Océ Report for the ﬁnancial year December 1,...

99

Océ Annual Report

Report for the financial year

December 1, 1998

to November 30, 1999

Océ ..

.. Box 101, 5900 Venlo, the Netherlands

Océ enables people to share information by offering products

and services for the reproduction, presentation, distribution and

management of documents.

This is a complete English translation of the official annual report published in Dutch.

We trust it will give a clear presentation of the Company’s operations and results, although some of the terminology

is that required by Dutch law or usage rather than that used in other countries. Certain financial/technical terms have

been translated in line with American usage.

Only the Dutch text is legally binding.

De Nederlandse uitgave van dit jaarverslag wordt u op aanvraag gaarne toegezonden.

Contents

6 Océ Profile

8 Report of the Board of Supervisory Directors

9 Composition of the Board of Supervisory Directors

12 Key figures

Report of the Board of Executive Directors

13 Main outlines

13 Results

14 Dividend

14 Prospects

15 Strategic outlook

17 Risk management

21 Financial review

24 Commercial and financial activities

28 Use of funds and finance

32 Lease

34 Busuness Units (markets, products/services)

35 Wide Format Printing Systems

36 Document Printing Systems

38 Production Printing Systems

40 Facility Services

41 Imaging Supplies

42 Research & Development ()

43 Safety, Health and the Environment

44 Manufacturing & Logistics

45 Personnel & Organisation

Financial Statements

49 Consolidated Statements of Operations

50 Consolidated Balance Sheets

52 Consolidated Statements of Cash Flow

54 Summary of Significant Accounting Principles

58 Notes to the Consolidated Statements of Operations

61 Notes to the Consolidated Balance Sheets

70 Company Balance Sheets

70 Company Statements of Operations

72 Notes to the Company Balance Sheets and the Company Statements of Operations

Other information

75 Net income appropriation

76 Authorised capital

78 United States generally accepted accounting principles ( )

81 Auditors’ report

Miscellaneous

83 Directors Central Services

84 Principal companies and their chief executives

86 Supplementary information for shareholders

88 Océ 1990-1999

90 List of terms and abbreviations

The future is present—on demand and at the speed of light

Océ Profile

6

Océ offers a broad range of products and services for the reproduction, presentation

and distribution of documents. In this way Océ enables people and organisations to

manage their document flows, allowing them to exchange information effectively

and efficiently. The range consists of high-quality printing and copying systems,

application software, consumables and imaging supplies. These products and

services are also offered in the form of a total package via outsourcing (Facility

Services).

Océ focuses on three main markets: document printing systems, wide format

printing and copying systems and production printing systems. Océ largely

develops, produces and markets these products itself. The related service and

financing are also handled by the company itself. In addition, some of the products

are selectively supplied via third parties.

In 1999 the Océ Group achieved total revenues of almost € 3 billion. World-

wide the Company employs more than 21,000 people in Océ operating companies

in more than 30 countries.

Océ has built up a leading position on its markets world-wide by supplying

state-of-the-art products and services. These are characterised by their high quality,

reliability, productivity, durability, ease of use and environmental friendliness.

Each year the Company invests some 6% of its total revenues in Research &

Development. Océ’s technology base is also strengthened via systematic cooperation

– even in the development phase – with suppliers, co-developers and, to an in-

creasing extent, with strategic partners.

Since most of the sales and service activities are handled via the Group’s own

distribution channels, Océ can provide the customer with professional support in a

one-on-one relationship. As a result Océ also has access to the most up-to-date

market information. The Company is therefore always able to respond effectively

and alertly to market needs by supplying a well-balanced range of products and

services.

The head office of the Océ Group is located in Venlo, the Netherlands.

The greater part of the research, production and international marketing activities

are also concentrated in Venlo, within the central operating company

Océ-Technologies .. The Océ Group also has its own research centres and/or

manufacturing facilities in Belgium, Germany, France, the Czech Republic and the

United States.

The – publicly listed – holding company of the Group is Océ ..

Further details about share listings and the Océ share can be found on pages

86 and 87.

Océ Profile

7

Board of Supervisory Directors H.B. van Liemt, chairmanM. Ververs, vice-chairman L.J.M. Berndsen

P. Bouw

J.V.H. Pennings

F.J. de Wit

Board of Executive Directors R.L. van Iperen, chairmanJ.F. Dix

H.J.A.F. Meertens

G.B. Pelizzari

Staff Director/Company J.M.M. van der Velden

Secretary

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

April 9, 1999. Océ .. is an international holding company within the meaning of

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

Registered office and The Company has its registered office in Venlo, the Netherlands, and is registered

Commercial Registry in the Commercial Registry in Venlo under No. 12002283.

Head office The head office is at St. Urbanusweg 43, Venlo, the Netherlands.

Postal address: .. Box 101, 5900 Venlo, the Netherlands.

Telephone (+31) 77 359 2222, fax (+31) 77 354 4700.

Océ on Internet: http://www.oce.com

For general information about Océ: telephone (+31) 77 359 3029.

Report of the Board of Supervisory Directors

To the Annual General Meeting of Shareholders of Océ N.V., Venlo.Annual Report We present to you the Annual Report for 1999 as drawn up by the Board of

Executive Directors. The Annual Financial Statements included herein have been

examined by and discussed with the auditors PricewaterhouseCoopers .. in close

cooperation with Océ’s Internal Audit Department. In respect of these statements

the auditors have issued an unqualified opinion which is set out on page 81 of this

report. We have approved these Annual Financial Statements and recommend that

you adopt them, as well as the dividend proposal, in accordance with the proposal

by the Board of Executive Directors.

Supervision In 1999 the Supervisory Board held seven meetings at which all members were present.

At our meetings we discussed not only the general course of business but also a

number of important issues, including the strategic development of the company and

the risks it faces in its operations. Special attention was devoted to the research and

development policy and to the product development programmes of the Strategic

Business Units. This year again we held extensive discussions about the acquisitions

and partnership policy. In discussing the financing policy attention was also focused

on the longer-term financing of the company. At a special meeting of our Board the

restructuring measures were discussed that were taken in the fourth quarter.

Over the past year we also talked about the composition and allocation of

responsibilities of the Board of Executive Directors and about the performance of

the Board of Executive Directors and the development of senior management. In

one discussion the Board of Supervisory Directors also devoted attention to its own

performance as well as to the proposed reappointment of a supervisory director.

Executive Board changes As was announced earlier, Mr. J.C.M. Hovers, chairman of the Board of Executive

Directors, decided to resign with effect from September 1, 1999. We respect this

decision and would like to express our gratitude to Mr. Hovers for his efforts during

his chairmanship.

With effect from the same date Mr. R.L. van Iperen was appointed chairman of

the Board of Executive Directors. Mr. Van Iperen has worked for Océ since 1978

and was appointed to the Executive Board in 1995. Mr. H.J.A.F. Meertens will be

retiring as a member of the Board of Executive Directors with effect from October 1,

2000. He was a member of the Board of Executive Directors for more than 12 years.

We would like to thank him sincerely for everything he did for Océ over the past

years, particularly for the way in which he structured the Company’s financial policy.

Development of results Partly as a result of intense competition in the market for Document Printing

Systems, the year 1999 was characterised by a slowdown in revenues and income

growth. The Board of Executive Directors has taken a number of measures, notably

in the fourth quarter, that should lead to a recovery in the growth of revenues and

income in the short term and, specifically, over the longer term as well. We there-

fore look forward with confidence to the developments in the new financial year.

Our thanks go to the Board of Executive Directors and to all Océ employees for

their efforts and for the contribution they made under what were often difficult

circumstances during the past year.

January 31, 2000

H.B. van Liemt, chairman

8

Composition of the Board of Supervisory Directors as at January 31, 2000

9

H.B. van Liemt (1933) Post(s) held: former chairman of the Board of Directors of .. Nationality:Dutch. Appointed in 1993. Current term of office until 2004. Maximum period ofoffice until 2004 (age limit). Supervisory directorships: chairman of the Supervisory

Board of Gamma Holding .. and Sara Lee/ .., member of the Supervisory

Board of Holding .. and Stienstra Holding .. Other posts: member

of the Board of Directors of Sara Lee Corp., Chicago, and board member of several

foundations.

M. Ververs (1933) Post(s) held: former chairman of the Board of Directors of Wolters-Kluwer ..

Nationality: Dutch. Appointed in 1995. Current term of office until 2003. Maximumperiod of office until 2003 (age limit). Supervisory directorships: Groep ..,

.., Laurus .., Getronics .. and Rijnconsult .. Other posts: chairman of

Board of Trustees of Isala Clinics, Zwolle, and member of the Board of External

Advisers, Ernst & Young.

L.J.M. Berndsen (1942) Post(s) held: chairman of the Board of Directors of Koninklijke Nedlloyd .. and

co-chairman of Nedlloyd Containerline Ltd. Nationality: Dutch. Appointed in

1996. Current term of office until 2000. Maximum period of office until 2008

(12-year period). Supervisory directorships: member of the Supervisory Board of

Holdings .., Martinair Holland .. and Delta Lloyd .. Other posts: member of

the Executive and Managing Board of - employers’ federation and

member of the Advisory Board of Holding ..

P. Bouw (1941) Post(s) held: former chairman of Koninklijke Luchtvaart Maatschappij ..

( ). Nationality: Dutch. Appointed in 1998. Current term of office until 2002.

Maximum period of office until 2010 (12-year period). Supervisory directorships:member of the Supervisory Board of .., Getronics .., Naco ..,

.. Nederlandse Spoorwegen, Koninklijke Pakhoed .., PontMeyer .., Vos

Logistics .. and De Nederlandse Bank .. Other posts: part-time professor in

Business Administration,Twente University, vice-chairman of Raad voor Verkeer en

Waterstaat (Transport and Waterways Council), member of the Board of Trustees,

Amsterdam Free-Reformed University and chairman of the Banking Counsel.

J.V.H. Pennings (1934) Post(s) held: former chairman of the Board of Executive Directors of Océ ..

Nationality: Dutch. Appointed in 1998. Current term of office until 2002. Maximumperiod of office until 2005 (age limit). Supervisory directorships: chairman of the

Supervisory Board of Koninklijke Grolsch .., Koninklijke .. and Essent

.. and member of the Supervisory Board of Wolters-Kluwer .., Alpinvest

Holding .. and Koninklijke Ahrend .. Other posts: chairman of the Regional

Development Corporation and board member of several foundations.

F.J. de Wit (1939) Post(s) held: former chairman of the Board of Directors of .. Koninklijke .

Nationality: Dutch. Appointed in 1997. Current term of office until 2001. Maximumperiod of office until 2009 (age limit and 12-year period). Supervisory directorships:chairman of the Supervisory Board of PontMeyer .. and member of the Super-

visory Board of .. and Koninklijke Ten Cate .. Other posts: member of

the Advisory Board of Deloitte & Touche and honorary consul general of Finland.

The future is present—in large messages on the -highway

12

Key figures

1999 1998 › € million

Total revenues 2,838.4 2,752.5

Increase on previous year (%) 3.1 11.5

Gross margin 1,215.0 1,170.1

As % of total revenues 42.8 42.5

Operating income 248.1 245.2



As % of average balance sheet total 9.0 9.6

Net income* 131.9 129.0



As % of average shareholders’ equity 17.1 18.1

Cash flow* 319.3 300.4

Dividend (including preference dividend) 45.2 44.8

Depreciation 187.4 171.3

Net capital expenditure 187.6 199.8

Number of employees at November 30 21,757 20,978 employees

Per € 0.50 ordinary share Basic earnings before exceptional items** 1.54 1.53 euro

Cash flow before exceptional items** 3.80 3.62

Shareholders’ equity 9.14 8.09

Dividend 0.50 0.50

Number of € 0.50 Average number outstanding 83,190,993 81,954,636 shares

ordinary shares Dilution resulting from potential increase

in conversion/options 1,282,474 2,128,605

Diluted earnings* per € 0.50 ordinary share 1.53 1.50 euro

Share prices Year’s highest 35.00 40.93

Year’s lowest 14.00 18.47

Year end 17.30 30.49

* Key figures are based on figures excluding exceptional items.

** Basic earnings, after exceptional items, amount to € 0.88 (1998: € 1.53) and Cash flow, after exceptional items,

amounts to € 3.13 (1998: € 3.62).


13

Main outlines

Océ achieved a net income from ordinary activities – i.e. before deduction of excep-

tional items – of €132 million in 1999. This was slightly ahead of the record income

of the previous year. However, it does mean a weakening of the income growth in 1999

following a prolonged period of strong growth. The main cause is the rapid switch –

in the office market – from analogue to digital technologies, which is being accom-

panied by increased pressure on prices, not only in the analogue but also in the digital

segment. This development has left its mark on the entire industry. It gave Océ a

vigorous impulse to tighten up the strategic policy thrusts that had been initiated in

the preceding financial year and to substantially speed up the pace of the changes that

had been set in motion.To promote the further growth of the business, sales efforts

are being intensified and the company will continue to invest as strongly as ever in

Research & Development and in building up the system and software know-how

needed for the successful penetration of growth markets. Digital machines and the

related revenues from software and service meanwhile represent 60% of total machines

and service revenues (1998:57%).The shareofdigital in total revenues, i.e. including

Imaging Supplies, increased from 48% in 1998 to 51% in 1999. A cost-reduction

programmewasdrawnup,whichwill result in the loss of some1000 jobsworld-wide,

chiefly in service, manufacturing and logistics and in support departments. This

number corresponds to approximately5%of the total numberof employees.Tocover

thecostsof thisprogrammeaprovisionof € 55millionnetwas takeninthefourthquarter,

so that the net annual income after exceptional items worked out at € 77 million.

Results

Net revenues increased by 3% to € 2,838 million. Autonomous growth accounted

for 1% of this increase; exchange rates and acquisitions each contributed 1% to the

growth in total revenues.

Operating income went up by 1% to € 248 million. Cash flow rose by 6% to

€ 319 million. On a per share basis, basic earnings from ordinary activities in-

creased by 1% to € 1.54 (1998: € 1.53) and cash flow by 5% to € 3.80 (1998: € 3.62).

After exceptional items, basic earnings per ordinary share amounted to € 0.88, a

decrease of 43%, and cash flow to € 3.13, a decrease of 13%.

Expenditure on Research & Development increased by € 12 million to € 167

million.This is equivalent to 5.9% of total revenues (1998: € 155 million, or 5.6%).

Gross capital expenditure on ‘Property, plant and equipment’ amounted to

€ 115 million (1998: € 113 million). Depreciation and disposals amounted to

€ 124 million (1998: € 110 million).

In themarket forWideFormatPrintingSystems Océbookedtotal revenuesof € 782

million, an increaseof 1%.Afterdeduction of acquisitions and exchange rate effects,

revenues decreased by 2.5%. Océ maintained its leading position. In the growing,

but competitive market for Display Graphics Océ is carving out a position for itself

with inkjet printers and the related supplies. In the market for Document PrintingSystems Océ’s revenues increasedby2%to € 1,399 million.* Excludingexchange rate

effects, the increase in revenues amounted to 1%. In the highly competitive digital

segmentof thismarketOcéachieveda largenumberofplacements, though these re-

vealed a faster than expected decline in the analogue segment. In terms of printing/

* Because of a reclassification of activities with effect from December 1, 1999, these revenues now include the revenues

of Network Printing Solutions for both 1998 and 1999. The revenues of Network Printing Solutions have therefore

been eliminated from those of Production Printing Systems for both years.

14


copying volume Océ’s market share grew further in all areas. Network Printing

Solutions grew in line with the ongoing process of digitisation, thanks to newly in-

troducedprinters, servers and software. In the market for Production Printing Systemstotal revenues increased by 7% to € 657 million, of which 1% was the result of

exchange rate effects. Océ improved its strong global position in this market. In the

fast-growing Printing & Publishing segment Océ doubled its revenues. In FacilityServices Océ booked a strong increase in revenues, both in the United States and in

Europe. The continuing expansive growth, which will also involve greater emphasis

on consultancy, will cause revenues to increase further.Though total revenues were

slightly lower, profitability of Imaging Supplies increased further, thanks in part to

successful new products and the rationalisation of manufacturing and logistics.

Dividend

For the1999 financial year we propose to distribute a dividend of € 0.50 (1998: € 0.50)

per ordinary share of € 0.50 nominal. This dividend involves an amount of € 41.7

million (1998: € 41.2 million). If the General Meeting of Shareholders adopts this

proposal the final dividend will amount to € 0.35; the interim dividend amounted

to € 0.15. It is proposed to make the final dividend available, at the option of share-

holders, either fully in cash or fully in shares to be charged to the (tax-free) paid-in

capital or, if desired, to the net income for 1999. The dividend in shares will be

determined on March 29, 2000 (after close of trading on the Amsterdam Stock

Exchange) and will be subject to a discount of at most 5% as compared to the cash

dividend. The newly issued shares will be entitled to those dividends that are made

available for payment over the new financial year and subsequent financial years.

The pay-out ratio of approximately 32.4% of the net income before exceptional

items (1998: 32.8%) is at a level that we consider necessary for a healthy and

balanced financing of our expansion.

