Océ Annual Report 2007 - KU Leuven · Email [email protected] The Annual Report as well as other publications such as press releases, presentations, speeches and other items ... 56 Océ

Printing forProfessionals

Océ A

nnual Report 2007

Océ is picking up speed

like a bird spreading its wings

and climbing with powerful strokes

into its territory: the blue sky.

It is an image that fits Océ this year.

The success of many new products

provides the uplift. The dynamics

of new markets and new applications

give the necessary thrust.

And the total commitment of

everyone in the business

generates the power and determination

to meet the targets of all our stakeholders.

Colophon

This is an English translation of the official Annual Report which

was published in the Dutch language. In the event of textual

inconsistencies between the English and the Dutch version the

latter shall prevail.

Design Carmen Arends, Venlo

Cover Geert Setola, Oirsbeek

Photography Thijs Wolzak, Amsterdam;

pages 12-13, 18, 22-23, 24 and 58-59

Remaining photography Various photographers

Text consultants Martin van den Akker, Tekstiel, Amsterdam

Printing Drukkerij Lecturis B.V., Eindhoven

Paper inside Coated Paper Silk, 150 g/m2

supplied by Océ Imaging Supplies

Paper cover Coated Paper Silk, 250 g/m2

supplied by Océ Imaging Supplies

© 2008 Océ

Océ Annual Report 2007Océ is picking up speed

like a bird spreading its wings

and climbing with powerful strokes

into its territory: the blue sky.

Océ N.V.

Report for the financial year December 1, 2006

to November 30, 2007

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 original

version are available on request from

Océ N.V.

Corporate Communications Department

Telephone [+31] 77 3592000

Email [email protected]

The Annual Report as well as other publications such as

press releases, presentations, speeches and other items

relating to the Annual Report can also be accessed via the

corporate website [http://www.oce.com].

2

www.oce.com

mailto:[email protected]

Report of

the Board of

Executive

Directors

Financial

Statements

Other

information

Miscellaneous

Contents

4 Profile

5 Key figures

6 This is Océ

8 Ambitions and strategy

25 Financial review

25 Results

28 Dividend proposal for 2007

28 Prospects

34 Commercial developments

36 Digital Document Systems

37 Corporate Printing Systems

39 Commercial Printing Systems

41 Océ Business Services

50 Technology and innovation

50 Research & Development

52 Manufacturing and logistics

54 Océ as an employer

56 Océ and sustainability

60 Management aspects

60 Corporate governance

70 Risks and risk management

79 Consolidated Income Statement

80 Consolidated Balance Sheet

82 Consolidated Statement of Changes in Equity

84 Consolidated Cash Flow Statement

86 Notes to the Consolidated Financial Statements

136 Proposed net income appropriation

137 Auditors’ report

138 Board of Supervisory Directors

139 Board of Executive Directors

140 Senior Executives Central Services

141 Principal subsidiaries

10 Strategic perspective

14 Report of the Board of Supervisory Directors

18 Report of the chairman of the Board of Executive

Directors

30 Use of funds and finance

30 Cash flow

43 Wide Format Printing Systems

44 Technical Document Systems

46 Display Graphics Systems

48 Imaging Supplies

130 Corporate Balance Sheet

130 Corporate Income Statement

132 Notes to the Corporate Balance Sheet and the

Income Statement

143 Supplementary information for shareholders

146 Océ 2003-2007

148 List of terms and abbreviations

152 Forward-looking statements

3

Océ: innovative by nature Océ supplies digital prin-

ting systems, software and services for the production,

reproduction, distribution and management of documents,

in color and black-and-white, in small format and in wide

format, for professional users in offices, educational insti-

tutions, industry, advertising and the graphics arts market.

Océ is a leading supplier of these systems world-wide.

The product offerings comprise printers with scanners and

peripheral equipment, document management software,

inks, toners and printing media, services in the area of

system integration and outsourcing of document manage-

ment activities and the leasing of printing systems.

The broad and comprehensive product portfolio consists

of a core range of products developed by the company

itself for the wide format and for the high and very high

volume segments of the small format, supplemented by

selected machines sourced from Original Equipment

Manufacturers [OEMs]. Océ supplies its equipment as

part of total solutions, ranging from the provision of initial

advice through to the maintenance of the systems.

Océ’s reputation is founded on productivity and reliability,

ease of use and a favorable ‘total cost of ownership’.

Financial year

The company’s financial year runs from December 1 to

November 30.

Articles of Association

The present Articles of Association were confirmed by a

notarial deed dated May 3, 2006. Océ N.V. is an interna-

tional holding company within the meaning of Article 153,

para. 3b, Book 2 of the Dutch Civil Code.

Foundation, registered office and commercial

registry

The company was founded in 1877. Its present legal form

dates from 1953. The registered office is in Venlo, the

Netherlands, and the company is registered in the com-

mercial registry in Venlo under No. 12002283.

Head office

The head office is located in Venlo at St. Urbanusweg 43,

P.O. Box 101, 5900 MA Venlo, the Netherlands, telephone

[+31] 77 3592222, fax [+31] 77 3544700, e-mail

[email protected], internet http://www.oce.com.

Profile

�

Océ is commercially active in over 90 countries; in more

than 30 of these it has its own sales and service organiza-

tion. In Europe, the United States and Canada Océ has its

own research and manufacturing facilities.

In 2007 Océ, which has nearly 24,000 employees,

achieved revenues of € 3.1 billion and a net income of

€ 78.9 million.

Business model Océ is active in the entire value chain

of printing systems: from development via manufacturing,

sales and service to the provision of business services and

financing. In a number of countries and market segments

where Océ itself does not have a sufficiently large presence,

part of the product range is made available via specialized

distributors.

Through its own Research & Development [R&D] Océ

develops its own basic technologies and the majority of its

product concepts. The direct feedback of customer ex-

periences serves here as an important source of inspira-

tion for new products.

In the Océ business model a major role is played by co-

operation with partners in all sorts of fields. These partner-

ships cover such areas as R&D, manufacturing, OEM,

distribution and financing.

Board of Supervisory Directors

P.A.F.W. Elverding, chairman

F.J. de Wit, vice-chairman

G.J.A. van de Aast

M. Arentsen

A. Baan

Board of Executive Directors

R.L. van Iperen, chairman

J. van den Belt

J.F. Dix

A.H. Schaaf

Company Secretary

F.W.T. Kool

Key figures

2007 2006 x € million

Total revenues 3,098.2 3,110.3

Change on previous year [%] - 0.4 16.2

Change [organically] 3.4 0.3

Non-recurring* 10.6 - 0.9

Recurring* 0.4 0.8

Gross margin 1,264.8 1,269.2

As % of total revenues 40.8 40.8

Operating income [EBIT]** 121.2 102.2

Change on previous year [%] 18.5 - 9.1


Net income 78.9 57.1

Net income attributable to shareholders 77.1 55.0

Change on previous year [%] 40.2 - 31.2


Balance sheet total 2,491.2 2,606.2

Equity attributable to shareholders 677.1 684.5

Equity 712.6 721.4

Equity as % of balance sheet total [solvency ratio] 28.6 27.7

Net Capital Employed 1,144.5 1,339.9

Return on Capital Employed [RoCE] 7.3 5.6

Cash flow before financing activities [free cash flow] 190.9 118.5

Number of employees at November 30 [in full-time equivalents] 23,798 23,784 employees

Per € 0.50 ordinary share

Net income attributable to shareholders 0.88 0.63 euro

Equity attributable to shareholders 7.32 7.48

Dividend 0.64 *** 0.58

Number of € 0.50 ordinary shares

Average number outstanding 84,314,949 83,899,228 shares

Potential increase from share-based compensation and

convertible debentures to employees 1,795,514 1,678,249

Net income based on diluted earnings per € 0.50 ordinary share 0.87 0.63 euro

Year’s highest/lowest 18.68/11.15 15.39/10.92

Year end 12.39 12.59

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

Recurring revenues: revenues from services, inks, toners, media, rentals, interest and business services.

** EBITDA 2007 amounted to € 330.8 million [2006: € 306.1 million].

*** Proposal to the Shareholders’ Meeting on April 23, 2008.�

This is Océ

Small format:

| Office and departmental printers, black-and-white and

color

| Production printers, black-and-white and color, cutsheet

and continuous feed

| Scanners

Wide format:

| Printers for production and working groups

environments, black-and-white and color [technical

documentation]

| Productive printers [roll-to-roll and flatbed] for indoor

and outdoor applications [display graphics]

| Scanners

6

Printers, copiers and scanners

Océ supplies ground-breaking innovative printing systems, software, media and document

management services to professional users, in over 90 countries with about 24,000 employees.

| Workflow and output management software for full-line

small format printing solutions

| Print management and distribution software for wide

format printers

| Print workflow, raster image and distribution software

for display graphics

Software

| Maintenance of machines and software

| Consultancy

| The handling and execution of document management

processes by Océ Business Services for customers in

various sectors

| Financial services [rental and lease]

This is Océ

7

Services

Imaging Supplies| Wide format CAD/PPC media

| Display graphics media

| Print media for offices and for graphics

applications [business graphics media]

| Profiles for media, ink and printer combinations

�

To build and strengthen leading positions in high production segments in small format

environments in both print-for-use and print-for-pay.

To expand the existing position in outsourcing services toward document management services

with high added value.

To strengthen the leading position in Technical Document Systems.

To build up a leading position in Display Graphics Systems.

To be a supplier of imaging supplies that make total solutions possible.

To be an attractive employer world-wide.

To be one of the ten most attractive employers for university graduates in the Netherlands

and one of the top five for technicians.

To achieve a Return on Capital Employed of at least 13% in 2010.

To realize an average annual organic growth in revenues of 5%.

To maintain the relative gross margin.

To maintain sound balance sheet ratios.

To further expand a constructive dialogue with shareholders.

To cooperate in the technology sector with the top specialists in the industry.

To cooperate with high value suppliers of components, modules and machines.

To cooperate with market partners that make a substantial contribution toward boosting our

distribution power.

To cooperate with leading vendor lease partners.

To limit and, where possible, prevent any undesirable effects of Océ products on the

environment.

To promote sustainable processes in the businesses of the company’s customers and in the

company itself.

To display and propagate good corporate citizenship in all activities.

Ambitions and strategy

Customers

Employees

Shareholders

Partners

Society

Strategic objectives

Océ seeks to create value for all stakeholders by realizing profitable growth. This forms the basis for

Océ’s continuity. Océ concentrates on strengthening existing and building up new leading positions

in the market for professional document printing and management systems.

Océ’s strategy is aimed at increasing its distribution power, strengthening the product portfolio and

optimizing business processes.

�

The productivity of the sales organization was improved further in 2007.

Further expansion of the sales organization for the graphic arts market.

Introduction of the Océ VarioStream 8000, the Océ ColorStream 10000 series, the Océ JetStream 1100/2200 and the Océ Arizona 250 GT.

Stronger support for color in various software packages.

Continuation of the central coordinated international human resources policy, aimed at leadership development and management development.

Global Océ Professionals program continued and start made on programs for development of high potentials in various countries.

International recruitment programs for graduates intensified.

Acceleration of growth: 2007 organic growth in revenues 3.4%.

Increase in RoCE: from 5.6% in 2006 to 7.3% in 2007.

Gross margin maintained at 40.8%.

Net debt position versus EBITDA improved from 2.1 in 2006 to 1.4 in 2007.

Excellent free cash flow achieved: € 191 million in 2007 [2006: � 119 million].

Co-development of products together with partners has been further expanded. One good example is the partnership with Miyakoshi that

led to the launch of the Océ JetStream 1100/2200.

Cooperation with various OEM partners [such as Fujifilm, Fuji Xerox and Konica Minolta] has been significantly reinforced, resulting in an

improved product portfolio and increased distributive power.

Open innovation initiatives have been further expanded with Document Services Valley in Venlo in which Océ works together with other

partners on the development of document-related services.

Following the relocation of existing manufacturing activities to Asia, attention has shifted toward the direct start-up of the production

of new machines in Asia.

Intensified dialogue with customers and suppliers on sustainability issues.

New machines offer more possibilities to avoid needless use of energy and paper.

Range of sustainable manufactured and recycled paper expanded.

Focal points determined to measure progress in sustainability.

Diverse social and cultural activities [sponsoring, donations] by local Océ companies.

Achievements in 2007

Ambitions and strategy

10

For the market for document printing and management

and related services the following trends are of special

importance:

| The replacement of analog by digital technologies.

| The shift from black-and-white to color.

| Shift to digital printing in the graphic arts market and

display graphics.

| Increasing outsourcing by customers of document-

related services.

| Replacement of paper documents by digital documents.

| Growing economic importance of the market in Asia.

Océ is responding to these trends by developing a full-line

product portfolio consisting of its own hardware and soft-

ware products supplemented by OEM equipment and

document-related services in combination with ongoing

investments in the sales and service organization.

Analog to digital In recent years most of the copiers

based on analog techniques have been replaced by digital

printers/copiers. Digital technology has created many new

possibilities for our customers because of the improved

print quality and greater reliability of the equipment. The

switch to digital printing technology has been virtually

completed in most of the markets important to Océ, with

the exception of emerging markets, for example in Asia.

Color Océ is rapidly strengthening its position in color

[23% of revenues in the fourth quarter of 2007 compared

to 17% of revenues in the fourth quarter of 2006] by offer-

ing a growing portfolio of color products, both developed

in-house and sourced from OEM partners, and by training

the sales and service staff in the use of color. In all relevant

segments, in wide and small format, continuous feed and

cutsheet, Océ offers customers equipment with outstand-

ing quality and efficiency. In 2008 Océ will again be launch-

ing various innovative color products for both wide format

and small format.

Graphic arts market and display graphics

Increasing numbers of documents, ranging from bro-

chures to books, that were previously printed in offset are

today being printed digitally ‘on demand’. This develop-

ment is being supported by the higher speed, lower costs

and better quality of digital printing in both color and black-

and-white in combination with a higher demand for docu-

ments in small print-runs [for example, personalized docu-

ments]. This shift is also in full swing in the display graphics

market. The reasons are the same as in the graphic arts

market: good quality, more efficient production and – for

smaller print-runs – cheaper than analog silkscreen print-

ing and photographic prints.

Océ prepared for this shift in good time by investing in the

development of hardware and software products as well

as services that support this trend. The sales and profes-

sional services organizations for the graphic arts market

and those for display graphics are being further expanded

and trained.

Document-related services Through Océ Business

Services [OBS], Océ invests in selected segments of the

rapidly expanding market for outsourcing. Océ is standard-

izing as much as possible the package that it offers for the

simpler services and is fast expanding its offerings of com-

plex services. Examples of the latter are the e-discovery

services for legal service providers, the Technical

Documentation Lifecycle Services for industry and, in

more general terms, records management. To strengthen

the development of these services, Océ took the initiative

in 2007 to set up a Document Services Valley in Venlo.

This is an open innovation center for the development of

document-related services together with partners.

Digital documents Digital documents are becoming

more and more important. On the one hand they offer the

possibility of distributing and storing documents immedi-

ately and at very low cost. On the other they create new

possibilities such as multimedia documents and enable

the computerization of processes and the related docu-

ment flows.

Océ responds to this by offering software and services

that facilitate the smooth integration of paper and digital

document flows.

Strategic perspective

11

Strategic perspective

Asian market Besides expanding in the United States

and Europe Océ wants to grow in Asia, a region which is

now showing a fast rate of growth. In the meantime the

company has its own sales companies in Malaysia,

Singapore, Thailand, Japan and China. Via distributors

Océ sells printers and software in a further 12 countries in

the region. In 2007 Océ achieved revenues of more than

€ 100 million in this region, where it has some 600

employees.

In China Océ strengthened its position through its partner-

ship with the Founder Group, one of the largest Chinese

technology businesses. Océ uses Founder controllers in

its printers so that they can also print Chinese characters.

In December 2006 Océ opened an office in Bangalore,

India. On the Indian market strong interest exists for Océ

color printers.

In 2008 Océ will further expand its distribution power in

Asia by strengthening its own sales organization and

entering into agreements with independent distributors.

Examples are the agreement with Fuji Xerox for sales of

the successful Océ TCS color systems and the intensified

partnership with Konica Minolta that were announced in

January 2008.

Partnerships – stronger together

Distribution

Renowned printer suppliers and distributors sell Océ systems in markets and regions where Océ does not have a

sufficiently strong presence.

Manufacturing

Some of Océ’s systems are produced by contract manufacturers under the direct supervision of Océ.

Logistics

The logistics network for the manufacture, sale and servicing of Océ systems comprizes dozens of global and local

logistics service providers.

Research & Development

In all stages of Research & Development Océ maintains close contacts with scientific organizations and educational

institutions.

Technological know-how is shared with institutions and companies, both for in-house product development and for new

developments in third-party products.

Product portfolio

The full-line product portfolio comprises not only products developed by the company itself but also selected machines

from OEM partners.

Financial services

To offer customers favorable lease terms as part of a complete solution, Océ and several leading financial service

providers work closely together.

12

Océ R&D

High-tech and handi-

craft It is already since

decennia that his hands

make Océ-models. In his

workshop wood, chisel and

plane still play a major role

side by side with modern

material. There, in the

course of their develop-

ment, all Océ machines

take form in three

dimensions. As do the

´treacherously´ real looking

mock-ups with which the

researchers test the

machines in their initial

stages, among others for

their ergonomical qualities.

His colleagues behind the

glass windows work in a

futuristic, ultraclean

environment with highly

advanced tools and

materials to produce an

ultramodern product. At first

sight there is a huge

contrast between high-tech

and handicraft. But in reality

it turns out to be two

exponents of the same

activity. Research &

Development is about the

continuing search for faster,

better products that answer

the needs of the client. But

those needs do not only lie

in the output performance.

It is also in the interaction

between man and machine,

in userfriendliness, in the

safe feeling to be able to

really manage the process.

That´s where form meets

function. That´s where hard-

and software and man-

oriented design meet in

high quality printing

systems. R&D is people.

13

1�

Report of the Board of Supervisory Directors

To the Annual General Meeting of Shareholders

of Océ N.V., Venlo.

Annual Report We herewith present to you the Annual

Report for 2007 which, together with the Financial

Statements for 2007, was drawn up by the Board of

Executive Directors. After taking note of the report by the

auditors PricewaterhouseCoopers Accountants N.V. that

is set out on page 137 of this Annual Report, we approved

and signed off the Financial Statements. We have

discussed the Annual Report with the Board of Executive

Directors in the presence of the external auditors and the

head of the internal audit department. The Financial

Statements are hereby submitted to you for discussion

and adoption. In the company’s Articles of Association a

distinction is made between the adoption of the Financial

Statements, the determination of the income

appropriation and the granting of a release and discharge

for the management and for our supervision over such

management.

We recommend that you adopt the Financial Statements,

including the dividend proposal, and that you grant a

release and discharge to the Board of Executive Directors

for its management during the past financial year and to

the Board of Supervisory Directors for its supervision over

such management.

Results and strategic position The net income

attributable to shareholders amounted to € 77.1 million

[2006: € 55.0 million], which is equivalent to € 0.88 [2006:

€ 0.63] per ordinary share.

Income and profitability in Wide Format Printing Systems

[WFPS] were excellent; in Digital Document Systems

[DDS] the first results of the strategic actions that had

been initiated started to become visible.

Océ Business Services achieved a strong increase in

revenues and satisfactory results.

The Board of Supervisory Directors of Océ N.V. From left to right:

A. Baan, G.J.A. van de Aast, P.A.F.W. Elverding, chairman,

F.J. de Wit, vice-chairman and M. Arentsen.

1�

During the year under review a number of new products

were successfully introduced both in DDS and in WFPS.

Some of these are OEM products sourced from partners.

After adjustment for exchange rate changes, revenues

rose by 3.4% in 2007. Particularly during the second half

of 2007 revenues developed favorably.

The further relocation of the manufacturing of machines

and components to countries with a competitive cost

structure was continued. The development of non-

recurring revenues in DDS and WFPS was very good.

Recurring revenues also developed positively.

The strategy of Océ and the actions resulting from it were

extensively discussed with the Board of Executive

Directors. The strategy, whose main thrusts are increasing

distribution power, strengthening the product portfolio

and optimizing business processes, was the subject of a

detailed external presentation given at the beginning of

2007 by the Board of Executive Directors.

In the implementation of the strategy new elements have

been added to improve profitability, notably in DDS. The

successful new market approach of the office segment in

the United States is now being rolled out further in various

countries in Europe. Over the past year the product

portfolio was strengthened by introducing new products

developed in-house as well as third-party products. The

development of the company’s own products will be

further concentrated on high volume and wide format

printers and on reducing the time to market. In addition,

cooperation with partners will be expanded at technology

and product level.

The strategy of WFPS is aimed at maintaining its current

strong position and profitability in the future as well and at

achieving further expansion. Specifically thanks to the

highly successful sales of the Océ Arizona 250 GT in 2007,

the Display Graphics Systems business group is

developing favorably.

The progress achieved with the corporate operational

excellence projects, aimed at optimizing business

processes, demands continuous attention. The logistics

processes in particular require system-based solutions

that need to be designed, built and implemented. Actions

aimed at a structural reduction in working capital have

been set in motion and will yield further results in 2008.

Océ’s RoCE is still too low at 7.3% [2006: 5.6%], but the

company is well on track toward realizing its objective for

2010 [RoCE of at least 13%].

The Board of Supervisory Directors is confident that

implementation of the strategy that has been mapped out

will result in the objectives being achieved in the period up

to 2010 inclusive.

Supervision and advice The Board of Supervisory

Directors held eight meetings with the Board of Executive

Directors in 2007. Our full Board was present at almost all

of these meetings.

One meeting took place in the United States. At that

meeting, which was attended by the American manage-

ment of Océ, there was an extensive discussion of the

market position and strategy in the United States, Océ

biggest market in terms of revenues. The integration of

Imagistics, which has meanwhile been completed, was

also discussed. In between the formal meetings there

were regular contacts, both between individual members

of our Board and with members of the Board of Executive

Directors.

In addition to the commercial and technological

developments and the financial results we devoted much

attention to the company’s strategy and the related

strategic choices. In January 2007, after approval by the

Supervisory Board, the Board of Executive Directors

presented the finalized strategic plan 2007-2010 to the

outside world. Over the past year we have closely

monitored the progress toward implementing this plan.

The strategy was also evaluated against the interests of

the various stakeholders of the company, this partly in

view of the interests, as are defined in greater detail in

Article 2 of the Articles of Association. The company’s

policy on sustainable business practices and the

presentation in the Sustainability Report was another

discussion topic.


16

A regularly recurring item on our Board’s agenda is risk

and risk management systems. Despite the termination of

the stock market listing in the United States [NASDAQ],

the company continues to apply certain valuable elements

of the Sarbanes-Oxley Act [SOx]. The effectiveness of the

risk management system was discussed with the Board

of Executive Directors. The analysis of the principal

business risks that had been drawn up by the Board of

Executive Directors was likewise discussed. When

dealing with matters of this type the Audit Committee

provides the full Supervisory Board with advice. In almost

every meeting we received feedback on the deliberations

that had taken place in the Audit Committee. The full

Supervisory Board held consultations with both the

internal and the external auditors. During various meetings

discussions of growth and acquisition opportunities also

took place. Partly in view of the chosen priorities in the

strategic plan and the fact that resources were focused on

the optimization of the business processes, only a few

smaller business acquisitions took place in 2007. At our

meeting in January 2007 the number of shares to be

acquired under the Share Plan by members of the Board of

Executive Directors was determined and the performance

targets were set for 2007. The variable pay for 2006 for

the members of the Board of Executive Directors was

determined by our Board on the basis of the targets that

had previously been set and the audited Financial

Statements for 2006.

The Board of Supervisory Directors held a meeting at

which the Executive Directors were not present to discuss

the functioning of the Supervisory Board and its members.

The functioning of the Board of Executive Directors and its

individual members was also discussed, as was the

company’s top management structure, now and in the

future. On page 139 of the Annual Report you can find

details of the current allocation of responsibilities between

the various members of the Board of Executive Directors.

In the opinion of our Board we comply with the indepen-

dence requirements set by the Dutch corporate

governance Code for supervisory boards. During the past

financial year no transactions took place in which

members of our Board or of the Board of Executive

Directors had interests that were in conflict with those of

the company.

The Audit Committee met six times in 2007 in the

presence of the internal and external auditors. Members

of the management attended the meetings when invited

to do so.

The main tasks of the Audit Committee comprise an

extensive evaluation of the financial reporting before this

is dealt with at the plenary meeting of the Supervisory

Board, the monitoring of the system of internal controls

and an evaluation of the company’s risk profile. To fulfill

these tasks the committee discussed the annual results

and the quarterly results. The committee also discussed

the internal management and control systems, the

financial reporting, compliance with recommendations

made by the internal and external auditors, the results of

investigations carried out by the internal audit department,

the activities, remuneration and independence of the

external auditors as well as subjects in the area of foreign

exchange risks, pensions, tax planning, ICT and the

financing of the company. The new charter for the Audit

Committee was also drawn up.


17

The Remuneration Committee held two meetings in 2007.

Matters discussed by the committee included the fixed

and variable pay components of the members of the Board

of Executive Directors based on the remuneration policy

for the Executive Board that was approved by the General

Meeting of Shareholders in 2004. For further details about

the total remuneration package and the Share Plan that

forms part of it we refer you to the section on corporate

governance and the explanatory notes to the Consolidated

Income Statement.

The Selection and Nomination Committee met twice in

2007. The committee gave advice to the Board of

Supervisory Directors on the selection, appointment and

functioning of Supervisory Directors and Executive

Directors. Specific attention was devoted to matters of

succession planning.

Composition of the Board of Supervisory

Directors At the General Meeting of Shareholders on

April 19, 2007 Mr. Brentjens retired as member and

chairman of our Board. In last year’s Annual Report we

described the importance of Mr. Brentjens’ contributions

to Océ. At the same Meeting of Shareholders Mr. Baan,

who retired by rotation at that moment, was reappointed.

With effect from April 20, 2007 our Board has been

chaired by Mr. Elverding.

In 2008 Mr. Arentsen is due to retire by rotation. At the

General Meeting of Shareholders, which will take place on

April 23, 2008, a proposal will be made that Mr. Arentsen

be reappointed. The chief reason for this proposal is the

major contribution that Mr. Arentsen makes to our Board’s

work. Mr. Arentsen is chairman of the Audit Committee

and acts as our financial expert within the meaning of best

practice provision III.3.2 of the Dutch Code.

Our Board currently consists of five members. Efforts will

be made to expand our Board so that it again comprises at

least six members.

We would like to thank the management and employees

for the great efforts they made in 2007. In 2008 all

employees of Océ will again be asked for their

commitment in helping to realize the challenging

objectives set for the second year of the strategic plan

2007-2010.

Venlo, January 25, 2008

The Board of Supervisory Directors

P.A.F.W. Elverding, chairman

F.J. de Wit, vice-chairman

G.J.A. van de Aast

M. Arentsen

A. Baan


Report of Rokus van Iperen, chairman of the


In numerous respects the 2007 financial year, which was

the 130th anniversary of our company, gave more cause

for satisfaction than recent years. In major parts of our

business operations the results of many years of hard

work are starting to show through in line with our strategy.

Following a lengthy period of building, replacing,

innovating and strengthening we are now seeing a faster

tempo. In some areas we have rapidly gained in strength,

in others we started to pick up momentum only recently,

but growth is undeniably taking place throughout the

whole business.

We are seeing the further expansion of our strong position

in wide format, where the youthful activity of Display

Graphics Systems is making remarkable advances. We are

seeing improvements in small format where, in addition to

our proven strength in the high and very high volume

segments, we are gaining ground in the wider office

market segment. And we are seeing favorable growth in

Océ Business Services, where our expertise in document

management enables our customers to concentrate fully

on their core activities.

We can see that two of our main strategic thrusts, a

competitive product portfolio and greater distributive

power, are now having a concrete effect. They are

boosting our machine sales and therefore the recurring

revenues that form the solid foundation of our business.

Likewise of crucial importance for ongoing value creation

is our third main strategic thrust: corporate operational

excellence. We initiated an ambitious program in the

previous financial year. Positive results have meanwhile

been achieved through more cost-effective purchase and

improved logistics processes. But a lot of work still has to

be done. Day-to-day operating processes need to be

streamlined, whilst sourcing and logistics costs have to

be reduced further, as does working capital. As a

consequence of this program, total cost savings

amounting to � 50 million will be realized in 2008.

The strength of an open organization In recent

years much has changed at Océ. First of all, in a tech-

nological respect. We have experienced the transition

from analog to digital technology. To a considerable extent

we even took the lead in this. The role of color in our

markets has also developed quickly, whilst digital printing

technology has entered new markets that offer good

prospects.

But the most significant changes relate to the character of

Océ as a business. Although Océ has worked together

intensively with partners in numerous areas in the past,

the business has always operated on the basis of its own

strengths, notably in the areas of product development,

manufacturing and distribution. And successfully so. But

under the influence of changing market conditions, more

complex technology, increasing globalization and major

changes in the competitive environment Océ is

increasingly working together with partners.

Océ increases the tempo

1�

On the one hand, with distribution partners that offer a

wider sales area for Océ products, on the other with OEM

partners that supply the products we use to strengthen

our product portfolio. But also with companies that have

the technology that allows us to develop new and strong

products. Our aim is to concentrate on our own unique

competencies and at the same time to make maximum

use of the innovative strength of our partners. In the area

of R&D, for example, Océ will be working closely together

with Konica Minolta on the development of new small

format, high volume printers.

Strategy in practice

Our strategy, implemented and fine-tuned in recent years

and aimed at realizing a strongly improved level of

profitability, is based on three pillars: increased distributive

power, a complete and competitive product portfolio and

corporate operational excellence. Each of these pillars was

strengthened during the year under review.

Distributive power We expanded our distributive

strength further during the past year by investing in our

sales organization and sales channels. Another important

step during the past year was starting to work together

with colleague suppliers and distributors to sell several of

our successful new products in countries and segments in

which we ourselves do not yet have a sufficiently big

presence.

In March 2007 we announced such partnerships with the

Japanese business Fujifilm and with the Chinese Founder

Group.

In January 2008 we were also able to report that we are

intensifying our long-standing relationship with Konica

Minolta. That company will be selling the Océ VarioPrint

6000 series. In return, Océ will have the opportunity of

selling Konica Minolta printers as OEM machines not only

in the United States and Europe, but also in the rest of the

world.

At the same time we announced a partnership with Fuji

Xerox. They will be selling the successful Océ TCS color

systems in Asia, formidably strengthening our position in

that vast and highly competitive market.

We have made substantial efforts and investments to

strengthen our position in the broad office segment in

2007. The sales organization that serves this important

segment has been further professionalized and in Europe

we have launched the new market approach that had

already proved effective in the United States.

Of crucial importance for achieving further growth are the

activities in markets that are new to us. It has taken time

to develop these, but we are now seeing that our efforts in

business services and the graphic arts market are being

transformed into solid drivers of growth. Essentially, all of

these markets are many times bigger than our traditional

markets, which means that they offer high growth

potential.

Product portfolio Thanks to its direct sales and service

organization, Océ has built up an intimate relationship with

its customers based on a thorough knowledge of their

document processes. This applies to all market segments,

both existing and new, and allows us to offer our

customers a mix of in-house and OEM product solutions

that are exactly tailored to their needs. During the past

year and shortly after its close we again introduced a

number of products that are far superior to what had

previously been available in the market. One of them, of

course, is the high speed, duplex Océ VarioPrint 6000

series for the cutsheet segment, the deserved winner of

various prestigious awards. But in the continuous feed

segment, too, we have booked rapid advances with our

new printers. A speed of over 1,500 pages per minute, as

delivered by one of our Océ VarioStream 9000 systems,

was inconceivable until recently. The same also applies to

the output of almost 2,200 pages per minute in color that

are produced by the Océ JetStream 2200, launched in

December 2007, and the 147 high quality full color pages

per minute of the Océ ColorStream 10000, a machine that

we first unveiled during the past year. For all markets that

demand high productivity we now offer ground-breaking

new solutions that will substantially boost our position.

This also applies to the display graphics market, where the

Océ Arizona 250 GT, our wide format color printer that

was brought to market in 2007, is highly successful.

1�

Report of the chairman of the Board of Executive Directors

20

Besides the new printers, software also plays an

important role. Our customers judge the performance of

our hardware by its level of productivity, as that is where

they achieve their margins. High productivity is only

possible with good software, which prepares and steers

the printing process and is capable of controlling an entire

work environment. The Océ PRISMA program of

integrated software packages provides us with strong

advantages in this area. Besides this, we offer a complete

range of consultancy and support services to help cus-

tomers through to full implementation of the document

management process.

Océ Business Services, outsourcing services for

document management, is steadily growing. This is an

expanding market in which we are able to build a good

profile for ourselves, for example with new, high value

document services closely connected to the core activities

of our customers.

Corporate operational excellence One of the most

important factors in reducing the cost base and working

capital is optimizing our business processes. This covers a

broad area that comprises all operational processes. In

2006 we initiated a number of projects that are being

conducted in parallel and centrally coordinated. This

relates to purchasing processes, optimization of the

supply chain, harmonization of business processes and

innovation of the supporting ICT systems. A reduction in

the costs of accommodation was achieved by analyzing

and renegotiating existing rental contracts. Savings were

also realized by centralizing the purchase of ICT and com-

munications infrastructure of our subsidiaries.

In the area of logistics we booked progress, for instance

by bundling various seagoing transport operations. These

projects will generate further savings in the years ahead.

During the second half of 2007 the Cash Conversion Cycle

project was initiated. This project will lead to a significant

reduction in working capital [as a % of total revenues] in

2008 and 2009. The harmonization of operational

processes and the supporting ICT systems will take a few

years yet. By the end of the planned project period, in

about 2010, the new ICT platform will facilitate structural

savings in Europe. Just like the two other main strategic

pillars, corporate operational excellence will then also form

a solid foundation for profitable growth.

Greater focus One of the important decisions that we

took during our restructuring operation several years ago

was the transition from a product-oriented to a market-

oriented organization. That was the right choice. Now,

however, it is time for the logical next step; further

intensifying the focus on individual markets. The effect of

this is visible in the Strategic Business Unit Digital

Document Systems. On December 1, 2007 Océ Business

Services became an independent Strategic Business Unit

that concentrates on services in the area of outsourced

document management processes. At the same time a

greater focus on the individual markets was put in place

within the Strategic Business Unit Digital Document

Systems. These separate markets are Production Printing,

which serves corporate IT print centers, mailers and

commercial print providers, and Document Printing for the

office segment and the printroom.


21

Documents are key Documents have started to

occupy an increasingly important place in our society.

Knowledge, in all its forms, is stored and distributed in

documents and today the quantity of information offered

in documents is already doubling each year. Some 25

years ago the information that was on offer doubled only

once in seven years.

Strict requirements are therefore set as regards the way in

which all this information is managed, stored, distributed

and presented. New legislation is also leading to tougher

standards governing the storage, management and retrie-

val of the millions of predominantly digital documents.

Although our company grew big in the reproduction of

images, our knowledge of documents has also moved us

increasingly in the direction of the content that we can

classify, manage and retrieve. This allows us to give our

clients a firm grip on their documentation. This is essential

in these times of voluminous information transfer and the

ever tighter requirements for transparency and

accountability. That is why we are again active in important

areas of this growth market with new activities such as e-

discovery and Technical Documentation Lifecycle

Services.

When we celebrated the 130th anniversary of our

company on October 29, 2007 we were able to look back

with pride on a history full of innovation, for the greater

part in relation to documents. On that occasion we also

announced the start of Document Services Valley, an

initiative in which research and development work will be

conducted into document-related services in cooperation

with partners from the world of science and industry.

It is no coincidence that two key elements of today’s Océ

are now combined within that initiative: documents in

wide sense and partnership. In the area of document

management and document production we have more

than demonstrated our reason for existence. By leveraging

our cooperation with partners we can substantially expand

the strength and scope of our expertise.

