Océ Annual Report 2002 - KU Leuven · P. Bouw J.V.H. Pennings F.J. de Wit Board of Executive R.L....

2002Océ

Océ

Jaarverslag 2002

Océ: van nature innovatief

Innovatie heeft vele wortels. Innovatie kan voort-

komen uit een toevallige vondst of uit doelgericht

onderzoek. Uit het brein van een individu of uit de

brainstorm van een groep. Uit een technologische

vinding en uit een behoefte in de markt. Feit is, dat

innovatie is gekoppeld aan herkenbare karakter-

trekken. Innovatie gaat samen met nieuwsgierig,

eigenzinnig en vindingrijk. Maar ook met handig,

niet voor één gat te vangen en vastbesloten.

Een innovatieve organisatie biedt ruimte aan die

karakters, zowel individuen als groepen. Mensen die

om verschillende redenen de dingen anders en beter

willen doen.

Zo’n organisatie is herkenbaar. Aan de inhoud van

de ideeënbus, de manier van werken en de producten

en diensten. Aan de cultuur, kortom.

Zo’n organisatie is Océ.

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Annual Report

2002Océ Annual Report

Océ

Annual R

eport 2002

Océ: innovative by nature

Innovation has many roots. Innovation can stem

from a chance discovery or from focused research.

From the brain of an individual or from a brain-

storming session by a team of people. From a tech-

nological breakthrough or a market need. One fact

is clear: innovation is linked to recognisable

character traits. Innovation goes hand in hand with

being curious, self-willed and resourceful. But also

with dexterity, inventiveness and perseverance.

An innovative organisation offers latitude for all

those characters to develop, both as individuals and

in teams. People who for various reasons want to do

things differently and better.

Such an organisation is recognisable. By the

contents of its suggestions box, by its way of

working and by its products and services. In short,

by its culture.

Océ is just such an organisation.

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Océ ..

Report for the financial year

December 1, 2001

to November 30, 2002

Océ enables its customers to

manage their documents efficiently

and effectively by offering

innovative print and document

management products and services

for professional environments.

More copies of the English translation of thisAnnual Report or of the Dutch-language originalversion are available on request from Océ,Corporate Communications Departmenttelephone: (+31) 77 3594000 e-mail: [email protected].

Enclosed in this Annual Report is a cd-rom, seeinside of back cover. The cd-rom contains theentire Annual Report plus detailed backgroundinformation about Océ and its operations. Also included on the cd-rom are interviews withcustomers plus various internet links that will giveyou direct access to the very latest information onthe website: www.oce.com.

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mailto:[email protected]

http://www.oce.com

Contents

4 Océ: innovative by nature6 The world of Océ

10 Key figures11 Report of the Board of Supervisory Directors13 Report of the Chairman of the Board of

Executive Directors

Report of the Board of Executive Directors

21 Vision and strategy

25 Financial review

25 Results25 Dividend26 Prospects26 Finance

37 Developments by market segment

37 Introduction

38 Digital Document Systems39 Corporate Printing40 Commercial Printing41 Software & Professional Services42 Facility Services

43 Wide Format Printing Systems43 Technical Document Systems44 Display Graphics Systems45 Imaging Supplies

49 Critical success factors

49 Capital49 Know-how and skills51 Océ’s partners52 Employees

57 Sustainable development

60 Management aspects

60 Corporate Governance64 Risks and risk management

Annual Financial Statements

69 Consolidated Statement of Operations70 Consolidated Balance Sheet72 Consolidated Statement of Cash Flow74 Summary of Significant Accounting Principles77 Notes to the Consolidated Statement

of Operations 82 Notes to the Consolidated Balance Sheet98 Company Balance Sheet 98 Company Statement of Operations

100 Notes to the Company Balance Sheet and Statement of Operations

Other information

103 Net income appropriation104 Authorised capital105 Auditors’ report

Miscellaneous

107 Board of Supervisory Directors109 Board of Executive Directors110 Directors central services111 Principal group companies and their chief

executives113 Supplementary information for shareholders116 Océ 1993-2002118 List of terms and abbreviations120 Safe Harbor Statement

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Océ is one of the world’s leading suppliers of high-quality products, services and complete solutionsfor use by professionals in print and documentmanagement, primarily in environments wherelarge numbers of documents are processed.

In its own centres Océ develops advancedmachines and systems for document production,distribution and management. The company alsooffers its customers innovative services in the areasof consultancy, financing and outsourcing(Facility Services). Océ’s customers are mainlyactive in office, industrial and graphical environ-ments.

Océ’s products and services are renowned for theirhigh quality. This is based on their reliability,productivity, durability, ease of use and environ-mental friendliness. In its 125-year history Océhas built up a solid reputation as an innovator,both technologically and commercially.

Market approach Océ’s products and services aremainly offered via the company’s own direct salesand service organisation. This ensures a constantflow of up-to-date market and customer infor-mation, allowing Océ to anticipate and respondalertly to changing market needs. Océ has specifi-cally tailored its organisation in line with themarket segments that are of strategic relevance tothe business. In a number of geographical marketspart of the range is made available via specialiseddistributors.Océ largely develops and manufactures its productrange itself. Océ’s strong and unique technologybase stems from its many years of experience andits programmes of consistent investment in .The company’s innovative capacity is broadenedand reinforced on an ongoing basis via allianceswith strategic partners and via systematic co-operation with co-developers and suppliers.

Océ operates in a total of eighty countries and hasits own sales companies in thirty countries. TheOcé Group has more than 22,400 employees,more than half of whom work in sales and service.Océ research and manufacturing facilities arelocated in the Netherlands, Germany, Belgium,France, the Czech Republic, the United States andJapan. In 2002 Océ achieved revenues of € 3.2 billionand net income of € 112.5 million.

Ambition Océ wants to strengthen its position inexisting and new market segments in the documentmanagement area. Océ aims to hold a top-threeposition in its selected segments. Its primary ob-jective in this respect is to create value for cus-tomers, shareholders, employees and partners aswell as for society as a whole.In its policy Océ clearly focuses on making a sub-stantial contribution to sustainable developmentworld-wide.Océ is an attractive employer and invests in ahealthy and inspiring working environment thatoffers challenging career opportunities.

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Board of Supervisory J.L. Brentjens, chairmanDirectors M. Ververs, vice-chairman

L.J.M. BerndsenP. BouwJ.V.H. PenningsF.J. de Wit

Board of Executive R.L. van Iperen, chairmanDirectors J. van den Belt

J.F. DixG.B. Pelizzari (until December 1, 2002)

Océ- Holding, Inc.R.E. Daly (as from December 1, 2002)Mr. Daly will be proposed for appointment as a member of the Board of Executive Directors at the Annual General Meeting of Shareholders to be held on March 12, 2003.

Staff Director/ H.J. HuibertsCompany 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 .. isan international holding company within themeaning of Article 153, para. 3b, Book 2 of theDutch Civil Code.

