the provisions of Article 379, Book 2 of the Dutch

Civil Code.

124

Principal group companies and their chief executives*

January 2005

North America

United States Océ-usa Holding, Inc. J. Dix Chicago, ill 773 7143762Océ North America, Inc. P. Chapuis Chicago, ill 773 7148500

and M. Baboyian Boca Raton, fl 561 9973100Arkwright, Inc. J. Heath Fiskeville, ri 401 8211000Océ Business Services, Inc. J.R. Marciano New York, ny 212 5022100Océ Groupware Technology, Inc. E. Wagner Cleveland, oh 216 6879970Océ Display Graphics Systems, Inc. W.J. Verheyen San José, ca 408 2324000Océ ReprographicTechnologies, Corp. E. Wagner Phoenix, az 602 7441353

Canada Océ-Canada, Inc. S. Goodall Toronto 416 2245600Mexico Océ-Mexico s.a. de c.v. J. Colin Mexico City 55 50898710

Asia/Pacific

Australia Océ-Australia Ltd. S.J.J. Notermans Scoresby 3 97303333China Océ Office Equipment M. Sak Beijing 10 65281200

[Beijing] Co., Ltd.Océ Office Equipment M. Sak Shanghai 21 62729698[Shanghai] Co., Ltd.

Hong Kong Océ [Hong Kong China] Ltd. M. Sak Hong Kong 25776064Japan Océ-Japan Corporation G.H. van Praag Tokyo 3 54026112Malaysia Océ Malaysia Sdn. Bhd. M.A.M.E. van Mierlo Petaling Jaya 3 79668000Singapore Océ [Singapore] Pte. Ltd. M.A.M.E. van Mierlo Singapore 6 4701500Thailand Océ [Thailand] Ltd. A.G.F. van Mastrigt Bangkok 2 2607133

Other countries

Brazil Océ-Brasil Comércio e Indústria Ltda. R. Uildriks São Paulo 11 30535300

Direct Export/Emerging Markets

Netherlands Océ Direct Export/Emerging Markets J.W.C. Verschaeren Venlo 77 3592222

Financing companies

Australia Océ-Australia Finance Pty. Ltd. S.J.J. Notermans Scoresby 3 97303333Belgium Océ-Interservices n.v./s.a. J. van Boerdonk Brussels 2 7294992Germany Océ-Deutschland Financial D. Pott Mülheim/Ruhr 208 48450

Services G.m.b.H.France Océ-France Financement s.a. Ph. Poulalhon Saint-Cloud 1 45925055Spain Océ-Renting s.a. E. de Sus Barcelona 93 4844800United States Océ-Financial Services, Inc. S. Schulein Boca Raton, fl 1 5619973100

Minority holdings

Cyprus Heliozid Océ-Reprographic 25%[Cyprus] Ltd.

Singapore Datapost Pte. Ltd. 30%

125Investor Relations [ir] policy The aim ofOcé’s ir policy is to keep financial stakeholdersinformed in good time and in the most effectivepossible way about developments within thecompany, the objective being to provide themwitha clear picture on which to base their invest-ment decisions with regard to Océ. Not onlyinformation about the financial results andprospects is of key importance, but also theprovision of information in the broadest senseabout the company’s strategic choices and ob-jectives and about social aspects such as sus-tainable development.The principal document for the provision ofinformation is the annual report. In additionOcé regularly organises roadshows and otherinformative meetings for institutional investorsand analysts. A number of investors and analystsvisit the Océ Open House in Poing [Germany].When the annual results are published Océholds a press conference. Following publicationof the annual [and six-monthly] results Océ alsoorganises a number of meetings for analysts.The presentations given on those occasions arepublished immediately afterwards on our web-site [http://www.oce.com]. After the announce-ment of the results for the first and the thirdquarters Océ holds a conference call foranalysts.Océ opts to interact pro-actively with its share-holders. By maintaining regular and direct con-tacts with investors Océ is able to form a pictureof their wishes and ideas. These dialogues are anextremely useful way of gaining an insight intohow Océ is perceived.Twice a year Océ publishes a magazine that isespecially focused on private investors who areinterested in Océ. This magazine, called InsideOcé, is aimed at giving private investors a betterinsight into Océ.Every year Océ also organises a day on whichthe company presents itself to groups of privateinvestors. This is known as the Océ PrivateInvestor Day.

The provision of information by Océ won threespecial accolades during 2004. For the thirdtime in its existence Océ was awarded theSijthoff Prize in recognition of the quality of theAnnual Report for 2003 and the informationcontained in it. The transparency of its corpo-rate policy was cited as the reason why Océ tookfirst place in the ‘other participants’ category inthe annual reports survey conducted by Scenter.Lastly, the quality of our Investor Relations wasrecognised by the granting of the ir Award byRematch.