Opting for sustainability Anyone who peers into our

past will see that at numerous moments in time our com-

pany has never lost sight of the human dimension, despite

its growth and despite an increasingly commercialized

business climate. Throughout our history there has been

a constant leitmotiv, running from a healthy and safe

working environment for factory employees, via

ergonomics to software and interfaces that make our

systems highly popular with users. And in times when

people still did not talk about sustainability but about

environmental friendliness, Océ machines and media had

already made extraordinary advances in terms of savings

on energy and paper and the re-use of materials. Océ now

concentrates on offering the most environmentally

friendly machines in the market. Growth has always been

a strategic priority, but always in harmony with man and

the environment. Sustainability as a concept is well suited

to our company. For a long time the aspects that together

determine sustainability were regarded as self-evident at

Océ and were never made explicit. For the past three

years we have been reporting on those aspects in the Océ

Sustainability Report.

This also makes it clear to our customers that

sustainability is an essential element of the Océ business

concept. Experience has shown that Océ not only meets

the standards set in this area but is also able to pro-actively

support its customers in meeting their own sustainable

business practices.

The image that adorns the cover of this report, the bird

soaring skywards, is in our view an apt reflection of how

we as a company are rapidly moving forward and upward.

We derive the energy that we need for this from a diverse

group of people. Our customers, who use and appreciate

our products, our employees, with their commitment and

strong sense of enterprise, our shareholders with the

confidence they place in us and our partners in various

fields who enhance our strength and the scope of our

operations. I would like to express my sincere thanks to all

those people.

Rokus van Iperen, chairman


22

23

Lightning Source

Incorporated

Books on-demand With

its fleet of high-speed digital

printers and finishing

equipment, Lightning

Source Incorporated [LSI]

provides on-demand

printing and distribution

services to more than 4,300

different publishers ranging

from small, independent

book publishers to major

booksellers and publishers.

With one of the largest

digital book libraries in the

industry, LSI has more than

400,000 book titles in its

library and has delivered

more than 33 million on-

demand books. LSI is

leading the digital book

revolution with a demand-

driven model that enables it

to rapidly deliver quality

products at a competitive

price. LSI prints books for its

customers on-demand in

any run length - from one to

several thousands - without

inventory or overstocks.

And because LSI can

respond to customer orders

immediately - from order to

shipping in 12 to 24 hours -

there are no understocks.

What’s more, books never

have to go out of print. Even

if they sell just a few books

a year, publishers can keep

their revenue streams alive

by printing on-demand. And,

when publishers can’t

justify a large print run for

new releases or reprints,

LSI provides a solution with

a short book run. Given

these capabilities, it’s not

surprising that LSI is making

a tremendous impact on the

industry. And Océ is proud

to provide the fast, versatile

digital printing systems LSI

uses to power its success.

2�

2�

Financial review

Results

Operating income in 2007 increased by 18.5% to € 121.2

million [2006: € 102.2 million]. Operating income was

negatively influenced by one-off extra depreciation of

€ 15.3 million on production assets because of the

relocation of manufacturing to Asia and the growing share

of third party products in total revenues. As against this

there was a one-off income item of € 15.0 million arising

from the sale of office buildings in the Netherlands and

France.

At € 24.8 million net the capitalized R&D costs were

at the same level as in 2006 [€ 25.2 million].

The strengthening of the euro against the dollar had

impact on both operating income and the balance sheet.

The average rate of the dollar, used to determine operating

income, amounted to € 1.36 during the year [2006: € 1.24].

To determine the balance sheet positions the rate of the

dollar at the end of the 2007 financial year is important.

This amounted to € 1.48 [2006: € 1.32].

Compared to 2006 the impact of foreign exchange rates,

especially the dollar, on operating income and the balance

sheet was as follows:

x € million 2007

Translation result - 4.1

Transaction result - 12.7

Net impact of hedging [2006 versus 2007] + 7.9

Aggregate effect of exchange rates on operating

income - 8.9

In 2006 exchange rate effects still had a positive impact of

€ 7.2 million compared to the previous year.

On the balance sheet the translation result [x � million] was:

Total assets - 113.5

Equity attributable to shareholders - 42.6

Report of the Board of Executive Directors

The Board of Executive Directors of Océ N.V. From left to right:

J. van den Belt, J.F. Dix, A.H. Schaaf and R.L. van Iperen, chairman.

26

Revenues Revenues in 2007 amounted to € 3,098.2

million [2006: € 3,110.3 million]. On an organic basis

revenues increased by 3.4%. This increase in revenues

was due to the successful introduction of various new

products that were developed in-house and to the growth

in the share of color and OEM in revenues.

Sales of printing systems [non-recurring revenues] grew

organically by 10.6%. Revenues from services, inks,

toners, media, rentals, interest and business services

[recurring revenues] were 0.4% higher on an organic

basis. Excluding fax the increase in recurring revenues

amounted to 1.7%.

Gross margin The relative gross margin was 40.8%,

which was the same as in the previous year. Normalized

for one-off items, i.e. extra depreciation on production

assets and the sale of buildings, the relative gross margin

amounted to 41.2%, an increase of 0.4 percentage points.

This means that Océ again succeeded in maintaining the

relative gross margin in 2007. This is one of the strategic

objectives.

Operating expenses Operating expenses as a

percentage of total revenues amounted to 36.9% [2006:

37.5%]. Normalized for the sale of the office buildings,

which reduced operating expenses by € 10.7 million,

relative operating expenses decreased to 37.2%.

Operating income Operating income for 2007

amounted to € 121.2 million [2006: € 102.2 million].

EBITDA rose by 8.1% from € 306.1 million in 2006 to

€ 330.8 million in 2007.

Financial expenses Financial expenses [net] amounted

to € 40.3 million [2006: € 46.0 million]. The decrease in

financial expenses was the result of a lower average size

of loans during the year. The principal sum of the loan and

also the interest costs are largely denominated in dollars.

Because of the weakening of the dollar, the expenses

declined substantially. The interest paid on dollar loans

therefore partly form a natural hedge for the translation

risk in respect of the income from our subsidiaries in the

United States.

Taxation Taxation amounted to € 2.4 million, which

meant that taxation as a percentage of results before

taxation was 3.0%. In 2006 taxation had still made a

contribution of € 0.4 million to the result.

The low tax charge is due, amongst other things, to the

fact that Océ has financing structures and tax-offsettable

losses. Partly because of the improved income

development there was a decrease in the provision for

receivables from loss compensation.

Net income Net income increased by 38.1% from

€ 57.1 million to € 78.9 million.

Net income per ordinary share attributable to holders of

these shares rose by 39.3% to € 0.88 [2006: € 0.63].

Report of the Board of Executive Directors | Financial review

Gross margin

As % of total revenues

50

45

40

35

30

25

20

15

10

5Total revenues

x € million

03 04 05 06 07

3,500

3,150

2,800

2,450

2,100

1,750

1,400

1,050

700

350

03 04 05 06 07

Dutch

GAAP IFRS

27


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

x € million

2007 2006 2007 2006 2007 2006

Revenues 898 875 2,200 2,235 3,098 3,110

Operating income [EBIT] 96 83 25 19 121 102

Assets 665 561 1,726 1,917 2,491 * 2,606 *

Capital Employed [net] 1,144 1,340

Return on Capital Employed 7.3 5.6 %

*Total assets including ‘non-allocated’ [2007: � 100 million; 2006: � 128 million].

Table 2 Quarterly revenues 2007 2006

x € million

recurring non-recurring total recurring non-recurring total

First quarter 534 195 729 550 204 754

Second quarter 540 237 777 561 222 783

Third quarter 517 237 754 534 207 741

Fourth quarter 530 308 838 552 280 832

Year total 2,121 977 3,098 2,197 913 3,110

Table 3 Changes [organically] in 2007 quarterly revenues compared to the same quarter of the previous year

as %

Wide Format Printing Systems Digital Document Systems total

recurring non-recurring total recurring non-recurring total recurring non-recurring total

First quarter 2.1 10.7 4.8 0.8 - 5.2 - 0.7 1.1 - 0.2 0.8

Second quarter - 0.5 9.3 2.7 - 0.9 9.1 1.8 - 0.8 9.2 2.1

Third quarter 0.4 20.8 6.9 - 16.5 4.3 0.1 17.9 5.1

Fourth quarter 1.4 22.8 9.0 1.0 10.6 4.2 1.1 14.2 5.5

Year total 0.8 16.2 5.9 0.2 8.0 2.4 0.4 10.6 3.4

2�

Development of revenues per Strategic Business

Unit

Revenues in the Strategic Business Unit Digital Document

Systems amounted to € 2,200.0 million. The organic

increase in revenues was 2.4%. Revenues from printing

systems [non-recurring] increased organically by 8.0%.

This growth stems in particular from good sales of the Océ

VarioPrint 6000 series and a considerable increase in sales

of color printers.

Recurring revenues were 0.2% higher on an organic basis.

Excluding the decrease caused by the fax business, this

increase amounted to 2.0%. The growth in the installed

base of printing systems will provide further support for

recurring revenues.

Océ Business Services achieved organic growth of 6.6%

in revenues.

Revenues in the Strategic Business Unit Wide Format

Printing Systems [WFPS] increased organically by 5.9%

compared to 2006 and amounted to € 898.2 million.

The increase in [non-recurring] revenues in WFPS from

sales of printing systems amounted to 16.2% on an

organic basis thanks to excellent sales in both the design

engineering and the display graphics market.

Recurring revenues increased organically by 0.8%. The

impact of the Océ Arizona 250 GT on recurring revenues is

still limited. In the forthcoming financial year the impact of

this printer on recurring revenues will increase further.

Dividend proposal for 2007

Océ proposes to shareholders that the dividend be raised

to € 0.64 per ordinary share. This increase is in line with

the dividend policy that was approved by the General

Meeting of Shareholders in April 2006 and reflects our

confidence in the realization of the strategic plan. If this

proposal is adopted, the final dividend for 2007 per

ordinary share will be € 0.49 in cash. The interim dividend

for 2007 amounted to € 0.15 per ordinary share.

Prospects

Implementation of the strategic plan and achievement of

the financial objectives are on track. Océ is strengthening

its distribution power, also thanks to the partnership with

Fujifilm, Konica Minolta and Fuji Xerox. Océ is also

expanding the range by adding competitive new products

that have been developed in-house plus printers sourced

from partners. These factors, together with stringent cost

control, are strengthening Océ’s market position. It is too

early to make a pronouncement for 2008.


01

Changes in

quarterly non-

recurring

revenues

compared to

the same

quarter of the

previous year

organically as %

02 03 04 01 02 03 04

2006 per quarter 2007 per quarter

24

20

16

12

8

4

0

- 4

- 8

- 12

Changes in

quarterly

recurring

revenues

compared to

the same

quarter of the

previous year

organically as %

2.5

2

1.5

1

0.5

0

- 0.5

- 1

- 1.5

- 2

01 02 03 04 01 02 03 04

2006 per quarter 2007 per quarter

2�


Table 4 Revenues by geographical area 2007 2006

x € million as % x € million as %

United States* 1,221 40 1,330 43

Germany 320 10 310 10

The Netherlands 305 10 285 9

United Kingdom 227 7 209 7

France 190 6 188 6

Rest of Europe 596 19 558 18

Countries outside Europe and the United States 239 8 230 7

Total 3,098 100 3,110 100

* Average exchange rates: 2007 � 1 = $ 1.36; 2006 � 1 = $ 1.24.

Table 5 Statement of cash flow* 2007 2006

x € million

Cash flow from operating activities 284 238

Cash flow from investment activities - 93 - 119

Free cash flow [before financing activities] 191 119

Cash flow from financing activities - 104 - 185

Exchange rate effects - 5 8

Change in cash and cash equivalents 82 - 58

* For details see pages 84 and 85.

Table 6 Ratios 2007 2006

Equity / Interest-bearing debt 1.2 1.0

Equity / Total equity and liabilities 0.29 0.28

Inventories as % of total revenues 10.6 10.9

Trade receivables as % of total revenues 16.1 17.7

Trade liabilities as % of total revenues 8.2 6.8

Net debt / EBITDA 1.4 2.1

EBITDA / Interest 8.2 6.7

30

Use of funds and finance

Balance sheet The balance sheet total decreased at the

end of 2007 to € 2,491 million [2006: € 2,606 million]. This

decrease was mainly attributable to a reduction in working

capital and exchange rate effects. Net Capital Employed

decreased from € 1,339.9 million in 2006 to € 1,144.5

million in 2007.

Return on Capital Employed The RoCE in 2007

amounted to 7.3% [2006: 5.6%]. The improvement in the

RoCE is an important step in the process to realize a RoCE

of 13% in 2010.

Equity Equity amounted to € 713 million [2006: € 721

million]. Changes in equity resulted from the addition of

net income to the General reserve [€ 79 million], the

distribution of dividends [- € 53 million], capital

movements resulting from lower exchange rates [- € 43

million], an inflow resulting from exercise of option plans

by participants [€ 13 million] and other movements

[- € 4 million].

Equity as a percentage of the balance sheet total

amounted to 29% [2006: 28%].

This solvency ratio is expected to reach Océ’s target of

30% in 2008.

Interest-bearing debt At the 2007 year end the

interest-bearing debt amounted to € 600 million, [2006

year end: € 713 million]. Of the loans, an amount of € 536

million [89.3%] has been taken out over the long term.

At the end of the financial year an amount of € 379 million

in the form of stand-by credit facilities covering several

years was contractually available to the Océ Group.

Cash flow

Cash flow from operational activities amounted to

€ 284 million, an improvement of € 46 million compared

to 2006 [€ 238 million]. This improvement was the net

result of the increase in income before taxation [+ € 24

million], financial leases [+ € 24 million], a reduction in

other working capital [+ € 20 million] and other

movements [+ € 15 million]. The cash flow resulting from

tax refunds decreased by € 37 million.

Cash flow from investment activities amounted to

- € 93 million [2006: - € 119 million]. The improvement of

€ 26 million in the cash flow from investment activities

resulted from the divestment of buildings [+ € 24 million]

and the low level of acquisitions [+ € 17 million].

The cash flow was reduced by € 22 million as a result

of a decrease in the sale of the lease portfolio and by

+ € 7 million as a result of other movements.

Cash flow before financing activities [free cash flow]

amounted to € 191 million [2006: € 119 million].

Cash flow from financing activities amounted to € 104

million negative [2006: - € 185 million]. Interest-bearing

debt was reduced by € 74 million compared to the

previous year.

The cash dividend distributed to holders of ordinary shares

amounted to € 49.0 million. The dividend for holders of

preference shares amounted to € 2.5 million.


Table 7 Distribution of employees by geographical area 2007 2006

[in full-time equivalents]

number as % number as %

United States 10,393 44 10,691 45

The Netherlands 3,809 16 3,792 16

Germany 2,889 12 2,813 12

France 1,193 5 1,125 5

United Kingdom 1,174 5 1,199 5

Rest of Europe 3,148 13 3,010 12

Countries outside Europe and the United States 1,192 5 1,154 5

Total 23,798 100 23,784 100

Table 8 Distribution of employees by type of function 2007 2006

[in full-time equivalents]

number as % number as %

Business Services 7,039 30 6,898 29

Marketing and sales 5,286 22 5,302 22

Service 4,766 20 4,916 21

Manufacturing and logistics 2,398 10 2,396 10

Research & Development 1,804 8 1,766 7

Finance and administration 993 4 995 4

Other 1,512 6 1,511 7

Total 23,798 100 23,784 100

31


32

Driver and Vehicle

Licensing Agency

Paying tax made easy A

fast online service should be

accompanied by a likewise

quick reaction and efficient

follow up. So, when the

Driver and Vehicle Licensing

Agency [DVLA] in the

United Kingdom introduced

a new customer service, car

tax online, they linked it with

a central print site. From

that moment on, motorists

were able to renew the tax

discs shown on their

windscreens within a few

minutes simply by using a

computer or telephone. The

online service, introduced in

2004, is a tremendous

success, with around one

million tax discs each month

being requested. Based on

the data supplied online, the

tax discs are produced and

delivered to the customer

within five working days.

Since the introduction of

this service, DVLA has

processed almost 18.5

million applications.

The Océ VarioStream 7300

proved to be part of the

solution. All personalized

information is printed

directly onto the discs, fully

in line with the nature of the

service: fast, flawless and

reliable. The main reasons

for DVLA to choose Océ

were: security, ease of use

for the operators and high

levels of back up service.

33

Though still only representing a small proportion of global book production, a

monthly total of more than 6 million books were printed digitally instead of

conventionally for on-line shops alone in 2007. Thanks to high volume

printers of Océ. And none of the readers see any difference from offset. For

smaller print-runs in particular digital printing is unbeatable in terms of price.

3�

Commercial developments

From a commercial perspective, 2007 was a successful

year for Océ. In all segments revenues increased, albeit

not to the same extent everywhere. With an increase in

organic revenues of 3.4% Océ amply exceeded the

average growth rate in the industry. Non-recurring

revenues grew organically by 10.6% and recurring

revenues, after adjustment for the anticipated decline in

the fax business in the United States, also grew by 1.7%.

This distinct growth reflected the progress made toward

achieving two key strategic pillars: strengthening the

distribution power and expanding the range.

During the year under review Océ continued to invest in

the sales organization, particularly in small format. In

addition various partnerships with strong market parties

have extended the commercial reach for various

successful products.

The range was substantially expanded and strengthened

in 2007 by adding products developed by the company

itself, which resulted in excellent sales figures in several

segments. But the steadily increasing share of OEM

equipment in the product range also proved its value,

especially as part of the complete solutions for which Océ

is the most successful supplier.

Lastly, another striking feature of 2007 was the ongoing

growth in the share of business services, endorsing the

sense that document management in all its forms has a

good future.

3�

New products

Partly thanks to the ever more intensive cooperation with

partners in the development of new Océ products, R&D is

able to develop clearly distinctive products for selected

market segments within a short time-frame. In practice

that means a concentration on wide and small format

printing systems for the mid, high and very high volume in

black-and-white and color.

During the year a number of important products were

introduced.

Small format:

| Océ VarioPrint 2100, 2110 Titanium

| Océ VarioPrint 3070, 3090, 3110 Titanium

| Océ VarioPrint 1055 DP

| Océ VarioPrint 1055 Book Copier

| New versions of the Océ VarioPrint 6000 series

| New versions of the Océ VarioStream 9000 series,

including the Océ VarioStream 9710 HS [1,515 ppm]

| Océ VarioStream 8000 series

| Océ ColorStream 10000 series

| Océ JetStream 1100/2200

| Océ BLM200 booklet maker

| Océ BLM500 booklet maker

| Various OEM printers both black-and-white and color

Wide format:

| Océ TDS700

| Océ CS2124 / 2136

| Océ CS2136 MF

| Océ 3050

| Océ Arizona 250 GT

| New versions of the Océ CS7400 series

| Océ CS9060

Software:

| Océ ReproDesk Professional

| ONYX Workflow Software V7 Océ Edition

| Technical Documentation Lifecycle Services

| Océ Count Logic

| New version of OcéPRISMAprepare

| New version of Océ PRISMAsatellite

| New version of Océ PRISMAproduction

| New version of Océ PRISMAweb

| New version van Océ DocSetter

| Océ VPconvert

| AFP2PS converter

| Océ Trapping Module

| New version of Océ DPconvert

| Various new software versions and releases

Report of the Board of Executive Directors | Commercial developments

36

Management, output and printing solutions for

small format documents

The Strategic Business Unit Digital Document Systems

comprises three business groups.

| Corporate Printing Systems, focused on integral

solutions for document output management in

environments where the emphasis lies on providing

support for core processes [print-for-use], such as the

corporate datacenter, central reprographic department

and the office environment. Customers include financial

institutions, telecom businesses, energy suppliers,

government bodies, educational institutions and

businesses in trade and industry.

| Commercial Printing Systems, focused on environments

in which printing is the core process [print-for-pay].

These include marketing service businesses, general

and specialized commercial printers and reprographics

businesses.

| Océ Business Services is one of the leading suppliers

of document-related services and technology for

businesses, government and law firms. For the

complete life cycle of documents, such as copying and

printing, mailroom processing, records management

and e-discovery, Océ Business Services offers efficient

solutions in the form of advanced technology, people

and processes, operating both inside and outside the

customer’s organization. In its activities Océ Business

Services generally uses Océ products and services,

from both DDS and WFPS, as well as from third parties.

Results of Digital Document Systems 2007 2006 changes as % growth

x € million [organic] as %

Revenues 2,200 2,235 - 1.6 2.4

| Non-recurring 653 626 4.3 8.0

| Recurring 1,547 1,609 - 3.8 0.2

Operating income [EBIT] 25 19 30.5

Digital Document Systems

37

Corporate Printing Systems business group

Improved position In the corporate segment Océ

improved its position, notably through the growth in the

number of machines installed in the market. In the high

and very high volume segments Océ continues to be one

of the leading suppliers. In the broad office segment the

position has not yet reached the desired level. Highly

promising new products, both printers and software, are

supporting the upward trend.

Market environment

Primary customer groups

Financial institutions and legal service providers

Telecom and utility companies

Public sector and education

Industry, trade and consultancy

Océ offers solutions for:

ERP environments

Reprographic environments

Office environments

Products and services

Office and departmental printers, multifunctionals

and copiers, black-and-white and color

Production printers, multifunctionals and copiers,

black-and-white and color

Continuous feed printers, black-and-white and color

An extensive range of finishing equipment

Output document management software

Consultancy and implementation services

Maintenance services

Financial services

Other suppliers

Canon, Hewlett Packard, Kodak, Konica Minolta,

Kyocera Mita, Lexmark, Ricoh, Sharp, Xerox

Strategy Océ aims to secure an important position in

selected market segments for corporate printing systems.

Océ offers a full-line range of products and services for the

office segment and ERP and reprographic environments,

covering the spectrum from low to very high volume. The

product portfolio comprises a high quality core range of

high production small format printing systems developed

within the company itself, supplemented by prominent

products of OEM partners.

Trends The switch to the digitization of documents and

document flows has been completed almost everywhere

within the office environment. In many cases the incoming

physical documents are also digitized to allow them to be

processed more efficiently, whilst physical archives are

converted to digital format to make them more readily

accessible. In many office environments transaction

printing, reprographics and office applications have been

integrated within one single network that uses the same

printer configurations. The workflow and output software

that is needed for this is becoming increasingly more

advanced, which results in more efficient working

processes and optimal utilization of the equipment. The

desktop printer is on its way out and is being replaced by

the departmental printer. Generally speaking, the volume

in black-and-white is decreasing, whilst color is rapidly

gaining ground. There is a growing demand for

multifunctional machines for printing and scanning.

Commercial developments in 2007

Population grows again In 2007 Océ grew in the

corporate segment, particularly in terms of non-recurring

revenues. In the black-and-white segment it was mainly

the Océ VarioPrint 6000 series [cutsheet] that contributed

to this growth. Non-recurring revenues also grew, thanks

to an increasing demand for color in office and repro-

graphic environments.

Recurring revenues, which are generated by a machine

population that has decreased in size in recent years, have

not yet succeeded in picking up again in full. However, the

effect of the renewed growth in the installed population

will soon be reflected in an upward trend in recurring

revenues. In the United States and the United Kingdom

the effect of the [anticipated] decline in the population of

fax machines still made itself felt.

Report of the Board of Executive Directors | Commercial developments | Digital Document Systems

3�

New Gemini technology The Océ VarioPrint 6000

series has created widespread interest in the markets that

this series was developed for. At the end of the year under

review this printing system also started to have a positive

effect on recurring revenues. The Océ VarioPrint 6000

series incorporates the innovative Gemini Instant Duplex

technology, which allows cut sheets to be printed

simultaneously on both sides. The precision and speed

with which this takes place form an optimal link-up with

the demand from central repro environments for reliable

high production machines. During the past year Océ

supplemented the series by adding two variants, for 200

and 160 prints per minute respectively. Together with its

partners Océ also offers the possibility of directly linking

the system to equipment for further processing, for

example for the automated production of brochures,

manuals and booklets.

Growing use of color Océ also grew in the color

segment of the office environment. Especially the OEM

products, a broad series of multifunctional color printers,

performed very well in meeting customer needs in terms

of price and quality and helped to boost revenues.

Because of its close link with the working processes of its

customers, Océ can focus its sales efforts on the qualities

of the printing solution as a whole, in which the primary

factors are efficiency, productivity and cost control. The

same also applies to the use of color. Color can be used in

an extremely functional and effective way, but is often

applied on a selective basis due to cost considerations.

Océ supports customers in this respect by giving them a

clear insight into the costs and also by supplying the

software that allows them to allocate the document flows

between various printers in the most cost-efficient way. A

good example of this is Océ PRISMAprepare, which was

launched in 2007 as the successor to the successful Océ

DocWorks. Océ PRISMAprepare is specially focused on

working practice in the central repro environment and is

able, just like the other Océ PRISMA products, to control

both Océ and non-Océ printers. It enables users to prepare

complicated print jobs in an easy way and to execute them

perfectly.

Close relationship with customer In corporate

printing Océ concentrated further during the year under

review on strengthening the sales process. As before, the

emphasis is on the implementation of complete systems.

Especially for the office segment Océ continues to invest

in sales teams that work with a recognizable concept, in

which the key features are a knowledge of the market

and, above all, of the customer’s working processes.

Thanks to its direct sales and service concept Océ can

build further on the close relationships that the company

maintains with its customers [customer intimacy]. As the

systems used in the office environment become

increasingly more complex, the know-how and expertise

of Océ in document [output] management can be

increasingly used to add value. Via this approach Océ

places the emphasis on optimizing the printing process

rather than on the mere sale of printing systems. Because

of the extensive product portfolio of its own and OEM

products Océ can then offer the right configuration for

every customer, from the lowest to the highest volume

segments.


3�

Commercial Printing Systems business group

New products for growth Océ was again one of the

most important suppliers in the commercial printing

segment in 2007. Further growth is expected to stem in

particular from the new machines that were added to the

range over the past year. Explicit allowance has been

made here for the graphic arts market and for new trends

in marketing, such as the incorporation of direct mail in

transaction documents. Speed, also in full color, is one of

the most important keywords.

Market environment


Marketing services [direct mail businesses]

General and specialized commercial printers

Digital print providers

Reprographic businesses [quick printers and copy shops]

Statement printers


High and very high volume printers/copiers, black-

and-white and color

Production printers, black-and-white and color, cutsheet

and continuous feed

Workflow software for management of printing solutions

Financial services

Other suppliers

Canon, Hewlett Packard, Kodak, Ricoh, Xerox

Strategy Océ aims to further strengthen its top position

in continuous feed systems for the most productive

segment of the print-for-pay market. It also wants to be

one of the leading suppliers in the high production

cutsheet segment.

Amongst direct mail businesses [marketing services] and

printed statements [incl. energy invoices, bank state-

ments] Océ holds a leading position world-wide and this

can be further strengthened and expanded.

In the graphic arts market, an important growth market for

digital printing, Océ aims to achieve a prominent position

with integrated digital printing solutions for general and

specialized commercial printing businesses.

Océ wants to expand its position as the leading supplier of

printshops and copy shops and digital print providers via a

targeted further strengthening of its sales staff and sales

support departments.

Trends The commercial digital printing segment is

showing excellent growth. On the one hand because

digital printing – thanks to its improved quality, lower costs

and good software support – forms an attractive alterna-

tive to offset for small print-runs. On the other hand

because more and more print jobs are being outsourced

by the corporate environment to commercial printing

businesses.

The advance of digital printing in the production of books,

manuals and newspapers is continuing. For a print-run of

up to several thousand copies digital printing is more

favorably priced than offset. Several very big commercial

printing businesses are already printing many thousands

of book titles digitally for publishers and on-line shops. The

print-runs there vary from several dozen to one single

copy. The total book printing market is so big that a shift of

only a few percent toward digital printing results in a major

expansion of the digital segment. Newspaper publishers

are also using digital technology to publish their

newspapers in small print-runs in remote locations.


�0


In the cutsheet segment the Océ VarioPrint 6000 series

in particular clearly strengthened the product offerings.

With this system Océ has profiled itself as a top supplier

in a segment in which speed and reliability are crucial.

The reception given to this new system was extremely

positive. Océ therefore possesses a strong concept,

thanks also to the completeness of the total offerings,

including consultancy, software and service.

To make it possible to offer an optimal product portfolio,

new versions of the continuous feed systems have been

tailored to the needs of the various user groups. Speed

and color were the keywords.

During the year the Océ VarioStream 9000 series was

extended by adding the Océ VarioStream 9710 HS, which

can print 1,515 black-and-white pages per minute, and the

Océ VarioStream 9240, which can print both black-and-

white and spot colors as well as in full color. Both

machines are aimed at the top segment of commercial

digital printing. The color printer offers high speed

combined with a good quality that links up with the trend

towards incorporating personalized marketing and

advertising in functional printed matter such as daily

statements and invoices. This ‘white space marketing’,

also known as ‘transpromo’, is quickly growing in

importance.

Shortly after the close of the year under review a further

two systems were presented for the top segment: the

Océ VarioStream 8000 series and the Océ JetStream

series. The latter, an inkjet printer, has pioneered new

standards for speed and can produce 1,074 full process

color pages per minute [single-sided and duplex]. In a twin

configuration this yields a constant production output of

2,148 [different] pages per minute. The application of a

revolutionary printhead enables a good color quality to be

achieved at this high speed, whilst making a limited use of

ink.

The start of the shift in the graphic arts market from offset

to digital printing has the greatest impact on black-and-

white printing, certainly now that systems such as the

Océ VarioPrint 6000 series and the Océ VarioStream 7000

and 9000 series are achieving ever higher speeds whilst

retaining an excellent print quality. More and more big

printing businesses are using digital printers for smaller

print-runs to supplement their offset presses. As an

extension of this, the demand for color is also growing.

For the graphic arts market Océ offers the Océ

ColorStream 10000. This machine, which was presented

in September 2007, can print 172 color pages per minute

at high quality and combines this with a high speed in

black-and-white [852 pages per minute]. Thanks to the

Océ ColorStream 10000 Océ is one of the few parties that

can meet the high requirements of the graphic arts market

in terms of quality and reliability.

With the introduction of the new continuous feed products

Océ has an up-to-date range of systems for the

commercial market well suited to the requirements of all

players active in that market. In conformity with the Océ

vision, all of these systems are field upgradable. That

means that as the need develops or the technology

advances further, it is in many cases not necessary to

replace the printer, as it is possible to add functionality,

speed and – where required –extra color capacity to the

equipment.


�1

Océ Business Services business group

Document outsourcing grows strongly

Océ Business Services continues to grow, in 2007 by

around 7% world-wide organically. The shift that Océ was

aiming to achieve from simpler assignments to high value

document management activities is in full swing. In

addition Océ has succeeded in strongly standardizing a

number of services, which has benefited the margin. The

development of Océ Business Services shows that the

document outsourcing market is a major growth market.

Market environment


Large and medium-sized corporations and public

organizations, for which document management does

not form part of their core business

Services

The handling and execution by Océ of document

management services throughout the entire life cycle

of documents [creation, distribution and archiving]

Other suppliers

Ikon, Pitney Bowes, Williams Lea, Xerox and local

suppliers

Strategy Océ focuses in business services on raising the

level of profitable revenues, for example by shifting the

emphasis toward more complex services in the area of the

management of document flows within organizations.

Besides this, Océ invests in the development and

acquisition of new, highly specialized document-related

services such as e-discovery, Technical Documentation

Lifecycle Services and fleet management. To ensure

optimal customer satisfaction Océ Business Services uses

standardized quality systems. With the aim of realizing

further growth Océ announced the set up of the Document

Services Valley development center at the end of 2007.

In due course some 50 researchers from Océ and its

partners will be working together there on new document-

related service concepts.

In line with the increasing emphasis that Océ is placing on

business services, the Océ Business Services business

group was transformed into a Strategic Business Unit on

December 1, 2007.

Trends The outsourcing market is growing quickly, both

in the United States and in Europe. The number of ser-

vices on offer is also growing fast. As the market develops

further, competition is increasing, notably in the area of

the more simple activities, and this is pressuring margins.

Many suppliers, including Océ, are therefore focusing on

high-added-value services, such as e-discovery and

records management. The latter is being stimulated by

factors such as stricter legal requirements in the area of

compliance. In addition the simpler services [mailroom,

repro] are in many cases being offered in a highly

standardized form to achieve maximum efficiency and

cost control. In document management services, too,

assignments are increasingly being granted via tendering,

which takes into account not only the price but the entire

package of services.


�2


Océ Business Services showed healthy growth in 2007,

particularly in Europe. That was chiefly due to the

extension of services toward activities with a higher added

value. The rapid transition from black-and-white to color in

central repro departments also formed the basis for

healthy growth in revenues. The number of employees in

this business group has meanwhile reached more than

7,500 world-wide.

The vast majority of the customers of Océ Business

Services are to be found in financial and legal services

[including the insurance sector], as well as in the

manufacturing and education sectors. Potential new

working areas are healthcare and pharmaceuticals. These

are environments in which document flows are being

increasingly automated so as to boost efficiency and at the

same time minimize the risk of human error. Océ Business

Services is very well positioned to provide services of this

type.

In 2007 Océ Business Services concluded several major

new contracts, including a seven-year contract with a

financial services provider in Europe with a total revenues

value of € 60 million.

In the United States Océ continued to develop

e-discovery services. Together with records management

this is one of the most recent developments in the pro-

vision of services. In the United States Océ Business

Services has set up a separate group for e-discovery and

records management under the name Records,

Compliance and Legal Solutions.

Océ Business Services was able to build up a good profile

in the highly fragmented market in 2007, and this was

underlined by the fact that Océ Business Services was

recognized by various bodies as ‘2007 #1 Document

Process outsourcing provider’ [Black Book of Outsourcing,

Brown-Wilson] and as one of the ‘Top 100 Global

outsourcing companies’ [International Association of

Outsourcing Professionals] respectively. The Records,

Compliance and Legal Solutions group of Océ Business

Services received a ‘Top Provider’ award [Socha-

Gelbmann Electronic Discovery Survey].


�3

Wide Format Printing Systems

The Strategic Business Unit Wide Format Printing

Systems comprises three business groups.

| The business group Technical Document Systems [TDS]

offers wide format document and printing applications

for customers such as construction companies,

architectural and engineering offices, industrial

businesses, utility and telecom businesses and the

government to the extent that these use the applications

in-house [print-for-use]. A substantial proportion of the

customer base is also formed by reprographic

businesses and digital print providers that perform

printing activities on a commercial basis for the

customer groups referred to above [print-for-pay].

| The business group Display Graphics Systems [DGS]

supplies printing solutions for sign and display

applications to the graphic arts industry, the advertising

sector and the print-for-pay industry. These are used to

create indoor and outdoor advertising and other forms of

[wide format] graphics communication.

| The business group Imaging Supplies [IS] supplies a

broad range of print media [both bulk and specialties] for

all printing systems.

Results of Wide Format Printing Systems 2007 2006 changes as % growth

x € million [organic] as %

Revenues 898 875 2.6 5.9

| Non-recurring 324 287 13.0 16.2

| Recurring 574 588 - 2.5 0.8

Operating income [EBIT] 96 83 15.7

��

Technical Document Systems business group

Very successful year The business group Technical

Document Systems showed healthy growth in 2007.

Both in black-and-white and color Océ was able to further

strengthen its market position, especially through the

sales of new printing systems.

Market environment


Print-for-use:

Construction companies

Architectural and engineering firms

Industrial and manufacturing companies

Utility companies

Telecom businesses

Government

Print-for-pay:

Reprographic businesses



Wide format printers for production, workgroup and

office environments in both black-and-white and color

Wide format scanners

Print management and distribution software

Financial services

Other suppliers

Canon, Fuji Xerox, Hewlett Packard, KIP, Ricoh and

Xerox

Strategy Océ intends to further expand the leading

position of Technical Document Systems in Europe and

the United States, to continue expansion in Japan and to

invest in building up a strong position in emerging markets

such as China. In product development, the growing role

of color in this market is being supported by products that

can print economically in both black-and-white and color.