Registered office and The company has its registered office in Venlo, the Commercial Registry Netherlands, and is registered 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 NetherlandsTelephone (+31) 77 3592222Fax (+31) 77 3544700Océ on Internet: http://www.oce.comE-mail: [email protected] general information about Océ: telephone (+31) 77 3592000

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http://www.oce.com


Financial, telecom and utility companiesBanksInsurers Telecom businessesUtility companies

Government and educationGovernment institutions Education Health careSocial welfare institutions

Trade and industryRetail and wholesale tradeTransport and logisticsIndustrial companiesConsultancy

Within these segments Océ is active in:Data centresCentral repro departmentsProfessional office environments

Marketing ServicesDigital Newspaper NetworkPrinting industryCopy shops & Quick printers

Customer segments

Corporate Printing

Commercial

Printing

Printers and copiersDepartmental printers, black-and-white and colour(Very) high volume printers/copiers, black-and-white and colour Production printers, black-and-white and colour, cutsheetand continuous feedHigh speed scannersOcé also supplies toners, inks and media for these machines

Software & Professional ServicesIntegrated document management systems

input and output management softwaredocument workflow softwaredocument production management softwaredocument archiving software

Professional servicestrainingconsultancyimplementationsupport

Financial services

Facility ServicesResponsibility for (outsourcing)

document management processesimplementation of document management processes

for both small and wide format applications

Printers and copiersVery high volume printers/copiers, black-and-white andcolour, cutsheet and continuous feedOcé also supplies toners, inks and media for these machines


input and output management softwaredocument workflow softwaredocument production management softwaredocument archiving software


Financial services

Products and services

The world of Océ

To strengthen its number-one position in continuous feed printingTo achieve a top-three position in cutsheet production printers

document and transaction printingdigital printing-on-demand

To strengthen its position in document related software andprofessional services

To achieve a top-three position in Europe and the United States

To achieve a top-three position in all sub-segments in Europe andthe United StatesTo strengthen its position in document related software andprofessional services

Océ’s ambitions

CanonHeidelberg

MinoltaRicoh Xerox

IkonPitney BowesXerox Local suppliers

CanonHeidelberg

MinoltaRicohXerox

Competitors

The world of Océ

Print-for-useConstruction companies, architectural andengineering officesIndustrial companiesUtility companiesTelecom businessesGovernment

Print-for-payRepro businessesQuick printersDigital printers

Print-for-useCorporate and retail in-house printingPrinting worksAdvertising and design agencies

Print-for-payRepro businessesQuick printersDigital printersPhoto processing laboratories

Customer segments

Technical Document

Systems

Display Graphics

Systems

Printers and copiersWide format production printers/copiers, black-and-white and colourWide format scanners


input and output management softwaredocument production management softwareimage processing softwaredocument archiving softwaredocument distribution software


Financial services

Imaging SuppliesWide format media

wide format paper inkjet media

Printers and copiersWide format high production printers (roll-to-roll andflatbed) for internal and external use


print management softwarecolour management software


Financial services

Imaging SuppliesSpecialised Display Graphics media

filmsphotographic and coated mediainksfinishing supplies

Products and services

To strengthen its leading position in wide format black-and-whiteprinters and copiersTo lead the change-over to colour for high volume productionapplications in wide format printers and copiers

To strengthen its leading position in Europe and the United StatesStrong growth in supplies

To strengthen its top-three position in mid-volume andhigh volume printersTo strengthen its leading position in print management softwarefor graphical applications

To achieve a leading position in Europe and the United States

Océ’s ambitions

Fuji-XeroxHewlett-Packard

(Xerox)

Hewlett-PackardNeusiedlerSihlPaper wholesalers and local suppliers

EpsonHewlett-PackardKodakNurScitexVutek

Hewlett-PackardLocal suppliers

Competitors

10

Key figures

2002 2001 › € million

Total revenues 3,176.1 3,233.6Change on previous year (%) –1.8 0.3Change (autonomous) on previous year (%) –3.1 –1.3

Gross margin 1,328.5 1,317.1As % of total revenues 41.8 40.7

Operating income () 226.1 224.7Change on previous year (%) 0.6 –20.4As % of total revenues 7.1 6.9As % of average balance sheet total 7.6 7.1

Operating income before depreciation and amortisation goodwill () 423.2 418.9

Net income 112.5 *105.1Change on previous year (%) 7.1 –30.8As % of total revenues 3.5 3.2As % of average shareholders’ equity 12.4 11.1

Total assets 2,851.3 3,127.5Equity 908.9 908.6Dividend (ordinary shares) 48.5 48.8Net capital expenditure on intangibleand tangible fixed assets 150.3 200.3Cash flow before financing activities 337.7 173.6

Number of employees at November 30 [7] 22,489 22,472 employees

Per € 0.50 ordinary shareBasic earnings [6] 1.30 *1.19 euro 4.99 *4.87Cash flow 3.64 *3.47Shareholders’ equity 10.21 10.13Dividend 0.58 0.58

Number of € 0.50 ordinary sharesAverage number outstanding 84,086,202 85,241,097 sharesPotential increase from conversion/options 692,944 714,355

Diluted earnings per € 0.50 ordinary share [6] 1.29 *1.18 euro

Year’s highest 14.05 18.90Year’s lowest 6.80 6.15Year end 11.45 10.20

* Key figures are based on figures excluding exceptional items. After exceptional items,

the net income for 2001 was € 10.1 million and the key figures per share were net

income € 0.08, € 3.41 and cash flow € 2.35.

The figures [ ] refer tothe notes

Report of the Board of Supervisory Directors

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

Annual Report We present to you the AnnualReport for 2002 as drawn up by the Board ofExecutive Directors. The Annual Financial State-ments included in this report have been examinedby PricewaterhouseCoopers Accountants .. inclose cooperation with Océ’s Internal AuditDepartment. The external auditor has issued anunqualified opinion which is set out on page 105of this Annual Report.

Océ concluded the financial year with a netincome of € 112.5 million; this is equivalent to€ 1.30 per share. This result was achieved despitethe fact that revenues were lower than in theprevious year. The Annual Report was discussedextensively with the Board of Executive Directorsin the presence of the auditors. The input of allthose involved in this discussion leads us to thebelief that this Annual Report complies with therequirements of transparency and forms a solidbasis for our Board’s acceptance of its accounta-bility for its supervisory activities.We recommend that you adopt the AnnualFinancial Statements, including the dividend, inaccordance with the proposal made by the Boardof Executive Directors.

Result and strategy The Supervisory Board is ofthe opinion that the result that has been achievedis satisfactory in the light of economic circum-stances prevailing in the markets in which Océoperates and given the resultant postponement ofinvestment decisions by customers. The Board ofExecutive Directors had already noted at an earlystage that the strengthening of Océ’s position inthe relevant markets made restructuring a neces-sity. This restructuring operation was successfullystarted during the past financial year and is pro-gressing well. The Supervisory Board is confidentthat this will ensure that the good structural posi-tion is maintained. During the year the policy ofthe Board of Executive Directors remained fo-cused, as before, on achieving the strategy whichhad been mapped out previously and which it dis-cussed in depth with the Supervisory Board. In the final quarter of the financial year the defi-nitive strategic plan was adopted.