Via the Investor Information link on the Océwebsite all sorts of relevant information can befound, such as quarterly and annual figures,press releases and background information andlinks to other sources. On the website it is alsopossible to take out a subscription to the InsideOcé magazine. The agenda for the Annual General Meeting ofShareholders is also posted on the Océ website.In that agenda authorisation is requested, interalia, for the issue of shares and the restriction orpreclusion of the pre-emptive right. An expla-nation is given in the agenda of the objectivesand restrictions that the Board of ExecutiveDirectors and the Supervisory Board willcomply with in the event that they make use ofsuch authorisation.

Investors and/or their advisers are welcome tosubmit any questions direct to Océ’s InvestorRelations department by telephone [+31] [0]773592240 or via e-mail [[email protected]], if desiredby mentioning their own telephone numberand the times when they can be called back.

Supplementary information for shareholders

http://www.oce.com


126


Quarterly results[net income] 2004 2003

› € million % change on › € million % change on

previous year previous year

First quarter 17.2 –19 21.2 –18Second quarter 21.4 +13 18.9 –32Third quarter *14.1 – **–5.6 –127Fourth quarter *25.4 –6 **27.0 –29

Year 78.1 +27 61.5 –45

Quarterly results [basic earnings 2004 2003per ordinary share, calculated onthe basis of the weighted average in euro % change on in euro % change on

number of shares outstanding] previous year previous year

First quarter 0.20 –20 0.24 –18Second quarter 0.25 +13 0.22 –33Third quarter 0.15 – –0.08 –133Fourth quarter 0.29 –6 0.31 –29

Year 0.89 +29 0.69 –46

Distribution of ordinary shares 2004 2003as % at end of financial year [indication based on information private institutional total private institutional total

provided by banks]

Netherlands 19 13 32 24 20 44United Kingdom – 21 21 – 19 19Belgium/Luxemburg 1 20 21 1 13 14United States – 19 19 – 17 17Other 1 6 7 1 5 6

Total 21 79 100 26 74 100

* Net income for the third and fourth quarter of 2004 includes impair-

ment of € 4.4 million and € 0.3 million respectively [after taxation] and

the release of tax provisions of € 5.6 million and € 1.4 million

respectively.

** Net income for the third and fourth quarter of 2003 includes

impairment [after taxation] of € 18.3 million and € 2.3 million

respectively.

Large Shareholdings Notification Act On thebasis of the Act on the Notification of LargeShareholdings in Publicly Listed Companies[Dutch abbreviation: wmz] which requires, interalia, that shareholders must notify any holdings ofmore than 5% of the ordinary outstanding shares,the following holder of ordinary shares is known:Internationale Nederlanden Groep [6.33%],notification February 28, 1992.Depositary receipts with limited cancellability forfinancing preference shares are held by: RabobankNederland [6.25%], notification May 31, 1996;Fortis n.v. [5.68%], notification May 10, 1999;and abp-pggm Capital Holdings n.v. [5.81%],notification June 14, 1999.The percentages mentioned above are the per-centages of the total outstanding share capitalheld at the time when the notification was made.

127


Important [publication] dates [subject to modification]

April 5, 2005 first quarter results 2005April 15, 2005 general meeting of shareholdersJuly 7, 2005 second quarter / first half year results 2005October 7, 2005 third quarter / nine months results 2005January 2006 provisional results for 2005February 2006 publication of 2005 annual report

Stock exchange listings Ordinary shares in Océare listed on the stock exchanges in Amsterdam,Düsseldorf, Frankfurt/Main and on the elec-tronic stock exchange [ebs] in Switzerland.They are traded in the United States as AmericanDepositary Receipts [adrs] via nasdaq.Options to Océ shares are traded on theEuronext Options Exchange.

year’s highest

year’s lowest

Share price development

index December 1, 1999 = 100

Océ

amx

aex

18.90

11.55

18.90

6.15

14.05

6.80

13.70

6.50

16.10

10.60

00 01 02 03 04

120

110

100

90

80

70

60

50

128 Consolidated Statement 2004 2003 2002 2001 2000 amounts › € million

of Operations

Total revenues 2,652 2,769 3,176 3,234 3,224Operating income 110 125 226 225 282Net income 78 61 113 10 152

Key figures:Total revenues

Increase/decrease in % –4 –13 –2 – 14Expenditure on researchand development 207 212 215 203 199

As % of total revenues 7.8 7.7 6.8 6.3 6.2Operating income

As % of total revenues 4.2 4.5 7.1 6.9 8.8As % of average balancesheet total 4.8 4.7 7.5 7.1 9.1

Net incomeAs % of total revenues 2.9 2.2 3.5 *3.2 4.7As % of average shareholders’ equity 10.9 8.3 13.1 *10.9 16.8