Trends In the TDS market a distinct shift away from

centralized to decentralized printing can be seen in both

print-for-pay and print-for-use customers. ‘Distribute-then-

print’ is becoming more and more the standard procedure,

thanks to advanced software for distributing the print jobs.

On balance this does not necessarily lead to fewer prints,

but the customer can achieve considerable savings on

logistics costs. As a result of this decentralization the

number of printers in use is rapidly increasing.

The role of software is growing in importance since almost

all equipment operates within a network. The role of color

in this market is also increasing: over 20% of the volume is

printed in color. What is striking is the growing use of color

for applications other than line drawings. Reprographic

firms are entering the graphics market, e.g. for point-of-

sale/point-of-purchase [POS/POP] materials: display

materials for sales outlets.

Report of the Board of Executive Directors | Commercial developments | Wide Format Printing Systems

��



Successful printers boost revenues The business

group TDS had an excellent year, thanks in part to growth

in the world economy.

During 2007 great interest was shown for almost all the

products Océ has to offer in this market. Two new

machines were very successful: the Océ TDS700 black-

and-white printer with optional color scanning and the Océ

TCS500 color printer, already introduced late 2006. With

the Océ TCS500 Océ has expanded its application reach to

include Geographical Information Systems [GIS] and the

print-for-pay market. It also covers a part of the Display

Graphics Systems market, particularly for the production

of [promotional] material with a short life span. Both

business groups are profiting from this and are using each

others’ expertise and networks to the benefit of their

customers.

Professional distribution partners are extremely important

in this market. Of all the machines installed, almost 50%

are now supplied to the customer by Océ’s partners. To a

large extent this extension of the distribution channel is

driving the growth of Océ’s products in this market. Océ

has launched the Océ Certified Partner Program to

strengthen the links with its distributors.

Color gains ground The use of color in this market

differs between the European and the American market.

In Europe the move toward color is strong; in the United

States the aggressive prices for black-and-white printing

along with the comparatively high volume are impacting

the transition to color. Still, the share of color is growing in

the United States.

Océ remains market leader in the black-and-white

segment and is number two in color. One of Océ’s

strengths is that it is the only supplier in this market that

offers a complete product portfolio of high-quality black-

and-white and color machines, including software, plus a

strong distribution and service network. This, in

combination with the strong customer intimacy for which

Océ is renowned in this market, forms the basis for

sustaining market leadership and offers a solid platform

for further growth.

During the year under review the Océ TDS700, a system

for the mid volume segment, received the prestigious IF

Gold Award for the best industrial design and a ‘5-star,

Exceptional’ commendation from the product evaluation

institute BERTL. The Océ TDS700 is also outstanding in

terms of sustainability. It is an eco-design product: with a

very low energy consumption, a low noise level and

extremely low ozone emissions.

In the area of software Océ launched an entirely new

version of the popular Océ ReproDesk, a program that

manages the input and output of a complete configuration

of different printers. In the new version, the system is no

longer restricted to working with only black-and-white

printers. It now offers all possibilities for working together

with color printers.

For every building you need a construction drawing. For the average project that means thousands of

drawings. Or many square meters of printed paper. By far the greater part of this volume

is printed digitally. And a great deal of that is produced

on wide format Océ printers. Océ sets the pace world-

wide in this market. It is market leader in black-and-

white and in the top 3

for color.

�6


Display Graphics Systems business group

Océ strong in display graphics Océ strengthened its

position in the market for display graphics in 2007. A very

good performance came from all business lines which

includes inks, service & support, software, hardware and

the Océ Arizona 250 GT in particular. Demand for this

multiple award-winning printer platform was even greater

than anticipated. Thanks in part to a distribution

partnership with Fujifilm hundreds of printers found their

way to customers.

Market environment


Print-for-use:

Corporate and retail in-house printing

Advertising and design agencies

Print-for-pay:


Commercial printers

Reprographic businesses

Professional photo laboratories

Graphic screen printers


Wide format production printers [roll-to-roll and flatbed]

for indoor and outdoor applications

Print workflow and raster image processing software

Financial services

Other suppliers

Durst, EFI/Vutek, Epson, Hewlett Packard,

Gandinnovations, Gerber Scientific Products, Mimaki,

Mutoh and Roland

Strategy In the market for display graphics Océ aims to

become one of the three most important suppliers for the

mid and high volume segment before 2011. To realize this,

Océ offers a range of its own printers in combination with

OEM printers and suitable finishing equipment. In this

market Océ’s ambition is to become the supplier of choice

for hardware, software, inks, media, service & support,

application know-how and consultancy for the users of its

printers. Océ is one of the few suppliers in this market that

can offer such a full range of products and services via its

own world-wide direct sales and service organization.

Trends The use of digital printers in this market is

gradually becoming more attractive for various

applications. There are a number of reasons for this. Firstly

we see an increase in color applications and a trend

toward decentralization. The latter, because a shift is

taking place toward the distribute-then-print approach. In

the case of large-scale advertising campaigns, for

example, stores can be supplied locally with large format

advertising materials, which can also be personalized.

Since this means that the print-runs for each [local] printer

are smaller, demand is shifting from large analog print-runs

on offset presses toward digital printing.

Digital printing also fits in excellently with short-term

advertising. The lack of set-up time for the printers and the

automated finishing bring significant time and cost

savings. Another factor is that the quality of the digital

prints closely approaches that of analog technologies,

whilst the price is attractive, especially for smaller print-

runs.

�7

The market for Display Graphics Systems is growing as a

whole by some 5% per year, particularly in mass-market

advertising, such as billboards, banners and posters, and

in point-of-sale [POS] applications. The printing systems

used in this market differ considerably, especially as

regards the inks they use. The Océ Arizona 250 GT uses a

solvent free ink that dries on exposure to ultraviolet light,

enabling greater system productivity than printers that use

solvent based inks. That is why this technology has the

potential to grow faster than the market growth that is

expected for the display graphics market as a whole.


Strong growth The business group Display Graphics

Systems developed very well during the past financial

year. Double-digit growth in revenues meant that the

increase far exceeded overall market growth. The impact

of the Océ Arizona 250 GT was considerable. Thanks to

the use of UV ink the Océ Arizona 250 GT is able to print a

durable image on almost any surface without using

solvents. This type of printer also features ‘variable dot

technology’, enabling higher resolutions and better color

gradients and also big savings on ink [up to 50%]. Though

initially available solely as a flatbed printer for rigid media

of up to 5 centimeters thick, the printer will be fitted with a

roller mechanism for flexible media in 2008. The possibility

of printing digitally in small print-runs on a wide range of

materials offers businesses in the display graphics market

lots of leeway to experiment with new possibilities. This

will further expand the market and will stimulate the sale

of printers.

Océ also introduced a new printer in the Océ CS9000

series, the Océ CS9060. This printer uses an ‘eco-solvent

ink system’ for indoor and outdoor advertising

applications. This printer also features variable dot

technology.

Via its ONYX Graphics subsidiary Océ has what is by far

the world’s most used software for raster image

processing. This software creates printer-ready data and

governs the quality of the prints, making it indispensable

for printing wide format graphics. In 2007 Océ presented a

new version of the modular ONYX Workflow Software:

the V7 Océ Edition.

Partnerships During the past year Océ entered into a

partnership with Fujifilm, which has included the Océ

Arizona 250 GT in its range. This partnership has improved

our market coverage. That was already clearly reflected in

2007 by the full orderbooks at both Océ and Fujifilm.

Océ also entered into a partnership with a supplier of

digitally controlled cutting equipment to be marketed with

the Océ Arizona 250 GT, enabling an automated workflow

in which textile, foam board or other rigid media can be

printed and cut in one single digital process. This ‘digital

finishing’ process brings a strong increase in productivity

because it eliminates the need for a large number of

separate operations.


Imaging Supplies business group

Lower revenues, better result Via a tighter focus on

margin the business group Imaging Supplies succeeded in

booking a better result, even though revenues were lower.

The business group has a strong range that links up

seamlessly with the Océ machine portfolio.

Market environment


All customer segments of:

Technical Document Systems

Display Graphics Systems

Corporate Printing Systems

Commercial Printing Systems

Océ Business Services


Wide format media

Display graphics media

Print media for the office and for commercial graphic

arts applications [business graphics media]

Profiles for media, ink and printer combinations

Other suppliers

3M, Corporate Express, Hewlett-Packard, Intelicoat,

Paperlinx, Sihl and Xerox

Strategy The business group Imaging Supplies strives

for profitable expansion of its position as supplier of high

value media for wide format printers in the TDS and DGS

segments in particular. For small format, too, Océ offers a

full range of media, mainly focused on the Océ products in

this segment. Through optimal synergy with the sale of

machines Océ aims to maximize its supplies to its own

population. For the customer major added value stems

from the certainty that the media supplied are suitable for

use on the equipment.

Trends The total market for wide format black-and-white

media is fairly stable. However, the market for CAD paper

is showing good growth at the expense of wide format

plain paper. The market for display graphics media is

growing considerably, especially for solvent and UV

applications. Nevertheless, water based media still

account for a very substantial share of this market. The

market for uncoated cutsheet paper in Europe is showing

annual growth of 3 to 4%. Driven by growth in color print

devices in office and production environments, the market

for color specific media shows considerable growth.

��


��


Imaging Supplies made a good contribution to Océ’s

income in 2007. Particularly in the wide format CAD

segment [design via computer] and display graphics, for

which IS supplies inks and specialty media, revenues

increased substantially. Revenues from [specialty] paper

for small format color devices also showed significant

growth.

The strongly increased world-wide raw material prices

continued in 2007 and led to a sharp rise in the paper price

for customers during the year under review.

Thanks to a shift in focus from revenue to margin, the

profitability of the IS business improved. The range has

been expanded, particularly in materials for display

graphics for use on the new machines, both in flexible and

rigid materials.

Sustainability in paper In response to an increasingly

more apparent demand for sustainability in paper use, Océ

Imaging Supplies offers customers a broad range of paper

made of wood from sustainably managed forests [FSC]

and several outstanding qualities of recycled papers for

both small and wide format.

The share of recycled paper is steadily growing.


�0


Océ’s Research & Development works in close

cooperation with the sales and service organizations to

develop the range of in-house products that form the basis

for Océ’s reputation in the market. In recent years Océ has

placed increasing emphasis on combining its development

activities with partners to add greater scale and innovative

strength. That has also led to the recent introduction of a

number of ground-breaking new printing systems.

Strong technologies Over the years Océ has

consistently invested a substantial proportion [7-8%] of its

revenues in R&D. That has created a strong technology

portfolio with a large number of own inventions. This

portfolio still forms the basis for the development of new

products and is constantly being expanded through the

addition of new inventions. Striking examples of this

include the CopyPress technique, in which the toner

image is transferred to the print medium by pressure

instead of by electrical charge, and the organic photo-

conductor [OPC]. Both inventions are applied in various

ways in Océ machines. Another good example is the

company’s own color technology for Wide Format Printing

Systems [Océ CrystalPoint], whose development has now

been completed. Océ’s ability to develop products on the

basis of a technological lead has always been an important

factor in the company’s commercial development. This is

why Océ has always been a front runner in the area of

digitization.

Feedback for innovation The reputation of Océ as an

innovator is largely due to systematic investments in

human resources and technology, effective cooperation

with universities and other knowledge institutes and,

more than anything, to its close links with the working

practices of customers. Wishes and observations from

users are communicated via sales and service employees

and this feedback is the trigger for improvements and new

developments. Océ’s broad range of software products

has also been developed on the basis of practical

experiences in its customers’ businesses. Obviously this

input from the customer base needs to be followed up in

an R&D organization that can translate market experience

into efficient products. Océ has been very successful in

this.

Toward an open innovation model Changing market

conditions call for new business models and different

development processes in which the time factor sets

increasingly greater constraints. Extensive development

processes that are conducted entirely independently take

up a lot of time and resources and this makes them

extremely vulnerable to rapid developments in the market.

This is the reason why Océ has for several years been

successfully using a development model in which

traditionally consecutive phases now take place in parallel

and in which there is ample scope for the input of the core

competencies of third parties. It is an effective way of

developing products quickly to give the business units a

market lead over their competitors. A good example is the

successful Océ Arizona 250 GT, which was developed in a

relatively short time using third-party printhead

technology. The Océ TCS500 wide format color printer

and the Océ JetStream series were also developed in

cooperation with partners.

Technology and innovation

�1

This open innovation model enables Océ to supplement

its own unique strengths by making optimal use of the

innovative capacity of its partners. Conversely, the know-

how and technology that Océ possesses also makes it

attractive for third parties to develop new products in

partnership with Océ.

Illustrative of the rapidly growing importance of this

approach is the Inkjet Application Center, a separate R&D

activity, which was opened by Océ in 2006 at the High

Tech Campus in Eindhoven, the Netherlands. There Océ

works together with third parties on various applications,

including the further development of printheads, but it also

works on the application of the highly advanced know-how

that has meanwhile been applied in the area of micro-

electro-mechanic systems [MEMS] for uses other than

printing on paper. This involves components [switches,

sensors etc.] of microscopically small size that are

integrated in chips.

At the end of the year under review Océ announced the

launch of the Document Services Valley in Venlo. This,

too, is an R&D facility in which Océ will work together with

external partners on innovative solutions relating to

document services. By concentrating research and

development in this location, Océ aims to speed up the

professionalization of document management services.

Report of the Board of Executive Directors | Technology and innovation

Océ has its own R&D facilities in seven countries In Venlo [the Netherlands] R&D concentrates on the

development of cutsheet and wide format printers and scanners, strategic consumables [incl. toners and photo-

conductors] and software. In Poing [Germany] high volume printers [mainly continuous feed] and software are

developed. In Vancouver [Canada] the activities are focused on wide format color printers for display graphics and in

Fiskeville [United States] a specialized R&D department is active in the Océ business Arkwright, which produces

specialty printing materials.

In Créteil [France], Gembloux [Belgium], Timisoara [Romania], Salt Lake City and Phoenix [United States] there are

R&D centers for software development.

Expenditure on R&D in 2007 amounted to € 228 million [2006: € 221 million]. Some 1,800 employees work in R&D.

�2

Manufacturing and logistics

Océ products are manufactured in various locations

throughout the world. In Venlo [the Netherlands], Poing

[Germany], Prague and Pardubice [Czech Republic] and

Vancouver [Canada] Océ has its own factories in which

products are assembled that originate from the company’s

own development work. A substantial proportion of the

production of cutsheet and wide format printers and

modules is performed by contract manufacturers in Asia.

To safeguard the quality and reliability Océ Technologies

Asia in Singapore coordinates the activities of all parties

involved in engineering, purchasing, quality control and

logistics.

The production of strategic materials, such as toners,

photoconductors, silicone materials, printheads, process

drums and LEDs, takes place in Venlo and Poing.

Developments in 2007

Manufacturing The relocation of manufacturing

activities from Venlo to Asia and Central Europe was

continued in 2007. A great many modules, for instance for

the Océ VarioPrint 6000 series, are also manufactured in

Asia. The relocation of manufacturing is in general a

transfer to countries with competitive wage costs. That

relocation has generated cost savings amounting to as

much as 30%.

At the end of 2007 nearly 60% of the Venlo production

value of the cutsheet and wide format machines

originated from Central Europe and Asia. During the year

modules were also sourced from the Far East for the

products that are manufactured in Poing. Since the

production of these machines is customer-specific to a

great extent, large-scale relocation of these manufacturing

activities is at present not opportune.

At the end of the year under review preparations were

started for the production of wide format printers with the

new Océ color technology. This technology, named

CrystalPoint, will be made available in the near future.

Advertising colors the world around us. Posters and billboards sometimes mega-sized, enliven

busy shopping malls. This is the playing field for digital

wide format printing: display graphics.

Photos and artwork, rapidly and durably

printed on all possible materials.


�3

Logistics The role of logistics within Océ has become

increasingly more important in recent years. The

expansion of the range [including OEM products], the

relocation of manufacturing activities and the need for an

ever shorter time-to-market place ever higher demands on

the availability of materials and machines. This involves

the processing of a series of different workflows within

harmonized business processes. Examples of this are the

flow of components and modules for the production

activities [supply chain management], but also the

availability of spare parts and the distribution of machines,

printing media and supplies.

In recent years substantial improvements have been

implemented in various of these elements. Changing

market conditions, new manufacturing and distribution

concepts and the much more complex logistics network

that resulted, call for thorough reorientation.

During the year under review Océ therefore started a

project aimed at an integral improvement of the physical

logistics structure, the supply chain management, the

organizational structure and the supporting ICT systems.

The objective is to realize a customer-led value chain

which offers a competitive advantage for both customers

and Océ.

The project forms part of the corporate operational

excellence program and is essential for reducing the

working capital tied up in inventories and for controlling

the costs. Océ will vigorously continue the restructuring of

logistics in 2008.


��

In the commercial and technological working environment

at Océ the contribution of the individual employee has

been high, especially because of the close relationship

with customers. An international Human Resources [HR]

policy, developed and implemented in recent years, is

aimed at ensuring that Océ can develop further at the

desired speed and in the desired direction.

Monitoring of talent Océ has a lengthy tradition in

progressive human resources management. That has

contributed to the creation of a strong business culture

with close reciprocal ties between employees and

commitment to the business. That is an important aspect

in a company that, because of its close relationships with

customers, relies to a large extent on the individual

qualities of its employees. Everywhere in the world Océ is

regarded as a good employer, which makes it easier to

attract new talent. Nevertheless the filling of management

posts continues to call for much attention. Management

development and succession planning are therefore

cornerstones of Océ’s human resources policy.

The development that Océ is now undergoing, which

entails the implementation of numerous strategic changes,

makes high demands on employees and calls for specific

capabilities and qualities. That also has consequences for

the range of responsibilities handled by human resources

management. Although caring for the employees,

detailing and monitoring their terms of employment and

developing their skills continue to form the basis, human

resources management is also responsible for ensuring

timely succession in the form of talented employees who

will provide a guarantee for the company’s further

development. This implies identifying, stimulating and

monitoring suitably qualified employees, so they can help

improve business performance at all levels.

International HR policy To achieve these

responsibilities, a centrally coordinated HR program was

started a number of years ago in all countries, aimed at

leadership development, competencies management and

executive development. It is based on an international HR

policy that is supported within all companies in the group.

That makes it possible for the elements that are laid down

in the HR program to be harmonized world-wide and

implemented in the operating companies.

Leadership labs continued The leadership program

which was introduced over the past few years and which

focuses on the development of specific leadership

qualities in existing and future managers has met with a

highly positive response from the organization. The

‘leadership labs’, which serve as the starting point for the

further managerial development, are regarded as

motivating and stimulating. The intention is that these

leadership labs will be followed by individual development

programs. In the operating companies where this

approach has been implemented, it has proved

successful.

Responsibilities and roles Competencies

management is aimed at ensuring that all jobs within the

company are performed by employees who possess the

competencies that are needed for their job. This involves

not only training in the skills required to perform the job

but also optimally preparing the employee to cope with

changing circumstances. Competencies management is

closely linked with the planning of the development of

employees and therefore with the company’s career

management system. It is also a powerful tool in the

recruitment of new [management] talent. To establish the

various responsibilities and roles that are applicable to the

various jobs, a competencies manual has been centrally

developed and is being implemented in all Océ

companies.

Océ as an employer

��

Executive development Leadership programs and

competencies management form the basis for a more

targeted system of executive development, ensuring that

Océ always has the required managers at its disposal. The

reality during the year under review, however, was that

too many vacancies still had to be filled externally. More

management talent is expected to become available once

the leadership and competencies management programs

have been more firmly anchored in the daily practice of all

Océ companies. Intensive work will be done on this in the

years ahead. Global Océ Professionals, an international

program to identify and encourage emerging Océ talent,

was continued during the past year. In various countries

‘high-potential’ programs have been started.

Continual training Education and training of employ-

ees are important and ongoing elements within HR

activities. Océ applies a ‘blended learning’ approach, in

which training in practice [some 90% of the time] is

alternated by computer-aided courses and training ses-

sions in the operating companies.

Most employees are able to strengthen their knowledge

and skills via the Océ ‘e-learning’ project LearnLink. In the

meantime many programs are already available via Learn-

Link and new ones are being added each year. The

worldwide approach guarantees a harmonized training

system in line with the Océ policy.

In addition a number of training courses are held in the

Océ International Training Center [ITC] in Venlo. That also

has a ‘competitive lab’ in which the performances of Océ

products can be compared in practice with those of

competitor products. The ITC receives more than 3,000

employees for a training course each year. ITC trainers

also hold training sessions for almost 1,800 employees in

the operating companies. A special program has been

developed in cooperation with Eindhoven Technological

University [the Netherlands]. Asian students are given the

opportunity of studying there on an Océ scholarship for

two years, on condition that they then spend three years

working in one of the Océ R&D centers.

Good labor relations Océ holds structured

consultation with its employees via local works councils

and trade unions.

In Europe a pan-European employee representative body

[the Océ European Works Council] is also active. It met

twice during the year under review. Issues discussed

included the strategic plan and the financial results.

Explanatory comments on these subjects were given by

various Executive Board members.

The activities of the various works councils and the

contacts with the trade unions contribute to the good labor

relations within Océ. That applies all the more when

restructuring operations are taking place, as in the recent

past.

Report of the Board of Executive Directors | Océ as an employer

�6

People, planet, profit – the three factors that together

define the concept of sustainability – have been given a

prominent place on the agenda of almost every company

in recent times. Océ considers sustainability to be an

essential part of the company’s long term strategy.

Sustainability as leitmotiv Care for people and their

environment is visible as a leitmotiv throughout the history

of the business. That applies to the way both are treated

and to the choice of technology and materials.

Océ is involved in various aspects of sustainability. First of

all, as a supplier of printing solutions that help customers

and users to do their work safely, effectively, profitably

and on a sustainable basis. In addition, as an organization

with employees all over the world, who count on having a

good, safe and interesting workplace. And lastly as a

manufacturing industry, with factories that consume

materials and energy.

Supplier of sustainability Particularly in the past

decade Océ has developed a number of machines that

combine advanced technology with sustainable

characteristics. Attention to user friendliness has yielded

workflow programs that not only simplify the work but

also make it more pleasant, prevent errors and provide

savings on energy and paper. Productivity, as the end-

result of speed and reliability, has always weighed heavily

in favor of Océ systems. Higher productivity leads to lower

costs for energy, material consumption and invested

capital. The intrinsic properties of Océ systems such as

safety, ergonomics, speed, low emissions of ozone and

dust and a low noise level add value to the workplace of

customers. Major technological breakthroughs, such as

duplex printing in one single pass in the Océ VarioPrint

6000 series, not only have financial significance, but also

make a tangible contribution to reducing paper and energy

consumption.

Sustainable in its own organization Within its own

organization Océ chiefly experiences the social aspects of

sustainability: human resources policy, education and

training and labor relations. Those aspects are described in

this report under the heading ‘Océ as an employer’.

Six Océ operating companies had already introduced an

ISO 14001 environmental management system and

gained certification for it. In 2007 they were joined by

the Portuguese, French and Slovakian Océ operating

companies.

Producing with care As a manufacturing industry Océ

is aware of the importance of using raw materials care-

fully. Recycling and re-use of machines are therefore

standard procedure. If machines, components and

modules are manufactured by third parties, Océ requires

its suppliers and manufacturing and buying partners to

show the same attitude toward sustainability as Océ. This

explicitly applies to both environmental and social issues.

Océ asks its suppliers to subscribe to a declaration that is

based on the ten points of the UN Global Compact.

Constant improvement The responsibility for

sustainability lies with the Océ Board of Executive

Directors and with the management of the operating

companies. As a central body at group level and as an

advisory body for the Board of Executive Directors, a

Corporate Sustainability Forum has been operating for

several years, with a broad composition of responsible

officers and experts from various disciplines. Under the

auspices of the Corporate Sustainability Forum a study

was conducted in 2006 into which aspects of sustainability

receive most attention from Océ’s customers. The aim

was to reduce the many relevant sustainability issues to a

manageable number that could serve as a basis for setting

quantifiable objectives. Energy consumption, the use of

paper and toner, recycling and emissions of ozone and

dust in particular were found to be of most concern to

customers. That input, combined with the internal

objectives of Océ, made a strong contribution to the

formulation of five focus points that will guide the

improvement of Océ’s sustainability performance in the

years ahead. The choice of these focus points originated

from the wish to set targets that Océ itself is largely able

to influence.

Océ and sustainability

�7

Focus points

| Minimizing the energy consumption per print

| Maximizing the re-use of materials and minimizing

non-reusable waste

| Minimizing emissions of ozone, dust and toner

| Minimizing incorrect and unnecessary prints

| Increasing attractiveness as an employer for

talented employees

Minimizing energy consumption: the Océ VarioPrint 6250

uses substantially less of the electricity consumed by

similar printers, thanks to the machine’s technology

platform [Gemini Instant Duplex Technology].

Maximizing re-use: Océ Asset Recovery Program and the

production of ‘remanufactured’ machines. But also

participation in the German program ‘Initiative Pro

Recyclingpapier’ to stimulate the use of recycled paper.

Minimizing emissions of ozone, dust and toner: Océ is the

only industry player to have introduced toner containers

which leave no toner residue in the container. Prior to

market introductions R&D has the toner emissions of Océ

printers tested by three independent institutes [TÜV and

Cetecom in Germany and Underwriter Laboratories in the

United States].

Minimizing incorrect prints: intelligent workflow software

displays the complete production path, including the

expected result, prior to actual printing. Any mistakes can

be corrected in advance.

Attractiveness as an employer: according to a survey by

the Dutch daily newspaper ‘NRC Handelsblad’, published

in December 2007, Océ is the second most attractive

employer in the ICT sector in the Netherlands.

Since 2004 Océ has published an extensive Sustainability

Report, dealing with the aspects of sustainability. For the

past three years this report has covered all manufacturing

locations and the 14 largest operating companies and

since 2006 the report has been verified by an external

auditor.

Report of the Board of Executive Directors | Océ and sustainability

Océ’s sustainability – ten facts

Sustainability for the customer

Simple to operate, user friendly and safe equipment

Low emission levels, low energy consumption

High productivity based on speed and reliability

Limitation of needless use of paper, ink and energy due to innovative software

Sustainability in manufacturing

Designed for durability

Safe products for user and environment [RoHS, WEEE, EuP, REACH]

Robust design suitable for re-use

Sustainability in the organization

Good employment conditions and development opportunities for employees

Safe working environment with strong business culture

Transparent management, good governance

��

Mazon Screen B.V.

Doors to the future

Mazon Screen B.V. grew big

in the tradition of screen

printing. That is typically a

discipline where ́ big´ and

´many´ go hand in hand with

precision and a thorough

knowledge of colors and

ink. Graphic professionalism

as key to success. Their

product gamut holds every

form of advertising you see

in shops, in the streets and

at the roadside . Posters,

signs, displays, and

computer cut text for the

lettering of cars and shops.

But also designers of

events, expositions and

fairs find their way to the

Limburg based company.

Especially where it comes

to unusual an unusually

demanding projects. Or just

ideas on the edge of what

can be realised.

In an environment like that

the decision to go digital is

not taken lightly. Print

quality, flexibility, efficiency

and cost all ask maximum

attention. That´s why Océ is

as proud being chosen to

provide the new printer, as

is Mazon Screen B.V as the

proud new owner. The Océ

Arizona 250 GT print directly

in near photo quality directly

on hard surfaces up to 5

centimeters in thickness.

And in doing so, Mazon

Screen opens numerous

doors to new applications

and new clients.

��

60

Corporate governance

Structure, policy and compliance Océ N.V. is an

international holding company within the meaning of

Article 153, para. 3b, Book 2 of the Dutch Civil Code.

This implies that shareholder rights are not restricted by

the rules that are applicable in the Netherlands to

companies subject to what is known as the ‘structure

regime’.

Océ’s corporate governance structure is based on the

legislation, jurisdiction and codes of best practices that are

relevant in the countries in which the company is active.

The European regulations are mostly of a principle-based

nature, whereas the regulations in the United States are

mainly rule-based.

In the Netherlands the Dutch corporate governance code

has been applicable since December 2003. This is known

as the Tabaksblat Code [referred to below as ‘the Dutch

Code’] and it consists of 21 principles and 113 best

practice provisions. The Dutch Code was given legal

status with effect from January 1, 2005. As from the 2003

financial year Océ has included in its annual report a

paragraph on corporate governance matters explaining the

way in which it applies the Dutch Code.

Until the termination of the company’s US stock market

listing [on NASDAQ] in 2007, the Sarbanes-Oxley Act in

the United States was of specific importance to Océ.

Though the company has meanwhile terminated its listing

in the United States, Océ largely maintains the measures

and the internal control structure that result from the

applicability of the Sarbanes-Oxley Act.

The Board of Executive Directors and the Supervisory

Board of Océ subscribe to the basic principle that was

applied when drawing up the Dutch Code: a company is a

long term collaboration between the various parties

involved. These parties, the stakeholders, are the groups

and individuals that directly or indirectly influence [or are

influenced by] the achievement of the company’s

objectives and they include employees, shareholders and

other providers of capital, suppliers and customers, but

also government and civil society. The Board of Executive

Directors and the Supervisory Board have overall

accountability for achieving the right balance between

these interests so as to safeguard value creation and

ensure the continuity of the business.

Management aspects

High-circulation daily newspapers are mostly produced

on big printing presses. But for small print-runs it is

much more economical to use a digital printer. Especially

when the ultimate point of sale is located thousands

of kilometres away. In numerous far-away places

throughout the world Océ printers produce newspapers

each day. So that people who are perhaps on the other

side of the globe can still read their favorite paper when

far away from home. Thanks to Océ Digital Newspaper

Network.

61

In December 2004 the Dutch government set up a

monitoring committee to promote the topicality and

practical application of the Dutch code and to monitor how

it was being implemented and complied with. In

December 2005, this committee issued its first report on

compliance. One of the main conclusions in the

monitoring committee’s most recent report [December

2007] is that compliance by companies with the Dutch

Code is high, with an average of 95% of the Code’s

provisions being met.

Compliance with and enforcement of the Dutch

Code Each year Océ explains the main outlines of its

corporate governance structure in the annual report; if

there are substantial changes in this structure, they will

- depending on the subject - be submitted to the General

Meeting of Shareholders for discussion or approval.

More detailed information about Océ corporate

governance and the related rules and regulations can be

found on the Océ website [www.investor.oce.com] under

the heading corporate governance.

Transparent accountability and an active dialogue with all

stakeholders and with society contribute to realizing the

objectives of the Dutch Code. Océ complies with the

Dutch Code and only a limited number of its provisions are

not applied. According to the Dutch Code departures from

it are permitted; under certain circumstances such

departures may in fact be justified. The ability to apply all

provisions of the Dutch Code depends on the concrete

situation. Not all companies are the same; they operate in

different markets, the distribution of share ownership may

differ. In part, the Dutch Code already anticipates future

legislation. The political and social discussion about the

adaptation of Dutch legislation to bring it into line with the

EU Takeover Directive confirms not only that corporate

governance is a highly topical subject, but also that views

on it are evolving. This is also confirmed by a number of

landmark decisions by the Dutch Enterprise Court and the

Dutch Supreme Court in 2007.

Océ complies with the Dutch Code. As regards com-

pliance with best practice provisions II.1.1 [appointment

period of executive directors], II.2.7 [severance pay for

executive directors], IV.1.1 [limiting the right to make

binding nominations] and IV.1.2 [financing preference shares]

and IV.2.1, IV.2.2 and IV.2.8 [issue of depositary receipts

for financing preference shares] explanations are given

under the relevant headings on pages 62, 64, 67 and 68.

Report of the Board of Executive Directors | Management aspects | Corporate governance

62


The Board of Executive Directors currently consists of four

members who are appointed by the General Meeting of

Shareholders. In the case of each appointment the holders

of the priority shares have the right to draw up a binding

nomination, which can be overruled by a resolution of the

General Meeting of Shareholders that has been adopted

by a majority of at least two thirds of the votes cast,

provided that such votes represent at least one half of the

issued share capital. This restriction on the possibility to

overrule the binding nomination is in conformity with the

arrangement set out in Article 133 and 142 Book 2 of the

Dutch Civil Code, but is a departure from best practice

provision IV.I.1.

If no binding nomination has been drawn up, the General

Meeting is free in its choice.

The Supervisory Board appoints the chairman of the Board

of Executive Directors and decides on the allocation of the

tasks of the Executive Board members in consultation

with the Board of Executive Directors. Regardless of the

allocation of tasks the Board of Executive Directors acts as

a body with collective responsibility. The functioning of the

members of the Board of Executive Directors is regularly

evaluated by the Supervisory Board.

Remuneration of the Board of Executive

Directors In accordance with the Articles of Association

of Océ N.V. the remuneration policy for the Board of

Executive Directors is determined by the General Meeting

of Shareholders in response to a proposal by the

Supervisory Board.

The current remuneration policy was adopted by the

General Meetings of Shareholders held on March 2 and

September 8, 2004 respectively and includes the share

plan that was approved by the General Meeting of

Shareholders.

The Supervisory Board fixes the remuneration and the

other terms of employment of the members of the Board

of Executive Directors on the basis of the advice of the

Remuneration Committee and with due regard for the

policy referred to above.

Remuneration policy The remuneration policy is aimed

at attracting and retaining the best executives needed to

manage a publicly listed company that operates on an

international scale in the area of technological activities.

The policy is intended to support both the short term and

the long term objectives of Océ.

As remuneration experts, Hay Associates conduct a

market survey of the remuneration packages and

employment conditions applicable to executives of Dutch

publicly listed companies. The basic principle is a

remuneration which, on balance, corresponds to the

median level within a peer group of companies which have

been selected by Hay and are listed on the AEX and

Midkap in Amsterdam, and which – in terms of size and

complexity – are comparable to Océ. In the survey of the

remuneration market the weighting of the job, expressed

in Hay points, forms the basis for comparing the

remuneration levels for jobs between and within

companies.

The remuneration components are: base salary, variable

pay [i.e. the short term and long term bonus] and pension

scheme. For Dutch members of the Board of Executive

Directors the Dutch labor market is taken as a basis, and

for non-Dutch members – of whom there were none

during the year under review – the market conditions of

the relevant country. In the case of Messrs. Dix and

Schaaf, both of whom reside outside the Netherlands, the

Dutch labor market is taken as a basis.

The total remuneration [base salary, variable pay, - short

term and long term bonus - and pension scheme] is

determined on the basis of the median level of the peer

group. Océ considers variable pay to be a substantial part

of the total remuneration package.

The performance criteria to which short term and long

term bonus are linked are focused on value creation and

on increasing shareholder value over the short and long

term.


63

The remuneration of the members of the Board of

Executive Directors is structured as follows:

I Base salary

Endeavors are made to adjust the base salaries to bring

them more into line with the median of the above-

mentioned peer group of companies. This means that

the base salary for 2008 is increased by 5%.

I Variable pay

Short term bonus The short term bonus scheme is

linked exclusively to measurable financial performance

criteria. For 2007 and 2008 these are the operating

income and the turnover rate of Net Capital Employed

compared to budget. Both components form the

basis for the Return on Capital Employed. The maximum

level of the bonus that can be earned has been fixed at

50% of base salary.

The annual bonus is granted in accordance with the

following table:

The extent to which the performance targets set by the

Supervisory Board have been achieved is also judged by

the external auditor.

Long term bonus Up to 2004 Océ operated a Share option

Plan. The last Share option Plan in 2004, under which

options were issued in November 2003, has a duration of

nine years and expires in 2012.

This Share option Plan consisted of conditional and

unconditional options. The number of conditional options

that could ultimately be granted was determined by the

extent to which the targets were achieved during a three-

year period that commenced as from the granting of

options under the Share option Plan. At the end of the

financial year there were no longer any outstanding

conditional options.