Prospects

Océ is on track in handling the market shift from analogue to digital. We aim to

become one of the leading companies in supplying integrated document solutions

in professional environments. The present range is competitive and new products

and services are being added to it, also thanks to ongoing innovation and new

partnerships. In addition, we will continue to build up digital know-how and

specific organisations for the growth markets.

The programme that has been initiated to strengthen and expand the company as

a supplier of digital products and services, together with the current extensive cost-

reduction programmes, which are aimed at countering the pressure on prices and

margins, is expected to result in an increase in total revenues and income. In view

of the market situation, provisional expectations for the new financial year are that

the growth in revenues and income will be limited.

In 2000 the number of employees in manufacturing, logistics, service and

indirect services will decrease. At the same time the number of employees in sales,

software development, support and Facility Services will increase.

Investments in property, plant and equipment and in rental copying equipment

will increase in 2000. The cash flow (net income plus depreciation) is expected to

be almost sufficient to finance these investments.

Further expansionof thenewmarketsby theNetworkPrintingSolutions,Display

Graphics andPrinting&Pubishingbusiness groupswill result in an increase in reve-

nues. Induecourse this is expected tobe followedbyagrowingcontributionto income.


15

Strategic outlook

The measures that Océ has taken to adapt itself to changing circumstances strengthen

each other. They relate to the realignment of the organisation to meet the changing

needs of the market as well as to specific measures to improve efficiencies and

control costs.

The changing technology in Océ’s markets, notably the switch from analogue

to digital, is leading to a number of radical changes. Stand-alone machines are being

replaced by digital machines linked together in networks. The information flows

that these generate both within companies and between companies have to be trans-

lated into efficient document flows. Océ is involved in that process in various ways,

the main emphasis being on ’products and services for the reproduction, presenta-

tion, distribution and management of documents’. Océ has repeatedly displayed its

prowess in this field by launching innovative digital machines and software. Slowly

but surely, however, the new role means that the organisation must acquire different

competencies and skills. Not only as regards the technical aspects, where technicians

trained to work on analogue machines have to make way for their digitally skilled

successors, but also in the area of sales and service, where the relationship with the

customer is changing. Today, it is no longer a matter of selling a machine, but of

supplying a tailor-made system that is subsequently given new and modified func-

tionalities at regular intervals. Specialists with a thorough knowledge of a machine

are making way for professionals who are highly familiar with the customer’s specific

field of work. Océ is well positioned to translate these changes into practical results.

Thanks to its strong knowledge base, its close relationship with customers and the

resultant in-depth knowledge of their way of working, the Océ organisation succeeds

in moving forward in tune with the changes in the market. Education, training and

a policy specifically aimed at ensuring mobility make a great contribution to this.

Now that the change processes are accelerating, these efforts will be further

intensified.

Organisation The structural changes in the organisation that were initiated during the year under

review will ensure a better link-up with the application areas for Océ’s products and

services. The new structure comprises three strategic business units, each divided

into two business groups: one for the existing activities and one for an operational

area which will be further developed and which is seen as a highly promising market.

In addition there are two supporting business groups, one for Imaging Supplies and

the other for Facility Services (see page 34).

The distinct acceleration of the switch to digital systems, especially in the office

market, and the strong growth in competition in this area have further strengthened

the need for drastic adaptations. Price competition brings the need for tighter cost

control and a strong improvement in efficiency. One of the causes, digitisation, is

even providing a helping hand in this restructuring operation because it greatly

reduces the servicing requirements of the equipment, whilst also enabling improved

logistics and manufacturing possibilities and new working methods. Though total

employee numbers at Océ will show a net decrease of around 1,000, this restructuring

operation will in fact involve many more employees. Technicians in particular will

be retrained where possible, but in addition there will be an inflow of new, highly

qualified employees. As an employer, Océ will of course act with the greatest social

responsibility in implementing this operation.


16

Markets In the market for Wide Format Printing Systems, which is growing by an average of

2 to 4% a year, demand is as a rule structurally related to the level of economic

activity and the investment climate. The technology of the equipment destined for

this market has in recent years changed almost entirely from analogue to digital.

Océ was the first to respond to this development with a series of digital machines

and the related software, whose functionality is constantly adapted to meet changing

market requirements. At the moment some 90% of the placements are digital.

Océ holds a leading position in this market world-wide and the company intends to

expand this further. The range will be strengthened in 2000 with new machines in

the high and low volume segments and, at least as importantly, with new application

software for document management. The innovation efforts are largely focused on

developing wide format colour printers which are based entirely on in-house tech-

nology and which will be brought to market several years from now.

The size and growth of the market for Display Graphics (wide format, short run

colour prints) are difficult to assess due to the heterogeneous nature of that market.

However, the multitude of applications and the related demand for speed and quality

indicate that this is a highly promising growth market. Océ continues to build a

prominent position in this market with bought-in printers and controllers and a

quality range of supplies developed in-house.

Document Printing Systems is hardly dependent on the level of economic activity

and is growing annually by some 3%. In this market digital black-and-white and

colour printing is rapidly displacing analogue techniques. Competition in the digital

area has increased strongly over the past year due to a number of new market en-

trants. In terms of printing/copying volume Océ is outpacing the market growth.

The company is concentrating in this market mainly on the medium and high

volume segments. In the European market for document printing systems Océ plays

a leading role with its copiers (analogue and digital) and printers. In the American

market the company’s share is still relatively small.

The market for Network Printing Solutions (mainly in office environments) is

growing by around 25% a year. This relates to printers (30-65 ppm) and servers

which operate in networks (Internet and Intranet) and which are equipped with

various functionalities for the management of document flows. In this market Océ’s

direct sales, consultancy and service organisation concentrates on the higher

volume segments, in which reliability and productivity are important; features

which are to a considerable extent also supported by application software. A central

role will be played here by the range of digital copiers/printers which will be further

completed.

The market for Production Printing Systems (>100 ppm) is growing annually by

3% in the segment and by some 15% in the Printing & Publishing segment.

For these markets Océ offers a complete and highly competitive range of continuous-

feed and cutsheet printers. These also offer excellent growth prospects in the

Printing & Publishing segment. In Europe Océ is market leader for very high volume

printers in the segment. In the United States, too, the company is a major force

in this market. Océ will strengthen its leading position in this market by continu-

ously innovating its offerings in this area. The range is being further expanded with

application software to support the document production process.

In the market for Printing & Publishing the currently still relatively modest

position is being expanded at a faster rate, also via new partnerships.


17

The market for Facility Services is showing an annual average growth rate of around

30% because of the ever stronger trend towards outsourcing: in Europe the market

is even growing by 40%. Océ supplies a broad range of services, ranging from the

(re)production of documents to the management of complete data and document

flows, mainly within big companies and institutions.

Océ aims to at least equal the growth in this market and is well equipped to do

so because of its strong presence in the market, its extensive range and its

knowledge of document flows.

The market for Imaging Supplies (carrier materials and auxiliaries) is growing

annually by around 5% because of the growth in the printing and copying volume

and the increase in the number of applications. Océ, a leading supplier in Europe,

offers a broad and innovative range focusing primarily on Océ customers with Océ

machines, even if they also use third-party equipment. In this market Océ seeks to

further improve its profitability on the basis of the measures that have already been

taken in the area of manufacturing and logistics and also by utilising the growing

possibility of doing business via e-commerce.In realising the growth objectives in its markets Océ will primarily expand its

position via autonomous growth. In addition acquisitions will be sought which

help make the business bigger and stronger, both commercially and technologically.

The company is constantly alert to the possibility of strengthening its position via

partnerships in whatever form and/or via acquisitions. In view of the size of the

markets in which we operate, we mainly seek acquisitions of a substantial size.

Yield objective Océ continues to devote high priority to enhancing the overall profitability of the

business, both through autonomous growth and, where opportune, through acqui-

sitions, as well as via improved efficiencies and by reducing the capital intensity.

Océ seeks to improve the return on total assets from 9.0% in 1999 (9.6% in 1998)

to 12%, to be achieved within a few years.

Risk management

Océ is faced with the commercial and technological risks of a company which

specialises in the development, manufacture and distribution of technologically

advanced products on a world-wide scale. Océ concentrates on the high-value

professional markets in which its unique technology allows the company to profile

itself clearly.

Market risks Because of the fast-moving developments in technology and in the markets in

which Océ operates, the company has always placed great emphasis on managing

the residual value risks of our machines. To the extent that residual value risks exist,

they are mainly restricted to the lease/rental portfolio in the market for document

printing systems. By reducing the depreciation period it applies to the analogue

machines in this market, Océ has lowered the risk. Besides, the risk is low because

the machines – after a complete overhaul – are given a second useful lifetime.

Océ’s broad technology base, the variety of markets on which the company

operates and its links, mostly on a long-term basis, with highly diverse customer

categories ensure a spread of the risks. The revenues from rentals, leases, service and

supplies, the highly diversified customer base and the wide geographical spread of

operations help to create stability in the total revenue flow.

Technological risks Océ has deliberately invested heavily in in recent years. That has resulted in a

The future is present—in a world of timeless space

20


range of self-developed core technologies and products and highly market-focused

innovations in the area of applications, operating concepts and improved environ-

mental and safety features. Those core technologies also encompass a number of

unique components and processes for new generations of printers and copiers for

both black-and-white and colour applications. However, it has taken more time

than expected to get the company’s own colour technology ripe for production.

Océ also holds a leading position in printer technology for continuous-feed appli-

cations. In addition to its strengths in hardware technology Océ has expanded,

partly through acquisitions, to become a software business that develops programs

and systems both for its own products and for customers.

To guarantee the closest possible contact with the market, service and sales em-

ployees are involved in the development of hardware and software products at an

early stage. Over the course of the years this has steadily reduced the learning curve

further. Furthermore, recent changes in the way that product development is steered

have strongly boosted the company’s reaction speed and the flexibility of its

response to new circumstances and customer needs.

Foreign exchange risks Océ achieves its revenues all over the world, with particular emphasis on Europe

and the United States. A considerable proportion of the costs are incurred in the

currencies of the sales areas ( dollar, euro and pound sterling). Océ also has costs

denominated in Japanese yen for the purchase of product sub-assemblies and com-

plete machines to supplement its range. As regards the revenues from service, the

foreign exchange risk is limited because most of the costs, consisting of the payroll

expenses of the service technicians, are in local currency. The effects of exchange rate

fluctuations over the long term are offset as much as possible by conducting buying

activities, where possible, in those currency areas in which the revenues are also

achieved (‘matching principle’) and by raising the local added value content. In ad-

dition, endeavours are made to offset the short-term consequences of foreign exchange

fluctuations by pursuing an active currencies management policy. Océ applies a

central foreign exchange management policy and a selective foreign currency policy

aimed at controlling the company’s commercial and net asset exposures in various

currencies. For this purpose Océ uses a number of financial instruments, particu-

larly forward foreign exchange contracts. The policy and the plans based on it are

implemented in close consultation with the Board of Executive Directors.

Interest rate risks Most of the interest revenues originate from market placements of machines under

financial lease contracts. Financial lease contracts usually comprise a fixed interest

which corresponds to the rates charged by external leasing businesses. These con-

tracts are mainly financed by interest-bearing capital whose interest rate is generally

fixed in line with the duration of the contracts. The interest rate policy is largely

executed centrally at corporate level through the use of financial instruments.

Implementation of this policy, which is subject to strict rules, likewise takes place in

close consultation with the Board of Executive Directors.

Euro Since January 1, 1999 Océ has been in a position to conclude contracts in euro.

For the benefit of the operating companies a conversion program has been prepared

which they can use to adapt their accounting system rapidly if they decide to switch

over to the new currency. In general Océ is ready to use the euro as a currency in any

form whatever.

21


21

Financial review

Total revenues In 1999 total revenues rose by 3% to € 2,838 million. Autonomous revenue growth

amounted to 1%. Acquisitions and exchange rates each had a positive effect of 1%

on revenues.

At € 1,647 million, revenues from sales remained practically the same as in the

previous year. Earnings from rentals and service went up by 7% to € 1,091 million.

Interest income from financial leases rose by 11% to € 100 million.

The growth in revenues was largely attributable to the following factors:

– the strongly increased sales of and service income from printers and digital copiers,

which were slightly higher than the decline in revenues from analogue machines;

– the contribution made to revenues by Océ-Japan after its acquisition;

– net positive exchange rate effects.

As a proportion of total revenues, revenues from rentals and service plus interest

income from financial leases amounted to 42% (1998: 40%).

The share of digital in total earnings rose from 48% in 1998 to 51% in 1999.

A more relevant indication is: if calculated as a percentage of the total revenues

from machines and the related software and service – i.e. excluding Imaging

Supplies – the share of digital increased to 60% (1998: 57%).

Development of revenues In the market for Wide Format Printing Systems revenues increased by 1% to

by market € 782 million. Revenues in the Document Printing Systems market went up by 2%

to € 1,399 million. In Production Printing Systems revenues increased by 7% to

€ 657 million.

Total revenues

› € million

95 96 97 98 99

Development of 1999 1998

total revenues byStrategic total revenues › € million as % total revenues › € million as %

Business Unit

Wide Format

Printing Systems 782 28 772 28

Document

Printing Systems 1,399 49 1,367 50

Production

Printing Systems 657 23 614 22

Total 2,838 100 2,753 100

3000

2400

1800

1200

600

0

Gross margin The total gross margin increased slightly more than total revenues. As a per-

centage of total revenues the gross margin increased to 42.8% (1998: 42.5%).

The principal reasons for this development are:

– higher margins in Production Printing Systems and Wide Format Printing Systems

because of more favourable margins on revenues from service, including software

and consultancy;

– lower margins in Document Printing Systems due to continuing pressure on the

margins for both analogue copiers and digital printers/copiers.

The average interest realised on the lease portfolio amounted to 10.4% (1998:

10.5%). In the financial lease contracts the interest percentage is fixed for the entire

duration of the contracts.

Operating income Operating income increased by 1% to € 248 million (1998: € 245 million). This is

equivalent to 8.7% of total revenues (1998: 8.9%) and corresponds to 9.0% of the

average balance sheet total (1998: 9.6%). The relative increase in selling expenses

meant that the increase in operating income lagged behind the growth in the gross

margin.

Research & Development Spending on increased to € 167 million, or 5.9% of total revenues (1998: € 155

(R&D) million and 5.6%). In 1999 an amount of € 8 million (1998:€ 15 million) was added

to expenditure to cover repayment liabilities in respect of development credits.

This, combined with the expansion of the organisation, meant that the

expenses in the Consolidated Statement of Operations slightly increased to € 174


22

Operating income

› € million

Total revenues 1999 1998

by geographical areas total revenues › € million as % total revenues › € million as %

Germany 383 13 383 14

France 213 8 214 8

United Kingdom 210 7 207 7

Netherlands 219 8 200 7

Rest of Europe 582 21 567 21

United States 1,049 37 1,018 37

Rest of the world 182 6 164 6

Total 2,838 100 2,753 100

95 96 97 98 99 95 96 97 98 99

Operating income as % of

total revenues

250

200

150

100

50

0

10

8

6

4

2

0


23

95 96 97 98 99

Research & Development

› € million

expenditure

costs

200

160

120

80

40

0

million, which is equivalent to 6.1% of total revenues (1998: € 170 million and

6.2% of total revenues). At the end of the year under review full provision had been

made for the remaining repayment liabilities in respect of development credits

received in the past, with the exception of those for the colour printer/copier.

General administrative and The general administrative and selling expenses increased by 5% from € 755

selling expenses million in 1998 to € 793 million. Expressed as a percentage of total revenues these

expenses increased to 27.9% (1998: 27.4%).

Financial expense (net) Financial expense (net) – the balance of interest paid and other interest received –

went down from € 61 million in 1998 to € 59 million in 1999. On the basis of a

lower average interest rate of 5.1% (1998: 5.6%) the average interest-bearing

capital increased by € 87 million. This is mainly due to the financing of and the

increase in the rental population and financial lease receivables.

Interest income from financial leases amounted to € 100 million in 1999

(1998: € 90 million).

Income taxes The average taxation charge amounted to 29.0% (1998: 29.0%).

Net income Net income before exceptional items increased by 2% to € 132 million. This cor-

responds to 17.1% of the average shareholders’ equity (1998: € 129 million and

18.1%). As a percentage of total revenues, net income before exceptional items

amounted to 4.6% (1998: 4.7%). Before exceptional items, basic earnings per

share, calculated on the basis of the weighted average number of ordinary shares

outstanding, increased by 1% to € 1.54 (1998: € 1.53).

After deduction of exceptional items amounting to € 55 million, net income

decreased by 41% to € 77 million.

The net income attributable to ordinary shareholders, i.e. after deduction of the

dividend on the financing preference shares, decreased by 42% to € 73 million.

Basic earnings per share, calculated on the basis of the weighted average number

of ordinary shares outstanding, decreased by 42% to € 0.88 (1998: € 1.53).

24


Commercial and financial activities

Océ’s activities are characterised by a combination of commercial and financial

services, each with their own income profile and balance sheet characteristics.

In assessing the financial position of the Company as a whole, a distinction must

be made between these two types of activities. As indicated below, the assessment

criteria for both activities differ widely.

The revenue from financial activities is formed by the interest from financial

leases. The costs comprise the costs of financing the lease portfolio and the selling

and administrative expenses. Where the financial activities are financed from

interest-bearing capital, it has been assumed that this has been done fully on a fixed-

interest basis.