Ordinary net incomeas % of average ordinary shareholders’ equity [roe]*** 11.3 8.5 13.6 *11.2 17.5

Net income retained 26 10 60 *53 99As % of net income 35.0 16.5 55.5 *51.9 66.6

Payroll expenses 1,228 1,271 1,347 1,310 1,242As % of total revenues 46.3 45.9 42.4 40.5 38.5

Number of employees 21,315 22,204 22,489 22,472 22,253

Per € 0,50 ordinary share[in euro]:Basic earnings** 0.89 0.69 1.30 *1.19 1.76Diluted earnings 0.88 0.69 1.29 *1.18 1.74Free cash flow 4.44 3.93 4.02 2.04 –0.22Shareholders’ equity 7.87 7.87 8.55 10.56 10.91Dividend 0.58 0.58 0.58 0.58 0.58

Average number of ordinaryshares outstanding [› 1,000] 83,488 83,409 84,086 85,241 84,401Increase from dilution [› 1,000] 1,271 759 693 714 1,131

Share price [in euro]:Year’s highest 16.10 13.70 14.05 18.90 18.90Year’s lowest 10.60 6.50 6.80 6.15 11.55Year end 11.25 11.92 11.45 10.20 17.75

Océ 2000-2004

* Before exceptional items.

** Basic earnings after exceptional items amount to € 0.08 in 2001.

*** The definition of roe has changed compared to 2003.

Consolidated Balance Sheet 2004 2003 2002 2001 2000 amounts › € million

Assets:Intangible fixed assets 37 49 86 44 –Tangible fixed assets 481 494 578 637 679Financial fixed assets 360 560 693 751 799

Fixed assets 878 1,103 1,357 1,432 1,478

Current assets 1,355 1,318 1,505 1,696 1,738

Total 2,233 2,421 2,862 3,128 3,216

Liabilities:Group equity 752 752 811 985 1,031Long term liabilities [provisions] 516 596 637 426 320Long term debts 438 381 756 754 853Current liabilities 527 692 658 963 1,012

Total 2,233 2,421 2,862 3,128 3,216

Key figures:Property, plant and equipment 423 431 459 458 445

Net expenditure 74 81 101 106 65Depreciation 86 94 95 91 86

Rental equipment 58 63 119 179 233Net expenditure 40 14 30 50 80Depreciation 43 65 87 103 108

Financial lease receivables [net] [including short term financial leases] 403 801 1,013 1,153 1,175

As % of balance sheet total 18 33 35 37 37Inventories 317 310 346 365 442

As % of total revenues 12 11 11 11 14Trade accounts receivables 452 503 574 649 696

As % of total revenues 17 18 18 20 22

Ratio of current assets tocurrent liabilities 2.6 1.9 2.3 1.8 1.7Group equity as % of balance sheet total 34 31 28 31 32

129

Océ 2000-2004

130 ac Audit Committee.Analogue In relation to copiers: non-digital pro-duction of a copy with the aid of a photo-lens;analogue machines cannot communicate withother copying machines [see also digital below].Application software Software designed tohandle specific applications.

Back service The increase in accrued pensionrights under a defined-benefit scheme prior toretirement as a result of salary increases orindex-linking.

cad Computer Aided Design: designing with theaid of the computer.Captive lease company/business An Océsubsidiary which takes over leases and leasingactivities from other Océ subsidiary companies.The lease receivables are then sold to externalfinanciers.ceo Chief Executive Officer.cfo Chief Financial Officer.cio Chief Information Officer.Competence Centre Used within Océ to mean:knowledge centre within the Océ organisationin which technological expertise and speciali-sations are concentrated.Conference call Used within Océ to mean: atelephone meeting convened by Océ withinvestment analysts to explain the financialresults and provide background information.Continuous feed Printing on rolls of paper oron pinfeed forms.CopyPress printing technique System forproducing copies of offset quality, in which thetoner is ‘pressed’ into the paper.Cost of ownership Ongoing fixed and variablecosts linked to the use of a product after it haspassed into customer ownership.Cut sheet printing Printing on separate sheetsof paper.

dc Disclosure Committee.dds The Strategic Business Unit DigitalDocument Systems.Design for re-use Making allowance for the re-use of a product, starting in the actual designstage.dgs The business group Display GraphicsSystems.Digital In relation to printers and copiers:producing a print or copy by means of laser orled exposure in a computer-controlledmachine which can also communicate via anetwork; used here as the opposite to analogue[see above].Digital print providers Businesses that arespecialised in the production of prints for thirdparties [copy shops and job printers].Direct Imaging Process [dip] System in whichthe image is formed in one single pass on adrum before being transferred to the copyingmaterial.Document workflow software Software usedfor the processing of document flows and allrelated activities.Dpi Dots per inch: indicates the resolution of ascan or print, i.e. the number of dots scanned ordisplayed per inch. Dutch gaap Dutch Generally AcceptedAccounting Principles.

ebit Term used to describe the financialresults: Earnings Before Interest and Tax.edp Electronic Data Processing.Embedded software Basic software forcontrolling Océ products.erp Enterprise Resource Planning: standardsoftware that integrates the most importantbusiness functions within one complete package[company-wide it solution].