A specification of the unconditional option rights of each

member of the Board of Executive Directors as at the end

of the financial year is given on page 127 of the Financial

Statements.

With effect from 2005 the annual Share option Plan was

replaced by a Share Plan that is linked to performance

criteria. These are focused in full on creating shareholder

value, i.e. share price gains plus dividend [Total Share-

holder Return - TSR]. Upon grant, the maximum level of

this long term bonus amounts to 60% of base salary. Each

year a three year cycle starts, with performances being

measured at the end of each period by comparison with

those of a peer group of other companies.

The position that Océ occupies in this peer group, which

consists of Océ and nine other companies, determines

the number of shares that are awarded each time in

accordance with the table below:

The shares to be granted at the end of a three year cycle

under the 2006 and 2007 Plans are required to be retained

for a further period of at least two years [under the 2005

Plan this period amounted to three years]. The three year

cycle during which the performance has to be achieved

[performance period] followed by the period of two years

in which the shares acquired have to be retained at their

owner’s own risk [lock up period] makes a total period of

five years. This therefore complies with the five year

criterion set in best practice provision II.2.3 of the Dutch

Code.

The peer group consists of European technology

companies with a comparable business model: besides

Océ it consists of Agfa, Akzo Nobel, ASMI, ASML, DSM,

Heidelberger Druck, Infineon, Philips and Stork.


percentage of target target 1 target 2 total

achieved [operating income] [turnover rate of

grant Net Capital Employed]

grant

≥ 100% 25% 25% 50%

95-99% 20% 20% 40%

90-94% 15% 15% 30%

85-89% 10% 10% 20%

80-84% 5% 5% 10%

< 80% 0% 0% 0%

position compared numbers granted

to peer group equivalent to

Number 1 or 2 60% of base salary





6�

For an overview of the individual remuneration of the

members of the Board of Executive Directors see page

126 of the annual report. An updated overview of the Océ

securities held by members of the Board of Executive

Directors can be found on www.afm.nl.

Pension scheme The pension scheme for the members

of the Board of Executive Directors consists of a combina-

tion of a defined benefit and a defined contribution sys-

tem. Up to a maximum salary of € 121,969 a provisionally

index-linked average earnings scheme is applicable. For

members of the Board of Executive Directors newly

appointed after January 1, 2006 a defined contribution

scheme is applicable for the salary in excess of that

amount. In respect of this scheme the company does not

run any [investment] risk. The members of the Board of

Executive Directors appointed prior to January 1, 2006

have a defined benefit scheme for the salary between

€ 121,969 and € 243,938 and a defined contribution

scheme for the salary in excess of that amount. An

overview of the accrued pension entitlements of the

members of the Board of Executive Directors and the

related financing costs is shown on page 126.

For members of the Board of Executive Directors the

contractual retirement age is 65. Two of the four members

of the Board of Executive Directors who were in office on

January 1, 2007 and who were older than 56 on that date

still have a contractual retirement age of 62. The chairman

of the Board of Executive Directors has an indicative

retirement age of 60. For new members the retirement

age will be 65.

Appointment period for executive directors Due

to the contractual arrangements that were concluded with

the executive directors prior to the introduction of the

Dutch Code, Océ does not comply with best practice

provision II.1.1. Océ will respect this contractual situation.

On October 11, 2006 Mr. A.H. Schaaf was appointed as an

Executive Director by the General Meeting of Share-

holders. It was agreed with Mr. Schaaf that he would be

appointed for an indefinite period. For the motivation see

the agenda of the shareholders’ meeting of October 11,

2006 and the explanatory comments that were given

during that meeting.

Period of notice The existing employment contracts

with the members of the Board of Executive Directors can

be terminated subject to a period of notice of six months.

If members of the Board of Executive Directors terminate

the contract themselves a period of notice of 3 months is

applicable.

Severance pay As regards payments in the event of

involuntary dismissal, as referred to in best practice

provision II.2.7 of the Dutch Code, the policy that Océ has

applied to date is to pay an amount of compensation that

is reasonable on the grounds of the contractual situation,

social developments and jurisprudence. For such time as

no mandatory change is made in the statutory regulation

of the employment conditions for executive directors Océ

intends to continue applying this policy in the future as

well. In the event of premature notice of termination being

given by Océ the severance payment to Mr. Van den Belt

and to Mr. Schaaf will amount to at most the equivalent of

24 months’ base salary. This implies a partial departure

from best practice provision II.2.7. For the motivation of

this departure in respect of Mr. Schaaf see the agenda of

the Meeting of Shareholders held on October 11, 2006

and the explanatory comments that were given during that

meeting. The employment contract with Mr. Van den Belt

was drawn up several years prior to the introduction of the

Dutch Code when he was appointed as a member of the

Board of Executive Directors. Messrs. Van Iperen and Dix

were appointed as members of the Board of Executive

Directors via internal promotion. No prior agreements

were made with them in respect to severance pay.

Loans Since 2002 Océ has no longer provided any

personal loans to members of the Board of Executive

Directors. Prior to that time interest-free loans were

provided within the framework of the Share option Plans.

The current level of these loans amounts to: € 35,000 for

Mr. Van Iperen and € 30,000 for Mr. Dix. Repayment

takes place on exercise of the relevant annual Share option

Plan for which the loan was provided.


6�

Supervisory Board

The Board of Supervisory Directors currently comprises

five members who are appointed in the same way as the

members of the Board of Executive Directors. The

Supervisory Board supervises the policy of the Board of

Executive Directors and the course of business in the

company and the activities relating thereto. The

Supervisory Board is supplied in good time by the Board of

Executive Directors with all the information that it requires

for the performance of its task.

The Supervisory Directors appoint one of their members

as their chairman.

Profile of the Supervisory Board In consultation

with the Board of Executive Directors, the Supervisory

Board has drawn up the following profile for its own

composition:

The Board consists of at least three and at most eight

members. The members should operate independently of

and critically with regard to each other, based on a good

relationship of mutual trust. They should be experienced in

the management of an international, publicly listed

company and the members should have sufficient time

available to fulfill the function of Supervisory Director. In

order to ensure continuity a spread in ages is aimed at.

Endeavors are made to ensure a broad representation of

know-how and experience in one or more of the

disciplines or areas that are relevant to Océ. In particular,

these are: R&D, the production of advanced machines and

materials, international marketing of high value products

and services, the environment, finance, government

policy, human resources and social policy.

This outline profile is periodically evaluated and adapted

where necessary. In doing so, the factors that are taken

into account include developments in the nature and the

size of the company and its business activities, the degree

of internationalization, and the extent of the specific risks

over the medium and long term.

Supervisory Board committees The following

committees operate at Océ:

Selection and Nomination Committee This committee

selects and nominates candidates for appointment as a

member of the Board of Executive Directors or as a

member of the Supervisory Board. At periodic intervals

this committee also assesses the functioning of individual

supervisory directors and executive directors.

This committee consists of Mr. P.A.F.W. Elverding,

chairman, Mr. A. Baan and Mr. F.J. de Wit. The Senior

Vice-President Corporate Personnel & Organization acts

as secretary of this committee.

Remuneration Committee This committee advises the

Supervisory Board on matters relating to the remuneration

of the members of the Board of Executive Directors,

draws up the remuneration report as referred to in best

practice provision II.2.9 of the Dutch Code and monitors

and evaluates the remuneration policy of the Océ Group.

The committee consists of Mr. F.J. de Wit, chairman,

Mr. A. Baan and Mr. P.A.F.W. Elverding. The Senior Vice-

President Corporate Personnel & Organization acts as

secretary of this committee.

Decisions on the level of remuneration, including the Océ

Share Plans and the granting of shares, fall within the

competencies of the entire Board of Supervisory

Directors.

Audit Committee This committee has a supervisory task

as regards monitoring the integrity of the company’s

internal and external financial reporting, its risk

management and the functioning of the internal and

external auditors. The committee was formally established

in October 2002 and has its own charter which was

updated in 2007 and which complies with the

requirements set by the Dutch Code.

This committee consists of Mr. M. Arentsen, chairman

and financial expert, and Mr. G.J.A. van de Aast.

The role and powers of these committees are further

defined in regulations for these committees which have

been posted on the Océ website.


66

Remuneration of the Supervisory Board In 2006

the General Meeting of Shareholders fixed the

remuneration of the Supervisory Board at € 50,000 [2006:

€ 46,355] for its chairman and € 37,000 [2006: € 30,903]

for its members with effect from the 2007 financial year.

For work performed in the Supervisory Board committees

the following additional payments are applicable with

effect from the 2007 financial year:

| Audit Committee, chairman € 7,000 and members

€ 5,000;

| Other committees, chairman € 5,000 and members

€ 3,000.

Up to and including the 2006 financial year no

remuneration was granted in respect of work done in the

committees.

The remuneration for any financial year is automatically

increased if the Dutch CBS Price Index figure for

household consumption in September of the preceding

year is at least 10% higher than the index figure that was

last used as a criterion. This increase corresponds to the

percentage increase in the most recently published index

figure.

For the 2007 financial year the total remuneration of the

present and former members of the Supervisory Board

amounted to € 255,335 [2006: € 226,973].

As at the end of the financial year the members of the

Supervisory Board held 2,969 ordinary Océ shares [2006:

2,969] and held no rights arising from options on Océ

shares listed on the Euronext Options Exchange.

General Meeting of Shareholders

A General Meeting of Shareholders is held each year.

Other meetings of shareholders may be held at the

request of the Board of Executive Directors, the chairman

of the Supervisory Board or two Supervisory Directors.

Shareholders who represent at least 10% of the

company’s issued capital may also convene a meeting.

The agenda for the meeting is drawn up by the party that

convenes the meeting. Shareholders who individually or

jointly represent 1% or a value of € 50 million of the

issued capital may submit proposals up to thirty days prior

to the meeting. All shares carry a voting right pro rata to

their nominal value.

Resolutions are adopted by an absolute majority of votes,

except in those cases where a qualified majority is

prescribed by law or in the company’s Articles of

Association.


Educational institutions, with many thousands of students, print tens of millions of pages each year.

Océ high speed printers in combination with state-of-the-art output management software ensure

efficient handling of the document flows. Simple document make-up and preparation and duplex

printing have brought a radical reduction in paper and

energy consumption and production times.

67

Capital and shares The company’s authorized capital

consists of ordinary shares, priority shares and financing

and protective preference shares. For details of the com-

position of the authorized capital and an explanation of the

various classes of shares in issue, see page 117 of this

annual report.

In best practice provision IV.1.1 of the Dutch Code it is

proposed that the right of the priority shareholder to draw

up a binding nomination for the appointment of executive

directors and supervisory directors should be limited.

The right to draw up a binding nomination forms an

important element in the corporate governance of Océ as

this has existed for almost 49 years since the transition

from a closed family business to an open, publicly listed

company. During this period Océ has grown to become

the technology company it is today. When considering

whether application of a best practice provision is in the

interest of the company, the consequences that this might

have for the specific business climate in which Océ

operates should also be taken into account.

Océ can only operate optimally in a market in which a level

playing field exists between the players concerned. The

players that are of relevance to Océ come from countries

and regions with various jurisdictions, such as the

European Union, the United States and the Far East.

Companies from the United States and the Far East

generally have effective means of protecting themselves

against takeovers.

As has also been shown by the discussions within the

European Union about the Takeover Directive, there is an

absence of a level playing field in the area of anti-takeover

protection in the various member states.

In the meantime the Takeover Directive has been imple-

mented in Dutch legislation. On the basis of this new

legislation there is no need for any change in the present

governance structure of Océ.

Unlisted depositary receipts for financing preference

shares form part of Océ’s capital. Upon the introduction of

these shares careful attention was paid to the matter of

the dilution of voting rights as compared to those attached

to ordinary shares. In connection with this it was decided

at the time to opt for the issue of depositary receipts

[certification] and to structure the composition of the

board of the Trust Office in such a way that one director is

appointed by the meeting of the holders of depositary

receipts, one by the Board of Executive Directors of the

company, and three by the General Meeting of

Shareholders.


6�

The issue of financing preference shares is limited to a

maximum of 20% of the issued share capital, which

means that certification does not operate as a protective

measure, but that it does comply with principle IV.2 of the

Dutch Code which states that the certification of shares is

a permitted means of preventing a [chance] minority of

shareholders from bringing too much influence to bear on

the decision making due to absenteeism at the General

Meeting of Shareholders.

This construction was introduced at the time with the

approval of the shareholders’ meeting. Consultation has

been held with the holders of depositary receipts for these

financing preference shares and also with the Trust Office

on the application of best practice provisions IV.1.2 [voting

right on the basis of fair capital contribution] and IV.2.1 to

IV.2.8 [composition of the Trust Office and the granting of

voting proxies to holders of depositary receipts]. In 2006

new agreements were made with the holders of

depositary receipts. As a consequence, the financing

preference shares are qualified as shareholders’ equity

under IFRS and holders of depositary receipts have

acquired the right to convert the depositary receipts for

financing preference shares into ordinary shares. Here

too, the corporate governance aspects were [again]

discussed. The holders of depositary receipts can request

a voting proxy from the Trust Office. The voting right

attaching to this proxy is based on the conversion price

and therefore corresponds to the capital contribution of

the ordinary shareholder as referred to in best practice

provision IV.1.2.

At the General Meeting of Shareholders on April 20, 2006

the relevant alterations in the provisions in the Articles of

Association relating to the financing preference shares

were approved.

Record date Since December 1999 legislation in the

Netherlands has permitted the use of a record date, which

has considerably reduced the period during which

shareholders do not have their shares at their disposal

because they have to be placed in deposit.

The Board of Executive Directors has been granted

authorization under the Articles of Association to

determine a record date on the basis of which

shareholders are entitled to attend the General Meeting of

Shareholders. The Board of Executive Directors set a

record date for the shareholders’ meetings held in 2005,

2006 and 2007 and intends to continue this practice in

future.

Dividend policy At the General Meeting held on April

20, 2006 the dividend policy was changed as follows.

Following the outsourcing of the lease portfolio and the

acquisition of Imagistics the dividend policy no longer

needs to be focused on efforts to distribute one third of

the annual income. Whilst maintaining consistency in the

dividend distribution to shareholders, endeavors will be

made to distribute to shareholders a stable, but preferably

gradually increasing dividend in line with the development

of income and subject to the conditions that there is

sufficient latitude for making a payment from the income

and/or the free cash flow and that healthy balance sheet

ratios are maintained.


6�

Issuing policy Each year the General Meeting of Share-

holders has given its authorization for the issue of shares

and for the limiting or preclusion of the related statutory

pre-emptive right.

On April 19, 2007 the General Meeting of Shareholders

designated the Board of Executive Directors for a period of

eighteen months as the body authorized as from the date

of that meeting to resolve on the further issue and the

granting of rights to subscribe to ordinary shares and

financing preference shares up to a maximum of 10% of

the entire share capital outstanding as at April 19, 2007,

which percentage will be increased to 20% in the event of

mergers or acquisitions, subject to the restriction that,

following such issue, the total number of financing

preference shares does not exceed 20% of the entire

issued capital after such issue.

Investor Relations [IR] policy and communica-

tion with shareholders Océ pursues an active IR

policy aimed at providing shareholders and other financial

stakeholders with regular and extensive information about

developments within the company. The CEO and the CFO

have primary responsibility for relations with shareholders,

other providers of capital, their intermediaries and financial

journalists. For more detailed information about Océ’s IR

policy see page 143 of this annual report.

All quarterly presentations and teleconferences about the

financial results are announced in advance and are made

simultaneously accessible via webcasting to all

shareholders and interested parties who are not present.

By way of experiment the Extraordinary General Meeting

of Shareholders held on October 11, 2006 was also made

accessible to shareholders and other interested parties via

audio webcasting. The General Meeting of Shareholders

held on April 19, 2007 could also be followed via audio

webcasting. The intention is to continue this policy in

future. The webcasts can be found on the Océ website.

This method of providing information to shareholders

complies with best practice provision IV.3.1.

Transactions involving a conflict of interest

During the financial year no transactions as referred to in

best practice provisions II.3.4, III.6.3 and III.6.4 took place

involving a conflict of interest relating to directors,

supervisory directors or natural and/or legal persons

holding at least 10% of the shares in the company.

Best practice provisions II.3.2, II.3.3, III.6.1 and III.6.2

were therefore not applicable.

Future developments In line with its previous

promises Océ will again judge the present structure of its

protective measures. The basic principle here is that Océ

wishes to maintain effective protection in the future as

well, so that careful consideration can be given to the

interests of all stakeholders, which in this context certainly

also include the shareholders. A proposal on this will be

submitted to the General Meeting of Shareholders to be

held on April 23, 2008.

The remuneration Committee and the Supervisory Board

are reconsidering the remuneration policy for the

Executive Board.


Internal risk control structure Risk categories

[x means: is applicable]

Strategic/operational Legislation & regulations Financial

Policy principles and procedures X X X

Strategic plans and budgeting process X - X

Organization structure and authorization manual X X X

Board of Supervisory Directors X X X

Audit Committee [AC] - X X

Selection and Nomination Committee X - X

Remuneration Committee X - X

Information Manual [IM] - X X

Letter of Representation [LOR] X X X

Governance / Compliance - X X

Disclosure Committee [DC] - X X

Internal audits X X X

Internal Audit Committee [IAC] - X X

70

Risks and risk management

The risk management and internal control

system

The Board of Executive Directors is responsible for the

structure and functioning of the system of risk

management and internal control that is applied within

Océ. This system is focused on identifying and controlling

the strategic, operational and financial risks and risks in the

area of legislation and regulations so as to enable the

company’s objectives to be achieved. The system is based

on the first reference model of the Committee of

Sponsoring Organizations of the Treadway Commission

[COSO]. As regards information technology the reference

model of the Information Technology Governance Institute

[CobIT, Control objectives for Information and related

Technology] has been applied.

Océ applies the structure of these models in the measures

that have been taken to control its business processes and

in the principal objectives for [financial] reporting. The

details of the models are worked out centrally and are

applied as consistently and clearly as possible in the

various parts of the organization and legal entities. An

overall risk analysis is anchored in the strategic business

plans.

To provide an idea of the way in which Océ controls the

relevant risks an overview is given below of the internal

risk control structure and how it relates to the various risk

categories.

Report of the Board of Executive Directors | Management aspects | Risks and risk management

71

During the year under review no material shortcomings

were found in the internal structure for risk control. A brief

explanatory description is given below of the main

elements in this structure:

Policy principles and procedures These form the

basis for the internal risk control structure and are drawn

up centrally by the Board of Executive Directors of the Océ

Group. All group companies must operate in accordance

with these policy principles and procedures.

They include the following elements:

| Océ policy principles The policy principles provide a high

level indication of the objectives of the Océ Group, how

these should be achieved and the ethical criteria that

should be complied with. The Board of Executive Directors

communicates these principles to all employees and en-

sures that they are adhered to. The Océ policy principles

are reviewed at periodic intervals and amended where

necessary.

| Whistleblowing procedure In addition to the national

legislation that is applicable to each individual group

company, the Audit Committee has approved a group

procedure that has been implemented world-wide. The

aim of the procedure is to ensure that within the whole

Océ Group any infringement of legislation and of existing

policy, principles or procedures can be reported without

the person making such report suffering any adverse

consequences in his or her legal position. In the United

States of America the procedure will again be brought to

the attention of all employees at the beginning of 2008 to

make sure that it operates effectively.

| Code of ethics for senior financial officers This code is

addressed to all members of the Board of Executive

Directors and senior financial officers in the Océ Group

and is aimed at emphasizing and promoting ethical and

responsible behavior by this group of employees. The

code is more detailed than the Océ policy principles and

chiefly deals with the financial processes and reporting

systems.

Strategic plans and budgeting process Strategic

plans are drawn up for all parts of the Océ organization

[operational and non-operational] and are converted into

budgets. On a monthly basis the results actually achieved

are evaluated in detail by the Strategic Business Units and

the Board of Executive Directors and compared to the

budgets.

Cash flow management is an important part of this

process. In 2007 this was the focus of extra attention and

a start was made on a Cash Conversion Cycle project

aimed at reducing working capital. As regards working

capital the company aims to become one of the best

businesses in the industry.

Organization structure and authorization

manual Within the organization the entire complex of

tasks, responsibilities and powers is set out in the

organization structure. The allocation of responsibilities

and powers is laid down in detail in various authorization

manuals. Océ ensures that employees are aware of the

organization structure and the sections of the authorization

manuals that are of relevance to them.

Information Manual [IM] This contains a detailed

description of the guidelines for management reporting

and external financial reporting. External financial reporting

is based on IFRS guidelines.

Letter of Representation [LOR] All Managing

Directors and Controllers of subsidiaries submit a detailed

declaration every quarter. This declaration states, among

other things, that the financial reporting is reliable and

complies with the IM. In addition, several questions about

potential risks are being answered specifically.

Any observations made in the LORs are reported to and

discussed by the Board of Executive Directors and the

Audit Committee. The issue of the LOR by the

management of the subsidiaries is supported by a detailed

risk analysis.

Governance / Compliance Although the termination

of registration with the Securities and Exchange

Commission in 2007 means that the American Sarbanes-

Oxley Act 2002 is no longer applicable to Océ, the

structure that existed for that purpose – now called

Governance / Compliance – has been left intact. As in

previous years, this structure comprises a management

assessment of the effective control of the financial

reporting process. This management assessment is

conducted within Océ by the management of the

operating companies and group units designated for such

purpose. The results of this assessment are reported to

and evaluated by the Board of Executive Directors and the

Audit Committee. The internal audit department

participates in this evaluation.


72


Disclosure Committee [DC] The DC consists of the

Group Controller [chairman], representatives of opera-

tional group companies, the Corporate Supply Centers,

the Strategic Business Units and Océ corporate staff

departments [Investor Relations, Corporate Strategy,

Group Finance & Administration], the Company Secretary

& Chief Legal Officer, the Chief Information Officer [CIO],

the Corporate Risk Officer and the Group Internal Auditor.

The DC evaluates the findings of the in-depth risk analyses

that are conducted by all operating companies. The results

of this evaluation are initially reported to and discussed

with the CEO and the CFO of Océ N.V. and are sub-

sequently discussed by the Audit Committee.

Internal audits Within the framework of control

mechanisms and assurance processes an audit plan is

drawn up by the Group Internal Auditor each year. The

internal audit plan is focused on the most important

business processes and risks. The plan is discussed and

approved by the Board of Executive Directors and the

Audit Committee. The internal audits relate to financial

reporting systems and the existence and proper

functioning of operational policy and procedures. The

internal control framework is largely evaluated as part of

the activities of the internal auditors.

The internal auditors issue a formal report on the

effectiveness of elements of the internal control

framework. The findings of the internal auditors are

discussed and agreed with the relevant management.

Subsequently the findings are discussed in the Internal

Audit Committee and the Audit Committee.

Audit Committee [AC] The AC consists of two

members of the Supervisory Board and takes care of the

independent monitoring of the process of risk manage-

ment on the basis of the supervisory role fulfilled by the

Supervisory Board. The AC focuses on the quality of

internal and external reporting, on the effectiveness of

internal controls with regard to both manual and computer-

ized processes and on the functioning of the external and

internal auditors. The AC meets at least four times a year.

The relevant financial officers and the external and internal

auditors are generally invited to attend these meetings.

The AC holds periodic consultations with the external

auditor and with the Group Internal Auditor at which no

[other] Océ officers are present.

Countless businesses have frequent contact with their customers in the form of bank statements,

insurance policy updates, metering data and telecom invoices. These media

are increasingly being discovered as ideal vehicles for

personalized marketing messages. Océ fast full color

printers effortlessly add these to their daily jobs in one

and the same process. Known as transpromo, this marks

a totally new route in personal marketing.


Internal Audit Committee [IAC] The IAC consists of

the Board of Executive Directors, the operational Group

Directors, the Company Secretary & Chief Legal Officer,

the Group Controller and the Group Internal Auditor. The

IAC concentrates on the structure of the internal control

framework, on how it functions and on the implementa-

tion of the ‘key recommendations for risk reduction’ that

result from the audits. The IAC also discusses specific

accounting issues and monitors application of the IFRS

guidelines.

In view of the size of the activities in the United States an

Internal Controls Committee [ICC] operates there as an

extension of the IAC. The members of the ICC are the

CFO of Océ-USA Holding, Inc., the CEO of Océ North

America, Inc., the Presidents of the principal operating

companies, the General Counsel and the Internal Audit

Director in the United States, as well as the CFO of

Océ N.V. [who also chairs the ICC].

External audit The external auditors carry out the

activities relating to the issue of an audit opinion on the

annual financial statements. The external auditors focus

on the financial reporting and take into consideration the

systems that are intended to ensure reliable reporting. The

external auditors report on any matters relating to internal

control measures that have been identified during the

auditing of the annual financial statements. The obser-

vations made by the external auditors are discussed in the

Audit Committee.

Statement relating to the system of internal

control

In line with best practice provision II.1.4 of the Dutch

Code and bearing in mind the recommendations of the

Monitoring Committee Corporate Governance Code, Océ

issues a declaration about the effectiveness of the system

of internal control of the processes on which the financial

reporting is based.

Océ’s system of internal controls is based on inter-

nationally accepted standards for corporate control,

including those of COSO.

In 2007 the Board of Executive Directors assessed the

effectiveness of the system of internal controls for

financial reporting. During the investigation on which this

assessment is based, no shortcomings were identified

that might possibly have a material impact. On the basis of

the results of the above assessment and the risk analyses

that were carried out at Océ within the framework of

Governance / Compliance, the Board of Executive

Directors is of the opinion – after consulting with the Audit

Committee and with the approval of the Supervisory Board –

that the system of internal controls provides a reasonable

degree of certainty that the financial reporting contains no

inaccuracies of material importance. An inherent element

in how people and organizations work together in a

dynamic world is that systems of internal control can not

provide an absolute degree [though they can provide a

reasonable degree] of certainty as regards the prevention

of material inaccuracies in the financial reporting, losses

and fraud.

In our view the system of internal controls, focused on the

financial reporting, functioned effectively over the past

year. There are no indications that the system of internal

controls will not function effectively in 2008.

73

7�

Major risks, control measures and actions

Risks

| Number of sales staff [FTE] too low

| Inadequate market coverage in the office segment

| Productivity per sales employee too low

| Number of indirect sales channels too low

| Gaps in full-line product portfolio

| Delay in introduction of products

| Insufficiently competitive cost level

| Competitive offerings by Océ Business Services

| Insufficient access to OEM products

| Lower net benefits

| Delayed implementation

| Cost overruns in implementation of process of

harmonization and system support [‘Spine project’]

Control measures / actions

| In Europe: organic increase sales staff and

acquisition of distributors

| Implementation of office model in Europe, where

possible by means of acquisition

| Intensive training programmes [E-learning] further

expanded

| Partnerships with distributors in countries where Océ

does not have sufficient presence

| Steering of own technology and product development

by Executive Board

| Increase interest OEM in product portfolio

| Sharper R&D focus on own unique strengths

| Combine development activities with partners that add

scale and innovation strength

| Outsourcing of manufacturing and assembly next to

more OEM systems in product portfolio

| Start Document Services Valley; dedicated R&D for

Océ Business Services

| Tactical and strategic alliances with OEM suppliers

| Direct steering by members of Executive Board of

individual projects

| In view of the significance of the programs, specific

commitment to realize cost savings of � 50 million in

2008

| Implementation support from external experts


Risk analysis

Below a summary is given of the risk analysis that was

carried out in 2007 by the Board of Executive Directors

and the Supervisory Board of Océ N.V. The analysis

concerns the identification of the main risks, of the

existing control measures which have to minimalize the

possible consequences of the risks and the effectiveness

of the actions to be taken. In a number of cases the control

measures were further tightened during 2007 and actions

were initiated to further reduce the possible impact of the

risks.

Lack of sufficient

distribution power:

No full-line

competitive

product and

services portfolio:

Failure to

implement

corporate

operational

excellence

programs

successfully:

7�


Risks

| Foreign exchange risk exposure

| Interest related exposure

Control measures / actions

| Support from external experts including the execution of

risk analyses before and during implementation

| Set up and implement safety measures such as buffer

stocks and operational back-up of critical processes

| Sharp focus on realization of the strategic plan

[‘Growth creates Value’]

| Cash Conversion Cycle management [working capital

reduction]

| Divestment of non-core assets and businesses

| Continue to outsource leasing in Europe to vendor lease

partners and expand the activities of the lease captive in

the United States

| Short term: use financial instruments to hedge

transaction exposure in main currencies

[12-months’ forward position]. Foreign exchange risks

on loans are 100% hedged. Currency translation risks

are not hedged

| Medium and long term: natural hedges, including

outsourcing of production and assembly of machines

and modules to Asia

| Actively implement Interest Rate policy through Interest

Rate Swaps

Venlo, January 25, 2008

The Board of Executive Directors

R.L. van Iperen, chairman

J. van den Belt

J.F. Dix

A.H. Schaaf

Business

interruption

resulting from

implementation

of corporate

operational

excellence

programs and

ICT projects:

Insufficient cash

flow to finance

the growth of the

business and repay

debt:

Financial risks

impacting on

value creation

and continuity:

76

Thyssen Krupp Steel

Printing the future of

steel Steel, in all its forms,

is a part of the world we

know. The products of

Thyssen Krupp Steel,

Europe´s second largest

producer, may be found all

over the world. As cars or

construction elements but

also as tins for canned food

and special electrical steel.

The company produces

almost 14 million tons of

crude steel each year,

transforming most of it in

high quality products and

services, providing solutions

to people´s needs and

customer requirements.

In order to meet the

challenges of the future,

Thyssen Krupp Steel puts

innovation in a prominent

place in daily operations,

creating new specialist

products in close

cooperation with the clients

and relying on the

company´s vast experience.

That is where Océ´s printing

systems play an equally

important role as an

efficient support. The large

format printers, Océ

TDS860 for black & white

and Océ TCS500 for colour

render their services day in

day out with a constant

quality, reliability and user

friendliness.

77

7�

Financial Statements

7�

Consolidated Income Statement

The figures [ ] refer to the notes 2007 2006 x € 1,000

Total revenues [1] 3,098,223 3,110,323

Cost of sales [2] - 1,833,385 - 1,841,170

Gross margin 1,264,838 1,269,153

Selling and marketing expenses - 715,444 - 738,915

Research and development expenses [4] - 230,058 - 224,978

General and administrative expenses - 198,151 - 203,012

Operating expenses [2] - 1,143,653 - 1,166,905

Operating income 121,185 102,248

Financial income [5] 17,239 10,608

Financial expenses [5] - 57,579 - 56,630

Share in income of associates 440 504

Income before income

taxes 81,285 56,730

Income taxes [6] - 2,422 393

Net income 78,863 57,123

Net income

attributable to Shareholders 77,097 54,977

Minority interest 1,766 2,146

78,863 57,123

Earnings per ordinary

share for net income

attributable to share-

holders [7] Basic 0.88 0.63 euro

Diluted 0.87 0.63


�0


Consolidated Balance Sheet November 30

Assets 2007 2006 x € 1,000

Non-current assets Intangible assets [8] 512,351 548,921

Property, plant and equipment [9] 373,333 428,132

Rental equipment [10] 107,874 111,909

Investments in associates [11] 2,231 1,820

Deferred income tax assets [12] 86,939 84,249

Available-for-sale financial assets [13] 9,300 9,389

Derivative financial instruments [14] 4,987 7,115

Trade and other receivables [15] 184,051 207,863

1,281,066 1,399,398

Current assets Inventories [16] 328,112 340,423


Trade and other receivables [15] 684,362 729,066

Current income tax receivables 7,456 32,527

Cash and cash equivalents [17] 167,233 84,996

1,199,361 1,197,379

Non-current assets held for sale [18] 10,742 9,452

Total 2,491,169 2,606,229

�1


Equity and Liabilities 2007 2006 x € 1,000

Equity Share capital [19] 53,669 53,644

Share premium 512,008 511,569

Other reserves [20] - 175,531 - 164,179

Retained earnings 209,892 228,505

Net income attributable to shareholders 77,097 54,977

Equity attributable to shareholders 677,135 684,516

Minority interest 35,464 36,929

712,599 721,445

Non-current Borrowings [21] 535,626 532,998

liabilities Derivative financial instruments [14] 14,786 4,728

Retirement benefit obligations [22] 413,596 421,262

Trade and other liabilities [23] 12,235 15,137

Deferred income tax liabilities [12] 15,640 50,643

Provisions for other liabilities and charges [24] 49,294 53,909

1,041,177 1,078,677

Current liabilities Borrowings [21] 64,243 179,746


Current income tax liabilities 23,698 2,202

Trade and other liabilities [23] 632,124 591,444

Provisions for other liabilities and charges [24] 15,711 29,291

737,393 806,107

Total 2,491,169 2,606,229

�2


Consolidated Statement of Changes in Equity

x € 1,000 Equity attributable to shareholders

share share other reserves retained earnings net income minority interest total equity

capital premium attributable to

shareholders

Balance at December 1, 2005 43,639 464,762 - 160,586 299,879 - 450 648,144

Cash flow hedges - - 10,198 - - - 10,198

Currency translation differences - - - 42,517 - - - 34 - 42,551

Other changes - - 25,165 - 25,354 - - - 189

Net income/[expense] recognized

directly in equity - - - 7,154 - 25,354 - - 34 - 32,542

Net income - - - - 54,977 2,146 57,123

Total recognized income - - - 7,154 - 25,354 54,977 2,112 24,581

Share based compensation [25]:

| value of employee services - - - 1,811 - - 1,811

| proceeds from shares reissued - - 3,561 62 - - 3,623

Conversion of convertible

debentures to employees 5 84 - - - - 89

Reclassification minority interest - - - - - 36,956 36,956

Reclassification of financing

preference shares 10,000 46,723 - 2,621 - - 59,344

Dividend - - - - 50,514 - - 2,589 - 53,103

10,005 46,807 3,561 - 46,020 - 34,367 48,720

Balance at November 30, 2006 53,644 511,569 - 164,179 228,505 54,977 36,929 721,445

Appropriation of net income - - - 54,977 - 54,977 - -

Balance at December 1, 2006 53,644 511,569 - 164,179 283,482 - 36,929 721,445

�3


x € 1,000 Equity attributable to shareholders

share share other reserves retained earnings net income minority interest total equity

capital premium attributable to

shareholders

Balance at December 1, 2006 53,644 511,569 - 164,179 283,482 - 36,929 721,445

Cash flow hedges - - - 3,496 - - - - 3,496

Currency translation differences - - - 42,558 - - - 18 - 42,576

Other changes - - 24,836 - 24,960 - - - 124

Net income/[expense] recognized

directly in equity - - - 21,218 - 24,960 - - 18 - 46,196

Net income - - - - 77,097 1,766 78,863

Total recognized income - - - 21,218 - 24,960 77,097 1,748 32,667

Share based compensation [25]:

| value of employee services - - - 1,944 - - 1,944

| proceeds from shares reissued - - 9,866 975 - - 10,841

Conversion of convertible

debentures to employees 25 439 - - - - 464

Capital decrease - - - - - - 1,293 - 1,293

Dividend - - - - 51,549 - - 1,920 - 53,469

25 439 9,866 - 48,630 - - 3,213 - 41,513

Balance at November 30, 2007 53,669 512,008 -175,531 209,892 77,097 35,464 712,599

��


Consolidated Cash Flow Statement

2007 2006 x € 1,000

Income before

income taxes 81,285 56,730

Adjustments for:

Depreciation and amortization 199,456 203,850

Impairment 10,206 -

Share-based compensation 2,885 2,466

Share in income of associates - 440 - 504

Other 828 - 445

Changes in provisions, rental equipment and working capital:

Retirement benefit obligations - 4,121 - 8,987

Provision for other liabilities and charges - 18,720 - 22,409

Other provisions [for inventories, finance lease and

trade receivables] 30,923 28,367

Rental equipment - 71,042 - 66,792

Inventories - 17,667 - 8,632

Finance lease receivables 10,542 - 12,870

Trade and other receivables [excluding finance

lease receivables] - 3,731 - 8,906

Trade and other liabilities 55,844 32,032

Income taxes 7,764 44,398

Cash flow from

operating activities 284,012 238,298

Investment in intangible assets - 49,006 - 64,465

Investment in property, plant and equipment - 86,959 - 82,693

Divestment in intangible assets 218 119

Divestment in property, plant and equipment 32,357 7,750

Change in other non-current assets - 4,182 1,265

Change in investments in associates 21 303

Sale finance lease portfolio 16,109 37,571

Acquisitions [net of cash] - 1,711 - 19,636

Cash flow from

investing activities - 93,153 - 119,786

��


2007 2006 x € 1,000

Proceeds from non-current borrowings 3,268 532,342

Repayments of non-current borrowings - 75,054 - 14,811

Proceeds from current borrowings 10,723 15,954

Repayments of current borrowings - - 668,094

Dividend - 50,729 - 50,889

Change in equity related to shares 10,859 3,623

Change in minority interest - 3,213 - 2,589

Cash flow from

financing activities - 104,146 - 184,464

Currency translation differences - 4,476 8,249

Changes in cash

and cash equivalents 82,237 - 57,703

Cash and cash

equivalents at start

of financial year 84,996 142,699

Cash and cash

equivalents at end

of financial year 167,233 84,996

�6

Notes to the Consolidated Financial Statements

Summary of Significant Accounting Policies

Introduction The following summary of significant

accounting policies is intended as a guide in interpreting

the consolidated financial statements. The consolidated

financial statements of Océ N.V. have been prepared in

accordance with International Financial Reporting

Standards [IFRS] as adopted by the European Union.