Supervision The Board is aware that various stake-holders, including shareholders, are increasinglyfocusing attention on the role and functioning ofthe Supervisory Board.This attention is reflected in the form of recom-mendations for best practices, as were recentlymade by the Winter Committee at the request ofthe European Commission, and also in recentlegislation, such as the Sarbanes-Oxley Act whichentered into force in the United States in July2002.We see these developments as confirmationof the importance of the role of the Board.

In 2002 the Supervisory Board held regular con-sultations with the Board of Executive Directors,involving a total of six meetings. The SupervisoryBoard also paid a visit to the operating unit inPoing (Germany) on the occasion of the intro-duction of seven new products. Our attentionwas constantly focused on commercial and tech-nological developments within Océ, as well as onthe company’s financial position.At a meeting with the internal and externalauditors we discussed the system of internal con-trols; this resulted in a tighter definition of therole and input of the Supervisory Board. Other areas that we looked at were the company’srisk profile and its sensitivity to risks. Specialattention was devoted to the company’s strategyand to the positions occupied by each of thestrategic business units, specifically as regardsfurther improvements in the market position ofthe core activities. The company’s relationshipswith its shareholders, customers, suppliers, em-ployees and with society as a whole were definedand anchored within the corporate strategy.During a separate meeting the human resourcespolicy for the Océ management was discussed,including the options scheme that is in force. In addition, the Board of Supervisory Directors –in the absence of the Board of Executive Directors– held discussions on the composition and func-tioning of the Executive Board and on mattersrelating to that Board’s remuneration. The Super-visory Board also discussed its own functioning.As a further guarantee of an effective CorporateGovernance structure the Supervisory Boardestablished an Audit Committee in October2002. Via this committee the Board will beoptimally able to perform its supervisory tasks in

11

Report of the Board of Supervisory Directors

the areas of financial reporting, internal controlsand financial risk management of Océ.

Supervisory Board changes Mr. M. Ververs will beretiring this year as a Supervisory Board member,having reached the age-limit set in the company’sarticles of association. The Supervisory Board isgrateful to Mr. Ververs for the major contributionhe has made since 1995. The holders of priorityshares propose to appoint Mr. A. Baan as hissuccessor. Mr. Baan has a sound knowledge andexperience of the business environment in whichOcé operates. He complies with the profile drawnup for our Board and we feel that he will fit inwell with the existing team.Mr. G.B. Pelizzari stepped down as a member ofthe Board of Executive Directors with effect fromDecember 1, 2002, upon his retirement. Mr. Pelizzari can look back on a successful Océcareer spanning 28 years. Since 1998 he had beena member of the Board of Executive Directors ofOcé .. and Chief Executive Officer of Océ-

Holding, Inc. The Board would like to express itsdeep gratitude to him for the outstanding con-tribution he made to the growth and results of theOcé Group.With effect from December 1, 2002 Mr. RonaldE. Daly, who previously held various manage-ment posts at Donelley & Sons Company,was appointed Chief Executive Officer of Océ-

Holding, Inc. The holders of priority sharespropose to appoint him a member of the Boardof Executive Directors.

Developments In the year 2002 any form of opti-mism about the recovery of the economy provedto be unfounded. Despite this, Océ was able tomaintain revenues at virtually the same level as inthe previous year and achieved a higher netincome than in 2001 (before exceptional items).The measures taken by the Executive Board tosupport the fastest possible recovery in revenuesand income growth contributed to this increasein net income. Thanks to the restructuring oper-ation Océ can operate profitably even if thepresent economic conditions continue, and thecompany is also fully prepared to seize oppor-tunities as soon as the economy starts to pick upagain. We therefore view future developmentswith confidence.

The Board would like to express its specialappreciation to the chairman and members of theBoard of Executive Directors, and also to allemployees everywhere, for the great dedicationthey showed in helping to achieve the resultsbooked in the past year.

January 30, 2003

J.L. Brentjens, Chairman

12

Report of the Chairman of the Board of Executive Directors

Océ booked a good result in 2002 in the light ofthe prevailing circumstances. Net incomeworked out at € 112.5 million, an increase of7.1% on the net income (before exceptionalitems) of the previous year.In 2002 customers postponed their investmentdecisions.This resulted in lower sales of machines.However, revenues from software and servicesincreased, which meant that the decrease in totalrevenues was limited to 3.1% on an autonomousbasis. Thanks to a higher gross margin and loweroperational expenses a higher net income wasachieved.This can be seen as proof of the company’s strengthand the soundness of its strategy. As a result agreat deal was accomplished under difficulttrading conditions.

Action programme implemented

An extensive action programme was imple-mented during the past year aimed at creating atighter focus on the market segments that areattractive for Océ. As an example, under-performing activities in the low and mid-volumesegments of the office market are being phasedout, whilst the positions in growth markets suchas Display Graphics and Facility Services arebeing strengthened. In addition, the company’scompetitive strength has been further improvedby optimising the operational processes and, as alogical consequence, the organisational structureas well. This also involves making the centralorganisations as well as the group companies linkup better with the customer segments, enhancingthe innovative strength by combining technologyportfolios, but also outsourcing the leaseactivities and reducing the level of inventories byimplementing a new logistics system.Océ’s implementation of this action programmemeans that good progress is being made towardsrealising the strategic thrusts that were mappedout in the previous financial year. This progresswas underlined yet again by the launch of sevennew machines and various software systems duringthe Océ Open House which attracted manyvisitors in November 2002. In view of this, 2002was a successful year for Océ in many respects.

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Better link-up with the selected market segmentsFaced by the changes in the markets and tech-nologies Océ has opted for a pro-active approach.More and more emphasis is being placed on notonly hardware but more specifically on Océ’sability to offer customers complete solutions,with software and services that are preciselytailored to their needs. With this in mind, theorganisation must link up closely with theselected market segments. During the year underreview this was achieved through a realignmentof the activities. The activities of the operatingcompanies were reorganised to make them linkup better with the user environments in whichOcé wants to excel. In line with the market focus,two of the three strategic business units, Docu-ment Printing Systems and Production PrintingSystems, were amalgamated under the nameDigital Document Systems (). Both andWide Format Printing Systems (), includingthe organisation, have been realigned. Inaddition, this restructuring explicitly created thelatitude that will allow Océ’s Facility Services andProfessional Services activities to achieve theirmaximum potential. To further improve theeffectiveness and to exploit synergies to the full,all activities of Facility Services and ProfessionalServices were brought under a singlemanagement structure for the two business units and .The restructuring, a radical operation, has broadsupport amongst employees. Not only because itslogic is crystal-clear, but also because the signifi-cance of the restructuring reaches far beyond theorganisation itself. It is coupled to a different wayof operating, thinking and teamworking. Therestructuring links up with the choices that Océhas made: to supply value added products andservices, in professional markets with high pro-duction volumes, that meet the needs of users intheir specific environments.

Continuous innovation Océ owes much of itssuccess to the great attention that it has consis-tently focused on . One factor that certainlyplayed a role in this is that, more than anythingelse, Océ has to profile itself to stand out from itscompetitors by offering products that have highlydistinctive characteristics.