Free cash flow The cash flow before financingactivities.

gri Global Reporting Initiative.

Hedging policy Providing cover against foreignexchange risks by means of forward buying orselling of expected physical net outflows andinflows in foreign currencies that are not thefunctional currency of the reporting unit.Interest risks can also be hedged so as to mini-mise mismatches between net interest inflowsand outflows.

List of terms and abbreviations

131

List of terms and abbreviations

iac Internal Audit Committee.icc Internal Controls Committee.ifrs International Financial ReportingStandards.Inkjet technology Printing technique in whichfine droplets of ink are used to build up theprinted image.Input and output management All activitiesinvolved in preparing for and executing printjobs. ir Investor Relations.

Non-recourse basis Used here to mean: the saleof the existing lease portfolio in a manner thatcannot be reversed.

One-stop shopping concept Used within Océto mean: Purchasing as many services as possiblefrom one single supplier, e.g. printers, systems,application software, service, support and theirfinancing.opc Organic Photoconductor: Light-sensitiveand durable photoconductor [drum or belt] fortransferring the image onto paper.Organic growth The development of theresults excluding acquisition and exchange rateeffects.Outsourcing American term for thecontracting out of activities.

Private label concept Performing activitiesunder a brand name other than the company’sown brand name. In the case of financial leasingthe lease partner may use the Océ name to offerits financing facilities to its contract partners.Process drum Image carrier in the DirectImaging Process [dip].Proxy solicitation Giving shareholders thepossibility of casting their vote without beingphysically present at the meeting ofshareholders.

r&d Research & Development.roa Return on Assets [financial ratio].roe Ordinary net income as % of ordinaryshareholders’ equity* [financial ratio].

sec Securities and Exchange Commission; thestock market supervisory authority in theUnited States.Stakeholders All those who have an interest inOcé’s activities.

tds The business group Technical DocumentSystems.Transaction print production Production ofprints and copies on request in either big orsmall print-runs.

us gaap United States Generally AcceptedAccounting Principles.

Volume segment Internationally acceptedindustrial standard for classifying the copyingand printing markets into segments based onthe number of prints or copies produced permachine per month.

wfps The Strategic Business Unit WideFormat Printing Systems.Workflow management Used at Océ to mean:managing the quantity of print assignments andthe related activities within an organisation.

* The definition of roe has changed compared to 2003.

132 This annual report contains certain forward-looking statements within the meaning of Section27a of the Securities Act of 1933, as amended,and Section 21E of the Securities Exchange Actof 1934, as amended. These forward-lookingstatements, which may be expressed in a varietyof ways, including the use of future or presenttense language, refer to future events. Océ hasbased these forward-looking statements on itscurrent expectations and projections aboutfuture events.Océ’s expectations and projections may changeand Océ’s actual results, performance orachievements could be significantly differentfrom the results expressed in or implied by theseforward-looking statements based on variousimportant factors, risks and uncertainties whichare neither manageable nor foreseeable by Océ(and some of which are beyond Océ’s control).When considering these forward-lookingstatements, you should keep in mind these risks,uncertainties and other cautionary statementsmade in this Annual Report or in Océ’s otherannual or periodic filings made with the UnitedStates Securities and Exchange Commission. In the light of these risks, uncertainties and as-sumptions, the forward-looking events dis-cussed in this Annual Report might not occur.These factors, risks and uncertainties include,but are not limited to, changes in economic andbusiness conditions, customer demand in com-petitive markets, the successful introduction ofnew products and services into the markets,developments in technology, adequate pricingof products and services, competitive pricingpressures within Océ’s markets, the financing ofOcé’s business activities, efficient and cost-effective operations, changes in foreign currencyexchange rates, fluctuations in interest rates,political uncertainties, changes in governmentalregulations and laws, tax rates, successfulacquisitions, joint ventures and disposals andthe effects of recent or further terrorist attacksand the war on terrorism.

For a more detailed discussion of the factors,risks and uncertainties that may affect Océ’sactual results, performance or achievements,you should refer to pages 69 to 73 of this annualreport, Océ’s Annual Report on Form 20-f andany other filings made by Océ with the UnitedStates Securities and Exchange Commission.

Océ’s forward-looking statements speak only asof the date on which the statements are made,and Océ is under no obligation to update orrevise publicly any forward-looking statement,whether as a result of new information, futureevents or otherwise.

Forward-looking statements

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