As the corporate financial statements of Océ N.V. are

included in the consolidated financial statements, the

corporate income statement is presented in abbreviated

format in accordance with Article 402, Book 2 of the Dutch

Civil Code.

The Group’s financial year commences on December 1

and closes on November 30 of the subsequent year.

The consolidated financial statements have been prepared

under the historical cost convention unless otherwise

stated.

The financial statements of Océ N.V. have been authorized

for issue by both the Board of Supervisory Directors and

the Board of Executive Directors on January 25, 2008. The

financial statements are subject to adoption by the Annual

General Meeting of Shareholders on April 23, 2008.

Consolidation The consolidated financial statements

comprise the financial statements of Océ N.V. and its

participations.

[a] Subsidiaries

Subsidiaries are all entities over which Océ has the

power to govern the financial and operating policies,

generally accompanying a shareholding of more than

half of the total shares issued and the related voting

rights. As from the date that these criteria are met, the

financial data of the relevant company is included in

the consolidation for 100%. Intercompany trans-

actions, intercompany balances and unrealized gains

on intercompany transactions are eliminated.

Unrealized losses are also eliminated unless the

transaction provides evidence of an impairment of the

asset transferred.

Business combinations are accounted for using the

‘purchase’ method. The cost of a business

combination is measured as the fair value of the

assets obtained, equity instruments issued and

liabilities incurred or assumed at the date of exchange,

including any directly attributable costs. Identifiable

assets acquired and liabilities and contingent liabilities

assumed in a business combination are recognized

initially at their fair values at the acquisition date,

irrespective of the extent of any minority interest. The

excess of the cost over the Group’s interest in the net

fair value of the identifiable assets, liabilities and

contingent liabilities is recognized as goodwill with

effect from December 1, 2000. Prior to that date

goodwill was charged directly to equity attributable

to shareholders.

The principle subsidiaries are listed on pages 141 and

142 of this report.


�7

[b] Investments in associates

Investments in associates are all entities over which

the Group has significant influence but not the power

to govern the financial and operating policies. This is

mostly linked to a voting right of 20% to 50% of the

total shares issued and the related voting rights.

Investments in associates are accounted for using the

‘equity’ method. The Group’s investments in

associates include goodwill identified on acquisition,

net of any accumulated impairment loss. Océ’s share

in its associates’ profits or losses after acquisition is

recognized in the consolidated income statement, and

its share in post-acquisition movements in equity

reserves is recognized in equity reserves of the Group.

The carrying amounts of associates are adjusted for

the cumulative post-acquisition movements of the

associates. When Océ‘s share in the losses of an

associate equals or exceeds its interest in the

associate, including any other unsecured receivables,

Océ does not recognize further losses, unless it has

incurred obligations that will probably result in an

outflow of cash or made payments on behalf of the

associate.

Unrealized gains on transactions between the Group

and its associates are eliminated to the extent of the

Group’s interest in the associates. Unrealized losses

are also eliminated unless the transaction provides

evidence of an impairment of the asset transferred.

[c] Minority interest

The minority interest in net assets of subsidiaries is

presented as a seperate component of equity.

Transactions with minority interest are accounted for

as transactions with third parties.

Foreign currency translation Items included in the

financial statements of each of the Group’s entities are

measured using the currency of the primary economic

environment in which the entity operates [‘the functional

currency’].

Foreign currency transactions are translated into the

functional currency using the exchange rates prevailing at

the dates of the transactions. Foreign exchange gains and

losses resulting from the settlement of such transactions

and from the translation at closing rates of monetary

assets and monetary liabilities denominated in foreign

currencies are recognized in the income statement,

except when deferred in equity as qualifying cash flow

hedges or as intercompany loans that have a permanent

nature.

The consolidated financial statements are presented in

euros, which is the Group’s functional and presentation

currency.

The results and financial position of all subsidiaries that

have a functional currency different from the euro are

translated into euros as follows: assets and liabilities for

each balance sheet presented are translated at the closing

rate at the date of the balance sheet, income and

expenses for each income statement presented are

translated at average exchange rates and all resulting

exchange differences are recognized in equity under

‘Currency translation differences’.

When a foreign operation is [partially] disposed of or sold,

currency translation differences that were recorded in

equity are recognized in the income statement as part of

the gain and loss on sale.

Goodwill and fair value adjustments arising on the

acquisition of a foreign entity are treated as assets and

liabilities of the foreign entity and translated at closing rate.


��

Revenue recognition Revenues comprise the fair

value of the considerations received or receivable from the

sale of goods and services to third parties in the ordinary

course of the Group’s activities excluding the taxes levied

on revenues and discounts granted. Océ recognizes

revenue when the amount of revenue can be reliably

measured, it is probable that future economic benefits will

flow to Océ and specific criteria have been met as

described below.

[a] Sales of machines

Revenues are recognized at the moment that both

delivery to and installation on the customer’s premises

have taken place. If a sales contract contains an

acceptance clause, revenue is recognized at the

moment that the customer has confirmed acceptance.

If Océ has offered the customer a finance lease

arrangement, revenue is recognized at commence-

ment of the lease term. The present value of the lease

payments is recognized as a receivable. The difference

between the gross receivable and the present value of

the receivable is recognized as unearned interest.

Unearned interest is recognized as ‘Interest from

finance lease’ over the term of the lease using the ‘net

investment’ method, which reflects a constant

periodic rate of return.

When machines are sold to a distributor, revenues are

recognized at the moment of delivery.

[b] Operating leases [defined by Océ as ‘Rentals’]

Leases in which a significant portion of the risks and

rewards of ownership are retained by Océ are

classified as ‘Rentals’.

Revenues from rentals are recognized in the income

statement on a straight-line basis over the term of the

contract.

[c] Service

Service revenues are mostly obtained from

maintenance contracts that have been concluded for

the machines sold and leased out and are recognized

pro rata over the period of the contract. If service

contracts have been invoiced in advance, these

amounts are included in the balance sheet under

‘Trade and other liabilities’.

[d] Supplies

Revenues are recognized at the moment of delivery.

Research and development expenses Research

expenses are charged directly to the income statement.

Development expenses are capitalized if they comply with

the relevant criteria as described under ‘Intangible assets’.

Development credits Development credits granted by

the government are recognized as a reduction of research

and development expenses at the moment that the

related expenses occur. These credits are subject to a

contingent repayment obligation, which is disclosed in the

notes as a contingent liability. When the repayment

obligation has become unconditional, a current liability is

recognized and is charged to the research and

development expenses.

Leases Leases in which a significant portion of the risks

and rewards of ownership are retained by the lessor are

classified as operating leases. Payments made by Océ

under operating leases [net of any incentives received

from the lessor] are charged to the income statement on a

straight line basis over the period of the lease.


��

Intangible assets

[a] Goodwill

Goodwill represents the excess of the cost of an

acquisition over the fair value of the Groups’ share in

the net identifiable assets of the acquired subsidiary at

the date of acquisition. Goodwill on acquisition of

entities that qualify as subsidiaries is presented under

‘Intangible assets’. Goodwill on acquisitions of entities

that qualify as investments in associates is included in

‘Investments in associates’. Goodwill on acquisition of

subsidiaries is allocated to cash-generating units for

the purpose of impairment testing. The allocation is

made to those cash-generating units or group of units

that are expected to benefit from the business

combination through which the goodwill arose based

on past experience.

Goodwill is tested annually for impairment, an

impairment loss is recognized for the amount by which

the cash-generating unit’s carrying amount exceeds its

recoverable amount. The recoverable amount of the

cash-generating unit is determined by the higher of its

fair value less cost to sell and its value in use. Goodwill

is carried at cost less accumulated impairment losses.

Impairment losses on goodwill are not reversed. Gains

and losses on the disposal of an entity include the

carrying amount of goodwill related to the entity sold.

[b] Software

Acquired software is capitalized on the basis of costs

incurred to acquire and to bring the specific software

to use. Amortization is calculated using the ‘straight-

line’ method to allocate the cost of acquired software

over the estimated useful life [3-7 years].

Development costs of software for internal use, that

will generate probable future economic benefits to the

company and that can be measured reliably, are

capitalized. Development costs consist of the direct

personnel costs on the basis of an hourly rate, in which

allowance is made for a mark-up for relevant overhead

costs. Amortization is calculated using the ‘straight-

line’ method to allocate the cost of software for

internal use over the estimated useful life [3-7 years].

[c] Technology

Technology comprises the costs [or purchase costs]

of product development, licenses and license

agreements.

Costs of product development are capitalized if they

meet the criteria of a separately identifiable project

that will generate probable future economic benefits

to the company and if the costs can be reliably

measured. Costs of product development are

amortized over the estimated useful life [5-10 years].

Acquired licenses and license agreements are carried

at cost less accumulated amortization and any impair-

ment. Amortization is calculated using the ‘straight-

line’ method to allocate the cost of licenses and

license agreements over the estimated useful life [5-

20 years].

[d] Customer base

Customer base is carried at cost less accumulated

amortization and any impairment. Amortization is

calculated using the ‘straight-line’ method to allocate

the cost of customer base over the estimated useful

life [5-10 years].

[e] Trade marks and other

Trade marks and other are carried at cost less

accumulated amortization and any impairment.

Amortization is calculated using the ‘straight-line’

method to allocate the cost of trade marks over the

estimated useful lives [2-10 years]. The estimated

useful life of other intangible assets is five years.


�0

Property, plant and equipment Property, plant and

equipment are carried at cost less cumulative depreciation

and any impairment. Costs of assets manufactured by

Océ include direct manufacturing cost, production

overhead and interest cost incurred for qualifying assets

during the construction period.

Costs of assets acquired by Océ include expenditures that

are directly attributable to the acquisition of the assets.

Asset retirement obligations are capitalized as part of the

cost of property, plant and equipment and expensed as

either depreciation over the asset’s useful life or as

impairment charges.

Subsequent costs are capitalized as a separate asset if it is

probable that future economic benefits associated with

the asset will flow to Océ and if the costs can be reliably

measured. The carrying amount of any replaced part is

derecognized. All other costs of repair and maintenance

are charged to the income statement during the financial

period in which they are incurred.

Land is not depreciated. Depreciation on other assets is

calculated using the ‘straight-line’ method based on the

estimated useful lives, taking into account any residual

values.

Depreciation of specific pieces of equipment used for the

manufacture of machines takes place pro rata to the

expected number of units to be manufactured.

Océ leases certain property, plant and equipment from

third party lessors. Leases of property, plant and

equipment where Océ has substantially all the risks and

rewards of ownership are classified as a finance lease and

included in property, plant and equipment. Finance leases

are capitalized at commencement of the lease at the lower

of fair value of the leased assets and the net present value

of the minimum lease payments. The corresponding rental

obligations, net of finance charges, are included in

‘Borrowings’. The assets leased via finance lease

agreements are written off over the lower of the lease

period and the assets’ useful life.

The estimated useful lives of the various classes of

property, plant and equipment are as follows:

| property and plant: 20 to 50 years;

| production equipment: 3 to 10 years;

| other equipment: 3 to 5 years;

| other fixed assets: 3 to 7 years.

The asset’s residual values and useful lives are reviewed,

and adjusted if appropriate, at each balance sheet date.

Rental equipment Rental equipment is valued at the

all-in manufacturing cost, plus the cost of ensuring that the

equipment can operate effectively at the customers’

premises less cumulative depreciation on a straight-line

basis.

The estimated useful life of the various types of machines

ranges from 3 to 5 years.

Deferred income tax Deferred income tax liabilities are

recognized for all deductible temporary differences arising

between the tax bases of assets and liabilities and their

carrying amounts in the consolidated financial statements

[‘liability’ method]. Deferred income tax assets are

recognized for all deductible temporary differences,

unused carry forward losses and unused carry forward tax

credits, to the extent that it is probable that future taxable

profit will be available against which the deferred income

tax assets can be offset.

Deferred income tax is not recognized if it arises from

initial recognition of an asset or liability in a transaction

other than a business combination that at the time of the

transaction affects neither accounting nor taxable profit or

loss. Also no deferred income tax is recognized regarding

the initial recognition of goodwill. Deferred income tax is

measured at the tax rates that are expected to apply to the

period when the asset is realized or the liability is settled,

based on tax rates [and tax laws] that have been enacted

or substantively enacted at the balance sheet date.

Allowance is made for non-offsettable dividend

withholding tax at the moment of dividend distribution by

an affiliated company.


�1

Available-for-sale financial assets Available-for-sale

financial assets are non-derivatives that are either

designated in this category or not classified in any of the

other categories of financial instruments under IAS 39.

Available-for-sale financial assets are carried at fair value.

Gains and losses on available-for-sale financial assets are

recognized in equity. When securities classified as

available-for-sale are sold or impaired, the accumulated fair

value adjustments are included in the income statement.

They are included in non-current assets unless manage-

ment intends to dispose of these available-for-sale

financial assets within 12 months after the balance sheet

date.

Derivative financial instruments and hedging

activities Derivative financial instruments are carried at

fair value. The method of recognition of the resulting gains

or losses depends on whether the derivatives are

designated as a hedging instrument, and if so, the nature

of the item being hedged. Océ designates certain

derivative financial instruments as either: [1] hedges of

exposure to changes in fair value of recognized assets and

liabilities [fair value hedge]; or [2] hedges of exposure to

variability in cash flows attributable to a particular risk

associated with recognized assets or liabilities or highly

probable forecast transactions [cash flow hedge].

At the inception of the hedge Océ documents the

relationship between hedging instruments and hedged

items, as well as its risk management objectives and

strategy for undertaking the hedge. Océ also documents

its assessment [prospective and retrospective], both at

hedge inception and on an ongoing quarterly basis,

whether the hedges are highly effective in offsetting

changes in fair values or cash flows attributable to the

hedged risks.

Derivatives are classified as non-current if the remaining

term of the derivatives is 12 months or more and as

current if the remaining term of the derivatives is less than

12 months.

[a] Derivatives that are not designated or do not qualify

for hedge accounting

Derivatives that are not designated or do not qualify for

hedge accounting are measured at fair value through

the income statement.

[b] Fair value hedge

Changes in the fair value of derivatives that are

designated and qualify as fair value hedges are

recognized in the income statement, together with

any changes in the fair value of the hedged asset or

liability that are attributable to the hedged risk. Océ

applies only fair value hedge accounting for hedging

fixed rate borrowings. The gain or loss relating to the

effective portion of interest rate swaps hedging fixed

rate borrowings is recognized in the income statement

within ‘Financial expenses’. The gain or loss relating to

the ineffective portion is also recognized in the income

statement as ‘Other gains / losses [net]’. Changes in

the fair value of the hedged fixed rate borrowings

attributable to interest rate risk are recognized in the

income statement as ‘Financial expenses’. If the

hedge no longer meets the criteria for hedge

accounting, the adjustment to the carrying amount of

a hedged item for which the effective interest method

is used is amortized to the income statement over the

period to maturity.

[c] Cash flow hedge

Océ applies cash flow hedge accounting for the

hedging of foreign exchange risks of forecasted

transactions and for hedging floating rate loans. The

gains or losses relating to the effective portion of

derivatives that are designated and qualify as cash

flow hedges are recognized in equity as ‘Other

reserves - Hedging reserve’, the ineffective portion is

recognized immediately in the income statement as

‘Other gains / losses [net]’. Amounts accumulated in

equity are recycled to the income statement in the

periods when the hedged item affects the income

statement depending on the nature of the hedged

item. In case of foreign exchange risks this is ‘Gross

margin’, in case of interest rate risks this is ‘Financial

expenses’.


�2

When a hedging instrument expires or is sold, or

when a hedge no longer meets the criteria for hedge

accounting, any cumulative gain or loss existing in

equity at that time remains in equity and is recognized

in the income statement when the forecast trans-

action occurs. When a forecast transaction is no longer

expected to occur, the cumulative gain or loss that

was recognized in equity is immediately recycled to

the income statement.

Trade and other receivables

[a] Trade receivables

Trade receivables are recognized initially at fair value

and subsequently remeasured at amortized cost using

the effective interest method less provision for impair-

ment. A provision for impairment of trade receivables

is recognized when there is objective evidence that

Océ will not be able to collect amounts due according

to the original terms of the receivables. The amount of

the provision is the difference between the assets’

carrying amount and the present value of estimated

future cash flows, discounted at the effective interest

rate.

The amount of the provision is recognized in the

income statement within ‘Selling and marketing

expenses’.

Trade receivables also include finance lease

receivables. Finance lease receivables comprise of the

present value of the lease payments receivable by Océ

and the unguaranteed residual values, less provision

for impairment. The difference between the nominal

value and the present value of the lease payments and

the unguaranteed residual values is recognized as

unearned interest.

[b] Other receivables

Other receivables and prepayments are initially recog-

nized at fair value and subsequently remeasured at

amortized cost. Duties and taxes are recognized and

measured at amortized costs. If the time to maturity is

less than 12 months they are presented as current

assets. Otherwise they are presented as non-current

assets, measured at their present value.

Inventories Inventories are measured at the lower of

cost and net realizable value. Cost is determined by using

the ‘First-in-First-out’ method [FIFO]. The costs of

inventory comprise all costs of purchase, costs of

conversion and other costs incurred in bringing the

inventories to their present location and condition.

Inventories of semi-finished products, spare parts and

finished products are measured at manufacturing cost

including a mark-up for indirect costs relating to

manufacturing and excluding borrowing costs. Net

realizable value is the estimated selling price in the

ordinary course of business, less estimated costs of

completion and cost to sell.

Cash and cash equivalents Cash and cash

equivalents include cash in hand, bank deposits that are

repayable on call, balances in bank accounts, cheques and

bills of exchange received.

Non-current assets held for sale Non-current assets

[or disposal groups] are classified as assets held for sale

and measured at the lower of their carrying amount and

fair value less costs to sell if their carrying amount is

recovered principally through a sales transaction rather

than through continuing use. Non-current assets held for

sale are measured at the lower of the carrying amount and

the fair value less costs to sell.

Share-based compensation Océ operates three types

of share-based compensation plans: [a] share option plans,

[b] share plans with cash alternatives as well as equity-

settlement and [c] cash-settled share plans. The fair value

of the employee service received in exchange for the

grant of the share-based compensation is recognized as

an expense in the income statement over the vesting

period. The total amount to be expensed is determined by

reference to the fair value of the share-based

compensation granted, excluding the impact of any non-

market based vesting condition regarding the equity part

of the share-based compensation plan. Non-market based

vesting conditions are included in assumptions about the

number of grants that are expected to vest. At each

balance sheet date, the entity revises its estimates of the

number of grants that are expected to vest. It recognizes

the impact of the revision, if any, in the income statement,

with a corresponding adjustment to equity or liability

depending on the settlement type of the share-based

compensation plan.


�3

[a] Share option plans

The share option plans are share-based compensation

plans with cash-alternatives in which the fair value of

the settlement alternatives are the same. Therefore

only a liability is recognized for the fair value of the

share options during the vesting period to the extent

the employees have rendered service. The liability is

remeasured at each balance sheet date and

derecognized at the moment of exercise or expiry. The

fair value is determined using a binomial option-pricing

model.

[b] Share plans with cash-alternatives as well as equity-

settlement

The share plans are share-based compensation plans

with cash-alternatives as well as equity-settlement.

The share plans give the holder the right to receive

part of the plan in cash, to fulfill their tax obligation,

without forfeiting the right on equity instruments for

the remaining part of the plan. Because of their hybrid

settlement nature, these plans are divided in an equity-

settled share-based compensation plan [equity] and a

share-based compensation plan with cash-alternatives

[liabilities] based on the estimated average tax

obligation.

[c] Cash-settled share plans

Cash-settled share plans are share-based

compensation plans measured at fair value and

recognized as a liability.

Borrowings Borrowings are recognized initially at fair

value, plus directly attributable transaction costs.

Borrowings are subsequently remeasured at amortized

cost using the effective interest method.

The carrying amount of borrowings is adjusted for changes

in fair value of the risk being hedged if the borrowings are

designated as a hedged item in a fair value hedge.

Borrowings are classified as current liabilities unless the

remaining term of the borrowings or the remaining term of

the facility under which the borrowings are drawn is 12

months or more.

Océ issues convertible debentures to employees.

Convertible debentures are compound financial

instruments consisting of a plain debenture, a conversion

option and a granted discount.

The fair value at inception of the plain debenture is

determined using a market interest rate for an equivalent

non-convertible debenture. Subsequently the convertible

debenture is remeasured at amortized cost using the

effective interest method until extinguished on conversion

or maturity of the debenture. The conversion option is an

option convertible to cash, which is measured using a

binomial option-pricing model and is recognized as a

derivative financial liability at fair value through the income

statement.

The difference between the initial fair value of the plain

debenture plus the conversion option and the

considerations received is recognized as an asset [granted

discount], which is amortized to the income statement

over the term of the convertible debenture.

Retirement benefit obligations Subsidiaries operate

various pension schemes. The schemes are generally

funded through payments to insurance companies or

trustee-administered funds. Océ has both defined benefit

and defined contribution plans. For defined contribution

plans, Océ pays fixed contributions to a separate entity.

Océ has no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to

pay all employees the benefits relating to employee

service in the current and prior periods. The contributions

are recognized as employee benefit expenses when they

are due.

A defined benefit plan is a pension plan that is not a

defined contribution plan.


��

Under defined benefit plans the pension entitlements are

calculated according to the ‘projected unit credit’ method.

Actuarial gains and losses in excess of a threshold of the

higher of 10% of the pension liabilities and 10% of the fair

value of the plan assets are charged or credited to the

income statement over the employees’ expected average

remaining working lives. Changes in pension plans are

charged directly to the income statement if they are

unconditional in nature or if they are the result of a

significant change. Calculations are made each year by

qualified actuaries.

The pension liability as recognized in the balance sheet is

the present value of the defined benefit obligation at

balance sheet date, less the fair value of the plan assets

and after adding or subtracting unrecognized actuarial

gains or losses and past-service costs. The present value

of the defined benefit obligation is determined by

discounting the estimated future cash flows using interest

rates of high-quality corporate bonds that are denominated

in the currency in which the benefits will be paid and that

have terms to maturity approximating the terms of the

related pension liability.

Past-service costs are recognized immediately in the

income statement, unless the changes to the pension plan

are conditional on the employees remaining in service for

a specific period of time [the vesting period]. In this case,

the past-service costs are amortized on a straight-line

basis over the vesting period.

Provisions for other liabilities and charges

[a] Other long term employee benefits

Other long term employee benefits include long-

service leave awards, jubilee and other long-service

benefits. The expected costs of these benefits are

accrued over the period of employment using an

accounting method similar to that for defined benefit

plans. Actuarial gains and losses arising from

experience adjustments and changes in actuarial

assumptions are charged or credited to the income

statement over the expected average remaining

working lives of the related employees.

[b] Employee termination benefits

Employee termination benefits are payable when

employment is terminated before the normal

retirement date, or whenever an employee accepts

voluntary redundancy in exchange for these benefits.

Océ recognizes termination benefits when Océ is

demonstrably committed to either terminating the

employment of current employees according to a

detailed formal plan without possibility of withdrawal,

or when Océ is providing termination benefits as a

result of an offer made to encourage voluntary

redundancy. Benefits falling due more than twelve

months after balance sheet date are discounted at

present value.

[c] Restructuring and other

Provisions for restructuring and other liabilities are

recognized when Océ has a present legal or

constructive obligation as a result of past events, for

which it is probable that an outflow of resources will

be required to settle the obligation and when the

amount can be reliably estimated.

The provisions are measured at the present value of

the expenditures that are expected to be required to

settle the obligation.

The discount rate used to determine the present value

reflects the current market assessments of the time

value of money and the risks specific to the obligation.

Trade and other liabilities Trade and other liabilities

are recognized initially at fair value and subsequently

remeasured at amortized cost using the effective interest

method, except for share-based compensation [reference

is made to caption ‘Share-based compensation’].

Impairment of non-financial assets Assets that

have an indefinite useful life, for example goodwill, are not

subject to amortization but are tested annually for

impairment. Assets with a finite useful life are subject to

depreciation or amortization and are reviewed for

impairment whenever events or changes in circumstances

indicate that the carrying amount may not be fully

recoverable. An impairment loss is recognized for the

amount by which the asset’s carrying amount exceeds its

recoverable amount.


��

The recoverable amount is the higher of an asset’s fair

value less costs to sell and its value in use. For the

purposes of assessing impairment, assets are grouped

based on the lowest level for which there are separately

identifiable cash flows [cash-generating units]. Impairment

is recognized as an expense in the income statement.

Non-financial assets, which are impaired, are tested

periodically to determine whether the recoverable amount

has increased and the impairment has to be reversed.

Impairment losses on goodwill are not reversed.

Impairment of financial assets The Group assesses

at each balance sheet date whether there is objective

evidence that a financial asset or a group of financial

assets is impaired. In the case of a financial asset

classified as available-for-sale, a significant or prolonged

decline in the fair value of the available-for-sale financial

asset below its acquisition cost is considered as an

indicator that the available-for-sale financial asset is

impaired. If any such evidence exists for an available-for-

sale financial asset, the cumulative loss [measured as the

difference between the acquisition cost and the current

fair value, less any impairment loss on that financial asset

previously recognized in the income statement] is

removed from equity and recognized in the income

statement. Impairment losses recognized in the income

statement on equity instruments classified as available-

for-sale are not reversed through the income statement.

Consolidated Cash Flow Statement The

consolidated cash flow statement has been prepared

using the ‘indirect’ method. Cash flows in foreign

currencies have been translated at average exchange

rates. Exchange differences are shown separately in the

consolidated cash flow statement. Cash flow from

investing activities consists of investments and

divestments in property, plant and equipment, and

intangible assets, the sale of the finance lease portfolio

and acquisitions insofar as these are paid for in cash.

Acquisitions of subsidiaries are presented net of cash

balances acquired.

Segment reporting A business segment is a

distinguishable group of assets and operations engaged in

providing products or services that is subject to risks and

returns that are different from those of other business

segments. A geographical segment is a distinguishable

group of assets and operations engaged in providing

products or services within a particular economic

environment that is subject to risks and returns that are

different from those of segments operating in other

economic environments.

Earnings per share attributable to shareholders

Earnings per ordinary share are calculated by dividing the

net income attributable to holders of ordinary shares by

the weighted average number of ordinary shares

outstanding during the year. In making this calculation the

[ordinary] treasury shares are deducted from the number

of ordinary shares outstanding.

The calculation of the diluted earnings per share is based

on the weighted average number of ordinary shares

outstanding plus the potential increase as a result of the

conversion of convertible debentures to employees and

the settlement of share-base compensation plans [share

plans and share options plans].

As regards to convertible debentures to employees it is

assumed that these are converted in full. An adjustment is

made to net income to eliminate interest charges, whilst

allowing for effect of taxation.

Regarding share plans it is assumed that all outstanding

equity-settled share plans and share plans with settlement

alternatives will vest and will be settled in shares.

The potential increase arising from share option plans is

based on a calculation of the value of the options

outstanding, i.e. the number of options times the exercise

price, divided by the average share price during the

financial year. This potential increase is only applied if the

option has intrinsic value.


�6


New Accounting Standards

On a regular basis, the IASB issues new accounting

standards, amendments to existing standards and

interpretations. These new accounting standards,

amendments to existing standards and interpretations are

subject to endorsement by the European Union. In 2007

the following new accounting standards, amendments to

existing standards and interpretations where issued by the

IASB, or became applicable for Océ:

IAS 1 [Amendment] ‘Presentation of Financial

Statements’ The amendment to IAS 1 ‘Presentation of

Financial Statements’ is applicable for reporting periods

starting on or after January 1, 2009. The amendment

intends to improve user’s capability of analyzing and

comparing the information in financial statements. Océ is

currently investigating the impact of the application of this

amendment to IAS 1 on the consolidated financial

statements.

IAS 23 [Amendment] ‘Borrowing Cost’ The

amendment to IAS 23 ‘Borrowing Costs’ is applicable for

reporting periods starting on or after January 1, 2009. The

amendment requires an entity to capitalize borrowing

costs directly attributable to the acquisition, construction

or production of a qualifying asset [one that takes a

substantial period of time to get ready for use or sale] as

part of the cost of that asset. The option of immediately

expensing those borrowing costs will be removed. This

amendment to the standard is still subject to endorsement

by the European Union. Océ is currently investigating the

impact of this amendment on the consolidated financial

statements

IAS 39 [Amendment] ‘Financial Guarantees’ The

amendment to IAS 39 ‘Financial Guarantees’ is applicable

for reporting periods starting on or after January 1, 2006.

The amendment requires management to account for

financial guarantees under IAS 39 instead of under IFRS 4

in the consolidated financial statements. Financial

guarantees accounted for under IAS 39 are initially

recognized at fair value and subsequently at the higher of:

[a] the amount determined under IAS 37; and [b] the

amount initially recognized less cumulative amortization.

Application of this amendment requires a restatement of

comparative figures. The application of this amendment

did not have a material impact on Océ’s consolidated

financial statements. Therefore, the comparative figures

have not been adjusted.

IAS 39 [Amendment] ‘Cash Flow hedge

Accounting for Intragroup Transactions’ The

amendment to IAS 39 ‘Cash Flow hedge Accounting for

Intragroup Transactions’ is applicable for reporting periods

starting on or after January 1, 2006. This amendment to

IAS 39 allows the foreign currency risk of a highly probable

forecast intragroup transaction to qualify as a hedged item

in the consolidated financial statements provided that the

transaction is denominated in a currency other than the

functional currency of the entity entering into that

transaction and the foreign currency risk will affect

consolidated profit or loss. The application of this

amendment did not have a material impact on Océ’s

consolidated financial statements.

IFRS 7 ‘Financial Instruments: Disclosures’ IFRS 7

is applicable for reporting periods beginning on or after

January 1, 2007. IFRS 7 introduces new disclosures

relating to financial instruments en supersedes IAS 30

‘Disclosures in the Financial Statements of Banks and

Similar Financial Institutes’ and the disclosure require-

ments of IAS 32 ‘Financial Instruments: Disclosure and

Presentation’. This standard does not have any impact on

the presentation and measurement of the Group’s

financial instruments in the consolidated financial

statements. Océ will not apply this standard early.

This standard will have impact on the disclosures in the


IFRS 8 ‘Operating Segments’ IFRS 8 is applicable for

reporting periods starting on or after January 1, 2009. IFRS

8 supersedes IAS 14 ‘Segment Reporting’ and aligns

segment reporting with the requirements of US standard

SFAS 131 ‘Disclosures about Segments of an Enterprise

and Related Information’. Océ is currently investigating

the impact of application of this standard on the


�7

IFRIC Interpretation 8 ‘Scope of IFRS 2’ IFRIC 8 is

applicable for reporting periods beginning on or after May

1, 2006. IFRIC 8 applies to share-based payment arrange-

ments with parties other than employees, whereby the

fair value of the share-based payment arrangement is

measured by the direct method [e.g. the fair value of the

goods or services received] and this fair value is less than

the fair value of the equity instruments granted. Océ only

operates share-based payment arrangements with

employees measured by the indirect method. This IFRIC

did not have any impact on the consolidated financial

statements.

IFRIC Interpretation 9 ‘Reassessment of

Embedded Derivatives’ IFRIC 9 is applicable for

reporting periods beginning on or after June 1, 2006.

IFRIC 9 prohibits subsequent reassessment of embedded

derivatives unless there is a change in the terms of the

contract that significantly modifies the cash flows that

would otherwise be required under the contract, in which

case reassessment is required. Océ has chosen to adopt

IFRIC interpretation 9 early, as of December 1, 2005. The

application of this interpretation did not have a material

impact on the consolidated financial statements.

IFRIC Interpretation 10 ‘Interim Financial

Reporting and Impairment’ IFRIC 10 is applicable for

reporting periods beginning on or after November 1, 2006.

IFRIC 10 prohibits the impairment losses recognized in an

interim period on goodwill, investments in equity

instruments and investments in financial assets carried at

cost to be reversed at a subsequent balance sheet date.

The application of this interpretation did not have a

material impact on Océ’s consolidated financial

statements.

IFRIC Interpretation 11 ‘IFRS 2 - Group and

Treasury Share Transactions’ IFRIC 11 is applicable

for reporting periods beginning on or after March 1, 2007.

IFRIC 11 requires a share-based payment arrangement,

in which an entity receives goods or services as

consideration for its own equity instruments, to be

accounted for as an equity-settled share-based payment

transaction, regardless of how the equity instruments

needed are obtained.

IFRIC 11 also provides guidance on whether share-based

payment arrangements, in which suppliers of goods or

services of an entity are provided with equity instruments

of the entity’s parent, should be accounted for as cash-

settled or equity-settled in the entity’s financial state-

ments. Océ has chosen to adopt IFRIC interpretation 11

early as from December 1, 2006. The application of this

interpretation did not have any impact on Océ’s con-

solidated financial statements. The application of this

IFRIC caused a reclassification in the corporate financial

statements.

IFRIC Interpretation 12 ‘Service Concession

Arrangements’ IFRIC 12 is applicable for reporting

periods starting on or after January 1, 2008. IFRIC 12

addresses how service concession operators should apply

existing IFRS to account for the obligations they undertake

and rights they receive in service concession arrange-

ments. Océ is not a service concession operator. IFRIC 12

is not relevant for Océ. IFRIC 12 is still subject to

endorsment by the European Union.

IFRIC Interpretation 13 ‘Customer Loyalty

Programmes’ IFRIC 13 is applicable for reporting

periods starting on or after July 1, 2008. ‘Customer Loyalty

Programmes’ are used by entities to provide customers

with incentives to buy products or services by providing

‘points’. IFRIC 13 requires that entities recognize these

‘points’ as a separately identifiable component of the sales

transaction. Océ does not use ‘Customer Loyalty

Programmes’. IFRIC 13 does not apply to Océ. IFRIC 13 is

still subject to endorsment by the European Union.

IFRIC Interpretation 14 ‘IAS 19 - The Limit on a

Defined Benefit Asset, minimum funding

requirements and their interaction’ IFRIC 14 is

applicable for reporting periods starting on or after January

1, 2008. IFRIC 14 provides guidance on assessing the limit

in IAS 19 on the amount of the surplus that can be

recognized as an asset. It also explains how the pension

asset or liability may be affected by a statutory or

contractual minimum funding requirement. IFRIC 14 has

not been endorsed by the European Union yet.