The costs of financing are then allocated on the basis of the average amount of

fixed interest-bearing capital. The selling and administrative expenses, including

provisions for doubtful debtors, are allocated as far as possible on the basis of origin.

The cost level that is applied corresponds to that of other ’captive’ lease companies

with similar activities. After expiry of the lease contracts the machines, provided

they have not been written off in full, are transferred to the commercial activities at

their residual book value.

For the financing of the financial activities a ratio of 0.15 between the equity

and the balance sheet total is used. This ratio is derived from ’captive’ companies in

the financial services industry which publish their own annual accounts. It is seen as

an extremely solid ratio. Under this method the remaining part of the equity is

allocated to the commercial activities.

The table on the next page gives a breakdown of the salient financial figures for

the two company activities.

As can be seen from that breakdown, both the commercial and the financial

activities have good profitability and solid balance sheet ratios. The net income

from the commercial activities remained practically at the same level as last year.

In the case of the financial activities the interest from financial leases was main-

tained at the high level of 1998. Due to a decline in the average interest costs, the

yield of the financial activities (net income as a percentage of the average equity)

showed a clear increase.


25

1999 1998 › € million

CommercialRevenues 2,738 2,663

Gross margin 1,115 1,080

Operating income 177 181

Financial expense (net) 15 17

Result before taxation 162 164

Income taxes 47 48

Result after taxation 115 116

Net income 112 114

Shareholders’ equity 659 584

Minority interest 42 40

Group equity 701 624

Interest-bearing liabilities 288 273

Provisions and other liabilities 870 775

Balance sheet total 1,859 1,672

RatiosOperating income as % of

average balance sheet total 10.0 11.0

Net income as % of

average shareholders’ equity 18.1 19.8

Shareholders’ equity as % of

balance sheet total 35.5 34.9

FinancialInterest from financial leases 100 90

Selling and general administrative expenses 29 26


Result before taxation 27 20

Income taxes 8 6

Result after taxation 19 14

Shareholders’ equity 159 142

Interest-bearing liabilities 898 806

Balance sheet total 1,057 948

RatiosInterest from financial leases

as % of average balance sheet total 10.0 10.0

Net income as % of average

shareholders’ equity 12.6 10.9

Shareholders’ equity as %

of balance sheet total 15.0 15.0

The future is present—with grand design in digital format

Rental copying equipment and After several years in which there was a move away from rentals and towards finan-

financial lease receivables cial leases, both rentals and financial leases have been on the increase since 1995.

The book value of rental copying equipment increased by € 16.5 million to € 257

million (an increase of 6.9%). The capitalised value of financial lease receivables

(including short term accounts receivable) went up from € 907 million in 1998 to

€ 1,026 million (an increase of 13.1%). The aggregate value of rental copying

equipment and financial lease receivables increased by 11.8% and represented

44.0% of the balance sheet total (1998: 43.8%).

The balance sheet value of rental copying equipment is calculated on the basis

of the all-in costs, less depreciation. Financial lease receivables are valued at the net

present value of the contracted lease instalments plus the residual value. Both these

valuations give only a partial reflection of the economic significance of the popu-

lation of machines installed on rental and on lease. A better assessment can be

obtained by comparing the balance sheet value of rental copying equipment and

financial lease receivables with their economic value, which consists of the cash

inflows expected to be generated on a contract basis.

Use of funds and finance

Gross capital expenditure In 1999 Océ’s gross capital expenditure on ‘Property, plant and equipment’

amounted to € 115 million (1998: € 113 million). This mainly relates to

investments in machines, plant and equipment for the production of machines and

the related supplies.

An amount of € 124 million (1998: € 110 million) was released from

depreciation and disposals.

28


Geographical 1999 1998

spread of assets› € million as % › € million as %

Germany 478 17 474 18

Netherlands 505 17 457 17

United Kingdom 254 9 234 9

France 204 7 204 8

Rest of Europe 449 15 427 16

United States 884 30 721 28

Rest of the world 142 5 103 4

Total 2,916 100 2,620 100

Rentals and leases

› € million

rental copying equipment

financial lease receivables

(including short term

financial leases)

95 96 97 98 99

1500

1200

900

600

300

0

As the above table shows, the population of rented and leased machines and the

related service contracts generate a gross cash flow which is about 2.0 times (1998:

1.9 times) higher than their balance sheet valuation. The average remaining

duration of the lease contracts is about three years and that of the rental contracts is

about one-and-a-half year. The contractual revenue from rentals, service and

financial leases forms a stable basis for the future. The rental copying equipment

and financial lease receivables also have a high liquidity value.

The cash flows generated by rentals, financial leases and service also contribute

to the company’s financial strength. To illustrate this, the table on page 30 shows the

relationship between the cash flows expected to arise from the rental, financial lease

and service contracts existing at balance sheet date and the total interest-bearing

capital. The contractual cash flows have been reduced for this purpose by sub-

tracting the relevant cash outflows. The latter consist of the estimated service costs

and financial expenses that have to be incurred during the subsistence of the rental

and financial lease contracts. Calculated on this basis, the net resultant cash flow

from rentals, financial leases and service exceeds the total interest-bearing capital by

36% (1998 year end: 28%).

Interest-bearing capital At the 1999 year end the interest-bearing capital amounted to € 1,187 million.

Of this amount, € 884 million (75%) had been taken out over the long term.

29


Contracted cash inflows

› € million

rental contracts

financial leases

and related

service contracts

95 96 97 98 99

1999 1998 › € million

Contractual cash inflows from:Rental contracts 508 452

Financial leases and the related

service contracts 2,063 1,744

Total 2,571 2,196

Balance sheet value of:Rental copying equipment 257 241

Financial lease receivables 1,026 907

Total 1,283 1,148

3000

2400

1800

1200

600

0

Cash flow and basic

earnings per share

amounts in euro

per € 0.50 ordinary

share

cash flow per share

basic earnings per share

before exceptional

items


Group equity Group equity increased to € 860 million (1998: € 766 million). This increase was

the result of earnings retained (+ € 31 million), foreign currency translations

(+ € 47 million), optional stock dividend (+ € 28 million), conversion of debentures

(+ € 2 million), goodwill paid upon acquisitions (– € 5 million) and other move-

ments (– € 9 million).

Group equity as a percentage of the balance sheet total amounted to 29.5%

(1998: 29.2%). Including the convertible subordinated guilder debenture loan,

whose conversion price is lower than the share price, this ratio amounted to 29.8%

(1998: 29.7%). The ratio between interest-bearing borrowings and Group equity

was 138:100 (1998: 141:100).

The shareholders’ equity per ordinary share, calculated on the basis of the

number of shares outstanding at the end of the financial year, amounted to € 9.14

(1998: € 8.09).

Cash flow Cash flow (net income attributable to ordinary shareholders, plus depreciation)

before exceptional items amounted to € 319 million and was therefore € 19 million

higher than in 1998. Expressed as a percentage of the interest-bearing capital, the

cash flow before exceptional items amounted to 27% (1998: 28%).

30

1999 1998 › € million

Contractual cash inflows from:Rental contracts 508 452

Financial leases and the related

service contracts 2,063 1,744

Total 2,571 2,196

Expected cash outflows from:Operational cash flows 845 714


Total 953 810

Expected net cash flows 1,618 1,386

Interest-bearing capital 1,187 1,079

Excess as a % 36 28

95 96 97 98 99

5

4

3

2

1

0 *

*

*


Cash flow per ordinary share before exceptional items, calculated on the basis of the

weighted average number of ordinary shares outstanding, rose by 5% to € 3.80

(1998: € 3.62).

The cash flow calculated on this basis does not take account of the financial lease

repayments; these increased in 1999 by 24% to € 352 million (1998: € 284

million). If these repayments had been added to the cash flow, it would have

increased in 1999 by 15% to € 672 million (1998: € 584 million)

As can be seen from the above table, the cash flow calculated on this basis was

sufficient in 1999 to finance about 106% (1998: about 92%) of the net

investments in property, plant and equipment, rental copying equipment and new

financial lease receivables.

When comparing the cash flow with the investments, a proper assessment is

again served by making a distinction between the commercial and the financial

activities.

The cash flow from commercial activities amounted to € 296 million (1998:

€ 282 million). The aggregate of the (net) investments in property, plant and equip-

ment and in rental copying equipment amounted to € 188 million (1998: € 200

million).The cash flow therefore exceeded the investments by € 109 million or 58%

(1998: € 82 million or 41%).

In the financial activities the cash flow, which comprises net income from and

repayments on financial leases, amounted to € 372 million (1998: € 299 million).

The investments in new financial lease receivables amounted to € 446 million

(1998: € 431 million). The investments in the financial activities therefore exceeded

the cash flow by € 74 million (1998: € 133 million).

Credit facilities At the end of the financial year a total of € 702.2 million of unused credit facilities

were available to the Océ Group, most of which are available under multi-year

stand-by credit contracts.

31

Dividend per share

amounts in euro

per € 0.50 ordinary

share

Investments

› € million

1999 1998 › € million

Investments in:Property, plant and equipment (net) 81 87

Rental copying equipment (net) 107 113

New financial lease receivables 446 432

Total 634 632

95 96 97 98 99 95 96 97 98 99

0.50

0.40

0.30

0.20

0.10

0

750

600

450

300

150

0


32

Lease

In the markets in which Océ operates, financing is an essential component of the

product offering. By actively offering this possibility, therefore, the company takes

on the role of a ‘one-stop supplier’. Océ offers financing via lease programmes

tailored to meet the specific wishes of each customer.

This ‘one-stop shopping’ concept has advantages for both the customer and Océ.

For Océ it means that the constant flow of revenues from maintenance and supplies

is accompanied by a steady profitable inflow of interest earnings.

Océ’s strength lies in the combination of leasing and the possibilities for re-

marketing after expiry of the contract. The company operates remanufacturing and

remodelling programmes which extend the technical and economic lifetimes of its

machines. As a result Océ can keep its machines on the market for longer periods,

both via contract extension and via placement with other customers.

The debtors risk is slight, not only thanks to the spread of customers across

many customer categories in many countries and the close relationship that exists

with customers via the provision of technical service, but also because Océ can

realise the value of the machines when they are remarketed.

Funding Since almost all lease contracts are based on an interest rate that is fixed for their

entire duration, it is Océ’s policy to finance its lease portfolio predominantly with

interest-bearing capital, with the interest rate generally being fixed in line with the

duration of the contracts (‘matching principle’) so as to safeguard the interest

‘spread’ during the full contractual period.

Accounting The lease programmes that Océ offers can be split into ‘financial’ and ‘operational’

leases. The latter type are also referred to as ‘rentals’. In the case of ‘financial’ leases

the economic risk passes to the customer. The duration of these lease contracts is

three to six years and is usually equal to and sometimes longer than the depreciation

period applicable to the relevant machines. In consequence, the residual value risk

is very limited.

At the moment when the financial lease contract is signed, the selling price of

the machine is recorded as revenue in the form of the discounted value of the


financial lease instalments. During the subsistence of the contract the interest

received is booked to revenue. Revenues from maintenance and service are

accounted for separately.

Machines for which an operational lease contract has been concluded are rented

to customers for durations of, normally, one to three years. In these contracts the

rental instalments are included in revenue for the reporting period in which they

fall due. The rental instalments represent a fee to cover the cost of use, servicing and

interest.

In 1999 48% (1998: 47%) of all direct sales of machines were installed on the

basis of financial leases. In Document Printing Systems this percentage was con-

siderably higher than in Wide Format Printing Systems and Production Printing

Systems.

Interest income from financial leases went up by 11.5% to € 100 million (1998:

€ 90 million). The balance sheet value of the financial lease receivables increased by

13.1% to € 1,026 million and represented 35% of the total invested capital at the

1999 year end (1998 year end: 35%). The aggregate balance sheet value of financial

and operational leases rose by 11.8% to € 1,284 million and amounted to 44.o%

(1998: 43.8%) of the total invested capital at the 1999 year end.

In view of the average interest rate of 10.4% (1998: 10.5%) achieved on the

lease portfolio, financial leases make a good contribution to the result. The return

on financial leases represents 12.6% (1998: 10.9%) of average shareholders’ equity.

Speed and precision go

hand in hand in Océ’s

high performance

printers. Up to one

thousand personalised

prints a minute, each

with variable data,

without missing a single

letter, without skipping

a single print.

34


Strategic Business UnitBusiness Units(markets, products/services)

–Wide FormatPrinting Systems

Business Group

–TechnicalDocumentationSystems

markets

Technical environments, such

as design engineering offices,

industrial companies, con-

struction companies, job

printers, architectural design

offices.

products/services

Series , , large format

printers/copiers, scanners,

folders.

Scanning, printing and

archiving software.

–DisplayGraphics

Printing sector.

Full colour posters and other

wide format colour printed

matter.

Wide format print shops and

copy shops.

Large format colour printers

and -scanners.

Raster Image Processor (),

copying and scanning

software.

Imaging Supplies.

–NetworkPrinting Solutions

Office environments.

Central Repro departments.

Electronic Data Processing

environments.

Print-for-pay market.

Series , and

printers.

Copiers/printers/scanners.

Server software. Application

software. Consultancy.

–ElectronicProduction Printing

Banks. Insurance companies.

Public utilities.


environments.

Series and fanfold

printers (Pagestream) and

cutsheet printers.

Application software.

Consultancy.

–ProductionPrinting Systems

–Facility Services Companies.

Governments.

(Local) authorities.

Non-profit organisations.

Document Management

Services: consultancy and

systems, document creation,

production, distribution,

archiving.

–DocumentPrinting Systems

–DocumentPrinting

–Printing &Publishing

–Imaging Supplies

Office environments.

Central Repro departments.


environments.

Print-for-pay market.

Series , , and

copiers/printers/scanners.

Server software.


Printers.

Publishers.

Series and fanfold

printers (Demandstream) and

cutsheet printers.


Consultancy.

All relevant Océ-markets,

for both Océ and third-party

equipment.

Broad range of supplies.

Wide format rolls.

4 white bulk. Specialties.

Colour copier supplies.

Toners.


Large projects, detailed

drawings. Océ systems

can store thousands of

drawings and produce

selected prints for imme-

diate use, neatly folded

and in any format.

Wide Format Printing Systems

In the market for Wide Format Printing Systems Océ maintained its strong posi-

tion. The revenues of this Strategic Business Unit, including service, supplies and

Facility Services, increased by 1% from € 772 million to € 782 million. After de-

duction of acquisitions and the effect of exchange rate changes, revenues decreased

by 2.5%. Despite some pressure on margins as a result of growing competition,

profitability in this market was maintained at a high level.

InMay1999Océacquiredamajority shareholding (85%) in the Japanesebusiness

Nippon Steel Calcomp Corporation, which now operates under the name Océ Japan

Corporation. The business possesses a well-trained sales staff and has much experi-

ence in transforming software for use in Japan.The acquisition has given Océ a good

bridgehead in a country which, when the economy picks up again, is estimated to have

40% of the potential of the European market. The entire digital (black-and-white)

product line is being equipped with Japanese operating software for this market.

The markets in Europe and the United States grew slightly, whilst the Far East market

picked up somewhat. The strong growth experienced by the successful Océ 9800 in

recent years was followed by a slight decline in the number of placements last year.

The complete version of the Océ 9600, destined for the medium volume, became

available later than had been anticipated. During the year under review, therefore,

Océ was still unable to derive full benefit from the demand that exists for this ma-

chine. However, a substantial portfolio of orders was built up. Market shipments of

the new machine started in the final months of 1999, which means that the effects

will only show through in full in the next financial year. In the autumn a more

powerful version of the Océ 9400 was introduced. This is quickly expected find a

place for itself in its segment: smaller-size design engineering environments.

In the wide format market more than 71% (1998: 70%) of the revenues (excluding

ImagingSupplies)meanwhileoriginate fromdigitalmachines. If supplies are included,

almost 46% of the revenues are related to digital technology (1998: also 46%).

However important the availability of good hardware may be, it is increasingly

clearer that market success hinges on the extent to which a supplier is able to provide

a total solution for the customer’s complex problems. In those solutions the role of

software is already equally as important as that of hardware. Océ software packages,

such as EngineeringExec and ReproDesk, are in many cases just as important as the

machines that they serve. The specific application packages that Océ offers link up

closely with the requirements of big companies which use extensive production and

business information systems and with the needs of job printers. In connection with

this, consultancy work relating to complex systems is also being given an inde-


Big, colourful advertise-

ments are a familiar sight

in today’s city scene and

on roadside sites.

More and more often

they have been produced

by Océ wide format

printers: high quality on

a wide range of materials,

efficiency in limited

print-runs.

pendent role, also as a separate source of revenues. The combination of machines,

consultancy and a more extensive arsenal of specialised software is increasingly

determining the image of Océ’s offerings.

During the year under review various partnership contracts were established

with systems suppliers, such as and Dassault.

In the wide format environment diazo technology has meanwhile declined

strongly. Only occasionally does demand still exist for new machines based on this

technology. That does not alter the fact that several tens of thousands of such

machines – mostly made by Océ – are still in use throughout the world, whilst Océ

is able, thanks to its relative size, to deliver the required supplies and thus ensure an

attractive contribution to operating income.