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Focus on attractive market segments It is clearthat the market segments in which Océ has beenactive in recent years are widely divergent interms of profitability and growth. Particularly inthe low and mid-volumes in the office marketOcé is least able to distinguish itself from itscompetitors and is not able to create sufficientadded value. That is why Océ is now concen-trating on those market segments in which thecompany can, given its capabilities and position,achieve the best returns and safeguard its futuregrowth. In practical terms these are the high-volume production environments in which qualityrequirements are high. The challenge facing Océis, firstly, to strengthen its existing positions – forexample in the commercial and wide formatmarket – and, secondly, to extend these positionsinto growth segments such as Facility Services,Software & Professional Services and DisplayGraphics.To link up with the needs that have been identi-fied, Océ is focusing more and more on the pro-vision of services in which it plays different roles:as consultant, as facility manager and as supplierof complete solutions for complex tasks in thearea of document management (ProfessionalServices). To a large extent the skills required forthis are already available within Océ. However,some parts of this still comparatively young areaof operations will have to be tackled togetherwith others, via alliances or acquisitions. A goodexample of this was the acquisition of PracticalPrint Solutions and its integration within FacilityServices over the past year. The integration of theformer Professional Imaging Division of Gretagand, last but not least, the introduction of newproducts contribute to a further strengthening ofOcé’s position in existing and in new markets.The shift towards market segments with a betterperformance will lead on the one hand to a re-duction of the number of jobs in the low volumesegment in the office market and, on the other, toan increase in the number of employees inactivities such as Facility Services.


Financial objectives

Océ seeks to achieve an average annual revenuesgrowth, including acquisitions, of 10% over thenext five years, half of which will be autonomous. This autonomous growth will in the years aheadbe the result of the phasing out of the position inthe low volume segment in the office market onthe one hand and the growth in the other marketsegments, particularly in Facility Services,Software & Professional Services and DisplayGraphics, on the other. Just as in the past, Océwill continue to pursue an active acquisitionpolicy.The financial objectives in Océ’s strategy requirea structural improvement in the financial ratios.The return on total assets () is currently at alevel of 7.6% and the return on equity ()amounts to 12.4%. The aim is to achieve a levelof 12% and 18% respectively in 2005. Thisimprovement will be accomplished by raising theprofitability of revenues via a tight focus onattractive markets and via operational improve-ments, and also by reducing the use of capital. In the operational area the restructuring has ledto cost savings of € 35 million in 2002. These willincrease to a saving of € 75 million in 2004. The outsourcing of the lease portfolio and thesubstantial reduction in working capital require-ments will ensure a further improvement inprofitability.

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Thanks to the ongoing interaction between

and the sales and service departments, a culturehas been created in which innovation is also anatural ingredient, alongside quality, reliability,ease of use and cost awareness. Océ uses its sub-stantial knowledge of the market to develop onlythose machines and systems that provide a uniqueanswer to customer requirements. As part of itstighter focus Océ has also organised its acti-vities in line with the selected market segments.This has made it easier to bundle together theappropriate technologies for those segments andthus to achieve synergies between them. During the year under review Océ clearly demon-strated what its strategic direction means inpractice. In all these segments, and now in thedesign engineering segment as well, the possi-bility of working with colour has been created.Océ has set new standards in the area of printquality, productivity and reliability in environ-ments with high production volumes.

Improving the use of capital During the past yearimportant steps were taken to reduce the workingcapital requirements. The outsourcing of theextensive lease portfolio was the most strikingexample, but the far-reaching cutbacks in workingcapital by reducing inventories and debtors werealso major steps forward.For the Scandinavian countries a contract wassigned early in 2002 with Telia Finans for thetransfer of the lease portfolio. For the large Euro-pean countries an agreement to the same effectwas signed with De Lage Landen International ..in November 2002. For leasing as a marketinginstrument the positive consequence of thetransfer of these activities to specialists is that theprovision of service to customers will improve.The funds that are released as a result of the out-sourcing of the lease portfolio can then be em-ployed more profitably, for example by investingin strategic activities which can bring a directincrease in growth and profitability.


Corporate Governance

Océ has actively integrated the developments inthe area of financial reporting and control in2001 and 2002 within its corporate policy. The outcome of this was an increased emphasison internal control measures and transparency.The company has also taken into account therecommendations of the Winter Committee andthe provisions of the Sarbanes-Oxley Act.Océ is making every effort, also via this annualreport, to achieve a greater transparency andaccountability.In the light of external developments the relation-ship with the external auditor has also beendiscussed in detail and confirmed with theSupervisory Directors and the auditor.

Prospects

At the moment there are still no concrete signalsthat indicate an economic recovery. We are con-siderably more positive about what has been andstill will be accomplished within the companyitself. Our efficient, market-driven and customer-focused business can operate successfully underdifficult circumstances. Because of the measuresthat have been taken, Océ is also well prepared –as soon as the economy picks up – to cash in onthe improvements and translate them into profit-able growth.

In this past, busy year great demands were againmade on our employees. Many of the changescalled for extra commitment, the acceptance ofgreater responsibilities and the tackling of newtasks. Those employees therefore deserve greatappreciation for the way in which they embracedthe required changes and for the drive they arenow showing in implementing them. The company is also grateful to its customers andsuppliers, with whom an increasingly tighterrelationship is being maintained. Lastly, we wouldlike to thank our shareholders who, in the midstof the uncertainties of economic developments,have made it clear that they have faith in ourcompany and our strategy.

R.L. van Iperen, Chairman

16

Report of the Board of Executive Directors

Océ helps customers to optimise their business processes<<<

Vision and strategy

Vision

In the strategically relevant market segments Océaims to be one of the top-three suppliers of inno-vative and high-quality products and services for theprinting and management of documents in profes-sional environments.

Only by being an innovative and reliable partnerand by concentrating all its efforts on thosemarket segments in which the company can opti-mally exploit its core capabilities in documentprinting and document management can Océoccupy the leading positions that are needed,now and in the future, to meet the needs of all itsstakeholders: customers, shareholders, employees,partners and society as a whole.

A strong Océ is therefore essential for each ofthese stakeholders:

– In the strategically relevant market segments Océ aims to be one of the top-three suppliers. Only a leading player is able to make the invest-ments that are needed to offer its customers thebest solutions in the future as well.

– Océ aims to achieve returns that will ensure that the company is positioned amongst the top suppliers inits industry.To realise a sufficient return for its shareholders,Océ must possess sufficient scale.

– Océ aims to offer an inspiring working environment.For employees it is important that the companyis profitable and is able to grow and renew itself.That will guarantee sufficient opportunities todevelop further within the organisation.

– Océ aims to build a network of partnerships that is one of the strongest in the industry.Building successful partnerships calls for con-siderable commitment from all partners. Partner-ships will therefore only be established if allparties are convinced that their shared future willbe a healthy one.

– Océ aims to conduct its business in a way that con-tributes to the sustainable development of society.A strong company is able to achieve its objectivesin a way which makes a positive contribution tothe development of society and which will alsoallow future generations to fulfil their ambitionsand needs. This conviction fits within a long-

term perspective. The company’s 125-yearhistory – but certainly also its current businesspractice – demonstrates that Océ takes itsresponsibilities in this area extremely seriously.