��

Financial Risk Management

Financial risk factors The Group’s activities are

exposed to a variety of financial risks: market risk [foreign

exchange risk, interest rate risk and price risk], credit risk

and liquidity risk. The Group’s overall risk management

programme focuses on the unpredictability of financial

markets and seeks to minimize potential adverse effects

on the Group’s financial performance. The Board of

Directors provide both written policies for the total risk

management and policies for specific areas such as

foreign exchange risk, interest rate risk, credit risk, use

of derivative financial instruments and non-derivative

financial instruments and the investment of excess

liquidity. Risk management is carried out centrally in close

co-operation with the subsidiaries. The Group identifies,

evaluates and hedges financial risks, using derivative

financial instruments for certain risks.

Market risk

Foreign exchange risk

Océ charges its customers for products and services in

the customers’ local currency. The largest possible part of

the cost is incurred in this local currency. However, since

manufacturing and development of new products for an

important part still take place in the Euro-zone, a foreign

exchange risk [transaction risk] arises in respect of the

flows of goods from the Euro-zone to countries outside

the Euro-zone. The relocation of part of the manufacturing

activities to Asia has reduced the net level of the foreign

exchange risk since these goods are paid for in US dollars.

At Océ, net cash flows in currencies other than the euro

are subject to an active foreign exchange management

policy, which is carried out in close consultation with the

Board of Executive Directors.

Océ applies a policy of managing the 12-months position

of mainly the US dollar, the Japanese yen, the Australian

dollar and the Pound sterling on a roll-over basis, with

hedging being applied up to a maximum of 80% of the net

cash flows. The policy pursued provides cover for the

transaction risk over the coming 12 months.

The foreign exchange risk on intercompany loans

[transaction risk] is hedged for 100%. Currency translation

risks are not hedged. This risk is regarded as an inherent

part of doing business as a multinational company.

Interest rate risk

Interest rate risk can be divided into fair value interest rate

risk and cash flow interest rate risk.

The central objective of the interest policy is to prevent a

mismatch between the average duration of the assets and

the financing of the Group. Efforts are made to achieve

40% to 80% of the funding in fixed interest rates.

Fair value interest rate risk relates to the risk that the fair

value of a financial instrument will fluctuate due to

changes in market interest rates.

Cash flow interest rate risk relates to the risk that future

cash flows of a financial instrument will fluctuate due to

changes in markets interest rates. Océ uses interest rate

swaps to change the interest-profile of [fixed and floating]

loans according to the risk management policy.

Price risk

Océ has no significant exposure to security price risk

because of the small amounts of investments held by

Océ, which are classified as available-for-sale financial

assets. Océ has no commodity price risk regarding any

financial instruments.

Credit risk Océ has no significant concentrations of

credit risk. It has policies in place to ensure that products

are sold to customers with an appropriate credit history.

Deposits, derivatives and cash transactions are only

entered into with financial institutions with high credit

rating. The Group has policies in place that limit the

maximum amount of credit exposure to any financial

institution. The maximum exposure to credit risk at

balance sheet date is € 51.7 million

Liquidity risk Prudent liquidity risk management implies

maintaining sufficient cash and the availability of funding

through an adequate amount of committed credit facilities.

Océ aims to maintain flexibility in funding by securing

sufficient committed credit lines.


��

Critical Accounting Estimates and Assumptions

When drawing up the consolidated financial statements

management is required to make estimates and

assumptions regarding the future. In doing so, manage-

ment takes past experiences as its basis for making the

best possible estimate of future developments. The actual

results will, by definition, rarely equal the estimates and

assumptions made by management. The estimates and

assumptions that bear a significant risk of causing a

material adjustment to the carrying amount of assets and

liabilities within the next financial year are disclosed

below.

Impairment of goodwill Océ tests at least annually

whether goodwill has suffered any impairment [see note

[9]], by comparing the recoverable amounts of cash-

generating units with their carrying amounts.

In determining the recoverable amount of a cash-

generating unit, Océ makes estimates and assumptions

about the net present value of future cash flows based on

the value in use. In determining the net present value of

future cash flows, Océ also makes estimates and

assumptions concerning future revenues, future costs,

future carrying amounts, Weighted Average Cost of

Capital [WACC] and future inflation rates.

Property, plant and equipment and rentals

Property, plant and equipment as well as rentals are

carried at cost less cumulative depreciation and any

impairment. Depreciation is calculated using the straight-

line method based on the estimated useful lives, taking

into account any residual values. Management makes

estimations regarding the useful lives and residual values

and assumes that depreciation takes place on a straight-

line basis. The assets’ residual values and useful lives are

reviewed, and adjusted if appropriate, at each balance

sheet date.

Fair value of financial instruments and share-

based compensation The fair value of financial

instruments traded in active markets is based on quoted

market prices at the balance sheet date. The fair value of

financial instruments that are not traded in an active

market and share-based compensations are determined

using generally accepted valuation techniques. These

valuation techniques include estimates and assumptions

about forward rates, discounted cash flows based on a

single interest rate or on a yield curve based on market

conditions existing at the balance sheet date. The fair

value of interest rate swaps is calculated as the present

value of the estimated future cash flows. The fair value of

forward foreign exchange contracts is determined using

quoted forward exchange rates at the balance sheet date.

The nominal value less impairment provision of trade

receivables and trade payables are assumed to

approximate their fair values. The fair value of non-current

financial liabilities is estimated by discounting the future

contractual cash flows at the current market interest rate

that is available to the Group for similar financial

instruments.

For share-based compensations, estimates are made

regarding the expected equity instruments [or its value]

necessary for settlement. For option-pricing models, Océ

also makes estimates and assumptions about the risk-free

rate, expected dividend and expected volatility.

Allowance for inventory obsolescence In

determining provision for inventory obsolescence, Océ

makes estimates and assumptions based on historical

usage of various product categories versus current

inventory levels and specific identified obsolescence risks

[e.g. end of life of related machines, the remaining service

period of these machines and the impact of new

environmental legislation].


100

Provision for impairment of trade and finance

lease receivables In determining provision for

impairment of trade and finance lease receivables Océ

bases its estimates and assumptions based on ageing and

specific developments regarding the customers

[e.g., creditworthiness and market developments].

The provision for impairment of trade and finance lease

receivables is reviewed periodically to assess for

adequacy of the provision.

Capitalization of development cost In determining

the development cost to be capitalized, Océ makes

estimates and assumptions based on expected future

economic benefits generated by products that are the

result of these development costs. Other important

estimates and assumptions in this assessment process

are the required internal rate of return, the distinction

between research and development and the estimated

usefull life.

Provision for restructuring Océ recognizes a

provision for restructuring regarding cost-saving

restructuring measures and the integration of acquired

businesses. Provisions for restructuring include, amongst

other estimates and assumptions about severance

payments and termination fees.

Income taxes Océ is subject to income taxes in

numerous jurisdictions. Estimates are required in

determining the world-wide provision for income taxes.

There are some transactions and calculations for which

the ultimate tax position is uncertain during ordinary

course of business. The Group recognizes liabilities for

anticipated tax audit issues based on estimates of

whether additional taxes will be due. Where the final tax

outcome of these matters is different from amounts that

were initially recorded, such differences will impact the

income tax and deferred tax provisions in the period in

which such determination is made.

Océ recognizes deferred tax assets to the extent that it is

probable that future taxable profits will be available for the

deferred tax asset to be recovered. This is based on

estimates of taxable future income by jurisdiction in which

Océ operates and the period over which deferred tax

assets are recoverable. In the event that actual results

differ from these estimates, and depending on the

possible tax strategies that may be implemented, changes

to the recognition of deferred tax assets could be required,

which could impact the financial position and net income.

Defined benefit plans Defined benefit plans represent

obligations that will be settled in the future. To project

these obligations over a longer period of time, Océ is

required to make assumptions regarding the development

of these obligations. Post-employment benefit accounting

is intended to reflect the recognition of future costs of

defined benefit plans over the employee’s expected

service period, based on the term of the plans and the

investment and funding decision made.

Post-employment benefit accounting requires Océ to

make assumptions about variables such as discount rate,

rate of compensation increase, return on plan assets and

future mortality rates. Océ periodically consults outside

actuaries regarding these assumptions. Changes in these

assumptions can have significant impact on the defined

benefit obligations. See also note [22].


101


Segment reporting

Business x € million Wide Format Digital Document unallocated total

segmentation Printing Systems Systems

2007 2006 2007 2006 2007 2006 2007 2006

Total revenues 898 875 2,200 2,235 - - 3,098 3,110

Inter-segment revenues 9 10 - - - - 9 10

Operating income 96 83 25 19 - - 121 102

Financial income and

expenses cost [net] - 40 - 46

Share in income of associates - - - 1 - - - 1

Income taxes - 2 -

Net income 79 57

Investments in associates - 1 2 1 - - 2 2

Other assets 665 560 1,724 1,916 100 128 2,489 2,604

Total assets 665 561 1,726 1,917 100 128 2,491 2,606

Liabilities 284 256 839 857 655 772 1,778 1,885

Equity 381 305 887 1,060 - 555 - 644 713 721

Capital expenditure* 34 44 140 162 174 206

Depreciation - 34 - 30 - 126 - 135 - 160 - 165

Amortization - 8 - 7 - 32 - 32 - 40 - 39

Impairment - - - 10 - - 10 -

Geographical x € million total revenues assets capital expenditure*

segmentation

2007 2006 2007 2006 2007 2006

United States** 1,221 1,330 868 1,015 59 51

Germany 320 310 313 309 31 30

The Netherlands 305 285 665 639 58 85

United Kingdom 227 209 98 101 5 10

France 190 188 101 112 - 4 8

Rest of Europe 596 558 324 313 19 15

Countries outside Europe

and the United States 239 230 122 117 6 7

Total 3,098 3,110 2,491 2,606 174 206

* Net capital expenditure in intangible assets, property, plant and equipment and rental equipment.

** Average exchange rate: 2007 � 1 = $ 1.36; 2006 � 1 = $ 1.24.

102


Exchange rates of a average exchange exchange rate at the

number of currencies rate of 1 euro balance sheet date of 1 euro

of importance to Océ

2007 2006 2007 2006

Pound sterling 0.68 0.68 0.71 0.67

US dollar 1.36 1.24 1.48 1.32

Australian dollar 1.63 1.66 1.66 1.68

Swiss franc 1.64 1.57 1.65 1.59

Japanese yen 160.78 144.63 162.55 153.31

[1] Development of x € million total revenues cost of sales gross margin

total revenues, cost of

sales and gross margin 2007 2006 2007 2006 2007 2006

Sales of goods 1,744 1,819 - 994 - 1,065 750 754

Revenues from rental and

services 1,327 1,261 - 839 - 776 488 485

Interest from finance lease 27 30 - - 27 30

Total 3,098 3,110 - 1,833 - 1,841 1,265 1,269

[2] Expenses x € 1,000 2007 2006

by nature

Material costs - 897,708 - 885,044

Employee benefit expenses [3] - 1,332,302 - 1,353,982

Depreciation, amortization and impairment charges - 209,662 - 203,850

Operating lease expenses - 56,575 - 66,441

Other expenses - 480,791 - 498,758

Total - 2,977,038 - 3,008,075

In total revenues the result of € 0.6 million [2006: € 2.5

million] on the sale of the lease portfolio is shown under

‘Sales of goods’.

The realized gain resulting from hedges of future cash

flows of € 9.0 million is included in cost of sales under

‘Sales of goods’ [2006: € 2.0 million loss].

103


[3] Employee x € 1,000 2007 2006

benefit expenses

Wages and salaries - 1,084,628 - 1,109,547

Social security - 190,962 - 193,861

Pension costs for [22]:

| defined contribution plans - 16,202 - 17,047

| defined benefit plans - 37,625 - 31,061

Share-based compensation [25] - 2,885 - 2,466

Total - 1,332,302 - 1,353,982

Recognition of the release pension obligation pension obligation restructuring total x € 1,000

and restructuring cost in the income statement

in 2006:

Cost of sales 4,701 - 4,701 -

Selling and marketing expenses 5,786 - 6,586 - 800

Research and development expenses 120 - 120

General and administrative expenses 5,903 - 6,741 - 838

Total 16,510 - 18,028 - 1,518

[4] Research and 2007 2006 x € 1,000

and development

expenses Research and development expenses - 227,529 - 221,143

Development credit repayable

and net subsidies received - 2,529 - 3,835

Total - 230,058 224,978

In the header ‘Research and development expenses’ an

amount of € 6.7 million is recognized regarding amortization

of capitalized development costs [2006: € 4.9 million].

The pension costs in 2007 are significantly lower than in

2006 also due to the release from the pension obligation

by € 16.5 million in 2006. Without the release, the pension

costs for defined benefit plans would have been � 47.6

million. The reduction in 2006 is the result of significant

changes in the pension schemes in several countries,

mainly in the United States. These changes relate,

amongst others, to a change from defined benefit plans to

defined contribution plans.

The reorganization plan initiated in 2005 to achieve further

reduction in costs, was continued in 2006. The reorgani-

zation has led to a reduction of approximately 500 jobs in

Europe and a reduction of approximately 300 jobs in the

United Sates. The reorganization costs mainly relate to

personnel costs.

10�


[5] Finance income 2007 2006 x € 1,000

and expenses [net]

Interest charges - 54,490 - 53,801

Interest on financing preference shares - - 820

Commitment fees - 1,229 - 1,840

Foreign exchange results [net] on financing activities - 1,537 1,744

Fair value results on financial instruments:

| interest rate swaps: fair value hedges 3,088 4,911

| fair value adjustments on borrowings - 3,088 - 4,911

Other financial expenses - 323 - 1,913

Financial expenses - 57,579 - 56,630

Financial income [interest income] 17,239 10,608

Total - 40,340 - 46,022

[6] Income taxes 2007 2006 x € 1,000

Current tax - 5,566 1,455

Deferred tax 3,144 - 1,062

Total income tax in income statement - 2,422 393

Tax calculated at domestic tax rates applicable to

income in the respective countries - 24,426 - 15,692

Income not subject to tax 16,778 10,028

Expenses not deductible for tax purposes - 1,518 - 5,459

Tax credits 785 650

Recognition of deferred tax assets 5,959 10,866

Tax charge in income statement - 2,422 393

The effective tax rate 2007 was 3.0% [2006: - 0.7%]. The

weighted average tax rate in 2007 was 30.1% [2006:

27.7%]. The reduction of the effective tax rate was mainly

caused by financing of the Group by means of a Belgium

financing company. Regarding the financing structure,

agreements have been made with the Dutch and Belgium

fiscal authorities. A further reduction of the effective tax

rate was realized by means of a release of fiscal provisions

which relate to the expiration of fiscal risks and the

completion of a number of tax audits.

In 2007, Océ has signed a so called ‘Handhavingsconve-

nant’ with the Dutch fiscal authorities.

All Dutch tax issues are discussed with the Dutch fiscal

authorities under the convenant, based on transparency.

In 2007 the fiscal audit up to and including 2005 was

settled. The impact of this audit on the net results was

limited.

10�


[7] Earnings per 2007 2006 x € 1,000

ordinary share for net

income attributable

to shareholders Net income attributable to shareholders of ordinary shares 74,544 53,244

Weighted average number of ordinary shares

outstanding [x 1,000] 84,315 83,899

Basic earnings per ordinary share 0.88 0.63 euro

Net income attributable to shareholders of ordinary shares 74,544 53,244

Interest costs of convertible debentures to employees [net] 208 243

Net income attributable to shareholders of ordinary shares

based on full conversion 74,752 53,487

Weighted average number of ordinary

shares outstanding [x 1,000] 84,315 83,899

Adjustment for assumed conversion [x 1,000] 622 704

Adjustment for assumed equity settlement of share-based

compensation [x 1,000] 1,173 974

Weighted average number of ordinary shares outstanding

on the basis of full conversion [x 1,000] 86,110 85,577

Diluted earnings per ordinary share 0.87 0.63 euro

106

[8] Intangible x € 1,000 goodwill software technology costumer trade marks total

assets base and other

Cost 374,473 102,275 8,828 94,054 45,318 624,948

Accumulated amortization and impairments - 615 - 50,162 - 6,107 - 1,185 - 2,583 - 60,652

Carrying amount at December 1, 2005 373,858 52,113 2,721 92,869 42,735 564,296

Movements in carrying amount in 2006:

Expenditure - 14,979 46,886 2,184 416 64,465

Divestments - - 119 - - - - 119

Net expenditure - 14,860 46,886 2,184 416 64,346

Acquisition subsidiaries 10,840 675 36 2,954 247 14,752

Amortization - - 14,683 - 6,726 - 9,452 - 8,020 - 38,881

Exchange differences - 38,472 - 3,135 - 96 - 9,524 - 4,365 - 55,592

At November 30, 2006 346,226 49,830 42,821 79,031 31,013 548,921

Cost 346,849 95,206 55,070 89,062 40,886 627,073


Carrying amount at November 30, 2006 346,226 49,830 42,821 79,031 31,013 548,921


Expenditure - 17,505 31,501 - - 49,006

Divestments - - 166 - 16 - 36 - - 218

Net expenditure - 17,339 31,485 - 36 - 48,788

Acquisition subsidiaries - - - 1,711 - 1,711

Amortization - - 15,121 -7,674 - 9,836 - 7,078 - 39,709

Impairment - -17 - - - - 17

Exchange differences - 35,113 - 2,117 - 25 - 7,387 - 2,701 - 47,343

At November 30, 2007 311,113 49,914 66,607 63,483 21,234 512,351

Cost 311,744 100,622 85,953 81,241 36,593 616,153


Carrying amount at November 30, 2007 311,113 49,914 66,607 63,483 21,234 512,351

Recognition of amortization costs 2007 2006 x € 1,000

in the income statement:

Cost of sales - 6,618 - 7,648


Research and development expenses - 8,780 - 7,264


Total - 39,709 - 38,881


107

Goodwill allocation to cash-generating units:

x € 1,000 Technical Document Display Graphics Corporate/Commercial Océ Business Services total

Systems Systems Printing Systems

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

United States 26,908 30,099 - - 246,137 275,323 21,544 24,099 294,589 329,521

Canada - - - - 7,852 7,676 - - 7,852 7,676

France - - 938 938 - - - - 938 938

United Kingdom - - - - 6,949 7,356 - - 6,949 7,356

Slovakia 400 323 - - 385 412 - - 785 735

Total 27,308 30,422 938 938 261,323 290,767 21,544 24,099 311,113 346,226

The key assumptions used for value-in-use measurements per CGU to which goodwill has been allocated:

in % Technical Document Display Graphics Corporate/Commercial Océ Business Services

Systems Systems Printing Systems

2007 2006 2007 2006 2007 2006 2007 2006

Weighted average growth rate 2.0 2.0 5.0 6.7 5.0 4.2 7.5 10.0

Weighted average inflation rate 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Pre-tax discount rate 9.5 10.9 9.5 10.9 9.5 10.9 9.5 10.9


The column software includes internally generated

software of € 29.0 million [2006: € 23.8 million]. The

column technology includes capitalized product

development expenses of € 51.1 million [2006: € 26.3

million].

The remaining amortization period of intangible assets

acquired or arisen from the acquisition of Imagistics

International Inc. are 5 years for software, 8 years for

customer base and 6 years for trademarks and other.

These assumptions have been used for the analysis of each CGU within the business segment. Management forecasts profits based on past performance and its

expectations for market development. The weighted average growth rates used are consistent with forecasts included in industry reports. The discount rate used is

pre-tax and reflects the risk of Océ as a whole.

Océ has designated five cash-generating units [CGU] for

the purpose of impairment testing and has allocated the

goodwill on acquisition to those cash-generating units.

The five cash-generating units are:

| Corporate/Commercial Printing Systems

| Océ Business Services

| Technical Document Systems

| Display Graphics Systems

| Imaging Supplies

The goodwill mainly relates to the acquisition of Imagistics

International Inc. in 2005.

The recoverable amount of a cash-generating unit is

measured as the higher of its fair value less cost to sell

and its value in use. These measurements use cash flows

projections based on financial forecasts approved by

management covering a five-year period. Cash flows

beyond the five-year period are extrapolated for another

5 years using the estimated growth rates per CGU stated

below and a perpetual phase. The growth rates used in the

second five-year period do not exceed the weighted

average growth rates for the business in which the CGU

operates. Management believes that the extrapolation for

another five years can be determined reliably and gives a

better reflection of Océ’s cash-generating potential. The

growth rates used in the perpetual phase, do not exceed

the average inflation rate of the economic environment in

which Océ operates.

10�


[9] Property, plant x € 1,000 property production other other fixed under con- not in total

and equipment and plant equipment equipment assets struction and production

prepayments process

Cost 370,320 467,686 106,449 358,295 19,581 15,079 1,337,410

Accumulated depreciation and

impairments - 177,170 - 361,247 - 60,482 - 273,734 - - 9,697 - 882,330

Carrying amount at December 1, 2005 193,150 106,439 45,967 84,561 19,581 5,382 455,080


Expenditure 4,824 9,299 31,073 16,455 21,002 40 82,693

Divestments - 739 - 1,036 - 4,666 - 1,135 - - 174 - 7,750

Net expenditure 4,085 8,263 26,407 15,320 21,002 - 134 74,943

Reclassifications 619 14,376 - 1,490 - 16,455 - 30 -

Acquisition subsidiaries - 663 - 214 - 80 957

Depreciation - 10,561 - 31,334 - 24,980 - 26,299 - - 686 - 93,860

Exchange differences - 2,212 - 1,918 - 2,554 - 2,040 - 146 - 118 - 8,988

At November 30, 2006 185,081 96,489 44,840 73,246 23,982 4,494 428,132

Cost 365,631 467,311 111,126 345,352 23,982 13,400 1,326,802


impairments - 180,550 - 370,822 - 66,286 - 272,106 - - 8,906 - 898,670

Carrying amount at November 30, 2006 185,081 96,489 44,840 73,246 23,982 4,494 428,132


Expenditure 2,303 10,512 28,406 21,109 24,629 - 86,959

Divestments - 20,848 - 5,392 - 2,385 - 2,207 - - 1,525 - 32,357

Net expenditure - 18,545 5,120 26,021 18,902 24,629 - 1,525 54,602

Reclassifications 736 15,027 888 2,942 - 18,780 - 813 -

Depreciation - 10,118 - 31,871 - 24,418 - 24,883 - - 115 - 91,405

Impairment - - 9,483 - -706 - - - 10,189

Exchange differences - 1,905 - 1,468 - 2,595 - 1,646 - 110 - 83 - 7,807

At November 30, 2007 155,249 73,814 44,736 67,855 29,721 1,958 373,333

Cost 325,890 463,373 118,682 331,828 29,721 2,167 1,271,661


impairments - 170,641 - 389,559 - 73,946 - 263,973 - - 209 - 898,328

Carrying amount at November 30, 2007 155,249 73,814 44,736 67,855 29,721 1,958 373,333

10�

Recognition of depreciation costs 2007 2006 x € 1,000

in the income statement:

Cost of sales - 52,591 - 51,458


Research and development expenses - 11,765 - 12,258


Total - 91,405 - 93,860

[10] Rental 2007 2006 x € 1,000

equipment

Cost 353,771 353,644

Accumulated depreciation and impairments - 241,862 - 229,925

Carrying amount at December 1, 2006/2005: 111,909 123,719

Movements in carrying amount:

Installed in rental 112,143 127,435

Divestments - 41,101 - 60,643

Depreciation - 68,342 - 71,109

Exchange differences - 6,735 - 7,493

At November 30 107,874 111,909

Cost 334,449 353,771

Accumulated depreciation and impairments - 226,575 - 241,862

Carrying amount at November 30 107,874 111,909

In the income statement depreciation is included in full

under ‘Cost of sales’.


‘Property and plant’ and ’Production equipment’ contain

an amount of € 24 million of divestments regarding office

buildings in the Netherlands and France. The revenues of

these transactions amount to € 39 million. The profit of

€ 15.0 million is recognized for € 4.3 million in the gross

margin and for € 10.7 million as operating expenses based

on historical depreciation.

‘Other equipment’ consists of Océ Business Services

machines and internally used machines.

The book value of ‘Other fixed assets’ contains an amount

of € 6.3 million of assets financed through means of

finance leases [2006: € 8.6 million].

In 2007 an impairment loss of � 10.2 million regarding

‘Production equipment’ and ‘Other fixed assets’ was

recognized in the SBU Digital Document Systems. This

loss has been included in the ‘Cost of sales’ in the income

statement.

Lease payments amounting to € 56.6 million [2006:

€ 66.4 million] relating to operating leases of buildings,

machinery and equipment, are recognized in the income

statement.

110

[11] Investment 2007 2006 x € 1,000

in associates

At December 1, 2006/2005: 1,820 1,480


Share in income 440 504

Divestments 203 - 3

Dividend - 224 - 300

Exchange differences - 8 139

At November 30 2,231 1,820

No goodwill is included in ‘Investment in associates’

at November 30, 2007 [2006: nil].

[12] Deferred

income tax

The changes in deferred income tax assets 2007 2006 x € 1,000

and liabilities are as follows:

At December 1, 2006/2005 33,606 59,429

Exchange differences - 1,473 - 32

Income statement 3,144 - 1,062

Transferred from the current tax position 36,022 - 24,729

At November 30 71,299 33,606

The composition of deferred 2007 2006 x € 1,000

income tax assets and liabilities

is as follows: assets liabilities assets liabilities

Intangible assets 11,965 45,553 22,344 56,030

Tangible assets 27,425 - 21,201 -

Leasing - 27,563 - 27,146

Current assets 22,466 - 29,277 -

Non-current liabilities 81,973 208 69,253 8,431

Current liabilities - 14,165 - 16,428

Total 143,829 87,489 142,075 108,035


Deferred income tax assets and liabilities are offset when

there is a legally enforceable right to offset current tax

assets against current tax liabilities and when the deferred

income tax relates to the same fiscal authority.

111

2007 2006 x € 1,000

assets liabilities assets liabilities

Deferred income tax netted by fiscal entity 71,980 15,640 84,683 50,643

Carry forward losses 41,626 - 38,617 -

Non-recognized income tax receivables - 26,667 - - 39,051 -

Total 86,939 15,640 84,249 50,643

x € million The claim for carry 2010 2011 2012 after 2012 unlimited total

forward losses falls

due as follows as at:

November 30, 2006 0.1 0.1 2.3 10.9 25.2 38.6

November 30, 2007 - 4.0 2.3 3.6 31.7 41.6

[13] Available- for-sale 2007 2006 x € 1,000

financial assets

At December 1, 2006/2005: 9,389 10,462


Additions 852 539

Disposals - 817 - 1,372

Net gains/[losses] transfer to equity - 97 - 189

Exchange differences - 27 - 51

At November 30 9,300 9,389

Listed securities [Japan] 389 513

Unlisted securities [Euro-zone countries] 8,911 8,876

Total 9,300 9,389

There were no special disposals or impairment provisions

on ‘Available-for-sale financial assets’ in 2007 [2006: nil].


112

[14] Derivative 2007 2006 x € 1,000

financial instruments


Interest rate swaps 588 13,484 940 2,961

Foreign exchange contracts 2,399 - 2,273 -

Cap on financing preference shares 2,000 - 3,902 -

Call option on convertible debentures

to employees - 1,302 - 1,767

Non-current 4,987 14,786 7,115 4,728

Interest rate swaps 204 284 3,079 408

Foreign exchange contracts 11,097 1,244 6,614 2,961

Call option on convertible debentures

to employees - 89 - 55

Embedded derivatives 897 - 674 -

Current 12,198 1,617 10,367 3,424

Total 17,185 16,403 17,482 8,152


113

Interest rate swaps Interest rate swaps are used to

achieve the desired risk profile in terms of fixed and

variable interest rate exposures. The central objective of

the interest policy is to prevent a mismatch between the

average duration of the assets and the financing of the

Group. Efforts are made to achieve 40% to 80% of the

funding in fixed interest rates. The contract value/notional

amounts of the outstanding interest rate swaps is € 360.9

million [2006: € 450.6 million]. At November 30, 2007 the

interest rates vary from 4.6% to 5.6% [2006: 3.4% to

5.4%]. The main floating rates are EURIBOR and USD-

LIBOR.

Foreign exchange contracts Océ uses foreign

exchange contracts [swaps and outright contracts] to

manage the foreign exchange risks. Océ does not hedge

the currency translation risk arising from net investments

in foreign operations. The foreign exchange management

policy is aimed at protecting the gross margin and

[intercompany] loans denominated in foreign currencies.

Regarding the operating margin, Océ applies a policy of

managing the 12-month position of the US dollar, the

Japanese yen, the Australian dollar and the pound sterling

on a roll-over basis, with hedging being applied up to a

maximum of 80% of the net transaction. Intercompany

loans are being hedged on a 100% basis. The principal

amounts of foreign exchange contracts at the balance

sheet date are as follows:

| in respect of future cash flows: € 191.4 million [2006:

€ 269.5 million];

| in respect of [intercompany] loans: € 27.8 million [2006:

€ 38.4 million].

Cap on convertible financing preference shares

Océ agreed revised conditions in 2006 on the financing

preference shares which were approved on the Annual

General Meeting of Shareholders of April 20, 2006. Based

on the revised conditions the holders of the financing

preference shares can convert these shares into ordinary

shares at a price of € 18.01 per share on November 30,

2012. The conversion option however is capped at 130%

of the conversion price, the difference between the actual

share price and 130% of the capped price is recognized as

a derivative financial asset [cap]. The cap is measured

using a binomial option-pricing model.


Call option on convertible debentures to

employees Convertible debentures to employees

contain the right to convert the debentures into the value

of ordinary shares. Because cash-conversion is applicable,

the call option on the convertible debentures is recognized

as a liability, measured by using a binomial option-pricing

model.

Embedded derivatives Océ enters into purchase and

sales contracts denominated in various currencies. In

some cases this currency is not the functional currency of

any party to the contract. In these cases the embedded

foreign exchange contract is bifurcated from its host

contract [purchase or sales contract].

Hedge accounting Océ has designated certain

qualifying derivative financial instruments as hedge

instruments for fair value hedge accounting or cash flow

hedge accounting to manage its volatility in earnings.

The principal amount and fair value of interest rate swaps

designated in a fair value hedge are as follows: € 4.5

million [2006: € 127.7 million] and € 0.4 million [2006:

€ 3.5 million].The principal amount and fair value of

derivative financial instruments designated in a cash flow

hedge are as follows:

| foreign exchange contracts € 130.8 million and € 9.7

million [2006: € 170.9 million and € 3.3 million];

| interest rate swaps € 249.4 million and - € 12.8 million

[2006: nil and nil].

For movements in the hedge reserve, see note [20].

11�

[15] Trade and other 2007 2006 x € 1,000

receivables

Finance lease receivables [net] 172,236 199,999

Other receivables 11,815 7,864

Non-current 184,051 207,863

Trade receivables [gross] 545,636 602,271

Provision for impairment of trade receivables - 46,952 - 53,240

Trade receivables [net] 498,684 549,031


Prepayments 17,323 18,659

Duties and taxes 15,001 13,720

Other receivables 60,141 44,273

Current 684,362 729,066

Total 868,413 936,929

Provision for impairment of trade receivables:

At December 1, 2006/2005 - 53,240 - 62,631


Additions to provision - 16,005 - 19,894

Receivables written off as uncollectable 16,083 24,286

Unused amounts reversed 4,273 2,565

Exchange differences 1,937 2,434

At November 30 - 46,952 - 53,240


There is no concentration of credit risk with respect to

trade receivables, as Océ has a large number of customers

internationally dispersed.

The carrying amount of the trade and other receivables

approximates the fair value.

‘Other receivables’ includes loans provided to the Board

of Executive Directors of € 65,000 [2006: € 250,000].

The specification of this amount is as follows:

R.L. van Iperen € 35,000 and J.F. Dix € 30,000. These

loans are interest-free and were provided prior to

November 30, 2002. Repayment takes place upon

exercise or cancellation of the annual tranche of options in

respect of which the loan was provided.

This item also includes an amount of € 483,000 [2006:

€ 504,000] which was provided to personnel in the form

of loans.

11�


Finance lease receivables comprise 2007 2006 x € 1,000

the following components:

Finance lease receivables [gross] 309,549 359,601

Unearned interest - 45,936 - 54,494

Residual value 6,576 5,701

270,189 310,808

Provision for impairment lease receivables - 4,740 - 7,426


The gross finance lease receivables can be sub-

divided into the following duration categories:

12 months or less 110,199 122,513

1-5 years 185,659 220,772

More than 5 years 13,691 16,316

Total 309,549 359,601

The net finance lease receivables can be sub-

divided into the following duration categories:

12 months or less 93,213 103,383

1-5 years 159,720 184,606


Total 265,449 303,382

Provision for impairment of finance lease

receivables:

At December 1, 2006/2005 - 7,426 - 15.866


Additions to provision - 5,489 - 3,324

Receivables written off as uncollectable 2,739 1,834

Unused amounts reversed 5,037 9,391 *

Exchange differences 399 539

At November 30 - 4,740 - 7,426

* An unused amount of � 6.1 million reversed in 2006 relates to a change in accounting estimate. The release

to the income statement has been included in ‘Selling and marketing expenses’.

116

2007 2006 x € 1,000

[16] Inventories Raw and other materials 58,287 59,349

Semi-finished products and spare parts 121,224 118,286

Finished products and trade inventories 148,601 162,788

Total 328,112 340,423

In 2007 an impairment loss on inventories of � 3.8 million has

occurred with SBU Digital Document Systems. This loss is

recognized in the income statement under ‘Cost of sales’.

[17] Cash and cash Cash and bank balances 55,052 24,018

equivalents Time deposits 112,181 60,978

Total 167,233 84,996

From the total amount of cash and cash equivalents,

€ 0.6 million is blocked regarding securities to be issued.

The effective interest rate on time deposits was 3.93%

[2006: 3.29%]; these deposits have an average maturity

of 3.3 days [2006: 1 day].

[18] Non-current

assets held for sale

[19] Share capital x € 1,000 ordinary priority financing total

shares shares preference

shares

At December 1, 2005 43,637 2 - 43,639

Conversion of convertible debentures to employees 5 - - 5

Reclassification of financing preference shares* - - 10,000 10,000

At November 30, 2006 43,642 2 10,000 53,644

Conversion of convertible debentures to employees 25 - - 25

At November 30, 2007 43,667 2 10,000 53,669


As part of the ongoing outsourcing of the lease portfolio

certain finance lease receivables, including underlying

assets, are to be sold to external finance companies.

These finance lease receivables have been presented as

non-current assets held for sale. This transaction has been

completed in December 2007.

* Océ agreed revised conditions on the financing preference shares in 2006, in which payment of dividend became conditional, which was approved by the General Meeting

of Shareholders on April 20, 2006. As a result, as of this date the financing preference shares are classified as equity.

Overview of movements number at conversion repurchase exercise of number at

in number of shares outstanding: December 1, share-based November 30,

2006 compensations 2007

Number of ordinary shares 87,285,440 49,012 - - 87,334,452

Treasury shares - 3,304,306 - - 703,175 - 2,601,131

Number of ordinary shares 83,981,134 49,012 - 703,175 84,733,321

Priority shares 30 - - - 30

Financing preference shares 20,000,000 - - - 20,000,000

117

Authorized capital The authorized 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 convertible cumulative financing preference

shares of € 0.50 each; and

| 175,000 cumulative protective preference shares of

€ 500 each.

All issued shares are fully paid-in.

Ordinary shares During the financial year the total number

of ordinary shares outstanding increased by 752,187 to

84,733,321 as at November 30, 2007. The main reason for

this was the exercise of share options in connection with the

share option plan.