Display Graphics The activities in display graphics have received new impulses now that they have been

given a place of their own within the organisation. Developments in this area are

progressing gradually, and Océ can build a good position for itself thanks to a series

of colour inkjet printers based on a bought-in engine and equipped with controllers

and application software. In the year under review two new printers, the Océ 5050

and the Océ 5070, and a scanner, the Océ 4050, were added to the range.

In this relatively new, heterogeneous market with its various, highly differenti-

ated segments there is a high level of competition. This is mainly due to the large

number of new entrants. By supplying complete solutions Océ is largely able to

escape the price-depressing impact of this. For the development of this market the

investments in sales, system consultancy and are initially still considerable.

For some time now Océ has been working on its own inkjet technology. Products

based on this will be introduced in a few years’ time, in the first instance in the

market for systems.

Document Printing Systems

In the market for Document Printing Systems Océ’s revenues, including service,

supplies and Facility Services, increased from € 1,367 million in 1998 to € 1,399

million. Autonomous growth amounted to 1% and the effect of exchange rates was

also 1%.The revenues for 1999 and those for 1998 comprise the revenues from

Network Printing which were previously included in the business unit Production

Printing Systems.The most striking development in the Document Printing

Systems market is the rapid shift from analogue to digital copiers in the number of

placements.

In the fast-expanding digital printer/copier market a number of rival suppliers are

meanwhile actively offering printers/copiers in the segment of around 60 ppm.


Both these developments have brought pressure to bear on prices and margins and

hence on profitability. In the meantime a number of specific measures have been

taken to achieve a substantial cost reduction in manufacturing, service and logistics

and this should largely compensate for the pressure on margins. A further strong

point of Océ in this market is formed by the regular introduction of new, unique

software releases.

Océ’s strength is founded on the direct relationship that its own sales and service

organisation has with customers and on its ability to ensure that the machines will

operate in complex environments with the aid of tailor-made software solutions.

In the United States, where Océ booked substantial growth in 1998 thanks in

part to its partner , an excessive build-up of stocks at caused that com-

pany to limit its offtake from Océ in 1999. However, the year under review saw

continued good performances by Océ’s own direct sales organisation in America,

which helped to offset the slower progress of . In the autumn sales by Océ to

picked up again. The business remains an important partner for Océ.

Although Océ’s unique position as the first supplier for the segment of around 60 ppm

came under pressure because of the strong competition, the company sustained its

success, especially with the versatile Océ 3165. That was reflected in a strong growth

in copying volume and revenues. Similarly, the Océ 3155 met with a good re-

ception, whilst the Océ 3145, whose launch was announced last year, will give Océ

its own strong series of digital machines in the medium and high volume segment.

That range will be further completed in the near future by digital machines with

speeds of 100 and 85 ppm. In the market for small format printing and copying

some 30% of Océ’s revenues, including service but excluding supplies, are mean-

while related to digital products (1998: 27%).

Due to growing competition the pressure on prices in the digital market

segment increased strongly.

In terms of printing and copying volume Océ’s market share grew right across

the board, in the United States slightly more than in Europe. That is attributable in

part to the high productivity and great versatility of the digital printers/copiers.

Despite the spectacular growth of the digital machines there is still a specific

need for analogue copiers in a great many areas. The number of analogue machines

placed by Océ, less machines returned from the market, was negative but this de-

crease was significantly smaller than the overall market decrease. Expectations are

that the analogue machines installed in the market will continue to make a positive

contribution to cash flow and income for many years yet.

The analogue copier for repro applications, the Océ 3100, which was still being

installed on a wide scale during the year under review, was the winner of two major

performance awards, as had also been the case in 1998. The Océ 3045 and 3055

also received accolades from British and American trade journals.

In the colour segment Océ grew faster than the market. On the basis of the

bought-in machines a substantial customer base as well as a wealth of experience

has meanwhile been built up. When it puts its own colour printer/copier on the

market Océ will therefore not only have excellent machines but also specialised sales

and service staff. During the year under review Océ also successfully started sales of

colour copiers in the United States.

37


The presentation of

clear, up-to-date infor-

mation from various

complex data flows, that

is the essence of Océ’s

Network Printing activi-

ties. Océ is in its element

when it comes to con-

verting electronic data

into information.

Network Printing Solutions The activities in the area of medium and high volume printers for office environ-

ments were amalgamated with the Document Printing Systems activities during the

year under review. Via its Network Printing Solutions Business Group Océ offers

complete network printing solutions for a wide variety of information flows in

complex office environments. Particular care is devoted here to ensuring maximum

connectivity within the systems of the leading systems suppliers. Océ’s product

concepts are concentrated on office processes, on central repro facilities and, more

recently, on the interface between users and the central repro department.

The growth in the number of machines operating in networks is remarkable,

especially in the high volume segment. It is characteristic of the change-over to a

situation in which the stand-alone copier is disappearing within an office environ-

ment that is predominantly served by networks and a wide variety of printing and

copying equipment. That change is also leading to the creation of a new customer

concept, in which the primary role is no longer played by the equipment but by the

complete solution to a specific customer problem. Against this background Océ

put various new software products on the market during the year under review,

including packages for print job management, workflow management and system

administration. This came in addition to a series of new releases for existing soft-

ware. In the applications area the partner programme was also strongly extended.

A growing proportion of earnings will in the near future be generated by the

consultancy services that Océ supplies to customers and potential customers.

Thanks to its extensive expertise Océ is effectively equipped for this.

The mutual cooperation between Océ’s German and the Dutch research centres

has resulted in innovations in the range of printers and servers thanks to an

exchange of functionalities between the machines.

Production Printing Systems

The Strategic Business Unit Production Printing Systems (high volume printers and

printing systems) increased its revenues in 1999. Revenues, including service, sup-

plies and Facility Services, went up by 7% to € 657 million (1998: € 614 million).

Of this increase, autonomous growth provided 6%, whilst the remaining 1% was

attributable to exchange rate effects. Profitability was maintained at a high level.

The market for high volume printing is dominated by a very limited number of

suppliers. An ongoing process of business concentration is also taking place in this

market. As a supplier of systems based on continuous-feed paper Océ maintained

its leading position world-wide and achieved a growth of more than 5%, well in

excess of the market growth. In cutsheet systems for high volume applications Océ

was likewise able to strengthen its position further, for instance by offering such


features as magnetically readable typeface and support colours. In this market, too,

a major strength is that Océ can supply the machines in combination with an ex-

tensive series of applications for document production and processing.

The product range on offer for the high volume market was further strengthened

during the year under review. Océ therefore underlined its technological leadership

yet again. The product range – also including the servers and software – offers the

user great flexibility as regards speed, the number of printer languages that can be

processed and the range of print resolutions. As a result the products can be used in

combination with virtually any system that the customer has installed, even if that

is of less recent date or has been designed with other print systems in mind.

The Domain software developed by Océ has quickly proved its value as a

powerful tool in the production of documents.

In the high volume market more than anywhere else, partnerships – in both the

hardware and the software field – are a critical success factor. All of Océ’s printers

are installed in combination with computer systems whose output they process, but

also with finishing equipment with which they form an integral whole. To ensure

that it can actually supply the complete solution that the customer demands, Océ

operates a series of partnerships – some of them on an exclusive basis – with the

most important suppliers of systems and hardware.

Since 1998 Océ has held a participation in the software development business

Siemens Software in Namur, Belgium. In October 1999 Océ increased its stake to

70%. The business, now called Océ Software Laboratories Namur, also develops

special application software for Océ customers.This currently involves 80 employees.

The number of employees working for Océ will be expanded further in future.

Printing & Publishing The market for Printing & Publishing (complete publications in relatively small

print-runs) likewise consists of a small number of suppliers who work in close

cooperation with partners. This market, which has mainly evolved to meet the

needs of the printing and publishing industry, is dominated by players that have a

strong customer base in pre-press and printing technology. None the less Océ was

able to double its revenues in this market. That growth rate is much higher than

that of this already fast-growing market. Partnerships, such as a substantial reseller

contract with Agfa for the Chromapress system, further reinforced the market

position. The costs of developing this relatively new market for Océ are high. By

concentrating on several highly promising market segments, especially the printing

of books and manuals, the operation can be done on a cost-effective basis. Since

Océ, in cooperation with a number of partners, focuses on the supply of complete

systems and functional software packages, a good margin is attainable in this

market. During the year under review this activity was given a separate place of its

own in the form of a special business group for Printing & Publishing.

The Demandstream 8080 printer, specifically developed for Printing & Publishing

applications, was very well received by the market. The new Prisma servers and

software have also proved to offer excellent solutions for this market. Their high

productivity is a feature that is particularly appreciated in the printing world. The

machine’s performances are directly reflected in the commercial value of the output.

In the market for Printing & Publishing Océ has, in cooperation with several

suppliers of finishing equipment, developed a complete system for the printing of

books in limited print-runs. At the Buchmesse in Frankfurt, Germany, the leading

trade fair for the publishing world, Océ created much excitement with this ’Book-

on-Demand’ system. It is the first digital printing system whose print quality and

39


Document handling is a

broad concept. Yet Océ

is familiar with all its

secrets and successfully

offers the market that

wealth of practical ex-

perience in the form of

facility services. An in-

vitation to contract out

the entire operation:

from electronic docu-

ment through to the

distribution of the

finished product.

finishing can compete with traditional book-printing methods. At the end of 1999

it saw its first deployment in practice at a printing firm in the United Kingdom.

The application of colour is also attracting more and more interest in the world

of high volume printing. For quite some time Océ has been supplying an optional

second print colour in a number of its models. The developments towards more –

and more varied – colours are in full swing and in a somewhat more distant future

four-colour printing will also become possible. During the year under review Océ

opened up the unique possibility of producing toner to match the customer’s exact

house style colour.

Facility Services

The trend towards the outsourcing of printing and copying activities and, as an

extension of that, the contracting out of a series of other facility services is now

gaining more momentum in Europe as well. Océ, which has already been active in

this field for several years, therefore experienced a strong increase in earnings from

these activities during the year under review. Revenues increased world-wide by

34% to € 197 million (1998: € 146 million). These revenues are included in the

revenues of the three Strategic Business Units: Wide Format Printing Systems,

Document Printing Systems and Production Printing Systems.

To focus on developing further in this attractive growth market (30% growth

on an annual basis) a separate Business Group, Océ Facility Services, was formed.

By offering Facility Services, Océ is responding to a clear need amongst cus-

tomers. For each customer the company develops a tailor-made package of services

which, although based on Océ’s own core competencies, encompasses an ever wider

spectrum. Following the addition of services such as postroom activities, a strong

demand is now arising mainly for activities involving the management of document

flows. This relates to the creation, production, reproduction, distribution and

archiving of (digital) documents. Specifically in big companies with complex docu-

ment flows Océ is able to make effective use of its expertise.

The demand for consultancy in this area is also growing. Here, just like in the

other business groups, Océ intends to acquire a clear – and profitable – place for

itself.

Océ sees this activity primarily as the provision of a service that has its own

earnings-generating function, but the company will also make as much use as pos-

sible of its own products (machines and supplies).

In the United States the activities of Archer Management Services, which was

acquired in 1998, have developed further at a rapid pace.This operation represented

a substantial proportion of the increased revenues in this region.


41

Imaging Supplies

Océ’s revenues in Imaging Supplies (paper, other imaging materials and toner)

decreased in 1999 by 1% to € 414 million. These revenues, which also comprise

those of Arkwright, are included in the revenues of the three Strategic Business

Units Wide Format Printing Systems, Document Printing Systems and Production

Printing Systems.

The activities, which are housed within a separate Business Group, are mainly

successful in new materials for business graphics (paper for colour prints and copies),

display graphics (wide format) and multi-purpose supplies. This success is

being achieved alongside the steady growth in the ‘core activities’ in the area of wide

format plain paper media. Sales of diazo supplies continued to fall steadily. To make

the most effective possible use of the available selling capacity, Océ concentrates in

the first instance on the equipment installed with Océ customers, both that of Océ

and that of third parties.

Against a background of static revenues, the margin developed favourably, in

particular because of the growing share of supplies with high margins and con-

tinued rationalisation of the product portfolio. Profitability increased further, also

thanks to savings in logistics operations, which have meanwhile largely been

contracted out.

In the sales of imaging supplies a growing role is played by e-commerce. In a

number of countries some 10% of the supplies are ordered via Internet and this

proportion is expected to increase quickly.

When developing new carrier materials Océ makes ample use of the expertise

that the business has built up over the years, notably in the area of coating. For

instance, one of the new materials for display graphics was a paper coated with an

impermeable layer to accept the water-based ink that is customary in inkjet printing.

This innovation has its roots in diazo technology. A large number of other carrier

materials are based on the expertise of Océ’s American business Arkwright. The

European and American activities are increasingly working more closely together.

Generally speaking, Océ is excellently qualified to supply a broad range of materials

that are precisely attuned to the machines they are used on. Océ is a leading

supplier of imaging supplies both in Europe and in the United States.


Research & Development (R&D)

The major changes that are currently taking place in the market and amongst Océ’s

customers because of the switch to digital technology had already led to a refocusing

of the programme many years ago. As a result Océ had been able to anticipate

these changes in full in its products. No substantial changes therefore took place in

technological developments during the year under review. Practical development

work was, however, brought into line with the rapidly changing demand for new

software products whose functionality also needs to be continually expanded. To

prevent possible tension between the need for completely new developments and

the expansion and updating of existing functionalities, these development cate-

gories have been separated. Océ applies a system of basic developments (known as

root, branch and leaf development), from which families of machines and systems

are developed, each with their own regular updates and new releases. In this way a

faster time-to-market is achieved for product variants that are needed by the market

over the short term, whilst still continuing to work on the innovation of basic

technologies. Many requests for adaptations and expansions are received from the

operating companies and also from, say, Océ Facility Services, which also serve as

sources of knowledge about specific customer processes. ’s task is to develop

these further in terms of either customer-specific or generic applications. Thanks to

its direct sales organisation and the resultant close involvement with the customer’s

processes, Océ is uniquely positioned to base its work on those processes instead of

on the approach of the individual user.

Thinking up solutions for market demands and needs brings much work for the

internal and external (software) developers who develop and expand the products

for Océ.

In the United States the cooperation with Groupware and PageMasters was

intensified. The facilities in the Netherlands (Venlo), Germany (Poing),

France (Créteil) and Belgium (Namur) are working together to an increasingly

closer extent.

Machines and systems During the year under review good progress was achieved with a number of

machines and systems whose launch is planned for the near future. In the successful

digital line of the Océ 3165 ‘family’, for example, two machines for 100 and 85

ppm respectively have now reached the engineering phase. The Océ 3125 colour

copier was given the required stability thanks to a newly designed drum and a new

toner that was totally redeveloped. Major steps forward were also achieved in inkjet

technology, with both water-based and solid inks. The technology is destined for

the production of Océ’s wide format colour printers.

Long before new systems

and machines are put on

the market, Océ’s –

often briefed by an alert

sales force – is busy

combining the changing

wishes and requirements

of users with the latest

technological develop-

ments to make new, ad-

vanced products.


43

Important work was done at the Océ laboratory in Créteil, where the Next

Generation Controllers are being developed for the wide format printers/copiers.

The new controller has meanwhile been incorporated in the new Océ 9400 and

9600 and is being prepared for the Océ 9800. The cooperation between the

activities in Germany and the Netherlands has been further intensified and is

beginning to yield tangible results. This was particularly the case in the area of

toners, organic photoconductors and techniques for duplex printing on cut sheets.

For the development of new imaging supplies the main emphasis has been

shifted to the department at Arkwright, where a wealth of experience has been

built up mainly in the area of carrier materials and coatings.

The cooperation with a large number of suppliers in the development phase of

new machines proved to be a success. This policy has meanwhile been refocused to

concentrate on a limited number of partners and co-developers of a higher standard

so as to enhance the ability to respond alertly to market needs.

The Océ Software Academy has been a great success. In this academy some 50

graduates from higher vocational education are trained as specialists who can

play an active and high-calibre role within the organisation. Almost half of those

participants have meanwhile completed their studies with very good results. A third

intake class started in 1999.

Safety, Health and the Environment

Océ has a tradition of caring for the health and safety of its employees and the users

of its products. The company does this by attempting to minimise the environ-

mental impact of its activities as much as possible. Océ’s commitment to safety,

health and the environment is laid down in a policy that plays a prominent role in

all the company’s operations. In combination with this policy, the endeavours to

achieve continual innovation have led to a great many improved characteristics, both

in the products themselves and also in working methods and processes, which are

likewise being improved all the time. As a rule the specifications are well in excess of

the statutory requirements relating to safety and the environment.

Sustainable development and Sustainable development has become an important element in present-day business

the environment practice. Océ has clearly booked outstanding achievements in this field over the

past years and has taken a series of measures aimed at achieving sustainability in all

aspects of its operations. This is reflected in special attention for the use and re-use

of materials and a focus on the reduction of energy consumption. Together with the

research and inspection institute Océ developed a system for safe and en-

vironmentally friendly design, a system that plays a central role in every phase of the

design process. Thanks to rationalisation measures and the introduction of new

processes in manufacturing and storage operations Océ’s environmental impact is

gradually being further reduced world-wide. The re-use and recycling processes and

a self-contained system of waste materials management are also reducing the impact

even further. The energy consumption of Océ machines decreases with each new

model; the new Océ 9600, for example, has an especially low energy usage. Almost

all Océ systems carry the American Energy Star seal of approval.