Trends

Economy In 2002 the economy was again underpressure in all major markets in which Océ isactive. At the start of the year under review amodest recovery in the economy was still expectedfor the second half of the year. That expectationdid not materialise. In its report of December2002 the predicted that in 2003 therewould be a very limited growth in the GrossDomestic Product of Océ’s most importantmarkets, varying from 1.5% (Germany) to 2.6%(United States). A recovery is not foreseen by the before the end of 2003.In view of this not very favourable outlook, thewillingness to invest by the customers is notexpected to increase over the short term, whichalso means that sales of machines will not recoverin full. Océ’s order portfolio at the beginning of2003 still does not show any clear improvementeither. In 2002 sales of machines accounted forapproximately 30% of Océ’s revenues. As timepasses, however, the decline in machine sales alsostarts to impact on the service revenues that aregenerated by the machines that have been in-stalled in the market. However, the (postponed)need for replacement investments continues toexist and the quality and possibilities of the newOcé machines and systems that were recentlylaunched will certainly provide support for sales.Océ therefore anticipates that it will at least beable to maintain its position in the market.

21

Vision and strategy

Customers The use of (paper) documents and therequirements they have to meet are changing.Whereas previously it was a matter of copyingand then distributing, documents are now distri-buted first in digital form (mostly via e-mail),then retrieved, looked at and printed out if andwhen required. Printing-on-demand and per-sonalised documents are taking the place of bigprint-runs and generic documents. In order to beable to work efficiently, customers are increasing-ly asking for a complete integration of paper anddigital document flows. As a result demand isshifting away from stand-alone machines towardscomplex systems for the management of docu-ments. This process is being accelerated by thecontinued growth in the production of infor-mation. At the same time the use of colour isbecoming an increasingly indispensable elementin document flows. Despite the steadily growingdocument flow, the demand for machines, bothcolour and black-and-white, appears to becyclical.

Technology Digitisation has triggered varioustechnological changes.Digital documents are increasingly replacingpaper documents. Network printers and multi-functional machines are replacing stand-alonecopiers. Printing technology is developing moreand more into a commodity: its costs are comingdown, print quality is getting better and afford-able colour technology – of a high quality – isavailable. So that they can continue to stand outfrom other offerings, systems are being tailoredmore and more to meet the specific customerdemands in a segment. Modular and scaleablesystems provide the solution to this. In parallelwith these changes, software is occupying anincreasingly important place in the developmentof products and systems.

Competition New suppliers are entering Océ’smarkets: manufacturers of offset printing pressesare expanding into the area of digital printing,whilst Japanese companies are strengthening theirpresence in Europe and North America and arealso focusing their attention on the productionprinting segments. Competitors from the lowvolume market are moving into the higher-endsegments of Technical Document Systems andCorporate and Commercial Printing. In addition,system houses are offering printers as part of atotal package. Amongst suppliers of hardwarethere is an increasing trend towards the out-sourcing of manufacturing operations. More andmore often, production is being carried out inlow-wage countries.

Strategic objectives

To put its vision into concrete terms and toensure that progress towards achieving this visionis made measurable for each stakeholder, Océ hasdefined clear objectives. Océ evaluates its internalplans as to the extent to which they contributetowards achievement of these objectives.

Customers Océ aims to occupy a leading positionworld-wide in professional print and documentmanagement environments in the followingways:

– by strengthening its leading position in black-and-white wide format printing and by acquiringa leading position in Display Graphics Systemsand other colour applications;

– by growing to become one of the top-three players in the area of production printing incorporate and commercial environments;

– by developing into a strong supplier of services in the area of document management, i.e. by be-coming one of the top-three players in FacilityServices and one of the leading suppliers of Soft-ware & Professional Services for the managementof documents in selected market segments.

Océ aims to improve customer satisfactionfurther. In concrete terms this means that Océ’sambition is to ensure that at least 90% of itscustomers indicate that they are satisfied with theservice that Océ provides.

22

Vision and strategy

Shareholders The company’s objectives of a 12%return on total assets () and an 18% returnon equity () remain unchanged. Achieve-ment of these targets is being sought, amongstother things, by taking the following actions:

– phasing out the low volume activities in the office environment;

– outsourcing the lease portfolio, which leads to a reduction in working capital requirements;

– bringing down inventories and reducing the level of debtors;

– expanding its activities in less capital-intensive areas such as Facility Services.

On balance, the developments outlined abovemay have the effect of depressing the grossmargins and operating income. However, therate of turnover of assets will increase as a resultof the significant reduction in assets, thanks inparticular to the outsourcing of the lease port-folio. is the product of operating income as apercentage of sales and the turnover of the totalassets (operating income/sales x sales/total assets).As described in previous annual reports, achievinga 12% means seeking an operating result asa percentage of sales of 10 or more and a turnoverof total assets of at least 1.2. In a situation inwhich the lease activities have been completelyoutsourced and in which the other planned stra-tegic and operational actions have been imple-mented, the above ratios will alter and amount toaround 6% and 2.0 respectively.

Employees Océ fully subscribes to the importanceof good and well motivated employees who arecapable of taking up the challenges of today aswell as those of the future.Océ seeks to become one of the most attractiveorganisations to work for. Within the Nether-lands this implies that Océ aims to be amongst thetop-ten most attractive companies for universitygraduates and aims to occupy a top-five positionas regards recruitment of technical specialists. In important markets outside the Netherlandsthe company aims to offer an attractive alter-native to working for local employers.

Océ will focus, even more than in the past, onrecruiting the best employees and on structurallyoffering development opportunities in directionswhich are crucial for the future of Océ and whichbring out each employee’s individual talents tothe full.

Partners The importance of partners is becomingever greater for Océ. Océ therefore pursues anactive policy with the aim of creating a strongnetwork of partners who add value to the productsand services. This is achieved in the followingways:

– by cooperating in the technological area with the best specialists in the industry;

– by selecting high-quality suppliers and by con-tracting work out to strong partners;

– by cooperating with market players who help to assure a wider spread of Océ products andstandards;

– by transferring lease activities to specialised partners.

Society As Océ wishes to make an active contri-bution to the sustainable development of society,the company is a signatory to the principles ofthe Global Compact and has committeditself to implementing the principles that formpart of it. In addition, Océ makes systematicefforts to reduce the impact of its products on theenvironment.

23

Vision and strategy

Perspective

The overview below shows the results of theactions that have been taken and still have to betaken to achieve the objectives over the short,medium and long term.The actions with a time-horizon covering thenext 1-3 years are focused on improving profit-ability by further strengthening Océ’s leadingposition and by phasing out those positions inwhich Océ cannot achieve leadership.The actionsare also aimed at optimising the company’soperational processes. The ultimate aim is to beable to supply increasingly better products andservices to the customers.For the medium term (3-5 years) Océ is concen-trating on safeguarding a strong position ingrowth markets and application areas such asDisplay Graphics, Facility Services and colour.This also involves the supply and ongoing deve-lopment of products and services for thosemarkets, together with Océ’s partners. Océdevotes particular attention to providing supportto its customers, so that they can make optimumuse of the new possibilities, and to the develop-ment of employees, so that they too are preparedfor the future.