Priority shares All priority shares are issued. They are held

by Foundation Fort Ginkel, Venlo, the directors of this Foun-

dation are: P.A.F.W. Elverding [chairman], R.L. van Iperen and

F.J. de Wit. The Articles of Association grant certain rights to

the holders of priority shares, including the following:

| they determine the number of members of the

Supervisory and Executive Boards;

| they draw up a binding nomination list to shareholders

for the appointment of Supervisory and Executive

Directors;

| alteration of the Articles of Association is possible only if

proposed by them;

| their approval is required for the issue of shares as yet

not issued.

In any one year not more than € 60 may be distributed as

dividend on all the priority shares together. The Board of

Executive Directors of Océ N.V. and the directors of Foun-

dation Fort Ginkel are jointly of the opinion that, with regard

to the exercise of the voting rights attached to the priority shares,

Foundation Fort Ginkel has complied with the requirements

set in respect hereof in Article 5:71 para. 1 sub c and d Wft

and Article 118a para. 3 Book 2 of the Dutch Civil Code.

Convertible cumulative financing preference

shares In 1996 5,000,000 financing preference shares were

placed with the Foundation ‘Stichting Administratiekantoor

Preferente Aandelen Océ’ in return for the issue to a number

of institutional investors of registered depository receipts

with limited cancellability. As a result of the share split the

number of financing preference shares currently placed

amounts to 20,000,000. With effect from May 3, 2006

conversion into ordinary shares is possible with due regard

to article 41of the Articles of Association of Océ N.V.

The directors of the Administration office are: P.H.

Vogtländer [chairman], S. Bergsma, J.M. Boll, J. Klaassen

and J. Zuidam.

Cumulative protective preference shares Since 1979

the Company has been under the irrevocable obligation to

issue protective preference shares to the Lodewijk

Foundation, Venlo, on the latter’s first request. As to the

nominal value of such issue, the Company’s obligation has

since February 1997 related to at most an amount equal to

the total nominal value of the ordinary and financing

preference shares of the Company issued at the time of the

request. The directors of the Lodewijk Foundation are:

N.J. Westdijk [chairman], S.D. de Bree, M.W. den Boogert

and F.J.G.M. Cremers.

The Board of Executive Directors of Océ N.V. and the

directors of the Lodewijk Foundation are jointly of the opinion

that, with regard to the independence of the directors of the

Lodewijk Foundation, the requirements set in respect hereof

in Article 5:71 para. 1 sub c and d Wft and Article 118a para.

3 Book 2 of the Dutch Civil Code have been complied with.

Treasury shares The Group’s policy is to purchase shares

required to settle equity-settled share-based payments

arrangements and share-based payments arrangement with

cash alternatives either before or upon settlement.


11�

[20] Other legal reserves

reserves

x € 1,000 treasury hedging available-for-sale currency other legal total

shares reserve investments translation reserves

differences

At December 1, 2005 - 49,383 - 7,886 - - 105,572 2,255 - 160,586

Cash flow hedges:

| transferred to hedging

reserve - 5,860 - - - 5,860

| recycled to the income

statement - 4,338 - - - 4,338

Currency translation differences:

| Group - - - - 42,656 - - 42,656

| investments in associates - - - 139 - 139

Other changes - - - 189 - 25,354 25,165

Total recognized income

and expenses - 10,198 -189 - 42,517 25,354 - 7,154

Share-based compensation [25] :

| proceeds from shares

reissued 3,561 - - - - 3,561

At November 30, 2006 - 45,822 2,312 - 189 - 148,089 27,609 - 164,179

Cash flow hedges:

| transferred to hedging

reserve - - 7,102 - - - - 7,102

| recycled to the income

statement - 3,606 - - - 3,606

Currency translation differences:

| Group - - - - 42,629 - - 42,629

| investments in associates - - - 71 - 71

Other changes - - - 124 - 24,960 24,836

Total recognized income

and expenses - - 3,496 -124 - 42,558 24,960 - 21,218

Share-based compensation [25] :

| proceeds from shares

reissued 9,866 - - - - 9,866

At November 30, 2007 - 35,956 - 1,184 - 313 - 190,647 52,569 - 175,531


11�

[21] Borrowings 2007 2006 x € 1,000

Convertible debentures to employees 5,859 7,249

6.18% semi-annual USPP Notes due in 2011 104,378 116,755




Drawn under € 500 million facility [5.259% - 6.188%] 249,446 204,701


Other loans 4,055 19,611

Finance lease obligations 3,511 5,100

Non-current 535,626 532,998


Bank overdrafts 7,917 4,976

6.25% annual debenture due in 2007 - 123,129


Finance lease obligations 4,576 5,616

Current 64,243 179,746

Total 599,869 712,744

Redemption of borrowings is as follows: 2007 2006 x € 1,000

12 months or less 64,243 179,746

1-2 year 2,870 20,384

2-3 year 1,605 2,548

3-4 year 454,045 988

4-5 year 1,188 426,136


Total 599,869 712,744


Océ N.V. is a company incorporated under Dutch law. In

accordance with the Dutch Civil Code, legal reserves have

to be established in certain circumstances. The currency

translation reserve, the available-for-sale investments

reserve, the hedging reserve and the other legal reserves

are legal reserves. The other legal reserves consist of a

reserve for non-distributed income of investments in

associates and for capitalized development costs. Legal

reserves are not available for distribution to Océ’s

shareholders. If the legal reserves have a negative total

balance, distributions to Océ’s shareholders are restricted

to the extent of the negative balance.

120

The carrying amounts of the borrowings 2007 2006 x € 1,000

are denominated in the following currencies:

Euro 112,692 157,101

US dollar 361,176 424,474

Pound sterling 37,026 40,826

Other 88,975 90,343

599,869 712,744


The fair value of borrowings is € 16.6 million higher than

the carrying amount [2006: € 13.5 million]. The carrying

amounts of borrowings is € 1.0 million lower [2006: € 3.7

million higher] than the face value, as a result of the

application of fair value hedge accounting.

In 2006, Océ concluded US Private Placements [USPP] for

$ 215 million and £ 20 million and a € 650 million multi-

currency revolving credit facility, to refinance its maturing

debentures and other loans and to finance the acquisition

of Imagistics International Inc.

The average effective interest rates are 2007 2006 per cent

as follows:

Convertible debentures to employees 4.00 3.99

Debentures and other loans 5.67 5.71

Finance lease obligations 9.50 10.25

Employees may opt for convertible personnel debentures

under the annual profit-sharing scheme. The duration is

6½ years. The average conversion price is € 12.05 [2006:

€ 11.87].

Finance lease obligations Redemption of the finance

lease obligations will take place from 2007 up to and

including 2011.

Convenants In order to refinance part of its debt

obligations Océ concluded a multi-currency revolving

credit facility with a number of international banks in 2006.

In that same year Océ concluded US Private Placements

in the United States.

The multi-currency revolving credit facility consists of a

€ 500 million credit facility to Océ N.V. and a € 150 million

credit facility to Océ-Interservices N.V./S.A.

The contracts of the US Private placements to Océ N.V. of

$ 215 million and £ 20 million have similar documentation

containing financial covenants, specifically a leverage test

and an interest coverage test at levels that are market

customary for a company with a credit profile similar to

Océ. There were no breaches regarding the convenants

during the financial year 2007.

Credit facilities Océ has € 755.3 million of stand-by

credit facilities with several international banks. Of the

total amount € 376.5 million is used.

121

[22] Retirement 2007 2006 x € 1,000

benefit obligations Balance sheet:

Defined benefit plans 413,596 421,262

Pension costs for:

| defined contribution plans 16,202 17,047

| defined benefit plans 37,625 31,061

Total 53,827 48,108

Recognition of pension costs in the

income statement:

Cost of sales 21,214 18,441

Selling and marketing expenses 17,834 13,297

Research and development expenses 9,823 8,920

General and administrative expenses 4,956 7,450

Total 53,827 48,108

Defined contribution plans:

The contributions are recognized as ‘Defined contribution

plan’ under ‘Trade and other receivables’ when they are due.

Defined benefit plans:

The weighted average actuarial 2007 2006 per cent

assumptions are:

Discount rate 5.48 4.65

Expected return on plan assets 6.30 6.12

Expected increase in salaries 2.74 2.73

Expected increase in benefits 1.77 1.90

The pension costs for defined benefit plans are

charged to the income statement as follows:

Current service costs 39,392 46,641 x € 1,000

Interest costs 71,198 67,856

Expected return on plan assets - 72,406 - 66,544

Amortization of [gains]/losses - 410 377

Curtailments/settlements - 149 - 17,269 *

Total 37,625 31,061

* This mainly relates to the release of the pension provision of € 16.5 million in financial year 2006.


122

The amounts included in the balance sheet 2007 2006 x € 1,000

are determined as follows:

Present value of funded obligation - 1,154,201 - 1,289,549

Fair value of plan assets 1,139,040 1,149,417

- 15,161 - 140,132

Present value of unfunded obligations - 237,402 - 259,623

Funded status - 252,563 - 399,755

Unrecognized actuarial [gains]/losses - 160,301 - 21,471

Unrecognized past service costs - 732 - 36

Liability in the balance sheet - 413,596 - 421,262

Movements in defined benefit obligations: 2007 2006 x € 1,000

Defined benefit obligations at December 1, 2006/2005 - 1,549,172 - 1,545,306

Current service costs - 39,392 - 46,641

Interest costs - 71,198 - 67,856

Employee contributions - 12,084 - 12,296

Actuarial gains/[losses] 206,370 45,686

Amendments 879 20,285 *

Benefits paid 45,159 40,584

Exchange differences 27,835 16,372

Defined benefit obligations at November 30 - 1,391,603 - 1,549,172

Movements in the fair value of the plan assets: 2007 2006 x € 1,000

Fair value of assets at December 1, 2006/2005 1,149,417 1,077,013

Actual return on plan assets 8,001 76,331

Employer contributions 41,826 40,048

Employee contributions 12,084 12,296

Amendments - - 2,461 *

Benefits paid - 45,159 - 40,584

Exchange differences - 27,129 - 13,226

Fair value of plan assets at November 30 1,139,040 1,149,417


* This mainly relates to a change from defined benefit plans to defined contribution

plans in financial year 2006, which resulted in the release of the pension provision

in 2006 of € 16.5 million, net of the related and not yet recognized actuarial losses.

Reference is made to page 103.

123

[23] Trade and 2007 2006 x € 1,000

other liabilities

Trade accounts payable 241,383 201,335

Notes payable 13,029 9,330

Other taxes and social securities payable 68,969 65,719

Dividend financing preference shares 2,553 1,733

Defined contribution plan 3,887 3,688

Salary expenses and payroll taxes 150,659 154,939

Share-based compensation [25] 7,245 6,304

Deferred income 58,876 56,575

Other liabilities 28,781 37,134

Accrued expenses 68,977 69,824

Total 644,359 606,581

Less non-current - 12,235 - 15,137

Current 632,124 591,444

The carrying amounts approximate the fair value.

[24] Provisions for x € 1,000 other long term employee restructuring other total

other liabilities and employee termination

charges benefits benefits

At November 30, 2006 36,588 15,291 11,902 19,419 83,200

Addition charged to income statement 3,207 5,937 654 8,066 17,864

Release to income statement - 1,979 - 756 - 363 - 3,126 - 6,224

Withdrawals - 3,824 - 10,544 - 3,977 - 12,015 - 30,360

Exchange differences - 33 - - 78 636 525

At November 30, 2007 33,959 9,928 8,138 12,980 65,005

Non-current 32,899 5,666 4,134 6,595 49,294

Current 1,060 4,262 4,004 6,385 15,711

Total 33,959 9,928 8,138 12,980 65,005


12�

[25] Share-based

compensation

x € 1,000 settlement fair value at total expense fair value at

type November 30, 2006 recognized in the November 30, 2007

income statement

Share option plans cash alternatives 5,803 - 731 5,072

Share plans cash alternatives 501 1,672 2,173

6,304 941 7,245

Share plans equity 1,878 1,944 3,822

Total 8,182 2,885 11,067


Other long-term employee benefits include long-

service leave awards, jubilee and other long-service

benefits.

Employee termination benefits relate mainly to an

early retirement program in Germany [‘Altersteilzeit’].

This program is used by Océ to create an incentive for

employees, within a certain age group, to transit from [full

or part-time] employment into retirement before their legal

retirement age.

Restructuring relates mainly to the restructuring that

was initiated in 2005 to achieve further reduction in costs.

Other relates among other things to legal proceedings,

guarantee commitments and onerous contracts in respect

of buildings.

The total amount of restructuring cost in 2006 of € 18.0

million has been recognized for € 11.1 million under

restructuring, € 4.3 million under employee termination

benefits and for € 2.6 million under other.

As an incentive for the achievement of Océ’s objectives

over the long-term and to stimulate a long-term

involvement with the company, Océ operates several

share-based compensation plans, which were granted to

certain senior company executives.

At November 30, 2007, the liability arising from share-

based compensation amounts to € 7.2 million [2006:

€ 6.3 million].

The intrinsic value of vested share option plans at

November 30, 2007 amounts to € 2.0 million [2006: € 2.5

million].

Share option plans Up to and including the 2005

financial year, Océ issued share option plans to a group of

eligible employees in which option rights and/or Share

Appreciation Rights [SARs] in respect of ordinary shares in

Océ were granted. In addition, conditional options were

also granted to a limited number of participants.

Share option plans have an average vesting period of 2½

years and an exercise period of 6 years. During the

exercise period, the employees have an American call

option on ordinary shares Océ. The fair value of the option

plan is measured using binomial option-pricing model. The

expected volatility was determined using the historical

volatility of the equivalent period in the past from the

moment of measurement. The ‘expected dividends’ of

€ 0.58 per share are based on the past dividends. The risk

free rate used is based on the ‘Marginal Lending Facility’

of the European Central Bank [5.0%]. Based on historical

data, it is expected that employees, on average, will

exercise their option early if the stock price is 39% above

the exercise price.

The table on the following page shows the rights granted

under this share option plan.

12�

share option number of options exercise price outstanding at forfeited/ exercised outstanding at expiration date

plan of year granted in euro November 30, 2006 expired November 30, 2007

Exercisable

2002 716,000 9.77-13.19 354,500 - - 189,000 165,500 November 28, 2009/2010

2003 793,000 10.75-14.51 511,000 - - 203,500 307,500 November 27, 2010/2011

2004 1,138,500 12.21-12.30 591,500 125,800 * - 173,500 543,800 November 26, 2011/2012

2005 1,015,000 11.25-15.19 978,000 -11,666 - 117,000 849,334 November 30, 2012/2013

Total 3,662,500 2,435,000 114,134 - 683,000 1,866,134

Average exercise price in euro per share 11.19 12.31 10.94 11.35


By decision of the Supervisory Board dated July 2, 2007,

126,800 share options of the share option plan 2004 have

become unconditional for the Board of Directors and

Senior Management. This movement in share options is

included in the column forfeited/expired.

Regulation Participation in the Océ share option plans is

subject to regulations so as to prevent the misuse of

inside information. Participants are prohibited from trading

in Océ options on the Euronext Options Exchange in

Amsterdam and are not allowed to dispose of or pledge

the options that they have been granted.

Participants have to transfer the exercise of their options

to an independent Trustee designated by the company;

this Trustee will then exercise the options according to the

instructions given by the participants. Participants can only

give such instructions if they are not in possession of

inside information during the designated exercise periods.

A designated period is a period of at most 9 stock exchange

trading days after publication of the quarterly results.

Total number of options/SARs As at November 30, 2007 a

total of 1,866,134 unconditional option rights or SARs [2006:

2,435,000] in respect of ordinary shares were outstanding

at an average exercise price of € 11.35 [2006: € 11.19].

The 3-year vesting period of all share-options has passed

and all share-options have become unconditional and

exercisable. The average remaining duration of these

options is 4½ years.

Share plans At the end of 2004 the share option plan for

the members of the Board of Executive Directors and at

the end of 2005 the share option plan for other senior

managers were replaced by share plans. For former senior

executives of Imagistics International Inc. a transitional plan

is in place. As a result of the appointment of Mr. A.H. Schaaf

to the Board of Executive Directors, a fourth plan is in place.

All share plans are subjected to a service condition. At the

end of the vesting period, holders can chose between full

settlement in shares or partial settlement in cash, to fulfil

their tax obligation, and the remaining part in shares.

Share plan Board of Executive Directors At the beginning

of 2005 a conditional right to shares was granted to the mem-

bers of the Board of Executive Directors for the first time.

The share plan comprises the conditional granting of

shares in Océ N.V. Each year a plan with a 3-year vesting

period starts in which the company’s performance is

measured at the end of the vesting period against that of a

peer group of companies. The number of conditional

shares corresponds to a percentage [at most 60%] of the

fixed reference salary divided by the price of the share on

the stock market on the first day of the vesting period. The

relative ranking that Océ achieves in the peer group

determines the definitive number of shares that are

granted. At the end of the vesting period, the Board of

Executive Directors may choose to settle part of the plan

in cash to pay the tax amount due. The remaining shares

vested must be retained by the members of the Board of

Executive Directors for a specific period [lock-up period].

Share plan senior managers At the beginning of 2006 a

conditional right to shares was granted to senior managers

for the first time. The share plan senior managers

comprises the conditional granting of shares in Océ N.V.

The vesting period is 3 years and the non-market based

performance condition is a target operating income.

Depending on growth in target operating income, the

vesting of the number of shares can vary between 0% and

120% of the conditional number of shares granted.

With effect from 2007, the grant has been changed from

right to shares Océ N.V. to phantom shares Océ N.V.

*

126

Share plan July 2006 This share plan comprises the

granting of conditional shares in Océ N.V. to Mr. A.H.

Schaaf. The graded vesting period has a term of 2½ years.

The shares vest 33.4% directly and 22.2% on the last

working day of January of each calendar year during the

vesting period.


Share plan Imagistics The share plan Imagistics comprises

the conditional granting of shares in Océ N.V. The graded

vesting period comprises 3 years, on December 1st of

each year 33.3% of the grant vests.

share plan year number of stock price conditionally granted vested forfeited/ conditionally end of lock-up period

conditionally at grant day outstanding expired outstanding vesting in years

shares granted in euro shares at shares at period

November 30, November 30,

2006 2007

Board of Executive

Directors 2005 71,713 12.55 71,713 - - - 71,713 28-2-2008 3

Board of Executive

Directors 2006 66,083 14.30 66,083 - - - 66,083 27-2-2009 2

Board of Executive

Directors 2007 98,666 12.70 - 98,666 - - 98,666 28-2-2010 2

Senior managers 2006 386,750 14.25 382,500 - - - 19,097 363,403 30-11-2008 -

Senior managers 2007 419,284 12.34 - 419,284 - - 11,097 408,187 30-11-2009 -

Imagistics 2005 162,552 12.11 153,043 - - 51,039 - 4,739 97,265 1-12-2008 -

Imagistics 2006 80,131 12.59 - 80,131 - - 80,131 1-12-2009 -

July 2006 2006 34,630 12.28 23,064 - - 7,688 - 15,376 30-1-2009 -

Total 1,319,809 696,403 598,081 - 58,727 - 34,933 1,200,824

[26] Directors’ The individual remuneration of the members periodic pay performance total pension

remuneration of the Board of Executive Directors over 2007 is: related pay contributions

in euro

R.L. van Iperen 653,720 321,300 975,020 217,736

J. van den Belt 493,333 240,975 734,308 184,142

J.F. Dix 493,333 240,975 734,308 224,270

A.H. Schaaf 493,333 240,975 734,308 140,144

For more information, see pages 62 to 64 inclusive.

in euro age on indicative increase in accrued accrued pension rights capital build-up in

November 30, 2007 retirement age entitlements 2007 as at November 30, defined contribution

2007 plan as at

November 30, 2007

R.L. van Iperen 54 60 6,586 249,256 495,560

J. van den Belt 61 62 4,509 49,461 374,178

J.F. Dix 61 62 11,139 223,049 319,307

A.H. Schaaf 53 65 2,284 3,232 138,055

127


Pension entitlements The table on the previous page

shows the accrued pension entitlements of the members

of the Board of Executive Directors and the annual pension

amounts that would be paid to them on the basis of their

years of service as at the end of 2007. With effect from

January 2003 the pension scheme for members of the

Board of Executive Directors was converted from a

defined benefit plan into a hybrid scheme [defined benefit

plus defined contributions plan].

Share-based compensation

share option number of options exercise price outstanding at expiration date

plan of year granted in euro November 30, 2007

R.L. van Iperen 2002 21,000 9.77 21,000 November 28, 2010

2003 21,000 10.75 21,000 November 27, 2011

2004 35,000 12.21 35,000 November 26, 2012

J. van den Belt 2003 17,500 10.75 17,500 November 27, 2011

2004 29,100 12.21 29,100 November 26, 2012

J.F. Dix 2002 17,500 9.77 17,500 November 28, 2010

2003 17,500 10.75 17,500 November 27, 2011

2004 29,100 12.21 29,100 November 26, 2012

share plan number of conditional share price at first day conditionally out- expiration date

of year shares granted of performance period standing shares at

in euro November 30, 2007

R.L. van Iperen 2005 28,685 12.55 28,685 February 28, 2008

2006 26,433 14.30 26,433 February 28, 2009

2007 30,359 12.70 30,359 February 28, 2010

J. van den Belt 2005 21,514 12.55 21,514 February 28, 2008

2006 19,825 14.30 19,825 February 28, 2009

2007 22,769 12.70 22,769 February 28, 2010

J.F. Dix 2005 21,514 12.55 21,514 February 28, 2008

2006 19,825 14.30 19,825 February 28, 2009

2007 22,769 12.70 22,769 February 28, 2010

A.H. Schaaf 2006 34,630 12.28 15,376 January 30, 2009

2007 22,769 12.70 22,769 February 28, 2010

The remuneration for the 2007 financial year of the

present and former members of the Board of Supervisory

Directors amounted to € 255,335 [2006: € 226,973]. The

remuneration for the Board of Supervisory Directors is

fixed at € 50,000 for the chairman and at € 37,000 for the

members, in conformity with the scheme set out on page

66. At the end of the financial year the members of the

Board of Supervisory Directors held 2,969 ordinary shares

in Océ [2006: 2,969] and nil rights to options listed on the

Euronext Options Exchange [2006: nil].

At the end of the financial year the members of the Board

of Executive Directors held 15,256 ordinary shares in Océ

[2006: 11,566] and nil rights to options listed on the

Euronext Options Exchange.

12�

Operating Lease Receivables

Operating lease receivables are receivables arising from

contracts for the equipment rented out to third parties.

The future minimum rental revenues amount to:


2007 2006 x € million

12 month or less 113 138

1 - 5 years 118 142

Total 231 280

The future minimum lease receivables [reported last year:

� 341 million] decreased with € 49 million as a result of

the devaluation of the US dollar and the decrease in

revenues from fax business.

Commitments, Contingencies and Legal

Proceedings

Commitments Repurchase commitments amounting to

€ 7.1 million [2006: € 7.5 million] exist under the terms of

lease contracts with third parties. In respect of these

commitments, the amount expected to be paid within one

year is € 0.4 million [2006: nil] and the amount expected to

be paid between one and five years is € 6.7 million [2006:

€ 7.5 million]. As a result of these commitments the

machines can be sold again upon their return. The

estimated market value upon return is higher than the

repurchase commitment.

Total contracted operating lease commitments amount to

€ 268 million [2006: € 286 million]. These commitments

fall due over the next years. The maturity dates over the

next years are as follows:

2008 69 x € million

2009 53

2010 40

2011 28

2012 20

after 2012 58

Total 268

Other commitments, such as buying contracts etc., have

been entered into as part of normal business operations

solely.

Contingent liabilities: 2007 2006 x € million

Guarantee commitments 10.8 10.4

Government development credits 44.7 45.9

Government development credits are received for product

development. These credits are subject to a contingent

repayment. Upon determination of commercial success of

a project, a current liability is created to cover the

repayment in respect of that project and is charged to

research and development costs.

Legal proceedings Océ is involved in a number of legal

proceedings, most of which relate to matters resulting

from the normal conduct of business. Océ does not

expect these court cases to result in obligations that may

have a material effect on the company’s financial position.

To cover those cases in which it is likely that the outcome

of the legal proceedings will be unfavorable for Océ and in

which the resultant obligation can be reliably estimated, a

provision has been made in the consolidated financial

statements. Reference is made to note [24].

12�

Business Combinations

In 2005, Océ acquired Imagistics International Inc. The

initial accounting was completed in 2006. During 2007,

two errors were discovered in the initial accounting. The

correction of these errors led to an increase in the carrying

amount of goodwill of € 2.3 million.

On October 2, 2006 Océ acquired all activities of

X Engineering Systems XES Oy. In 2007 the initial

accounting of X Engineering Systems XES Oy was

completed. This completion did not lead to any

adjustments in the fair value of the net assets.

On November 9, 2006 Océ acquired CaseData Inc. The

initial accounting will be completed on November 30, 2009

as a result of a 3-year earn-out agreement. The earn-out

agreement consists of three clauses, of which two are

based on the ‘EBITDA’ measured respectively 6 months

and 12 months after the acquisition date. The third earn-

out clause is based on the cumulative sales of machines

and related software and services provided to a specific

customer measured over the period between the date of

acquisition and November 30, 2009. The comparative

figures 2006, as presented in the consolidated financial

statements contain the adjusted carrying amounts of

assets and liabilities due to the interim accounting.


The interim accounting of provisional fair values fair values x € 1,000

CaseData Inc. had the following

effect on assets and liabilities:

Goodwill 12,148 10,840

Software 1,206 675

Technology 36 36

Customer base 1,527 1,527

Trade marks and other 247 247

Property, plant and equipment 922 922

Trade and other receivables 4,834 4,834

Borrowings - 2,616 - 2,616

Trade and other payables - 483 - 483

Total purchase consideration 17,821 15,982

In 2007 Océ acquired the business activities of 2 small

entities, MPA Direct A.G. [Switzerland] and Thrane

Printing Systems A.S. [Norway] for a total amount of € 1.7

million. Reference is made to note [8].

Related-party Transactions

Océ provided loans to the Board of Executive Directors of

€ 65,000 [2006: € 250,000]. For a specification of this

amount reference is made to note [15].

Océ is not a party to any transactions or loans with any

other party that controls Océ, is controlled by Océ or is

under common control with Océ, or any associates,

individuals or enterprises with significant control over Océ

or the Board of Executive Directors.

Events after the Balance Sheet Date

On December 21, 2007 Océ N.V. and Captaris Inc.

reached agreement about the sale of Océ Document

Technologies G.m.b.H., located in Konstanz [Germany].

This transaction was concluded in January 2008.

Océ Document Technologies G.m.b.H. is a part of the

Strategic Business Unit Digital Document Systems and

provides for software and application-solutions for

document management, textrecognition and document-

classification, which activities are too far from the core-

activities of Océ. The company has assets per November

30, 2007 for a total of � 28 million, of which an amount of

� 23 million on intercompany accounts. Per November 30,

2007 the total liabilities were � 18 million, of which an

amount of � 13 million were retirement benefit obligations.

The sales price amounted to � 22.7 million and the

expected book profit [after deduction of costs] will be over

� 15 million.

130

Corporate Balance Sheet at November 30

before net income Assets 2007 2006 x € 1,000

appropriation

Non-current Subsidiaries 616,020 646,273

assets [27] Receivables from subsidiaries 558,241 568,080

Investment in associates 2,036 1,820

Deferred income tax assets 521 -

Available-for-sale financial assets 400 524


Other receivables 787 790

1,182,992 1,224,602

Current assets Receivables from subsidiaries 270,583 296,748


Other receivables 1,593 275

Current income tax receivables 7,430 5,296

Cash and cash equivalents [29] 114,103 59,918

405,010 371,930

Total 1,588,002 1,596,532

Corporate Income Statement

2007 2006 x € 1,000

Income of subsidiaries after taxes 61,374 53,490

Other income after taxes 15,723 1,487



131

Equity and liabilities 2007 2006 x € 1,000

Equity attributable Ordinary shares 43,667 43,642

to shareholders Priority shares 2 2

Financing preference shares 10,000 10,000

Share premium 512,008 511,569

Treasury shares - 35,956 - 45,822

Legal reserves - 139,575 - 118,357



677,135 684,516

Non-current Borrowings [30] 433,027 408,355

liabilities Payables to subsidiaries 34 31,588


Deferred income tax liabilities 594 8,269

448,441 452,940

Current Payables to subsidiaries 434,041 302,757

liabilities Borrowings [30] 19,570 147,672


Other liabilities [31] 7,198 5,223

462,426 459,076

Total 1,588,002 1,596,532


132

Notes to the Corporate Financial Statements

Summary of significant accounting policies The

corporate financial statements of Océ N.V. have been

prepared in accordance with provisions of Part 9, Book 2

of the Dutch Civil Code. Océ has applied the option in

Article 362 sub 8 to use the same accounting principles for

the recognition and measurement of assets and liabilities

and determination of results for the corporate financial

statements as the consolidated financial statements.

Investments in subsidiaries are carried at net asset value.

The net asset value is established by valuing assets,

provisions and liabilities and calculating the result, in

accordance with the accounting policies applied in the


For a list of principle subsidiaries reference is made to

pages 141 and 142. Investments in subsidiaries are

included at the pro rata value of Océ’s share in their net

assets value.

For principles of recognition and measurement of assets

and liabilities and determination of results reference is

made to the Notes to the Consolidated Financial

Statements.

[27] Non-current x € 1,000 subsidiaries receivables investments deferred available- derivates other total

assets from in associates income for-sale receivables

subsidiaries tax assets financial

assets

At November 30, 2005 581,876 969,822 1,477 - 764 8,828 781 1,563,548

Impact of adoption of IFRIC 11 - 5,649 - - - - - - - 5,649

At December 1, 2005 576,227 969,822 1,477 - 764 8,828 781 1,557,899


Incorporation and capital increase 79,001 - - - - - - 79,001

Share in income 53,490 - 504 - - - - 53,994

Elimination result on intercompany transactions - 7,568 - - - - - - - 7,568

Dividend - 12,430 - - 300 - - - - - 12,730

Additions - 2,342 - - - - 171 2,513

Repayments - - 344,788 - - - - - - 344,788

Gains/[losses] - - - - - 189 - 1,713 - 162 - 2,064

Foreign currency translations - 42,447 - 59,296 139 - - 51 - - - 101,655

At November 30, 2006 646,273 568,080 1,820 - 524 7,115 790 1,224,602


Divestment - 2,326 - - - - - - - 2,326

Share in income 61,374 - 441 - 3 - - 61,818

Elimination result on intercompany transactions - 12,795 - - - - - - - 12,795

Dividend - 34,190 - - 225 - - - - - 34,415

Additions - 45,429 - - - - - 45,429

Repayments - -2,050 - 521 - - - - 1,529

Gains/[losses] - - - - - 100 - 2,128 - 3 - 2,231

Foreign currency translations - 42,316 - 53,218 - - - 27 - - - 95,561

At November 30, 2007 616,020 558,241 2,036 521 400 4,987 787 1,182,992


133

[28] Derivatives x € 1,000 2007 2006


Interest rate swaps 588 13,484 940 2,961

Foreign exchange contracts 2,399 - 2,273 -

Cap on financing preference shares 2,000 - 3,902 -

Call option on convertible debentures to employees - 1,302 - 1,767

Non-current 4,987 14,786 7,115 4,728

Interest rate swaps 204 284 3,079 408

Foreign exchange contracts 11,097 1,244 6,614 2,961

Call option on convertible debentures to employees - 89 - 55

Current 11,301 1,617 9,693 3,424

Total 16,288 16,403 16,808 8,152

[29] Cash and cash 2007 2006 x € 1,000

equivalents

Cash and bank balances 3,303 918

Deposits 110,800 59,000

Total 114,103 59,918

Shareholders’ equity For specification see statement

of changes in equity under notes [19] and [20].

[30] Borrowings 2007 2006 x € 1,000








Non-current 433,027 408,355


13�

2007 2006 x € 1,000


Bank overdrafts 3,405 1,258

6.25% debenture due in 2007 - 123,129


Current 19,570 147,672

Total 452,597 556,027

Redemption of borrowing is as follows: 2007 2006 x € 1,000

12 months or less 19,570 147,672

1-2 years 843 1,304

2-3 years 600 934

3-4 years 354,684 822

4-5 years 1,040 322,361


Total 452,597 556,027

The fair value of borrowings is € 16.3 million higher than

the carrying amount [2006: € 13.2 million]. The carrying

amount of borrowings is € 1.0 million lower [2006: € 3.7

million higher] than the face value, as a result of the

application of hedge accounting.

The effective interest rates are as follows: 2007 2006 per cent

Convertible debentures to employees 4.00 3.99

Debentures and other loans 5.86 6.05

Employees may opt for convertible debentures under the

annual profit-sharing scheme. The duration is 6½ years.

The average conversion price is € 12.05 [2006: € 11.87].


13�

[31] Other 2007 2006 x € 1,000

liabilities

Preference dividend 2,553 1,733

Other 4,645 3,490

Current 7,198 5,223

[32] Employees Océ N.V. does not have any employees.

Commitments and contingent liabilities: 2007 2006 x € million

Bank guarantees for subsidiaries 31.5 33.2

Collateral securities provided for subsidiaries 52.5 55.6

Fiscal unity in the Netherlands

Océ N.V. forms a fiscal unity with several Dutch entities

for corporation tax purposes. The full list of Dutch entities

which are part of the fiscal unity is included in the list

containing the information referred to in article 379 and

article 414 Book 2 of the Dutch Civil Code, which is filed at

the office of the Chamber of Commerce in Venlo. In

accordance with the standard conditions, a company and

its subsidiaries that form the fiscal unity, are jointly and

severally liable for taxation payable by the fiscal unity.

Directors’ Remuneration

Reference is made to note [26] of the consolidated

financial statements.


Upon adoption of this proposed net income appropriation,

the dividend for the 2007 financial year will be: € 2 per

priority share of € 50, € 0.09 [rounded] per financing

preference share of € 0.50 and € 0.64 per ordinary share

of € 0.50. The final dividend per ordinary share for the

2007 financial year will amount to € 0.49, as a distribution

of € 0.15 per ordinary share was made on October 22,

2007 on account of the expected dividend. It is proposed

to make the final dividend per ordinary share available fully

in cash. This proposed net income appropriation is in

conformity with Article 36 of the Company’s Articles of

Association.

Extract from the Articles of Association relating

to net income appropriation The rules for net income

appropriation as laid down in the Articles of Association

can – where of relevance at the present time – be

summarized as follows [for literal text see Article 36 of the

Articles of Association]. Where possible, the following

dividends shall be distributed in turn from the net income:

first, on the protective preference shares a percentage of

the paid-up amount equal to the average three-month

EURIBOR percentage, weighted according to the number

of days during which it was applicable, increased or

reduced where necessary by at most two percentage

points; then on the priority shares 4% of the nominal

value. Subsequently, of the net income then remaining, as

much shall be reserved as may be deemed necessary by

the Board of Executive Directors, subject to approval of

the Supervisory Board. Then, on the financing preference

shares, 4.5% of the paid-up amount including share

premium, which percentage is fixed for the period until

December 1, 2012 and will subsequently be adapted each

time eight years thereafter. In sofaras the net income has

not been set aside in the form of reserves, it shall be at the

disposal of the holders of ordinary shares.

Signatures to the financial statements and other

information set out on pages 79 to 136:

January 25, 2008

The Board of The Board of

Supervisory Directors Executive Directors

P.A.F.W. Elverding R.L. van Iperen

G.J.A. van de Aast J. van den Belt

M. Arentsen J.F. Dix

A. Baan A.H. Schaaf

F.J. de Wit

Other information

136

Proposed appropriation of net income 2007 2006 x € 1,000

attributable to shareholders

Preference dividend 2,553 1,733

Cash dividend interim 12,732 12,619

Cash dividend final 41,606 36,178

Added to Retained earnings:


Total net income attributable to shareholders 77,097 54,977

Auditors’ report

To the General Meeting of Shareholders

of Océ N.V.