During the year under review Océ introduced an environmental care system

based on 14001 for all its manufacturing facilities in Venlo. Certification of this

system will take place at the beginning of 2000. The operating companies, too,

have shown an interest in obtaining such certification.

4444


Manufacturing & Logistics

Machines The start of the year under review brought a decline in demand for various analogue

product lines at the manufacturing locations. As a response to that, the manufac-

turing capacity was adjusted by cutting back on flexible manpower resources. The

digital production lines continued to be fully utilised. Managing the varying demand

for products requires a great deal of attention, but the flexi-system has again demon-

strated its value. In the meantime the management of stocks has been changed from a

plan-driven to a consumption-driven system. In addition, a Manufacturing Excel-lence programme has been initiated with the aim of raising the efficiency, whilst at

the same time enhancing the quality.This is being supported by a number of factors,

such as the simpler construction of the machines thanks to digital technologies, the

increased use of complete pre-assembled modules sourced from premanufacturing and

the transfer of part of the work to the manufacturing facilities in the Czech Republic.

The outcome will be that the increase in assembly personnel will lag behind the

anticipated growth in production.

The outsourcing of factory supply logistics which had been implemented in the

previous year proved successful, despite the rapid fluctuations in demand.

Logistics In the logistics for service components, one of the most vital processes within the

Océ organisation, the centralisation that was started in 1998 was further continued.

In the new set-up the service technicians can now be supplied with components

before 07.00 hrs. provided that the orders were placed before 17.00 hrs. on the

previous day. This applies not only in the Benelux but also in Germany, France and

the United Kingdom. The other countries in Europe will soon follow.

As regards the second major logistics outsourcing project, the logistics of sup-

plies, the first phase has been implemented. A new logistics centre in Venlo and a

number of local storage facilities in various countries will handle the distribution

under the leadership of an international provider of logistics services. The project

will yield immediate savings, thanks in part to the use of a variable costing system.

During the past year a start was made on direct deliveries of machines to cus-

tomers on the basis of customer specifications. Final assembly and pre-installation

take place centrally. Distribution, installation and instruction will be handled in

cooperation with partners. Partnerships have meanwhile become essential in

logistics, as they lead to improved performances and greater flexibility.

Recycling There-useof reconditionedcomponents frommachines thathavebeenreturned from

themarkethasbeendevelopedbyOcé intoapermanent systemover a series of years.

In designing new machines the re-use of components and modules is now standard

practice.Partlybecauseof the switch fromanalogue todigital, relatively largenumbers

ofmachines are currently being returned to the special recycling plant that Océ built

at the beginning of the 1990s. That plant, located in the Czech Republic (Prague),

also plays an increasingly important role in the remanufacturing of machines.


Paper, in many different

qualities, plastics,

coloured and transparent,

but also textiles, self-

adhesive materials and

transfers are used in

printers all over the

world. Océ offers an

attractive collection of

carrier materials, each

tailored to the various

markets. Easily ordered,

promptly delivered.

Personnel & Organisation

Human resources management () was closely involved in the internal changes

in the Océ organisation at all levels. Based on the recognition that adequate man-

power is the main driver of Océ’s success, has also focused its policy on the

new requirements and has acquired new methods and techniques to help accelerate

the internal restructuring process that has already been set in motion.

This is governed by two key aspects: the switch from analogue to digital tech-

nology, combined with a transition to a role as ‘supplier of complete solutions’, and

the increasingly higher average education that is needed to fulfil the functions

effectively.

The effect of the switch is particularly noticeable in product development,

manufacturing, service and sales, although its timing is phased differently in all four

areas. In some 60% of the employees are trained in . The need for

specialists has grown strongly. The company’s own training programme filled

part of that need by supplying motivated people of very high quality. In the service

area the number of digital machines and especially systems is now increasing fast,

particularly in the office market. That has intensified the demand for digitally

trained technicians, though the greatly reduced need for service is keeping the

number of service staff limited in absolute terms. In sales, too, the switch from

selling (often stand-alone) machines to selling complex digital systems calls for a

different type of salesman/consultant.

The ever higher average level of education marks the transition from a

production-based to a knowledge-based organisation. Via a continuous education

and training programme Océ provides its own employees with additional training.

At the same time, however, the recruitment of highly trained new employees has

been intensified.

To analyse the requirements for specialists as well as for personnel who are

familiar with it, an Master Plan has been drawn up in cooperation with the

Strategic Business Units.

As part of the Management Development programme, a start was also made

during the year under review on monitoring and identifying young talent via the

Young Executive Programmes.

Under the restructuring programme Océ has already had to take its leave of a

number of employees during the year under review, including many dozens who had

what was often a lengthy period of service. The company owes them a great debt of

gratitude for their contribution to the successful growth of Océ over the years.


Océ also undeniably grew again in many ways during the year under review. In a

number of new areas, too, Océ has gained ground and has taken steps that will prove

important for the future. To grow responsibly in this way calls for dedication and

effort but also for imagination and daring. Océ people have shown that they possess

these qualities in ample measure. That gives us the confidence that – however much

the world around us may change – Océ can continue to grow in the future as well.

We would like to convey our sincere thanks to everyone, employees, customers,

partners, for the contributions they made over the past year.

Venlo, January 31, 2000

The Board of Executive Directors:

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

H.J.A.F. Meertens

G.B. Pelizzari

Distribution of 1999 1998

employees bygeographical areas number as % number as %

Netherlands 4,155 19 4,155 20

Germany 3,144 14 3,110 15

France 1,606 7 1,578 8

United Kingdom 1,104 5 1,239 6

Rest of Europe 3,454 16 3,449 16

United States 7,103 33 6,369 30

Rest of the world 1,191 6 1,078 5

Total 21,757 100 20,978 100

Distribution of 1999 1998

employees bytypes of work number as % number as %

Research &

Development 1,780 8 1,614 8

Manufacturing &

Logistics 3,507 16 3,878 19

Facility Services 4,198 19 3,237 15

Sales 4,926 23 4,885 23

Service 5,322 25 5,415 26

Accounting and

other staff 2,024 9 1,949 9

Total 21,757 100 20,978 100

4646

49

1999 1998 › € 1,000

Net sales 1,647,233 1,646,185

Rentals and service 1,091,050 1,016,506

Interest from financial leases 100,142 89,853

Total revenues 2,838,425 2,752,544

Cost of sales 907,113 914,440

Cost of rentals and service 716,299 668,007

1,623,412 1,582,447

Gross margin 1,215,013 1,170,097

Selling expenses 656,823 621,038

Research and development expenses 174,380 170,112

General and administrative expenses 135,685 133,747

966,888 924,897

Operating income 248,125 245,200

Financial expense (net) 58,989 61,018

Income before income taxes, equity in income of unconsolidated companies and minority interest 189,136 184,182

Income taxes 54,912 53,446

Income before equity in incomeof unconsolidated companies and minority interest 134,224 130,736

Equity in income of

unconsolidated companies 376 820

Income before minority interest 134,600 131,556

Minority interest in net income of

subsidiaries 2,675 2,507

Net income before exceptional items 131,925 129,049

Exceptional items (net of tax) –55,250 –

Net income 76,675 129,049

Dividend preference shares 3,551 3,551

Net income attributableto holders of ordinary shares 73,124 125,498

Consolidated Statements of Operations

50

after net income appropriation Consolidated Balance Sheets November 30

Assets 1999 1998 › € 1,000

Tangible fixed assets Property, plant and equipment 449,808 445,771

Rental copying equipment 257,198 240,690

707,006 686,461

Financial fixed assets Unconsolidated companies 4,367 3,660

Financial lease receivables 624,151 555,141

Other long term assets 21,837 21,499

650,355 580,300

Current assets Inventories 395,342 365,945

Accounts receivable 1,106,347 942,891

Prepaid expenses 20,224 26,018

Cash and cash equivalents 36,854 18,294

1,558,767 1,353,148

Total assets 2,916,128 2,619,909

51

Liabilities 1999 1998 › € 1,000

Group equity Ordinary shares 42,224 37,742

Priority shares 2 1

Financing preference shares 10,000 9,076

Paid-in capital 502,695 506,009

Revaluation reserve 37,155 37,258

Legal reserve 1,733 1,479

Other reserves 224,096 134,324

Total shareholders’ equity 817,905 725,889

Minority interest 42,213 40,305

860,118 766,194

Long term liabilities (provisions) 280,368 213,107

Long term debt 884,256 859,235

Current liabilities Short term debt 302,800 219,476

Other liabilities 289,477 301,181

Accrued liabilities 258,042 217,124

Deferred income 41,067 43,592

891,386 781,373

Total liabilities 2,916,128 2,619,909

Consolidated Balance Sheets November 30

52

Consolidated Statements of Cash Flow

* See page 53 for the specification of Net change in other working capital accounts.

1999 1998 › € 1,000

Cash flow from operating Net income 76,675 129,049

activities Adjustments to reconcile net income to

cash flow generated by operating activities:

Depreciation 187,379 171,305

Installed in rental copying equipment –167,830 –168,129

Divestments in rental copying equipment 61,299 55,444

Financial lease receivables –17,591 –50,334

Equity in income of

unconsolidated companies –190 –522

Increase in long term liabilities

(provisions) 66,953 –20,229

Net change in other working

capital accounts* –153,325 –39,890

Total cash flow from operating activities 53,370 76,694

Cash flow from investing Capital expenditure:

activities Additions to property, plant and

equipment –115,227 –113,042

Other investments 1,408 –2,120

Proceeds from sale of property,

plant and equipment 34,205 25,959

Released investment grants related

to property, plant and equipment – –53

Acquisition of unconsolidated companies –117 –1,021

Proceeds from disposition of

unconsolidated companies – 1,404

Movement from unconsolidated companies

to consolidated companies –729 –

Aquisition net asset value (net of cash) –4,797 7,277

Goodwill –5,088 –69,442

Total cash flow from investingactivities –90,345 –151,038

53


1999 1998 › € 1,000

Cash flow from financing Long term debt:

activities Proceeds from long term debt 141,541 170,381

Repayment of long term debt –130,256 –42,304

Borrowings and current portion

of long term debts 82,145 –44,740

Issue of new shares – 16,368

Repurchase of shares –11,739 –13,619

Dividends paid –48,032 –45,209

Optional dividend 28,035 23,985

Decrease in minority interest 1,907 –560

Other –102 –242

Total cash flow from financing activities 63,499 64,060

Effect of exchange rate changes –7,964 483

Changes in cash and cash equivalents 18,560 –9,801

Specification of Net change in other working capital accounts:Inventories –21,863 1,857

Accounts receivable (excl. financial leases) –102,684 –18,147

Financial leases –49,823 –68,243

Prepaid expenses 6,509 –9,386

Trade accounts payable –2,151 12,768

Income taxes –21,204 16,405

Value added taxes, social

security and other taxes payable 12,537 6,300

Pension liabilities –127 –1,074

Other liabilities –7,672 5,528


Deferred income –2,525 –2,520

Balance –153,325 –39,890

Introduction

The following summary of significant accounting principles is intended as a guide

in interpreting the financial statements. There has been no change in the

accounting principles since the previous financial year.

The euro amounts are calculated using the fixed rate of 1 euro = 2.20371.

The Group’s financial year commences on December 1 and closes on November 30 of thesubsequent year.

Principles of consolidation

The consolidated financial statements combine the financial data for Océ .. and its

subsidiaries. The financial data of subsidiaries are fully consolidated; the minority

interest is stated separately. A company is considered to be a subsidiary if Océ

directly or indirectly holds a majority controlling interest in it.

The financial data of a company joining the Océ Group in the course of a

financial year are consolidated from the date of the Group’s entitlement to that

company’s results.

If the value of the acquisition exceeds the net asset value based on our accounting

principles, the difference, being the goodwill paid, is charged upon acquisition to

the Shareholders’ equity.

The principal companies affiliated to the Group are listed on pages 84 and 85 of

this report. A number of affiliated companies of minor importance have been

omitted by virtue of the provisions of Article 379, para. 2c, Book 2 of the Dutch

Civil Code.

Balance sheet items of foreign subsidiaries are translated into euro. As the

opening assets and movements in assets during the year are recalculated on the basis

of the closing exchange rate at the end of the reporting period, differences arise as

compared to the calculation based on the exchange rate used for the previous

period. Such differences are charged against or added to the Shareholders’ equity

(under Accumulated translation adjustment).

Statement of operations items of foreign subsidiaries are translated into euro at

the average exchange rate during the reporting period. The result calculated on this

basis differs from that calculated on the basis of the closing exchange rate for the

reporting period. This difference is debited or credited directly to the Shareholders’

equity (under Accumulated translation adjustment).

Consolidated Statements of Operations

Revenues These are the proceeds from the sale of goods and services to third parties, excluding

turnover taxes. Receipts from sales also include the receipts from the financial

leasing contracts concluded during the financial year. Interest income arising from

these contracts is included under total revenues.

Receipts from rental and service contracts for equipment are included in

revenues as far as they relate to the reporting period. Where rental and service

contracts have been invoiced in advance, the relevant amounts are shown in the

balance sheet under ‘Deferred income’.

54

Summary of Significant Accounting Principles

Costs Consumption of raw materials and other cost items, except depreciation on buildings

and production facilities, are based on historic cost.

Depreciation on fixed production assets is charged at a fixed percentage of the

lower of the replacement value or the value to the business (current value) of the

relevant asset. Depreciation on rental copying equipment is charged at a fixed per-

centage of the all-in cost. Government contributions to operating costs are deducted

directly from these costs.

Provisions are made to cover risks linked to business operations.

Research and development Expenditure on research and development, including purchased know-how, is

expenses charged directly to income.

Development credits and subsidies Development credits received from the government are subject to a contingent repay-

ment liability. This contingent liability, to which a contractual mark-up is applied

each year, is not included in the balance sheet. According as the relevant projects

prove successful, the liability ceases to be contingent in nature and a real liability

arises. A provision to cover these liabilities is set up in the year in which the liability

arises. The actual repayments fall due pro rata to the revenues achieved on the

relevant product. These repayments are charged to the provision for development

credits. Each year the balance of credits received and the repayment liabilities that

have arisen in respect of successful products are included in the results under

‘Research and development expenses’.

Subsidies received from the government are included in the statement of

operations as an income item in the year of the entitlement thereto.

Financial expense (net) Besides interest received and interest paid, also expenses relating to raising of loan

capital are included. The effect of interest rate instruments and interest on loans are

also included under this heading.

Income tax Income tax is calculated on the commercial results at the rates applicable in

the various countries. This method implies that provisions are made for deferred

income taxes. The entitlement to loss compensation is taken into consideration in

so far as there is a reasonable expectation that it can be realised. Allowance is made

for non-offsettable dividend withholding tax at the moment of dividend distri-

bution by an affiliated company.

55


Consolidated Balance Sheets

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

Foreign currencies Receivables and payables denominated in a foreign currency are translated into

local currency at the exchange rate ruling at year end. In so far as the exchange

results include results on forward exchange contracts relating to the positions of

subsidiaries, they are recorded under Shareholders’ equity. The differences relating

to operational cash flows, including those arising on the relevant forward exchange

contracts, are included in income.

Property, plant and equipment Property, plant and equipment are valued at the lower of the replacement value or the

value to the business (current value). In determining the replacement value, the

nature and location of the assets involved are taken into consideration. Adjustments

to replacement value are credited or debited directly to Shareholders’ equity

(Revaluation reserve) after deducting deferred taxes. Deferred taxes are not taken

into account regarding adjustments to replacement value of land.

Rental copying equipment These are valued at the all-in cost.

Unconsolidated companies These are included at the attributable net asset value, calculated where possible on

the basis of the valuation principles applied in these Financial Statements and

taking into account the specific risks connected with the company’s nature and

location.

Financial lease receivables These comprise the long-term receivables and residual values in respect of financial

lease contracts. They are valued at the present value of the contracted receivables.

Other long term assets These comprise assets that are not immediately realisable, such as mortgage debtors,

cash advances and guarantee deposits. They are valued at expected realisable value.

Inventories Purchased inventories are valued at purchase price by the First-in-First-out method.

Inventories of finished and semi-finished products and spare parts are valued at

manufacturing cost inclusive of a surcharge for indirect costs related to the manu-

facturing, no interest being charged. The risk of obsolescence is allowed for. Results

on transactions between consolidated companies are eliminated.

Accounts receivable Accounts receivable (trade debtors, financial leases, other debtors) and amounts

receivable from unconsolidated companies are shown at face value less an allowance

for bad and doubtful accounts.

Prepaid expenses These are shown at face value.

Cash and cash equivalents This item is valued at face value and includes unrestricted cash and short term

deposits with a maturity of less than three months.

Minority interest The minority interest in subsidiary companies are included at their net asset value

determined in accordance with the valuation principles used in these financial

statements.

56


Long term liabilities The provision for deferred income taxes is calculated on the differences between

(provisions) valuation of assets and liabilities for commercial and tax purposes, based on the

effective rate of income tax in the various countries and is stated at face value.

Claims in respect of loss compensation are deducted from this provision.

The self insurance franchise provision relates to uninsured potential future

losses that have not yet occured.