The actions that have now been initiated arefocused on the long term and are aimed at creatingoptions for future growth by enlarging theposition of software and services for the selectedsegments in the professional document manage-ment market. In this case Océ is guided on theone hand by the expected needs of customers inmarket segments of relevance to Océ and, on theother, by growth opportunities that link up withOcé’s core capabilities, i.e. innovation and directcontact with customers. Océ’s activities in thesteadily developing professional market fordocument management are good examples ofthis. Here again an important role will be playedby Océ’s partners.

24

Strategic perspective

Strengthening leading positions and profitability

Safeguarding the position in growth markets

Expanding the position in Software & Professional Services

1-3 years

3-5 years

> 5 years

Financial review

Results

Total revenues were € 3,176 million, which is1.8% lower than in the previous financial year.On an autonomous basis the decrease was 3.1%;exchange rate effects were negative (–2.1%) andacquisition effects positive (+3.4%).Operating income increased slightly to € 226million.Net income was 7.1% higher than in 2001 andamounted to € 112.5 million. On a per ordinaryshare basis net income increased by 8.8% to€ 1.30 (2001: € 1.19 before exceptional items).Expenditure on Research & Development roseby 5.6% to € 215 million, which corresponds to6.8% of total revenues (2001: € 203 million and6.3% of total revenues). Gross capital expendi-ture on property, plant and equipment amountedto € 116 million (2001: € 130 million).Depreciation and disposals amounted to € 110million (2001: € 115 million). The cash flowbefore financing activities and dividend (free cashflow) amounted to € 338 million (2001: € 173million).

In Digital Document Systems revenues decreasedby 3.0% to € 2,155 million. On an autonomousbasis revenues were 2.1% lower than in theprevious year. Sales of machines were down by18%. This occurred despite the introduction ofthe Océ 400 and the Océ 700, whichreflects how the slowdown in growth impactedon this market segment.

In the market for Facility Services revenues in-creased by 17%. This increase occurred both inthe United States and in Europe.

In Wide Format Printing Systems revenuesremained the same as those of the previous year(€ 1,021 million). If acquisitions and exchangerate effects are excluded, revenues were 5.2%lower. Sales of machines decreased by 13% due tothe postponement of investment decisions bycustomers.

In Technical Document Systems Océ retained itsmarket share and leading position in black-and-white. Software and services largely compensatedfor the decrease in machine revenues.

In Display Graphics, where Océ now holds a top-three position in the mid-volume and highvolume segments, the integration of thebusinesses acquired in December 2001 has beencompleted.

Revenues of Imaging Supplies lagged behind thoseof the 2001 financial year. Rationalisation andrenewal of the product ranges, especially those ofArkwright, Inc. in the United States, appear to bebearing fruit.

Dividend

We propose, as in 2001, for the financial year 2002to distribute a dividend of € 0.58 per ordinaryshare of € 0.50 nominal.This dividend involves anamount of € 48.5 million (2001: € 48.8 million).If the General Meeting of Shareholders adoptsthis proposal the final dividend will amount to€ 0.43; the interim dividend amounted to € 0.15. It is proposed to distribute the final dividend fullyin cash. The pay-out ratio amounting to 44.5%of net income (2001: 48.1% before exceptionalitems) is higher than the standard set in the divi-dend policy (33%).

25

Financial review

Prospects

The development of the economy remains un-certain and, linked to that, the willingness of ourcustomers to make investments in our productsand services. To date there are no indications thatany significant improvement will occur in thissituation over the short term. In view of this un-certainty and given the prevailing market con-ditions we feel it is not possible to give a forecastfor 2003.The restructuring measures that we have initiatedwill bring a further reduction in operating ex-penses in 2003.It should be noted, however, that the relativeweakness of the dollar and an increase inpension premiums will tend to depress the resultfor 2003.The new market-focused organisation structure,backed by the launch of several major new pro-ducts, has a positive effect on Océ’s competitivestrength. That will put Océ in the best possibleposition to seize the opportunities that arisewhen the market picks up.

Finance

Revenues In 2002 total revenues amounted to€ 3,176 million. On an autonomous basis reve-nues decreased by 3.1%. Revenues from salesamounted to € 1,792 million, which was 2%down on the previous year. Earnings from rentaland service decreased by 0.4% to € 1,267 million.Interest income from financial leases decreasedby 7% to € 117 million. Facility Services activities currently contribute13% of revenues, as compared to 11% in 2001.For Imaging Supplies these percentages were11% in 2002 and 12% in 2001.

Gross margin The gross margin amounted to41.8%, which was higher than in 2001 (40.7%).Thanks to foreign currency hedging a positiveeffect of 1.1% was achieved. In addition, theeffect of capacity under-utilisation as a result oflower machine sales was offset by lower costs andthe phasing out of poorly performing activities.

26

02

Total revenues

› € million

98 99 00 01 0298 99 00 01

3500

2800

2100

1400

700

0

Operating income

› € million

300

240

180

120

60

0

Financial review

The average interest realised on the lease port-folio amounted to 10.7% (2001: 10.7%). In thefinancial lease contracts the interest percentage isfixed for the entire duration of the contracts.

Operating income Operating income increasedby 0.6% to € 226 million (2001: € 225 million).This is equivalent to 7.1% of total revenues(2001: 6.9%) and corresponds to 7.6% of theaverage balance sheet total (2001: 7.1%).

Research & Development () Expenditure on rose to € 215 million (2001: € 203 million).This corresponds to 6.8% of total revenues(2001: 6.3%). In 2002 a repayment liability inrespect of the development credit was added to expenditure for the colour printer that waslaunched in 2001 (€ 3.0 million). Further repay-ment liabilities are dependent on the future salesof this colour printer.

27

Information by strategic business unit Wide Format Digital Document Total › € million

Printing Systems Systems

2002 2001 2002 2001 2002 2001

Total revenues 1,021 1,012 2,155 2,222 3,176 3,234Operating income 97 98 129 127 226 225Assets 803 809 2,048 2,319 2,851 3,128

Total revenues by geographical areas 2002 2001

total revenues as % total revenues as %

› € million › € million

United States 1,298 41 1,333 41Germany 371 12 392 12Netherlands 278 9 279 9United Kingdom 238 7 219 7France 209 7 220 7Rest of Europe 554 17 568 17Rest of the world 228 7 223 7

Total 3,176 100 3,234 100

Operating income

as % of total revenues

10

8

6

4

2

0

250

200

150

100

50

0

Expenditure on

Research & Development

› € million

0298 99 00 01 0298 99 00 01

Financial review

General administrative and selling expensesThe general administrative and selling expensesdecreased from € 893 million in 2001 to € 890million in 2002 (–0.4%). Expressed as a per-centage of total revenues these expenses remainedpractically the same as in 2001. On an auto-nomous basis these expenses decreased by 3%thanks to tight cost control.

Financial expense (net) Financial expense (net)(the balance of interest paid and other interestreceived) went down from € 69 million in 2001to € 54 million in 2002. The decrease in financialexpense (net) is caused by a reduction in loans andlower interest rates. At an average interest rate of5.25% (2001: 5.65%) the average interest-bearing capital decreased by € 169 million to€ 992 million. Interest income from financial leases amountedto € 117 million in 2002 (2001: € 125 million).