Report on the financial statements We have

audited the accompanying financial statements for the

year ended November 30, 2007 of Océ N.V., Venlo as set

out on pages 79 to 135. The financial statements consist

of the consolidated financial statements and the corporate

financial statements. The consolidated financial state-

ments comprise the consolidated balance sheet as at

November 30, 2007, the profit and loss account, state-

ment of changes in equity and cash flow statement for the

year ended November 30, 2007, and a summary of signifi-

cant accounting policies and other explanatory notes. The

corporate financial statements comprise the corporate bal-

ance sheet as at November 30, 2007, the corporate profit

and loss account for the year ended November 30, 2007

and the notes.

Managements’ responsibility The management of the

company is responsible for the preparation and fair pre-

sentation of the financial statements in accordance with

International Financial Reporting Standards as adopted by

the European Union and with Part 9 of Book 2 of the

Netherlands Civil Code, and for the preparation of the

report of the Board of Executive Directors in accordance

with Part 9 of Book 2 of the Netherlands Civil Code. This

responsibility includes: designing, implementing and main-

taining internal control relevant to the preparation and fair

presentation of the financial statements that are free from

material misstatement, whether due to fraud or error;

selecting and applying appropriate accounting policies;

and making accounting estimates that are reasonable in

the circumstances.

Auditors’ responsibility Our responsibility is to express an

opinion on the financial statements based on our audit.

We conducted our audit in accordance with Dutch law.

This law requires that we comply with ethical require-

ments and plan and perform our audit to obtain reasonable

assurance whether the financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the finan-

cial statements. The procedures selected depend on the

auditors’ judgement, including the assessment of the risks

of material misstatement of the financial statements,

whether due to fraud or error. In making those risk assess-

ments, the auditor considers internal control relevant to

the company’s preparation and fair presentation of the

financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of

the company’s internal control. An audit also includes eval-

uating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by

the management board, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit

opinion.

Opinion with respect to the consolidated financial state-

ments In our opinion, the consolidated financial state-

ments give a true and fair view of the financial position of

Océ N.V. as at November 30, 2007, and of its result and its

cash flows for the year ended November 30, 2007 in

accordance with International Financial Reporting

Standards as adopted by the European Union and with

Part 9 of Book 2 of the Netherlands Civil Code.

Opinion with respect to the corporate financial statements

In our opinion, the corporate financial statements give a

true and fair view of the financial position of Océ N.V. as

at November 30, 2007, and of its result for the year ended

November 30, 2007, in accordance with Part 9 of Book 2

of the Netherlands Civil Code.

Report on other legal and regulatory require-

ments Pursuant to the legal requirement under 2:393 sub

5 part e of the Netherlands Civil Code, we report, to the

extent of our competence, that the management board

report is consistent with the financial statements as

required by 2:391 sub 4 of the Netherlands Civil Code.

Amsterdam, January 25, 2008

PricewaterhouseCoopers Accountants N.V.

P.R. Baart RA

Other information

137

Board of Supervisory Directors

13�

as at January 25, 2008

P.A.F.W. [Peter] Elverding, chairman [1948],

Gulpen-Wittem

Post[s] held former chairman of the Board of Executive

Directors of Royal DSM N.V.

Nationality Dutch.

Appointed in 2006.

Current term of office until 2010.

Maximum period of office until 2018.

Committees at Océ chairman Selection and

Nomination Committee and member Remuneration

Committee.

Supervisory directorships member of the Super-

visory Board of ING Group N.V. and SHV Holdings N.V.

Other posts chairman of the Board of Trustees

Maastricht University and member of the Board of

Trustees Transnational University Limburg.

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

Bonaire [Netherlands Antilles]

Post[s] held former chairman of the Board of Executive

Directors of N.V. KNP B.T.

Nationality Dutch.

Appointed in 1997.



Committees at Océ chairman Remuneration

Committee and member Selection and Nomination

Committee.

Supervisory directorships none.

Other posts none.

G.J.A. [Gerard] van de Aast [1957], Laren

Post[s] held Chief Executive Officer of Reed Business

and Executive Director of Reed Elsevier Group plc and

Reed Elsevier N.V.

Nationality Dutch.

Appointed in 2006.



Committees at Océ member Audit Committee.

Supervisory directorships none.

Other posts none.

M. [Rinus] Arentsen RA [1939], Reeuwijk

Post[s] held former member of the Board of Executive

Directors of CSM N.V.

Nationality Dutch.

Appointed in 2004.



Committees at Océ chairman Audit Committee.

Supervisory directorships chairman of the

Supervisory Board of Klaverblad Verzekeringen U.A. and

Van der Moolen Holding N.V. and member of the

Supervisory Board of Incotec Group B.V.

Other posts board member of several foundations.

A. [Adri] Baan [1942], Eindhoven

Post[s] held former member of the Board of

Management of Royal Philips Electronics N.V. and a

former member of the Group Management Committee of

Royal Philips Electronics N.V.

Nationality Dutch.

Appointed in 2003.



Committees at Océ member of the Selection and

Nomination Committee and the Remuneration

Committee.

Supervisory directorships chairman of the

Supervisory Board of Royal Volker Wessels Stevin N.V.,

Wolters Kluwer N.V., Hagemeyer N.V. and Dockwise Ltd.

[Bermuda].

Other posts chairman of the Supervisory Board of the

Dutch Authority for Financial Markets [AFM], chairman

Administratiekantoor KASBANK N.V., member of the

Board of Trustees Amsterdam University and Amsterdam

Medical Center.


13�

as at January 25, 2008

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

Post chairman Board of Executive Directors.

Nationality Dutch.

Appointed as member of the Board of Executive

Directors in May 1995 and as chairman of the Board of

Executive Directors in September 1999.

Functional responsibilities Corporate Strategy,

Corporate Personnel & Organization, Secretariat of the

Company, Legal Affairs and Corporate Communications.

Geographical United States, Canada, Mexico, Germany,

Belgium, Switzerland and Japan.

Other posts member of the Supervisory Boards of

Technical University Eindhoven and Academic Hospital

Maastricht.

Previous posts Employed by Océ since 1978. After

several posts within R&D, appointed Vice President in

1986. From 1989 responsible for the Printing Systems

business unit. Managing Director of Océ-Belgium N.V.

from 1992 until his appointment as member of the

Executive Board.

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

Post member Board of Executive Directors.

Nationality Dutch.

Appointed March 2001.

Functional responsibilities Finance & Administration,

Corporate Treasury, Corporate Tax, Internal Audit, Investor

Relations and financing companies.

Geographical United Kingdom, Spain and Portugal.

Other posts member of the Supervisory Boards of

Accell Group N.V. and the Groeneveld Group B.V. and

member of the Board of Trustees Preference Shares

Gamma Holding.

Previous posts From 1970 employed by Unilever in the

Netherlands and the United Kingdom. Joined N.V. Royal

Dutch Petroleum Company [Shell] in 1977. Until 1997

various management posts with Shell in the field of

treasury and controlling and as Chief Financial Officer

[CFO] in various countries in Latin America, the United

Kingdom and the Netherlands. From 1997 until 2000 CFO

of Shell in Brazil. Joined Océ N.V. as CFO on September 1,

2000.

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


Nationality Dutch.

Appointed May 1998.

Functional responsibilities Océ Business Services,

Direct Export, Emerging Markets, Information Technology

and Marketing Communications.

Geographical France, Nordic, Central Europe, Far East

and Brazil.

Other posts none.

Previous posts From 1970 until 1972 director of the

family business Trappenfabriek Dix B.V., Utrecht. Joined

Douwe Egberts N.V. in 1972; from 1973 until 1977 as

director in Denmark. Joined Océ on March 1, 1977. After

several management posts, he was appointed Managing

Director of Océ-Belgium N.V. in 1985. Worked for Océ in

the United States from 1988 until 1998. Was President of

Océ-USA, Inc. from 1992 until his appointment as a

member of the Executive Board. Member of the Executive

Board of Océ N.V. since 1998.

A.H. [Anton] Schaaf [1954], Strasslach-

Dingharting [Germany]


Nationality Dutch.

Appointed October 2006.

Functional responsibilities Research & Develop-

ment, Manufacturing & Logistics and purchase of non-

product related commodities and services.

Geographical Netherlands, Germany, Italy and

Australia.

Other posts none.

Previous posts From 1987 until 2005 he worked for

Siemens AG in various posts world-wide, including the

posts of Executive Vice President, member of the

Executive Board and Chief Technology Officer of Siemens

Communications in Germany. Chief Technology Officer of

Deutsche Telekom AG from 2005.

Joined Océ N.V. on July 1, 2006 as Chief Technology and

Operations Officer and was appointed member of the

Executive Board of Océ N.V. on October 11, 2006.

1�0

January 2008

Strategic Business Units

Digital Document Systems

| Production Printing S. Landesberger

| Document Printing N.A.P. Debargue

Wide Format Printing Systems T. Egelund

Océ Business Services J.F. Dix a.i.

Production Printing

Graphic Arts and DiPP P. Wolff

Transaction and Mail S. Landesberger a.i.

Document Printing

Office and Printroom M.W. Drontmann

Wide Format Printing Systems

Technical Document Systems G. Rongen

Display Graphics Systems G.H. van Praag

Imaging Supplies C.P.G. Raijmakers


Wide Format Systems and Cutsheet Systems

A.H. Schaaf a.i.

Continuous Feed Systems P. Feldweg

Software M. Pracchi

Manufacturing and Logistics

M.L.M. Pennings

Central Operating Company Venlo

Executive Committee

L.C. Versluys, chairman

P.H.G.M. Creemers

T. Egelund

W.A.W. de Herder

J. Hol

F.W.T. Kool

P.M. Vincent

Central Operating Company Poing [Germany]

Executive Committee

P. Feldweg

S. Landesberger

A. Mittelsteiner

Corporate Staff

Secretariat of the Company, Legal Affairs F.W.T. Kool

Corporate Personnel & Organization P.H.G.M. Creemers

Group Finance & Administration P.M. Vincent

Chief Information Officer W.A.W. de Herder

Corporate Strategy P.F.A. Middelhoek

Corporate Treasury W.J.H. de Schrijver

Corporate Tax H.W.E.K. Dullens

Corporate Communications J. Hol

Internal Audit Department R.H. van Nie

Investor Relations C.A. Schaeken

Senior Executives Central Services

1�1

January 2008

Europe

Austria Océ-Österreich Ges.m.b.H. J. van Boerdonk Vienna +43.1 86.336

Belgium Océ-Belgium N.V./S.A. M.A.M.E. van Mierlo Brussels +32.2 729.4861

Océ Software Laboratories Namur S.A. B. Hucq Gembloux +32.81.876.710

Czech Republic Océ-Czeska republika s.r.o. J. Pachman Prague +420.2.4401.0111

Denmark Océ-Nordic Holding ApS J. Bjørkmann Copenhagen +45.43 29.7000

Océ-Danmark a/s H. Risør Copenhagen +45.43 29.7000

Finland Océ-Finland Oy J.P. Koskenmies Helsinki +358.207.438.710

France Océ-France S.A. N.A.P. Debargue a.i. Noisy-le-Grand +33.1.4592.5000

Océ Print Logic Technologies S.A. R. Balmès Créteil +33.1.4898.8000

Océ Business Services S.A. N.A.P. Debargue a.i. Neuilly-sur-Seine +33.1.4592.5000

Germany Océ Holding Deutschland P. Feldweg and Mülheim/Ruhr +49.208.48.45.0

Verwaltungsgesellschaft m.b.H. J. van Boerdonk

Océ-Deutschland G.m.b.H. J. van Boerdonk and Mülheim/Ruhr +49.208.48.45.0

L. Pouwels

Océ Printing Systems G.m.b.H. P. Feldweg, Poing +49.8121.72.4031

S. Landesberger and

A. Mittelsteiner

Océ-Deutschland Business Services G.m.b.H. J. van Boerdonk Mülheim/Ruhr +49.208 48.45.0

Hungary Océ-Hungária Kft. G. Németh Budapest +36.1236.1040

Ireland Océ-Ireland Ltd. B. Curley Dublin +353.1403.9100

Italy Océ-Italia S.p.A. G. Seno Milan +39.02.92726.1

Netherlands Océ-Technologies B.V. L.C. Versluys Venlo +31.77.359.2222

Océ-Nederland B.V. J.W.C. Verschaeren ‘s-Hertogenbosch +31.73.6.815.815

Arkwright Europe B.V. C.P.G. Raijmakers Venlo +31.77.320.9020

Océ-America, Inc. R.P.M.J. van Loenen Venlo +31.77.359.2222

and P.M. Vincent

Océ General Partnership R.P.M.J. van Loenen Venlo +31.77.359.2222

and P.M. Vincent

Norway Océ-Norge A.S. J. Bjørkmann Oslo +47.2202.7000

Poland Océ-Poland Limited Sp. Z o.o. M. Kozlowski Warsaw +48.22.500.2100

Portugal Océ-Portugal Equipamentos Gráficos S.A. F. Vestjens a.i. Lisbon +351.21.412.5700

Romania Océ-Software S.R.L. M. Mühe Timisoara +40.256.200.786

Slovakia Océ-Slovenská republika s.r.o. J. Pachman Bratislava +420.2.4401.0228

Spain Océ-Iberia Holding Valores S.L. F. Vestjens a.i. Barcelona +34.934.844.800

Océ-España S.A. F. Vestjens a.i. Barcelona +34.934.844.800

Sweden Océ Svenska AB J. Bjørkmann Stockholm +46.8.703.4000

Switzerland Océ [Schweiz] A.G. Ph. Convents Glattbrugg +41.44829.1111

United Kingdom Océ [UK] Limited B. Curley Brentwood +44.870.600.5544

* 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.

Principal subsidiaries*

1�2

North America

United States Océ-USA Holding, Inc. R.L. van Iperen Chicago, IL +1.773.714.4401

Océ North America, Inc. J.D. Skrzypczak Trumbull, CT +1.800.945.9708

| Commercial Printing Division M. Baboyian Boca Raton, FL +1.561.997.3100

| Corporate Printing Division C. Dewart Trumbull, CT +1.203.365.7000

| Wide Format Printing Division P. Chapuis Chicago, IL +1.800.877.6232

Arkwright Inc. J. Heath Fiskeville, RI +1.800.556.6866

Océ Business Services, Inc. J.R. Marciano New York, NY +1.800.937.2724

Océ Reprographic Technologies, Corp. A. Mainoli Phoenix, AZ +1.602.744.1300

Onyx Graphics, Inc. L. Hanssen a.i. Salt Lake City, UT +1.801.568.9900

Canada Océ-Canada Inc. S. Goodall Toronto +1.416.224.5600

Océ Display Graphics Systems G.H. van Praag Vancouver +1.604.273.7730

Mexico Océ Mexico S.A. de C.V. J. Escudero Mexico City +52.55.5089.8710

Asia/Pacific

Australia Océ-Australia Ltd. S.J.J. Notermans Scoresby +61.3.97303333

China Océ Office Equipment [Shanghai] Co., Ltd. M. Sak Shanghai +86.21.3865.7600

Océ Rental [Shanghai] Co., Ltd. H. Würges Shanghai +86.21.5496.1188

Hong Kong Océ [Hong Kong China] Ltd. M. Sak Hong Kong +852.2166.0333

Japan Océ-Japan Corporation Y. Yamamoto Tokyo +81.3.5402.6112

Malaysia Océ Malaysia Sdn. Bhd. A.A.C. Hoeben Petaling Jaya +60.3.7966.8000

Singapore Océ [Singapore] Pte. Ltd. A.A.C. Hoeben Singapore +65.64701.500

Thailand Océ [Thailand] Ltd. A. Lübbers Bangkok +66.2.260.7133

Other countries

Brazil Océ-Brasil Comércio e Indústria Ltda. R. Uildriks São Paulo +55.11.3053.5300

Direct Export/Emerging Markets

Netherlands Océ Direct Export/Emerging Markets H. Würges Venlo +31.77.3592222

Financing companies

Australia Océ-Australia Finance Pty. Ltd. S.J.J. Notermans Scoresby +61.3.9730.3333

Belgium Océ-Interservices N.V./S.A. M.G.M. Berben Brussels +32.2.729.4861

France Océ-France Financement S.A. S. Kovacs Saint-Cloud +33.1.4592.5000

Germany Océ-Deutschland Financial Services G.m.b.H. L. Pouwels Mülheim/Ruhr +49.208 48.45.0

Portugal Océ-Renting S.A. F. Vestjens Lisbon +351.21.412.5700

Spain Océ-Renting S.A. E. de Sus Barcelona +34.934.844.800

United Kingdom Océ [UK] Finance Ltd. B. Curley Brentwood +44.870.600.5544

United States Océ-Financial Services, Inc. M. Gingold Boca Raton, FL +1.561.997.3100

Minority holdings

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

Singapore Datapost Pte. Ltd. 30%

Principal subsidiaries

1�3

Investor Relations [IR] policy By maintaining regular

and direct contacts with [potential] investors Océ is able to

form a picture of their wishes and ideas. The aim of Océ is

to keep them informed in good time and in the most

effective possible way about developments within the

company in order to provide them with a clear picture on

which to base their investment decisions with regard to

Océ. This relates to information about the financial results,

the company’s strategic choices and objectives and about

social aspects such as sustainability.

The principal document for the provision of information is

this annual report. In addition, Océ publishes quarterly

results, organizes press conferences and conference calls,

roadshows, one-on-one meetings, group meetings and

other informative meetings for analysts and institutional

investors. Furthermore Océ organizes an Océ Private

Investor Day where the company presents itself to private

investors.

Via the Investor Information link on the Océ website all

sorts of relevant information can be found, such as annual

and quarterly figures, press releases and information,

relating to Corporate Governance, agendas and minutes of

the Annual General Meeting of Shareholders and links to

other sources. On the website it is also possible to take

out a subscription to the Inside Océ magazine.

Investors and/or their advisers are welcome to submit any

questions direct to Océ’s Investor Relations department

by telephone [+31] [0] 77 359 2240 or via e-mail

[[email protected]].

Supplementary information for shareholders

1��

Quarterly results 2007 2006

[net income attributable to shareholders]

x € million % change x € million

on previous year

First quarter 11.7 - 1 11.9

Second quarter 17.9 54 11.6

Third quarter 12.2 110 5.8

Fourth quarter 35.3 38 25.7

Year 77.1 40 55.0

Quarterly results 2007 2006

[basic earnings per ordinary share, calculated

on the basis of the weighted average number in euro % change in euro

of shares outstanding] on previous year

First quarter 0.13 - 7 0.14

Second quarter 0.20 53 0.13

Third quarter 0.14 125 0.06

Fourth quarter 0.41 38 0.30

Year 0.88 39 0.63


1��

Important announcement dates [subject to

modification]

April 3, 2008 first quarter results 2008

April 23, 2008 general meeting of shareholders

July 3, 2008 second quarter / first half year

results 2008

October 1, 2008 third quarter / nine months

results 2008

January 2009 provisional results for 2008

February 2009 publication of 2008 annual report

Stock exchange listings Ordinary shares in Océ are

listed on the stock exchanges in Amsterdam, Düsseldorf,

Frankfurt/Main and on the electronic stock exchange [EBS]

in Switzerland.

Options to Océ shares are traded on the Euronext Options

Exchange.

On January 23, 2008 Océ announced its intention to

voluntarily delist from the stock exchanges in Germany

and Switzerland. It is expected that Océ ordinary shares

will be solely listed on NYSE Euronext in Amsterdam with

effect from June 2008.

Large Shareholdings Notification Act Since 1992 a

statutory obligation has existed in the Netherlands to

notify any controlling interest or large holding of capital in

publicly listed companies where such holding exceeds a

certain threshold value. This obligation is described in the

Financial Supervision Act [Wet op het financieel toezicht].

The aim of this act is to provide greater transparency as

regards controlling interests and capital holdings in

securities issuing institutions and to make the notification

procedure for those obliged to notify simpler than it was in

previous legislation.

Those obliged to notify are:

| the issuing institution that reports any change in its

issued share capital;

| the shareholder whose existing substantial interest in

the issued capital reaches, exceeds or moves below a

certain threshold percentage;

| the holder of shares that carry a special controlling right

under the company’s Articles of Association;

| the executive directors and supervisory directors who

notify the shares and the voting rights that they hold.

An automatic notification and registration reference

system is used by the Dutch Authority for Financial

Markets [AFM]. Details of this system can be found on the

website www.afm.nl/registers/

As at November 30, 2007 [end of the financial year] the

following notifications had been made to the Authority for

Financial Markets with regard to Océ N.V.:

Fortis Utrecht N.V. Total holding 8.53%, of which

7,280,000 depositary receipts for cumulative convertible

preference shares and 1,586,922 ordinary shares in Océ.

Ducatus N.V. Total holding 9.99%, consisting solely of


preference shares in Océ.

ING Groep N.V. Total holding 9.11649%, consisting of


preference shares and 7,478,456 ordinary shares in Océ.

Pictet & Cie Total holding 5.65%, consisting solely of

ordinary shares in Océ.

Orbis Investment Management Limited Total voting right

7.48076%.

BriTel Fund Trustees Limited Total holding 5.02%

consisting solely of ordinary shares in Océ.


1�6

Consolidated Income Statement IFRS IFRS IFRS Dutch GAAP Dutch GAAP Dutch GAAP

amounts x € million 2007 2006 2005 2005 2004 2003

Total revenues 3,098 3,110 2,677 2,677 2,652 2,769

Operating income 121 102 113 110 110 125

Net income 79 57 82 81 81 64

Net income attributable to shareholders 77 55 80 79 78 61

Key figures:

Total revenues

| Increase/decrease in % - 16 - 1 - 4 - 13

Expenses on research and development 228 221 232 * 193 207 212

| As % of total revenues 7.3 7.1 8.7 7.2 7.8 7.7

Operating income


Net income attributable to shareholders


| As % of average equity attributable to shareholders 11.3 8.1 11.8 10.7 10.9 8.3

Return on Capital Employed [RoCE] 7.3 5.6 8.9 8.1 7.7 6.8

Retained net income attributable to shareholders 20 4 29 28 26 10

| As % of net income attributable to shareholders 27.1 8.4 37.6 36.7 35.0 16.5

Employee benefit expenses 1,332 1,354 1,183 1,184 1,228 1,271


Number of employees 23,798 23,784 24,164 24,164 21,315 22,204

Earnings per ordinary share for net income

attributable to shareholders [in euro]:

Basic 0.88 0.63 0.93 0.92 0.89 0.69

Diluted 0.87 0.63 0.92 0.91 0.88 0.69

Per ordinary share [in euro]:

Free cash flow 2.26 1.41 - 6.06 - 6.06 4.44 3.93

Equity attributable to shareholders 7.33 7.48 7.81 8.65 7.87 7.87

Dividend 0.64 ** 0.58 0.58 0.58 0.58 0.58

Weighted average number of ordinary

shares outstanding [x 1,000] 84,315 83,899 83,698 83,698 83,488 83,409

Increase from dilution [x 1,000] 1,796 1,678 971 971 1,271 759

Share price [in euro]:

Year’s highest 18.68 15.39 13.54 13.54 16.10 13.70

Year’s lowest 11.15 10.92 10.80 10.80 10.60 6.50

Year end 12.39 12.59 12.11 12.11 11.25 11.92

* Commencing December 1, 2005, Océ classifies innovation costs as ‘Operating expenses’. Until November 30, 2005, these costs were classified as ‘Cost of sales’.

For the purpose of comparison, the IFRS figures for the 2005 financial year have been adjusted accordingly.

** Proposal to the Shareholders meeting of April 23, 2008.

Océ 2003-2007

1�7

Océ 2003-2007

Consolidated Balance Sheet IFRS IFRS IFRS Dutch GAAP Dutch GAAP Dutch GAAP

amounts x € million 2007 2006 2005 2005 2004 2003

Assets:

Non-current assets 1,281 1,399 1,491 1,459 878 1,103

Current assets 1,199 1,198 1,356 1,360 1,355 1,318

Non-current assets held for sale 11 9 - - - -

Total 2,491 2,606 2,847 2,819 2,233 2,421

Equity and liabilities:

Equity 713 721 748 818 752 752

Non-current liabilities 1,041 1,079 785 740 954 977

Current liabilities 737 806 1,314 1,261 527 692

Total 2,491 2,606 2,847 2,819 2,233 2,421

Key figures:

Property, plant and equipment 373 428 455 455 423 431

| Net capital expenditure 55 75 86 86 74 81

| Depreciation 91 94 89 89 86 94

Rental equipment 108 112 124 124 58 63

| Net capital expenditure 71 67 49 49 40 14

| Depreciation 68 71 38 38 43 65

Finance lease receivables [including short term

finance leases and non-current assets

held for sale] 276 313 343 343 403 801

| As % of balance sheet total 11 12 12 12 18 33

Inventories 328 340 364 364 317 310

| As % of total revenues 11 11 14 14 12 11

Trade accounts receivables 499 549 568 573 452 503

| As % of total revenues 16 18 21 21 17 18

Ratio of current assets to current liabilities 1.6 1.5 1.0 1.1 2.6 1.9

Equity as % of balance sheet total 29 28 26 29 34 31

1��

AFM Authority Financial Markets: the Dutch Authority for

Financial Markets.

Asset recovery The recovery from used equipment of

all serviceable materials, parts and components so that

they can be made suitable for re-use.

CAD Computer Aided Design: designing with the aid of

the computer.

Captive lease company An Océ company which takes

over lease and leasing activities from other Océ

subsidiaries. The lease receivables are then sold to

external financiers.

CEO Chief Executive Officer.

CFO Chief Financial Officer.

CIO Chief Information Officer.

Competencies management Policy aimed at

increasing the professional performance of employees

and accelerating the development of [young] talent.

Continuous feed printing Printing on rolls of paper or

on pinfeed forms.

CopyPress printing technique System for producing

copies of offset quality in which the toner is ‘pressed’ into

the paper.

Corporate operational excellence All activities

aimed at optimizing and harmonizing the business

processes.

Cost of ownership Ongoing fixed and variable costs

linked to the use of a product after it has passed into

customer use.

CTOO Chief Technology and Operations Officer.

Customer intimacy Indicates the very close

cooperation with the customer during the delivery of

products and services.

Cutsheet printing Printing on separate sheets of paper.

DDS The Strategic Business Unit Digital Document

Systems.

DGS The business group Display Graphics Systems.

Digital print providers Businesses that are specialized

in the production of prints for third parties [copyshops and

job printers].

Distribute-then-print Distribution of the printing

process for identical prints between various printers that

are often located far apart from each other, aimed at

avoiding physical transportation costs.

Document management The complete process of the

creation, distribution and presentation of documents.

Document workflow software Software used for the

processing of document flows and all related activities.

Dpi Dots per inch: Indicates the resolution of a scan or

print, i.e. the number of dots scanned or displayed per

inch.

Dutch GAAP Generally Accepted Accounting Standards

Dutch accounting principles used in the preparation of the

financial statements.

EBIT Earnings Before Interest and Tax: financial term

used to describe the result before deduction of financing

costs net and tax charges.

Eco design Design and composition of products

according to the latest environmental and safety

requirements.

Eco solvent A solvent with relatively little negative

impact on the environment.

E-discovery Discovery and classification of specific

information stored in digital files.

EDP Electronic Data Processing: the digital processing of

data by a computer.

Embedded software Basic software for controlling Océ

products.

ERP Enterprise Resource Planning: standard software

that integrates the most important business functions

within one complete package [company-wide IT solution].

EuP Energy-using Products: European directive relating to

ecological design for energy consuming products.

List of terms and abbreviations

1��

Field upgradable Indicates the possibility of adding

new and extra functionality to a machine by installing new

components as well as software ‘in the field’.

Finishing In relation to printers: post-printing operations

such as: folding, cutting, stapling, collecting, glueing,

franking, collating etc.

Flatbed printers Wide format printers in which the

printhead moves across a flat plate, enabling the printing

of non-flexible surfaces.

Free cash flow The cash flow before financing activities

[including dividends].

GIS Geographical Information System: information

system covering all sorts of data related to environmental

planning.

GRI Global Reporting Initiative: organization that develops

basic principles for the reporting of factors relating to

sustainable business practices.

Hedging policy Providing cover against foreign

exchange risks by means of forward buying or selling of

expected physical net outflows and inflows in foreign

currencies that are not the functional currency of the

reporting unit. Interest risks can also be hedged so as to

minimize mismatches between net interest inflows and

outflows.

IAC Internal Audit Committee.

ICC Internal Controls Committee [United States sub-

committee of the IAC].

ICT Information and Communication Technology.

IFRS International Financial Reporting Standards:

standard accounting principles prescribed in the EU for

publicly listed companies. Have been applicable to Océ as

from the 2006 financial year.

Imaging supplies All materials required for printing,

such as print media [paper, plastics, textiles], inks and

toners.

Inkjet technology Printing technique in which the

printed image is built up from very fine droplets of ink.

IR Investor Relations.

IS The business group Imaging Supplies.

LED Light Emitting Diode: semiconductor that produces

light when direct current is passed through it.

Media In relation to printing: all materials on which a print

is produced.

Non-recurring revenues Revenues from the sale of

machines, software and professional services.


1�0

OBS Océ Business Services.

Océ Group Indicates Océ N.V. [the holding company]

and all consolidated Océ companies. The terms Group,

Océ Group or Océ are used to refer to the business as a

whole.

OEM Original Equipment Manufacturer: refers to the

producer of a machine that is used in the sales process of

another producer or distributor.

OPC Organic Photoconductor: light-sensitive

photoconductor [drum or belt] for transferring the image

onto the copying material.

Organic growth The development of the results

excluding acquisition and exchange rate effects.

Outsourcing The contracting out of document

processes within a company to a specialized external party

such as Océ Business Services.

POP / POS Point-of-Purchase / Point-of-Sale: refers to

advertising media that are used in stores and shopping

malls, such as showcards, banners, posters etc.

Print-for-pay Refers to printing processes of companies

where commercial printing is the primary process.

Print-for-use Refers to printing processes that serve to

support a company’s primary business processes.

Private label concept Performing activities under a

brand name other than the company’s own brand name. In

the case of finance leasing the lease partner is allowed to

use the Océ name when offering financing facilities to its

contract partners.

Process drum Image carrier in the Direct Imaging [DI]

process.

REACH Registration and Authorization of Chemical

substances: European directive: a company must be

aware of the risks of all substances that it produces,

processes or passes on to customers and must specify

the measures needed to control such risks.

Records management Service related to the

registration, archiving, retrieval and [re]production of all

documents that are of importance for the conduct of a

business.

Recurring revenues Revenues from services, inks,

toners, media, rentals, interest and business services.

Remanufacturing Restoring used machines to an as-

new condition so that they can embark on a new life cycle;

this involves thorough cleaning, replacement of parts

subject to wear and tear and possibly the addition of new

functionalities.

R&D Research & Development.

RoCE Return on Capital Employed: operating income for

the year, after normalized taxes [20%] as % of Net Capital

Employed. Net Capital Employed is total assets excluding

cash and cash equivalents, minus non-interest bearing

liabilities corrected for derivatives.

RoE Return on Equity: ordinary net income as a

percentage of ordinary shareholders’ equity [financial

ratio].

RoHS Restriction of Hazardous Substances: European

directive to reduce hazardous substances.

Roll-to-roll Method of [wide format] printing for very

long media in which the printed material is directly wound

onto another roller.


1�1

Spine Project that started in 2006 and is aimed at

harmonizing the business processes of Océ, supported by

a new ICT system.

Stakeholders All those who have an interest in Océ’s

activities.

Statement printers Companies that produce large

quantities of documents such as bank statements,

invoices and policies for third parties or for internal use.

Supply chain management Systematic and strategic

coordination of the supply chain business functions across

several business units within an organization.

TDS The business group Technical Document Systems.

Technical Documentation Lifecycle Services

Service for the total handling, archiving, searching and

reproduction of all documents relating to the development

and manufacture of technical documentation.

Transaction printing The printing of documents that

support a company’s primary business process, such as

invoices, daily statements, order confirmations, packing

lists and waybills.

Transpromo Refers to the use of personalized

advertising in business correspondence sent out to

customers, such as bank statements, energy statements,

policies etc. See also white space marketing.

UV ink Ink for printers that dries when exposed to

ultraviolet light.

Variable dot technology Technology used in inkjet

printing to vary the size of the ink droplets, enabling much

more subtle shades and color gradients than can be

achieved with a fixed droplet size.

Volume segment Internationally accepted standard

used within the industry to subdivide the printing and

copying markets into segments based on the number of

prints or copies produced per machine per month.

WEEE Waste Electrical and Electronic Equipment:

European directive to reduce waste materials from

electrical and electronic products.

WFPS The Strategic Business Unit Wide Format Printing

Systems.

White space marketing Refers to the incorporation of

personalized advertising messages in commercial

correspondence with customers, such as bank

statements, energy bills, insurance policies etc. The term

indicates that empty spaces on the paper are often used

for this.

Workflow management Used at Océ to mean:

managing the volume of print assignments and the related

activities within an organization.


1�2

This annual report contains information as referred to in

article 5:59 in conjunction with article 5:53 of the Dutch

Financial Supervision Act [Wet op het financieel toezicht].

Any forward-looking statements in this report refer to

future events and may be expressed in a variety of ways,

such as ‘expects, ‘projects’, ‘anticipates’, ‘intends’ or

other similar words.

Océ N.V. [“Océ”] has based these forward-looking

statements on its current expectations and projections

about future events. Océ’s expectations and projections

may change and Océ’s actual results, performance or

achievements could differ significantly from the results

expressed in or implied by these forward-looking

statements due to possible risks and uncertainties and

other important factors which are neither manageable nor

foreseeable by Océ and some of which are beyond Océ’s

control.

When considering these forward-looking statements, you

should bear in mind these risks, uncertainties and other

important factors described in this annual report or in

Océ’s other annual or periodic filings.

For a non-limitative discussion of the risks, uncertainties

and other factors that may affect Océ’s actual results,

performance or achievements, we refer you to this annual

report and other publications issued by Océ.

In view of these uncertainties no certainty can be given

about Océ’s future results or financial position. We advise

you to treat Océ’s forward-looking statements with

caution, as they speak only as of the date on which the

statements are made. Océ is under no obligation to update

or revise publicly any forward-looking statement, whether

as a result of new information, future events or otherwise,

except as may be required under applicable [securities]

legislation.

Forward-looking statements

Printing forProfessionals

Océ Jaarverslag 2007

Colofon

Van dit jaarverslag is ook een Engelse vertaling verkrijgbaar.

In het geval van tekstuele verschillen tussen de Engelse en

de Nederlandse versie prevaleert de laatste.

This annual report is also available in English. In the event of

textual inconsistencies between the English and the Dutch

version the latter shall prevail.

Vormgeving Carmen Arends, Venlo

Omslag illustratie Geert Setola, Oirsbeek

Fotografie Thijs Wolzak, Amsterdam;

pagina’s 12-13, 18, 22-23, 24 en 58-59

Overige fotografie Diverse fotografen

Tekstadviezen Martin van den Akker, Tekstiel, Amsterdam

Druk Drukkerij Lecturis B.V., Eindhoven

Papier binnenwerk Coated Paper Silk, 150 g/m2,

geleverd door Océ Imaging Supplies

Papier omslag Coated Paper Silk, 250 g/m2,

geleverd door Océ Imaging Supplies

© 2008 Océ

Océ Jaarverslag 2007Océ maakt vaart

zoals een vogel zijn vleugels spreidt

en met krachtige wiekslagen

naar zijn territorium klimt: de blauwe lucht.

Océ spiegelt zich dit jaar aan dit beeld.

Het succes van vele nieuwe producten

zorgt voor opwaartse druk. De dynamiek

van nieuwe markten en nieuwe toepassingen

biedt de noodzakelijke versnellingen.

En de inzet van alle betrokkenen levert de kracht

en vastberadenheid om de gestelde doelen

voor alle stakeholders te bereiken.

Océ maakt vaart

zoals een vogel zijn vleugels spreidt

en met krachtige wiekslagen

naar zijn territorium klimt: de blauwe lucht.