The provision for retirement benefits and severance payments relates to the

commitments, determined on an actuarial basis, which are not covered by separate

pension or redundancy funds, as well as to other non-activity schemes. In the

Netherlands and in most other countries the pension schemes are administered by

separate funds which apply local arrangements and practices. On aggregate the

liabilities of € 586 million are offset by separately held assets of € 644 milion. The

liabilities have been calculated on the basis of the present salary level of the relevant

employees. The provision for non-activity schemes relates to employees who have

opted to make use of such a scheme.

The restructuring provision relates to costs connected with the reorganisation of

business activities.

Other long term liabilities (provisions) among others relate to (legal)

proceedings and guarantee commitments.

All provisions are long term in nature.

Long term debt These include loans available for longer than one year. Loan amounts due within

one year are included under ‘Current liabilities’.

Current liabilities These commitments comprise liabilities falling due within one year.

Commitments and contingent These are commitments and contingent liabilities arising from contracts, mostly

liabilities not stated in the of more than one year (leasing contracts, rental contracts, capital expenditure

balance sheet commitments, repayable development credits, financial instruments, etc.).


The figures in this statement are derived from the movements in the Consolidated

Balance Sheets. In the event of a major acquisition, however, the acquired net asset

value, net of cash, is shown separately. The movement in the portions of long term

debt falling due within one year is shown under ‘Long term debt: repayment of

long term debt’.

57


Total revenues 1999 1998 › € 1,000

Total revenues 2,838,425 2,752,544

Geographical distribution Germany 13 14 percentages

France 8 8

United Kingdom 7 7

Netherlands 8 7

Rest of Europe 21 21

United States 37 37

Rest of the world 6 6

100 100

Distribution by industry Wide Format Printing Systems 28 28 percentages

segment Document Printing Systems 49 50

Production Printing Systems 23 22

100 100

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

number of currenciesof importance to Océ 1999 1998 1999 1998

Pound sterling 0.66 0.67 0.63 0.70

American dollar 1.08 1.11 1.00 1.15

Australian dollar 1.67 1.75 1.59 1.82

Japanese yen (10,000) 123.53 145.33 102.40 141.26

58

Notes to the Consolidated Statements of Operations

59

Costs & Expenses 1999 1998 › € 1,000

Depreciation Property, plant and equipment 89,542 83,651

Rental copying equipment 97,835 87,654

187,377 171,305

Payroll expenses Wages and salaries 894,423 824,814

Social security 184,837 170,930

Pensions 42,428 37,858

1,121,688 1,033,602

The remuneration costs (including social charges and cost allowances) and pension

scheme contributions of the present members of the Board of Executive Directors

for the 1999 financial year amounted to € 2,312,696 (1998: € 1,921,869) and

€ 537,276 (1998: € 497,797) respectively, whilst those of former Executive Board

members amounted to nil (1998: nil).

Under the Océ Stock Option Plan (see page 77) 112,000 options were granted

to the members of the Board of Executive Directors (1998: 182,000 units). At the

end of the financial year the members of the Board of Executive Directors held no

ordinary shares in Océ (1998: nil) and no rights to shares (1998: nil) from the 1994

issue of convertible bonds and from options listed on the Options Exchange.

The remuneration for the 1999 financial year of the present and former members

of the Board of Supervisory Directors amounted to € 193,637 (1998: € 186,305).

At the end of the financial year the members of the Board of Supervisory Directors

held 2,876 ordinary shares in Océ (1998: 2,814) and no rights to shares (1998: nil)

from the 1994 issue of convertible bonds and from options listed on the

Options Exchange.

1999 1998 › € 1,000

Research and development Total expenditure on research

and development 166,646 155,169

Development credits repayable

and net subsidies received 7,734 14,943

174,380 170,112

Financial expense (net) Interest and similar income items –5,016 –4,570

Interest charges and similar expenses 63,007 64,229

Other financial expenses 998 1,359

58,989 61,018


Income taxes A reconciliation of the Dutch statutory income tax rate to the effective income tax

rate is set forth below:

1999 1998 percentages

Dutch statutory tax rate 35.0 35.0

Non-deductible expenses 1.5 1.6

Foreign tax rate deviating from the

Dutch tax rate –1.4 –2.3

Tax credits –1.0 –1.2

Other –5.1 –4.1

Effective income tax rate 29.0 29.0

Exceptional items The extraordinary charges relate to a restructuring provision for redundancy costs

of employees and the write-off of assets that have been taken out of use.

1999 1998 › € 1,000

Restructuring provision 85,000 –

Income taxes 29,750 –

Exceptional items (net) –55,250 –

Employees by category 1999 1998 employees

Research and development 1,780 1,614

Manufacturing and logistics 3,507 3,878

Facility Services 4,198 3,237

Sales 4,926 4,885

Service 5,322 5,415

Accounting and other staff 2,024 1,949

Number of employees at November 30 21,757 20,978

Average number of employees 21,368 19,366

60


Tangible fixed assets

Property, plant and equipment property production other fixed under fixed assets not total › € 1,000

and plant machines assets construction in production

and prepayments process

At November 30, 1998

Replacement value 352,138 351,230 303,500 21,714 4,578 1,033,160

Accumulated depreciation 136,793 250,710 197,642 _ 2,244 587,389

Book value 215,345 100,520 105,858 21,714 2,334 445,771

Movements in book valueExpenditure 5,640 32,155 59,114 18,220 96 115,225

Divestments 13,307 5,797 10,921 4,179 – 34,204

Net expenditure –7,667 26,358 48,193 14,041 96 81,021

Acquisition of companies 284 522 412 – – 1,218

Depreciation 8,278 37,939 43,036 7 282 89,542

Revaluation – – – – – –

Foreign currency translations 3,508 3,954 3,408 387 83 11,340

At November 30, 1999 203,192 93,415 114,835 36,135 2,231 449,808

Replacement value 340,144 375,539 346,832 36,142 4,608 1,103,265

Accumulated depreciation 136,952 282,124 231,997 7 2,377 653,457

Book value 203,192 93,415 114,835 36,135 2,231 449,808

Revaluation included in book value amounts to € 12.8 million.

The estimated useful lives of the various classes of fixed assets are as follows:

– property and plant: 20 to 50 years;

– production machines: 8 or 10 years;

– equipment: 3 to 10 years;

– vehicles: 4 or 5 years.

Property, plant and equipment contains an amount of € 12.9 million for

financial leases (1998: € 13.1 million).

Depreciation on property, plant and equipment on the basis of historic cost

amounts to € 89 million (1998: € 83 million).

61

Notes to the Consolidated Balance Sheets

62


1999 1998 › € 1,000

Rental copying equipment At November 30, 1998/1997

Cost 533,867 500,382

Accumulated depreciation 293,177 280,996

Book value 240,690 219,386

Movements in book valueInstalled on rental 167,830 168,129

Divestments –61,299 –55,444

Depreciation –97,835 –87,654

Foreign currency translations 7,812 –3,727

At November 30 257,198 240,690

Cost 588,924 533,867

Accumulated depreciation 331,726 293,177

Book value 257,198 240,690

The estimated useful life of the various types of machines ranges from 3 to 5 years.

Financial fixed assets 1999 1998 › € 1,000

Unconsolidated companies Book value at November 30, 1998/1997 3,660 3,715

Changes due toEquity in income 376 820

Increase in/acquisition of companies 760 1,021

Divestments – –1,404

Decrease resulting from addition to

consolidated companies –643 –

Distributions received –186 –298

Foreign currency translations 400 –194

Book value at November 30 4,367 3,660

63


1999 1998 › € 1,000

Financial lease receivables Lease amounts receivable at November 30,

1998/1997 704,012 642,051

New lease amounts receivable 445,764 431,467

To current lease amounts receivable –402,165 –352,342


Lease amounts receivable at November 30 799,028 704,012

Residual values 38,974 41,569

Unearned income –213,851 –190,440

At November 30 624,151 555,141

Other long term assets Book value at November 30,

1998/1997 21,499 19,277

New amounts receivable 2,824 2,818

Repayments –2,656 –573



Current assets 1999 1998 › € 1,000

Inventories Raw and other materials 34,633 31,770

Semi-finished products and spare parts 124,447 132,821

Finished products and trade stock 236,262 201,354

Total 395,342 365,945

Accounts receivable Trade accounts receivable 634,529 527,356

Discounted trade bills –714 –691

Lease receivables 402,165 352,342

Other 70,367 63,884

Total 1,106,347 942,891

Cash and cash equivalents Cash and bank balances 31,800 16,464

Time deposits 5,054 1,830

Total 36,854 18,294

* For further information about the authorised capital see page 76.

** If distributed in the form of shares, this amount is available to shareholders without attracting Dutch income tax.

Group equity 1999 1998 › € 1,000

Authorised capital* Ordinary shares 72,500 65,798

Priority shares 2 1


Protective preference shares 87,500 79,412

Total 175,002 158,824

Paid up share capital Ordinary sharesAmount at November 30, 1998/1997 37,742 36,614

Conversion of convertible loans 89 600

Share issue – 282

Stock dividend 518 246

Redenomination in euro 3,875 –

Amount at November 30 42,224 37,742

Number at November 30, 1998/1997 83,173,250 80,686,176 shares

Conversion of convertible loans 195,288 1,322,959

Share issue – 621,916

Stock dividend 1,081,616 542,199

Number at November 30 84,450,154 83,173,250

Priority sharesAmount at November 30, 1999/1998 1 1

Redenomination in euro 1 –

Amount at November 30 2 1

Number at November 30 30 30 shares

Financing preference sharesAmount at November 30, 1998/1997 9,076 9,076

Redenomination in euro 924 –

Amount at November 30 10,000 9,076

Number at November 30 20,000,000 20,000,000 shares

Paid-in capital Amount at November 30, 1998/1997 506,009 476,288

Conversion of convertible loans 2,004 13,881

Issue of ordinary shares – 16,086

Stock dividend –518 –246

Redenomination in euro -4,800 –

Amount at November 30** 502,695 506,009

64


1999 1998 › € 1,000

Revaluation reserve At November 30, 1998/1997 37,258 44,970

Revaluation of property, plant and

equipment less deferred tax liability – –7,470

Tax rate change –103 –242

At November 30 37,155 37,258

Legal reserve Reserve for non-distributed income of unconsolidated companiesAt November 30, 1998/1997 1,479 1,014

From Retained earnings 254 465

At November 30 1,733 1,479

Other reserves Accumulated translation adjustmentAt November 30, 1998/1997 –100,835 –79,179


To Retained earnings 13,904 –

At November 30 –39,586 –100,835

Retained earningsAt November 30, 1998/1997 246,075 210,405

To legal reserve –254 –465

From accumulated translation adjustment –13,904 –

Added from net income 31,473 84,296

Goodwill –5,088 –69,442

Repurchase of shares –106 –2,703

Settlement of optional stock dividend

previous year 3,004 3,459

Optional stock dividend (estimated) 25,031 20,525

At November 30 286,231 246,075

Repurchased shares relating to the Stock Option PlanAt November 30, 1998/1997 –10,916 –

Repurchased –11,633 –10,916

At November 30 –22,549 – 10,916

Number at November 30 1,149,840 449,840 shares

Total Other reserves 224,096 134,324

Minority interest At November 30, 1998/1997 40,305 40,865

Capital distribution / contribution –1,187 –3,084

Share in income 2,675 2,507

Foreign currency translations 420 17

At November 30 42,213 40,305

65


66


Long term liabilities (provisions) 1999 1998 › € 1,000

Provision for deferred At November 30, 1998/1997 10,019 17,437

income taxesMovements due toAcquisition of companies – –5,621

Differences between income for

commercial and tax purposes 23,249 –3,022

Foreign currency translations –1,540 1,225

At November 30 31,728 10,019

The composition of the provision for deferred income taxes is as follows

Leasing 135,111 122,839

expenses –13,558 –41,408

Other fixed assets –3,389 –15,826

Current assets –54,588 –45,825

Long term liabilities (provisions) –12,457 233

Current liabilities –19,391 –9,994

Total 31,728 10,019

Other provisions Self insurance franchise 1,815 3,630

Retirement benefits and severance payments 160,441 141,507

Development credits 2,799 5,785

Reorganisation provision 60,628 31,861

Other provisions 22,957 20,305

At November 30 248,640 203,088

Total long term liabilities (provisions) 280,368 213,107

Long term debt 1999 1998 › € 1,000

Convertible subordinated guilder

debenture bonds 10,011 11,931

Convertible guilder debenture

bond to Company personnel 6,955 5,387

Loans 862,184 835,672

Capitalised lease obligations 5,106 6,245

Total 884,256 859,235

Convertible subordinated Principal conditions of these 7-year bonds are:

guilder debenture bonds – final maturing date June 15, 2001;

– annual interest 4.75%, payable June 15;

– earlier redemption in whole or part is permitted under certain conditions as from

June 15, 1998;

– the bonds are convertible into ordinary shares until June 15, 2001 at the

stipulated conversion price of € 10.71 per € 0.50 ordinary share;

– the conversion price will be adjusted (inter alia) in case of a rights issue below market

price with pre-emptive rights for existing shareholders and if a share distribution is

made out of reserves or in the form of a dividend.

The Trustee: Amsterdamsch Trustee’s Kantoor ..,

Fred. Roeskestraat 123, 1076 Amsterdam.

Convertible guilder debenture The average conversion price is € 26.10 (1998: € 24.54).

bond to Company personnel

Loans principal amount average interest rate redemption amounts due after

amounts › € 1,000 at November 30 (%) more than five years

Guilder

debenture loan 136,134 6.25 2007 136,134

Guilder

debenture loan 113,445 6.38 2006 113,445

Guilder

debenture loan 90,756 6.50 2001 –

Guilders 58,084 8.32 2002 –

Guilders 13,613 7.20 2003 –

Guilders 22,689 6.84 2005 22,689

Guilders 77,143 5.70 2006 77,143

Guilders 18,151 6.00 2004 –

Guilders 4,538 5.84 2013 4,538

American dollars 5,976 6.30 2001 –

Euro 85,600 3.65 2003/5 17,800

French francs 43,448 3.94 2003/4 –

British pounds 61,807 5.95 2004 –

Swiss francs 24,344 2.39 2002 –

Swiss francs 58,364 2.10 2001/4 –

Norwegian crowns 22,374 6.17 2001/4 –

Swedish crowns 11,363 3.61 2001/5 1,754

Other 14,355 5.45 2001/5 3,999

Total 862,184 5.57 377,502

The fixed interest rates of the guilder (debenture) loans have been fully swapped

into variable interest rates.

67


68


Current liabilities 1999 1998 › € 1,000

Short term debt Borrowings under bank lines of credit 51,167 44,018

Current portion of long term debt 73,189 21,796

Short term borrowings 178,444 153,662

Total 302,800 219,476

Other liabilities Trade accounts payable 139,813 144,151

Notes payable 19,978 11,869

Income taxes –425 20,779

Valueaddedtaxes, social securityandother taxespayable 58,303 45,767

Pension liabilities 1,227 1,354

Dividend 15,195 18,025

Other 55,386 59,236

Total 289,477 301,181

Accrued liabilities Salary expenses and payroll taxes 133,084 121,157

Other 124,958 95,967

Total 258,042 217,124

Financial instruments

Financial instruments are used to hedge against the financial risks that are inherent

to the Group’s underlying commercial activities. For an explanation of the foreign

exchange and interest management policy, see page 20 of the Report of the Board of

Executive Directors.

Foreign exchange risks The policy for the management of foreign exchange risks is aimed at protecting the

operating income and participations held in foreign currencies. Forward foreign

exchange contracts have been entered into to control these foreign exchange risks.

The contract value and the result of forward foreign exchange contracts at balance

sheet date were as follows (in millions):

– in respect of cash flows: € 230.4 and € –13.3 (1998: € 308.6 and € 5.9);

– in respect of participations: € 317.3 and € –8.4 (1998: € 344.9 and € 5.0).

Interest risks Interest rate instruments are used to achieve the desired risk profile in terms of fixed

and variable interest exposures. A central objective of the policy is to prevent a mis-

match between the portfolio of rentals and leases and financing of the Group.

Efforts are made to achieve a ratio of about 80% between the above fixed-interest

assets and liabilities. At balance sheet date the contract value/notional principal

amount and the market value of interest rate instruments were as follows (in millions):

– interest rate swap contracts: € 1,493.5 and € 15.5 (1998: € 1,156.2 and € 57.2);

– interest rate cap contract: € nil and € nil (1998: € 26.1 and € 0.1);

– interest/foreignexchange swap: € nil and € nil (1998: € 2.1 and € –0.1);

– interest swaption: € 4.5 and € –0.2.

Credit risks Credit risks are reduced by doing business solely with financial institutions which

have a high credit rating, with fixed limits being applicable to each institution.

Commitments and contingent liabilities 1999 1998 › € million

not stated in the balance sheets

Collateral security Collateral security for liabilities 0.4 0.5

Contingent liabilities Guarantee commitments 2.6 3.8

Government development credits 48.2 57.9

Guarantee commitments include guarantees given in respect of import duties and

loans from third parties.

Other commitments Repurchase commitments of € 8.8 million (1998: € 8.3 million) exist on

the lease contracts with third parties. 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 lease commitments amount to € 180.9 million (1998: € 176.1

million). The instalments which become due in 2000 amount to € 58.8 million

(1999: € 52.2 million). Other commitments, such as buying contracts etc., have

been entered into solely as part of normal business operations.