Income taxes The average taxation chargeamounted to 33.4% (2001: 31.1%). A furtherincrease in the tax charge is expected in the yearsahead.

Net income Net income from ordinary activitieswent up by 7.1% to € 112.5 million; this cor-responds to 12.4% of the average shareholders’equity (2001: € 105 million and 11.1%). As a per-centage of total revenues, net income amountedto 3.5% (2001: 3.2% before exceptional items).Basic earnings per share, calculated on the basisof the average number of ordinary shares out-standing, increased by 8.8% to € 1.30 (2001: € 1.19 before exceptional items).

Breakdown of commercial and financial

activities

In 2002 Océ’s activities were again characterisedby a combination of commercial and financialservices, each with their own income profile andbalance sheet characteristics.In assessing the financial position of the companyas a whole, a distinction must be made betweenthese two types of activities. The revenue fromfinancial activities is formed by the interest fromfinancial leases. The costs comprise the costs offinancing the lease portfolio and the admini-strative and selling expenses. Where the financialactivities are financed from interest-bearingcapital, it has been assumed that this has beendone fully on a fixed-interest basis. The costs of financing are then allocated on thebasis of the average amount of fixed interest-bearing capital. For the administrative and sellingexpenses, including provisions for doubtfuldebtors, a cost level has been applied which cor-responds to that of external captive lease com-panies with similar activities. After expiry of thelease contracts the machines, provided they havenot been written off in full, are transferred to thecommercial activities at their residual book value.For the financing of the financial activities a ratioof 0.15 between the equity and the balance sheettotal is used. This ratio is likewise derived fromcaptive companies in the financial services in-dustry which publish their own annual accounts. The remaining part of the equity is allocated tothe commercial activities.The table on the next page gives a breakdown ofthe salient financial figures for the two companyactivities.

28

Financial review

29

2002 2001 › € million

CommercialRevenues 3,059 3,109Gross margin 1,212 1,192Operating income 142 135Financial expense (net) 10 17Result before taxation 132 118Income taxes 44 37Result after taxation 88 81Net income 86 *79

Shareholders’ equity 754 732Minority interest 40 41

Group equity 794 773Interest-bearing liabilities 63 254Provisions and other liabilities 961 925

Balance sheet total 1,818 1,952

RatiosOperating income as % of average balance sheet total 7.5 6.8 per centNet income as % of average shareholders’ equity 11.5 10.2Shareholders’ equity as % of balance sheet total 41.5 37.5

FinancialInterest from financial leases 117 125General administrative and selling expenses 33 35Financial expense (net) 44 52Result before taxation 40 38Taxes 13 12Result after taxation 27 26

Shareholders’ equity 155 176Interest-bearing and other liabilities 878 1,000

Balance sheet total 1,033 1,176

RatiosOperating income as % of average balance sheet total 7.6 7.5 per centNet income as % of average shareholders’ equity 16.1 14.7Shareholders’ equity as % of balance sheet total 15.0 15.0

* Based on figures before exceptional items in 2001.

Financial review

Use of funds and finance

Gross capital expenditure In 2002 Océ’s grosscapital expenditure on property, plant and equip-ment amounted to € 116 million (2001: € 130million). Depreciation and disposals amount to€ 110 million (2001: € 115 million).

Rental equipment and financial lease receivablesThe book value of rental equipment decreased by€ 60 million to € 119 million (a decrease of 34%).The capitalised value of financial lease receivables(including short term accounts receivable) de-creased from € 1,153 million in 2001 to € 1,013million in 2002 (a decrease of 12%).This decreasewas partly caused by the sale of a part of the leaseportfolio. The aggregate value of rental equip-ment and financial lease receivables decreased by15% and represented 39.7% of the balance sheettotal (2001: 42.6%).The balance sheet value of rental equipment iscalculated on the basis of manufacturing cost lessstraight-line depreciation. Financial lease

receivables are valued at the net present value ofthe contracted lease instalments plus the residualvalue.

Interest-bearing capital At the 2002 year end theinterest-bearing capital amounted to € 843million (2001 year end: € 1,141 million). Of thisamount, € 757 million (90%) has been taken outover the long term.

Group equity Compared to 2001 Group equityremained constant at € 949 million . Changes in Group equity were the result of dis-tribution of dividend charged to General reserve(– € 52 million), exchange rate movements (– € 49 million),purchase of shares in the company(– € 6 million), addition to net income (+ € 112million) and other movements (– € 5 million).Group equity as a percentage of the balance sheettotal amounted to 33.3% (2001: 30.4%). Due toa decrease in interest-bearing borrowings, theratio between interest-bearing debt and Groupequity was 89:100 (2001: 120:100).

30

Geographical spread of assets 2002 2001

› € million as % › € million as %

United States 885 31 1,000 32Netherlands 625 22 586 19Germany 450 16 538 17United Kingdom 237 8 262 8France 178 6 201 6Rest of Europe 361 13 422 14Rest of the world 115 4 119 4

Total 2,851 100 3,128 100

Rental and leases

› € million

total rental and leases

financial lease receivables

including short term receivables

1500

1200

900

600

300

0

Free cash flow

› € million

400

300

200

100

0

–1000298 99 00 01 0298 99 00 01

Financial review

31

Shareholders’ equity per ordinary share calculatedon the basis of the average number of ordinaryshares outstanding at the end of the financialyear, amounted to € 10.21 (2001: € 10.13).

Cash flow The cash flow from operational activi-ties amounted to € 446 million and improvedstrongly by € 98 million compared to the previousfinancial year.This improvement was the net result of highernet income, trade creditors and movements inother working capital items on the one hand, andof lower (net) investments in rental machines andof the significantly lower levels of stocks, provi-sions and debtors on the other. The measurestaken to reduce stocks clearly made themselvesfelt. The cash flow from investment activitiesamounted to – € 108 million (2001: – € 175million).This development is due to acquisitions,investments in intangible assets and in property,plant and equipment and the sale of the financiallease portfolio.

The cash flow from financing activities amountedto – € 356 million (2001: – € 147 million).Interest bearing debts were substantially reducedcompared to the previous year (– € 298 million).Purchase of the company’s own shares to covercommitments under the Océ StockOptionPlaninvolved a cash outflow of € 6 million. The dividend paid in cash was € 48.5 million.The dividend paid to the holders of preferenceshares was € 3.5 million.

Credit facilities At the end of the financial year atotal of € 961 million of unused credit facilities inthe form of multi-year stand-by credit contractswere available to the Océ Group.

Statement of cash flow* 2002 2001 › € million

Cash flow from operations 446 348Cash flow from investment activities –108 –175

Free cash flow (before dividends and financing activities) 338 173

Financing activities and dividends –356 –147Exchange rate effects 15 –7

Change in cash –3 19

* For details see pages 72 and 73.