Recourse liabilities in respect of bills discounted amount to € 0.7 million

(1998: € 0.7 million).

Litigation Since November 1996 Océ and Siemens have been involved in a lawsuit brought

before a court in Florida relating to alleged infringement of antitrust regulations.

Océ is contesting this complaint vigorously. Together with its advisers Océ takes

the view that a strong defence exists against all claims. Océ feels there is no reason to

assume that the claims will entail any risk to the financial position of the Océ Group.

69


70

Assets 1999 1998 › € 1,000

Financial fixed assets Consolidated companies 729,384 635,275

Amounts receivable from consolidated

companies 810,495 751,161

Unconsolidated companies 3,638 3,156

Other long term assets 67 11

1,543,584 1,389,603

Current assets Amounts receivable from consolidated

companies 110,467 221,395

Other amounts receivable 446 3,584

Cash and cash equivalents 59,176 32

170,089 225,011

Total assets 1,713,673 1,614,614

after net income appropriation Océ .. / Balance Sheets November 30

1999 1998 › € 1,000

Income of consolidated companies 75,004 127,175

Other net income 1,671 1,874

Net income 76,675 129,049

Océ .. / Statements of Operations

71

Liabilities 1999 1998 › € 1,000

Shareholders’ equity Ordinary shares 42,224 37,742

Priority shares 2 1


Paid-in capital 502,695 506,009

Revaluation reserve 37,155 37,258

Legal reserve 1,733 1,479

Other reserves 224,096 134,324

817,905 725,889

Long term liabilities Provision for deferred taxes 4,910 –

Long term debt Amounts payable to consolidated

companies 21,128 18,844

Long term liabilities 598,730 647,082

619,858 665,926

Current liabilities Amounts payable to consolidated

companies 82,892 76,321

Short term debt 157,292 88,115

Other liabilities 1,593 41,059


271,000 222,799

Total liabilities 1,713,673 1,614,614

Océ .. / Balance Sheets November 30

72

Océ .. / Notes to the Balance Sheets and the Statements of Operations


The accounting principles are the same as those used for the consolidated financial

statements. The Statements of Operations have been drawn up in accordance with

the provisions of Article 402, Book 2, of the Dutch Civil Code.

Financial fixed assets 1999 1998 › € 1,000

Affiliated companies For a list of companies affiliated to the Group in the Netherlands and elsewhere see

pages 84 and 85. Affiliated companies are valued pro rata to the net asset value held.

Consolidated companies Book value at November 30, 1998/1997 635,275 531,252

Changes due toEquity in income 75,004 127,175

Capital increase 29,188 124,946

Capital decrease –1,695 –15,468

Revaluation of property, plant and

equipment –99 –7,712

Dividends received –53,832 –41,116


Goodwill –5,088 –69,442


Amounts receivable from At November 30, 1998/1997 751,161 891,028

consolidated companies Prepayments 35,910 117,856

Repayments –36,552 –237,473


At November 30 810,495 751,161

Unconsolidated companies Book value at November 30, 1998/1997 3,156 3,688

Changes due toEquity in income 257 820

Acquisition of companies 10 537

Divestments – –1,398

Distributions received –186 –298



Current assets 1999 1998 › € 1,000

Cash and cash equivalents Cash and bank balances 59,176 32

Shareholders’ equity

For specifications, see pages 64 and 65.

Long term debt 1999 1998 › € 1,000

Long term liabilities Convertible subordinated guilder

debenture bonds 10,011 11,931

Convertible guilder debenture bond to

Company personnel 6,955 5,387

Loans 581,764 629,764

Total 598,730 647,082

The principal details of the convertible subordinated guilder debenture bonds are

stated on page 67. The average conversion price of the convertible guilder

debenture bond to Company personnel is € 26.10 (1998: € 24.54).

Loans principal amount average interest rate redemption amounts due after

amounts › € 1,000 at November 30 (%) more than five years

Guilder

debenture loan 136,134 6.25 2007 136,134

Guilder

debenture loan 113,445 6.38 2006 113,445

Guilder

debenture loan 90,756 6.50 2001 –

Guilders 58,084 8.32 2002 –

Guilders 13,613 7.20 2003 –

Guilders 22,689 6.84 2005 22,689

Guilders 77,143 5.70 2006 77,143

Guilders 18,151 6.00 2004 –

Guilders 4,538 5.84 2013 4,538

French francs 22,867 3.42 2003 –

Swiss francs 24,344 2.39 2002 –

Total 581,764 6.21 353,949

The fixed interest rates of the guilder (debenture) loans have been fully swapped

into variable interest rates.

73


Current liabilities 1999 1998 › € 1,000

Short term debt Borrowings under bank lines of credit 44,176 58,772

Current portion of long term debt 54,339 6

Short term borrowings 58,777 29,337

Total 157,292 88,115

Other liabilities Income taxes –13,613 19,624

Dividend 15,195 18,025

Other 11 3,410

Total 1,593 41,059

Commitments and contingent liabilities 1999 1998 › € million

not stated in the balance sheets

Contingent liabilities Government development credits 48.2 57.9

Other commitments Bank guarantees to group companies 152.3 153.4

Guarantees to group companies 31.8 39.9

For an explanation of the financial instruments see page 68.

74


75

Other information

Net income appropriation 1999 1998 › € 1,000

Preference dividend 3,551 3,551

Cash dividend:Dividend 41,651 41,202

Optional stock dividend (estimated) –25,031 –20,525

16,620 20,677

Added to Retained earnings:From net income 31,473 84,296

Optional stock dividend (estimated) 25,031 20,525

56,504 104,821

Total net income 76,675 129,049

Upon adoption of this proposed net income appropriation, the dividend for the

1999 financial year will be: € 2 per priority share of € 50, € 0.18 (rounded) per

financing preference share of € 0.50 and € 0.50 per ordinary share of € 0.50.

The final dividend per ordinary share for the 1999 financial year will be € 0.35, as

a payment of € 0.15 per ordinary share was made on October 29, 1999 on account

of the expected dividend.

It is proposed to make the final dividend available optionally either fully in cash,

or fully in shares, charged to the tax-free paid-in capital reserve or, if desired,

charged to the net income of 1999. This proposed net income appropriation is in

conformity with Article 36 of the Company’s Articles of Association.

Extract from the Articles of The rules for net income appropriation as laid down in the Articles of Association can –

Association relating to net where of relevance at the present time – be summarised as follows (for literal text see

income appropriation 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 financing preference shares:

6.26% of the paid-up amount including share premium, which percentage shall be

adapted on December 1, 2004 and subsequently each time eight years thereafter;

then on the priority shares: 4% and then on the ordinary shares: 5%, of the

nominal value.

Subsequently, of the net income then remaining, as much shall be reserved as

may be deemed necessary by the Executive Board, subject to approval of the

Supervisory Board.

In so far as 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.

76

Other information

Authorised capital

Priority shares All priority shares are issued. They are held by Foundation Fort Ginkel, Venlo, the

directors of which are: H.B. van Liemt (chairman), R.L. van Iperen and M. Ververs.

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 for 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 on all the priority shares

together. The Board of Executive Directors of Océ .. and the directors of

Foundation Fort Ginkel are jointly of the opinion that, as regards the exercise of the

voting rights attaching to the priority shares, Foundation Fort Ginkel has complied

with the requirements set in respect hereof in Appendix X to the Securities

Regulations of the Amsterdam Exchanges ..

Ordinary shares To encourage the long term achievement of the Company’s objectives, Océ operates

an Océ Stock Option Plan under which option rights and/or Share Appreciation

Rights (’s) to ordinary shares in Océ are granted to directors and certain senior

company executives. A is the right to receive payment of the share price gain,

whereby the share price gain is the difference between the stock market price of the

share on the day of exercise and the exercise price fixed on the day of grant. Instead

of receiving payment of the share price gain, a participant may also request delivery

of a share.

During the financial year an aggregate of 588,000 option rights and 178,000

’s were granted to a total of 167 participants for the Océ Stock Option Plan

2000. For participants in the Netherlands, Belgium and France the options or ’s

have a duration of six years, whilst the duration for participants in other countries

amounts to five years.

Participants in the Océ Stock Option Plan are expected to abide by a code of

conduct or waiting period. This code stipulates that, where the duration of the

options or ’s amounts to five years, they will not exercise option rights or ’s

within two years after grant and, where the duration of the options or ’s

amounts to six years, they will not exercise within three years after grant.

The exercise price is equal to the opening price quoted for the Océ share on the

Amsterdam Exchanges () on the day of grant and amounts to € 17.02 for the

’s and for the options of participants outside the Netherlands. Participants

domiciled in the Netherlands may choose, at the moment of grant, between an

exercise price of € 17.02, € 18.72, € 20.42 or € 22.98. To cover the income tax

payable by Dutch participants upon grant of the options, loans have been provided

which are repaid upon exercise.

Participation in the Océ Stock Option Plan is subject to regulations aimed at

preventing the misuse of inside information. Participants are prohibited from

trading in Océ options on the Options Exchange and from disposing of or

pledging the options that have been granted.

At November 30, 1999 an aggregate of 2,554,300 option rights or ’s to

ordinary shares were outstanding at an average exercise price of € 24.68.

The remaining duration of these options is 4.2 years on average.

The Company’s policy is to buy in the shares either in advance or upon exercise

required for implementation of the Océ Stock Option Plan.

The table above contains information about the options and ’s outstanding

at November 30, 1999.

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 the said 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: O. Hattink

(chairman), J.J.C. Alberdingk Thijm, J.M.M. Maeijer, Th. Quené, H.B. van Liemt

and R.L. van Iperen.

The Board of Executive Directors of Océ .. and the directors of the Lodewijk

Foundation are jointly of the opinion that, as regards the independence of the

directors of the Lodewijk Foundation, the relevant requirements set in respect hereof

in Appendix X to the Securities Regulations of the Amsterdam Exchanges .. have

been complied with.

During 1996 20,000,000 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 depositary receipts with

limited cancellability. The directors of this Foundation are H. de Ruiter

(chairman), S. Bergsma, J.M. Boll, L. Traas and D.M.N. van Wensveen.

77

Other information

issued issued number of options exercise price exercised number option forfeited outstanding at expiration date

in euro of options November 30, 1999

1994 624,000 8.30 615,000 9,000 – Nov. 29, 1999

1995 676,000 10.45 659,000 – 17,000 Nov. 30, 2000

1996 806,400 21.05 680,600 4,000 121,800 Nov. 25, 2001

1997 807,000 24.85 26,000 2,000 779,000 Nov. 28, 2002

1998 872,500 30.40-41.15 – 2,000 870,500 Nov. 29, 2003/04

1999 766,000 17.02-22.98 – – 766,000 Nov. 26, 2004/05

4,551,900 1,980,600 17,000 2,554,300

United States generally accepted accounting principles (US GAAP)

Net income and shareholders’ Océ’s consolidated financial statements are drawn up on the basis of the accounting

equity based on United States principles applied in the Netherlands, which differ in a number of respects from

accounting principles United States generally accepted accounting principles ( ). The statements

below give an approximate indication of the effect that application of

would have on net income, earnings per share and shareholders’ equity. This

information will be presented in more detail in the Form 20- report which will be

submitted to the Securities and Exchange Commission and which will be available

on request at the end of May.

Net income and shareholders’ equity 1999 1998 › € 1,000

under U S G A A P

Net income as reported in the

Consolidated Statements of Operations 76,675 129,049

U S G A A P adjustmentsBusiness combinations –19,258 –20,202

Reorganisation costs 28,686 –7,261

Depreciation 668 836

Self insurance –908 –

Deferred income taxes –6,106 7,215

Use of tax-deductible goodwill –4,084 –7,850

Net income under 75,673 101,787

Earnings per ordinary share of € 0.50 nominal under U S G A A P

Based on average number of shares

outstanding (basic) 0.87 1.20 euro

Based on increase upon

conversion/options (diluted) 0.86 1.17 euro

Shareholders’ equity as reported in the

Consolidated Balance Sheets 817,905 725,889

U S G A A P adjustmentsBusiness combinations 333,289 347,931


Revaluation of property, plant and equipment –8,390 –8,222

Self insurance franchise 1,815 3,630

Final dividend 15,195 18,025


Deferred income taxes on above adjustments –121,173 –116,576

Shareholders’ equity under 1,102,077 1,005,445

78

Other information

Under the Consolidated Balance Sheets items set out below would be:

Balance sheets items under U S G A A P 1999 1998 › € 1,000

Intangible assets (net) 333,289 347,931

Property, plant and equipment (net) 441,417 437,549

Long term liabilitiesProvision for deferred income taxes 152,902 126,595

Self insurance franchise – –


Other long term liabilities (provisions) 186,196 13,335

Current liabilitiesDividend – –


The main differences between the accounting principles applied by Océ

(Dutch ) and are summarised below:

Business combinationsGoodwill paid is charged by Océ directly to shareholders’ equity in the year of

acquisition. Under goodwill is capitalized as intangible fixed assets and

then amortized on a straight-line basis over a period of 20 to 40 years.

Reorganisation provision Under the formation of a provision is subject to more stringent criteria.

For this reason often a part of a provision is not yet recognised in .

Revaluation of property, plant and equipmentAs described on page 56 of the financial statements property, plant and equipment

are valued at the lower of replacement value or the value to the business. Under

such fixed assets are valued at their original cost. As a result, the higher

depreciation costs are adjusted to allow for this.

Self insurance franchise Under a provision for self insurance is not permitted.

Dividends not declaredThe final dividend on ordinary shares that is submitted to the shareholders’

meeting for approval is included under ‘Current liabilities’ in the financial state-

ments. Under this amount should be classified under shareholders’ equity

until the moment when the net income appropriation has been approved by the

shareholders.

79

Other information

Use of tax-deductible goodwillIn a previous acquisition a provision was made for the capitalised claims in respect

of deferred taxation.

Under these claims have to be netted against the goodwill included,

upon realisation.

Signatures to the financial statements and other information set out on pages 49 to 80:

January 31, 2000

The Supervisory Directors: The Executive Directors:H.B. van Liemt R.L. van Iperen

L.J.M. Berndsen J.F. Dix

P. Bouw H.J.A.F. Meertens

J.V.H. Pennings G.B. Pelizzari

M. Ververs

F.J. de Wit

80

Other information

Auditors’ report

Introduction We have audited the financial statements as included in the annual report for the

year ended November 30, 1999 of Océ .., Venlo.These financial statements are

the responsibility of the company’s management. Our responsibility is to express an

opinion on these financial statements based on our audit.

Scope We conducted our audit in accordance with auditing standards generally accepted in

the Netherlands. Those standards require that we plan and perform the audit to ob-

tain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by management, as

well as evaluating the overall financial statement presentation. We believe that our

audit provides a reasonable basis for our opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial

position of the company as of November 30, 1999 and of the result for the year then

ended in accordance with accounting principles generally accepted in the Netherlands

and comply with the financial reporting requirements included in Part 9, Book 2 of

the Dutch Civil Code.

Eindhoven, January 31, 2000

PricewaterhouseCoopers ..

81

83

Strategic Business Units

Wide Format Printing Systems G. Kraaijeveld

Document Printing Systems P.J.J.G. Nabuurs

Production Printing Systems W. Gemmel

Business Groups

Imaging Supplies J. Dix

Facility Services J. Dix

Corporate Staff

Secretariat of the Company, J.M.M. van der Velden

Legal Affairs

Corporate Personnel and P.H.G.M. Creemers

Organisation

Finance and Administration C.F. Lindenhovius

Central Operating Company Venlo

Venlo Executive Committee J.C.A. Vercoulen, chairmanN.J. Koole

Manufacturing and Logistics N.J. Koole

Research and Development J.C.A. Vercoulen

February 2000 Directors Central Services

See also page 7.

84

February 2000 Principal companies and their chief executives*

* Where holdings are less than 95% of the equity, capital percentages are 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.

Europe

Belgium Océ-Belgium ../.. J. van Boerdonk Brussels (2)729.4811

Océ-Interservices ../.. J. van Boerdonk Brussels (2)729.4992

Océ Software Laboratories B. Hucq Namur (81)554.211

Namur .. (70%)

Denmark Océ-Danmark .. H. Risør Copenhagen (43)29.7000

Germany Océ-Holding Deutschland A.A.J. van Driel and Mülheim/Ruhr (208)48.450

G.m.b.H. P. Feldweg

Océ-Deutschland G.m.b.H. A.A.J. van Driel and Mülheim/Ruhr (208)48.450

S. Landesberger

Océ Printing Systems G.m.b.H. P. Feldweg and Poing (8121)72.4031

W. Gemmel

France Océ-France .. A. Gimenez Noisy-le-Grand (1)4592.5000

Océ-Industries .. J.L. Desriac Créteil (1)4980.8000

Hungary Océ-Hungária Kft. G. Németh Budapest (1)236.1040

Ireland Océ-Ireland Limited R. Thompson Dublin (1)459.5411

Italy Océ-Italia S.p.A. F. Calosso Milan (02)927.261

Netherlands Océ-Technologies .. J.C.A. Vercoulen Venlo (77)359.2222

Océ-Nederland .. J.J. Kwaak ’s-Hertogenbosch (73)6815.815

Arkwright Europe .. J.R. Marciano Venlo (77)382.5315

Norway Océ-Norge .. O. Fondevik Oslo (2)202.7000

Austria Océ-Österreich Ges.m.b.H. G. Schennet Vienna (1)865.336

Poland Océ-Poland Limited, Sp. z z.o. M. Kozlowski Warsaw (2)2846.7429

Portugal Océ-Lima Mayer .. Th. de Lima Mayer Lisbon (21)412.5700

Spain Océ-España .. A. Aznar de Argumosa Barcelona (3)484.4800

Czech Republic Océ-Czech republic s.r.o. I. Konecny Prague (2)440.10111

United Kingdom Océ () Limited M.J. Cornish Loughton (181)508.5544

Sweden Océ Svenska F.O. Nilsen Stockholm (8)703.4000

Switzerland Océ (Schweiz) .. H. Würges Glattbrugg (1)829.1111

North America

United States Océ- Holding Inc. G.B. Pelizzari Chicago, (773)714.8500

Océ- Inc. G.B. Pelizzari Chicago, (773)714.8500

Océ Printing Systems , Inc. H.W. Krause Boca Raton, (561)997.3100

Arkwright Inc. J.R. Marciano Fiskeville, (401)821.1000

Archer Management M.D. Weiner New York, (212)502.2100

Services, Inc.

Océ Groupware D. Bower Cleveland, (216)687.9970

Technology, Inc.

Canada Océ-Canada Inc. S. Goodall Toronto (416)224.5600

´

Far East

Hong Kong Océ (Hong Kong China) Ltd. N.W. Kooij Hong Kong 2577.6064

China Océ Office Equipment N.W. Kooij Beijing (10)6528.1200

(Beijing) Co., Ltd.

Japan Océ Japan Corporation (85%) K. Mukozaka Tokyo (3)5402.6112

Singapore Océ (Far East) Pte. Ltd. N. Klitsie Singapore (8)46.2381

Malaysia Océ Systems M. Sak Petaling Jaya (3)758.4088

(Malaysia) Sdn. Bhd.

Singapore Océ (Singapore) Pte. Ltd. N. Klitsie Singapore (8)46.2381

Taiwan Océ (Taiwan) Ltd. N. Klitsie Taipei (2)2651.6516

Thailand Océ (Thailand) Ltd. S. Santhidej Bangkok (2)260.7133

Other countries

Australia Océ-Australia Limited P.W.M. Thomassen Scoresby (3)9730.3333

Brazil Océ-Brasil Comércio e S. Notermans São Paulo (11)3621.8444

Indústria Ltda.

South Africa Océ Printing Systems T. Venediger Johannesburg (11)258.6000

(South Africa) (Pty.) Ltd.

Direct Export

Netherlands Océ Direct Export W.J. Verheijen Venlo (77)359.2222

Lease companies

Australia Océ-Australia Finance Pty. Ltd. P.W.M. Thomassen Cheltenham (3)9263.3333

Germany Océ-Deutschland A. Hütter Mülheim/Ruhr (208)48.450

Leasing G.m.b.H.

France Océ-France Financement .. M. Gianfermi Saint-Cloud (1)4592.5055

Spain Océ-Renting .. E. de Sus Barcelona (3)484.4800

United Kingdom Océ () Finance Limited N. Anderson Loughton (181)508.5544

United States Océ-Credit Corporation S. Schulein Purchase, (914)694.1116

Minority holdings

Cyprus Heliozid Océ-Reprographics 25%

(Cyprus) Ltd.

Germany InterFace Connection G.m.b.H. 11%

Hungary Szenzor Számítóközpont Kft. 34%

Singapore Datapost Pte. Ltd. 30%

85

Principal companies and their chief executives

86

The aim of Océ’s investor relations policy is to keep shareholders informed as effec-

tively as possible about developments within the business and to provide them with

details of its corporate policy. The annual report is one of the main instruments for

achieving this aim. In addition, all relevant information, such as quarterly and annual

results announcements, press releases and background information, plus references

to other sources can be found on Océ’s Internet site http://www.oce.com, by clicking

the link Investor Information. Océ regularly organises roadshows and other meetings

for institutional investors, banks/brokers and their clients to inform them about the

company. Investors and their advisers are welcome to ask any questions they may have

by contacting our Investor Relations department direct on: (+31) 77 359 2240.

Quarterly results (net income*) 1999 1998

› € million % in-/decrease on › € million % increase on

previous year previous year

First quarter 28.3 12 25.2 25

Second quarter 35.2 6 33.1 24

Third quarter 24.2 –10 26.9 18

Fourth quarter 44.2 1 43.8 16

Year 131.9 2 129.0 20

Quarterly results (basic earnings* 1999 1998

per ordinary share, calculated on the basis of the weighted average in euro % in-/decrease on in euro % increase on

number of shares outstanding) previous year previous year

First quarter 0.33 10 0.30 24

Second quarter 0.41 5 0.39 20

Third quarter 0.28 –11 0.31 14

Fourth quarter 0.52 – 0.52 14

Year 1.54 1 1.53 18

Distribution of ordinary shares 1999 1998

as % at end of financial year (approximate indication based private institutional total private institutional total

on information provided by banks) Netherlands 36 27 63 26 32 58

United Kingdom – 10 10 – 11 11

Belgium / Luxemburg 2 10 12 1 10 11

United States – 6 6 1 8 9

Other 1 8 9 1 10 11

Total 39 61 100 29 71 100

Supplementary information for shareholders

* Before exceptional items.

Substantial Shareholdings On the basis of the Substantial Shareholdings Notification Act () which was

Notification Act introduced in the Netherlands in 1992 and which requires, inter alia, that share-

holders must publish holdings of more than 5% of the ordinary outstanding shares,

the following shareholder is known: Internationale Nederlanden Groep: 6.33%

(notification February 28, 1992).

Depositary receipts with limited cancellability for financing preference shares

are held by: Rabobank Nederland (6.25%), notification May 31, 1996; Fortis ..

(5.68%), notification May 10, 1999; - Capital Holdings .. (5.81%),

notification June 14, 1999.

Important publication dates March 9, 2000 meeting of shareholders;

(subject to modification) April 6, 2000 1st quarter results 2000;

July 6, 2000 2nd quarter results / 1st half year 2000;

October 5, 2000 3rd quarter results / nine months 2000;

January 5, 2001 provisional results for 2000;

January 31, 2001 4th quarter and 2000 full year results;

February 2001 publication of 2000 annual report.

Stock exchange listings Océ ordinary shares are listed on the stock exchanges in Amsterdam, Düsseldorf

and Frankfurt/Main and on the electronic stock exchange (). in Switzerland.

They are traded in the United States as American Depositary Receipts ( s): via

(over the counter). Options to Océ shares are traded on Amsterdam

Exchanges ..

87

Supplementary information for shareholders

Share price development

index Dec.1,1994 = 100

Océ

500

400

300

200

100

year’s highest

year’s lowest

11.23

8.45

95

22.44

10.85

96

30.11

20.42

97

40.93

18.47

98

35.00

14.00

99

88

amounts › € million Océ 1990-1999

* Before exceptional items.

** Basic earnings, after exceptional items, amounts to € 0.88 (1998: € 1.53) and Cash flow, after exceptional items, amounts to € 3.13 (1998: € 3.62).

Consolidated Statements 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

of Operations

Total revenues 2,838 2,753 2,469 1,894 1,330 1,257 1,192 1,242 1,190 1,070

Operating income 248 245 200 145 101 84 75 90 100 85

Net income 77 129 108 77 49 41 28 39 46 39

Key figuresTotal revenues

Increase/decrease (%) 3 12 30 42 6 6 –4 4 11 9

Expenditure on research and

development 167 155 139 111 84 84 84 86 83 79

As % of total revenues 5.9 5.6 5.6 5.9 6.3 6.7 7.1 6.9 7.0 7.3

Operating income


As % of average balance

sheet total 9.0 9.6 8.8 8.0 7.0 6.3 5.8 7.1 8.5 7.9

Net income

As % of total revenues *4.6 4.7 4.4 4.1 3.7 3.3 2.4 3.2 3.8 3.6

As % of average

shareholders’ equity *17.1 18.1 16.5 14.2 10.3 8.9 6.3 9.1 10.7 9.2

Net income retained *87 84 70 48 30 25 12 24 30 25

As % of net income *67.6 67.2 67.3 64.1 62.3 59.3 42.1 59.0 65.9 64.6

Payroll expenses 1,122 1,034 869 689 481 458 455 463 440 406


Number of employees 21,757 20,978 17,754 16,495 12,633 11,718 11,666 12,262 12,354 11,416

Per € 0.50 ordinary share (amounts in euro)Basic earnings before

exceptional items** 1.54 1.53 1.30 1.03 0.75 0.64 0.44 0.63 0.75 0.64

Diluted earnings 1.53 1.50 1.26 0.96 0.70 0.62 0.44 0.63 0.73 0.62

Cash flow before

exceptional items** 3.80 3.62 3.26 2.81 2.45 2.35 2.24 2.75 2.96 2.66

Shareholders’ equity 9.14 8.09 7.96 6.92 7.34 7.22 7.07 6.91 7.02 7.09

Dividend 0.50 0.50 0.42 0.34 0.29 0.25 0.25 0.25 0.25 0.23

Average number of

ordinary shares outstanding

(› thousand) 83,191 81,955 79,913 73,136 65,224 64,680 63,696 62,720 60,744 60,332

Increase from dilution

(› thousand) 1,282 2,129 2,997 6,452 7,740 3,292 1,840 420 3,392 3,780

Share price (in euro)

Year’s highest 35.00 40.93 30.11 22.44 11.23 10.16 6.85 9.08 7.37 7.23

Year’s lowest 14.00 18.47 20.42 10.85 8.45 6.78 4.38 4.11 3.80 4.05

Year end 17.30 30.49 25.70 21.33 11.23 8.73 6.85 4.40 7.03 4.08

89

Océ 1990-1999

Consolidated 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

Balance Sheets

AssetsTangible fixed assets 707 687 672 599 420 408 413 430 461 455

Financial fixed assets 650 580 545 382 329 286 252 209 149 122

Fixed assets 1,357 1,267 1,217 981 749 694 665 639 610 577

Current assets 1,559 1,353 1,263 1,115 771 677 641 647 640 518

Total 2,916 2,620 2,480 2,096 1,520 1,371 1,306 1,286 1,250 1,095

LiabilitiesGroup equity 860 766 740 646 480 471 453 440 432 431

Long term liabilities (provisions) 280 213 228 190 120 116 120 119 117 108

Long term debt 884 860 749 546 471 284 309 312 165 160

Current liabilities 892 781 763 714 449 500 424 415 536 396

Total 2,916 2,620 2,480 2,096 1,520 1,371 1,306 1,286 1,250 1,095

Key figuresProperty, plant and equipment 450 446 453 396 255 253 254 264 278 265

Net expenditure 81 87 87 74 53 50 38 41 50 54

Depreciation 90 83 72 59 45 48 50 49 46 41

Rental copying equipment 257 241 219 203 165 159 166 176 198 211

Net expenditure 107 113 79 97 76 57 55 66 76 73

Depreciation 98 88 85 72 65 63 64 84 88 81

Financial lease receivables

(incl. short term financial leases) 1,026 908 806 565 453 416 360 291 216 136

As % of balance sheet total 35 35 32 27 30 30 28 23 17 12

Inventories 395 366 363 359 257 202 196 207 213 176

As % of total revenue 14 13 15 18 19 16 16 17 18 16

Trade accounts receivable 635 527 530 447 299 256 241 255 264 242

As % of total revenue 22 19 21 22 22 20 20 21 22 23

Ratio of current assets to

current liabilities 1.7 1.7 1.7 1.6 1.7 1.4 1.5 1.6 1.2 1.3

Group equity as % of

balance sheet total 29 29 30 31 32 34 35 34 35 39

90

Analogue In relation to copiers: producing a copy with the aid of

a photo-lens in a stand-alone machine; the opposite of

digital (see below).

Book-on-Demand System Digital printing system used for the (short run)

printing of books.

Business Graphics Materials (supplies) for making high quality colour

prints, especially on transparent film for presentations

(see also Display Graphics).

Computer Aided Design.

‘Captive’ lease companies Lease companies which form part of the Océ Group.

Coating Applying a special (usually chemical) layer to paper or

polyester.

Continuous-feed paper Technology in which fanfold paper is fed from a roll

into the machine.

Controller In relation to printer systems: an electronic device

which converts input data into a format which can be

understood by the printer.

Cut sheet Loose sheets of paper for feeding into a printer

(as opposed to fanfold or roll feeding).

Diazo Abbreviation of the word diazonium; a chemical

compound which is coated onto paper so that images

can then be developed on the paper after exposure to

light; a process formerly known as dyeline printing.

Digital In relation to copiers and printers: producing a copy or

print by means of laser or exposure, in a machine

which can be linked up to a network; used here as the

opposite to analogue (see above).

Digitisation The conversion of information into digital codes.

Display Graphics Large format colour prints, e.g. on posters, banners and

billboards.

Document management All activities involved in the preparation, copying/

printing and finishing of documents.

Document Printing (Previously known as Office Systems). Used by Océ to

Systems mean the market for copying and printing in office

environments.

E-commerce Buying and selling and paying for articles/products via

the Internet/Intranet.

segment Electronic Data Processing. Market segment in which

the processing of information by computers is the main

activity.

Electronic Production (Production) printing and processing of documents in

Printing high volumes.

Engine Complete driver and controller unit for a printer.

Facility Services Where the supplier of certain products handles the work

involved in the use of those products; specifically in

those cases where Océ performs copying and printing

activities on a customer’s premises at that customer’s

request.

Fanfold printer High volume printer for processing fanfold

(continuous-feed) forms.

Full colour Image reproduced entirely in colour.

Human resources The recruitment and development of personnel to fulfil

management posts within a business.

Imaging Supplies Materials which are used (mainly as information

carriers) in copying and printing, such as paper, films,

labels, etc.

Inkjet technology Specific printing technology in which fine droplets of

ink are used to build up the printed image.

Interface Communication system between users and systems

and between separate systems.

Master Plan Plan developed to recruit and develop specialists who

are trained in information technology.

Job management Managing and controlling the execution of pre-set

(print) jobs.

Job printer A business specialising in making copies and prints for

third parties.

Multi-purpose Materials that can be used for several different purposes

supplies in design work using (Computer Aided Design)

technology.

Network Printing Using printers and servers to provide solutions for the

Solutions reproduction of documents in networks (chiefly in

office environments).

One-stop shopping Buying in as many products and services as possible

from one single supplier, such as copiers, printers,

system software, service support as well as their

financing.

One-stop supplier A supplier who can provide as many services as

possible, including copiers, printers, system software,

service support as well as their financing.

Outsourcing Contracting out the total package of copying, printing

and finishing activities to the supplier (in this case Océ).

Pay-out/pay-out ratio The proportion of the net income that is distributed in

the form of dividend.

Plain paper Ordinary (untreated) paper.

ppc Plain paper copying: making copies on ordinary

(untreated) paper.

ppm Prints per minute: used to denote the speed of a

machine’s output.

Pre-press Preparatory activities prior to printing.

Printing The (repeated) production by a printer of an original

document using data stored in a digital memory.

Printing & Publishing Printing and finishing complete publications in

relatively small print-runs for a client.

Print resolution Indicates the quality of a print. Resolution is expressed

in dots per inch (dpi).

Production Printing Used by Océ to refer to the market for high and very

Systems high volume printing systems.

List of terms and abbreviations

91

List of terms and abbreviations

Remanufacturing Replacing certain machine components and making the

required adjustments to settings so that the machine

will operate as new when placed in the market again.

Remodelling Adding a different functionality to an existing machine.

Reseller contract Contract for the resale of third-party products.

Strategic Business Unit: the Océ business structure for

each application area.

Scanner Machine that reads an image digitally and then stores it

in digital form in a memory.

Server System that organises and controls the ‘traffic’ between

computers and the printer(s) connected to them.

Stand-alone A copier or printer which is not coupled up to a

network.

Swap Interest rate hedging instrument used to change the

type of interest rate (fixed or variable) attached to a

loan. Also used as a verb: to swap.

Technical Documentation The copying and printing of wide format drawings in

Systems technical environments, such as design engineering

offices, factories and architectural design offices.

Time-to-market The time that is required to get a product ready for

market launch.

American accounting principles (United States

Generally Accepted Accounting Principles).

Volume segment Internationally accepted industrial standard for

classifying the copying and printing markets into

segments based on the number of copies or prints

produced per machine per month.

Wide Format Printing (Previously known as Engineering Systems). Used by

Systems Océ to refer to the market for machines and supplies

for the printing and copying of wide format

documents.

Workflow management The organisation and management of projects.

©2000 Océ ..

Colophon Design/dtp

Baer Cornet , Venlo

Illustrations

Geert Setola, Oirsbeek

Photography

Egon Notermans (Zebra Fotostudio’s), Venlo

Text consultants

Jonkergouw & Van den Akker

Financial Communication Consultants, Amsterdam

Translation

Alan Hemingway, Rijsoord

Printing

Drukkerij Lecturis .., Eindhoven

Océ Report for the ﬁnancial year December 1,...

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