Dividend per share

amounts in euro per € 0,50

ordinary share

0.75

0.60

0.45

0.30

0.15

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

5

4

3

2

1

0 0298 99 00 01 0298 99 00 01*

* *

Financial review

Financial leases

General Lease programmes represent an importantmarketing instrument for Océ. More than 50% ofits machine sales are financed via financial leases.Leasing forms an indispensable component of the‘one-stop shopping’ concept that Océ offers. Océ has to date mainly handled the financing andadministration of its leasing activities itself.Research conducted in 2001 showed that financialpartners are able (thanks to their specialisationand scale of operation) to offer Océ’s customersadditional benefits, yet without having to abandonthe one-stop shopping concept. Océ is and willremain the face to the customer by continuing touse the Océ logo, the Océ sales force and the Océservice organisation. Océ has decided to out-source its lease portfolio and at the same time toretain the Océ identity towards the customer byapplying the private label concept. The basic principle remarks that the relationshipwith the customer is not disrupted.The improvement of the offering of financial pro-ducts will not only give Océ greater commercialopportunities but will also offer it the possibilityof focusing investments on its core activities andmaking improvements in transparency, return onassets () and return on equity ( ).

Partners For the reasons described above Océconcluded a private label partnership agreementwith Telia Finans for Scandinavia at the endof 2001. In 2002 a framework agreement was concludedwith De Lage Landen International .. (), asubsidiary of Rabobank. The agreement with , just like the trans-action with Telia Finans , relates to new andexisting financial leases for which the risks &rewards are transferred to the financial partners.In 2003 the intention is to conclude specificagreements in the Netherlands, Belgium, France,Germany,Spain and the United Kingdom.The cooperation with will commence in thefirst quarter of 2003 with new leases. The transferof the existing lease portfolio in each country willbe effected as quickly as possible, but must beaccomplished within the constraints set by thepossibilities that are available to Océ’s customers.Océ is seeking to achieve a gradual transfer of itsEuropean portfolio within a period of one to twoyears.

United States In the United States the leaseportfolio will likewise be transferred to externalpartners over the course of the next two years.The way in which this will be done, and itstiming, will depend in part on the experiencesgained in Europe.

Impact During the year under review leases worth€ 81 million were already outsourced to externalpartners. Expectations are that by the end of 2003around € 400 million of the portfolio(s) will havebeen transferred.Thanks to the gradual transitionno abrupt shocks will occur in the balance sheetor in the statement of operations. All thingsbeing equal, the expectation is that the balancesheet will be substantially shortened and that

32

2002 2001 › € million

Investments in:Property, plant and equipment (net) 101 107Intangible fixed assets 19 43Rental equipment (net) 30 50New financial lease receivables 394 438

Total 544 638

98 99 00 01 02

Investments

› € million

750

600

450

300

150

0

Financial review

interest income, interest expenses and the othercosts relating to the leasing business will (largely)disappear. The sale of the portfolio(s) in the indi-vidual countries will not take place at below theirbook value. The proceeds from the sale of thelease portfolio are sufficient to pay off all existingloans. The financing space thus created will beused to strengthen the company’s activities andthereby enhance shareholders’ value, in the fol-lowing order of priority: reduce debt, invest inassets enabling the company to reach targetreturns and other options such as the purchase ofthe company’s own shares.To give an impression of the results of the com-mercial and financial (lease) activities, an over-view is given above of the operating income(), net income, the cash flow before dividendand financing activities (free cash flow), returnon total assets () and return on equity ()over the past five years.

Accounting The lease programmes that are madeavailable in the market can be split into financialleases and operational leases. The latter type arealso referred to as rentals. In the case of financialleases the economic risk passes to the customer.The duration of these lease contracts is three to sixyears and is usually nearly equal to and sometimeseven longer than the depreciation period appli-cable to the relevant machines. As a result theresidual value risk is limited.At the moment when the financial lease contractis signed, the selling price of the machine is re-corded as revenue in the form of the net presentvalue of the financial lease instalments. During thecontract period the interest income is booked asrevenue. Revenues from maintenance and serviceare accounted for separately. In the case of anoperational lease contract machines are rented tocustomers for durations of, normally, one to threeyears. The rental instalments from these contractsare included in the revenue for the reporting periodin which they fall due. The rental instalmentscover the cost of use, servicing and interest.

33

Commercial versus financial results 2002 2001 2000 1999 1998 › € million

Operating income () Commercial 142 135 200 177 181Financial 84 90 83 71 64

Total 226 225 283 248 245

Net income Commercial 86 79 128 113 115Financial 27 26 24 19 14

Total 113 105 152 132 129

Cash flow before Commercial 236 137 38 1 30financing activities Financial 102 36 –57 –38 –105

Total 338 173 –19 –37 –75

Return on total Commercial 7.5 6.8 10.5 10.0 11.0 as %assets () Financial 7.6 7.5 7.4 7.1 7.1

Total 7.6 7.1 9.1 8.8 9.5

Return on equity () Commercial 11.5 10.2 17.4 18.1 19.8Financial 16.1 14.7 14.3 12.6 10.9

Total 12.4 11.1 16.8 16.9 18.1

Océ surpasses the market by innovative moves.<<<

Developments by market segment

Introduction

Océ is active in various market segments, eachhaving its own characteristics. There are, for ex-ample, big differences in size, growth and trendswhich influence how these markets develop.Developments in the market segments that are ofstrategic relevance for Océ are described below.

Corporate & Commercial The production ofinformation and documentation continues togrow. Documents are increasingly distributed indigital form, and are only printed out later. High volumes are still printed centrally or arecontracted out to commercial print shops. The commercial market segment is growing fastbecause of the increasing demand for personaliseddocuments and printing-on-demand. This effectis being strengthened by the falling costs andhigher quality of digital printers, and it is takingplace at the expense of the traditional offsetmarket.Océ,with its high-quality products and integratedsystems, holds a leading position in these growthsegments, which include marketing services anddigital newspaper printing.

Facility Services A clear tendency exists within bigcorporations to concentrate on their core activi-ties and to contract out their non-mainstreamactivities to specialists. Repro departments, forexample, are contracted out to partners who canalso manage complex document processes in anefficient and effective way. This guarantees theflexibility needed to handle constantly changinguser requirements, such as printing in colour anddocument management.Océ has already built up a strong position inFacility Services and is excellently positioned toexpand this further through the innovative com-bination of processes, products and services.

Document management Document managementis the working area of the Software & ProfessionalServices business group. Expectations for thismarket are high, despite the poor economic cli-mate. Businesses feel the need to structure anduse their know-how and documents in an efficientway. In addition, trends such as decentralisedprinting and printing-on-demand help to givedigital documents an increasingly important rolecompared to paper documents. In a number ofcountries it is in fact already compulsory forcertain government documents to be archived indigital form. Océ is responding to this via its Software &Professional Services business group by offeringdocument management systems that link upclosely with its hardware products. In addition,Océ intends to expand its position further withinthe document management segment.

Technical Documents The primary processes inthe market for technical documents and therelated requirements that are set for documentflows are changing. Though more documents arebeing produced, these are printed out less oftenand are increasingly being printed in decentra-lised locations. The total print volume is growingslightly. Scanning and digital archiving are be-coming ever more important. The share of colouris growing, and with it the importance of inkjetprinters. At the end of 2002, therefore, Océlaunched the Océ 400 wide format colourprinter. The position held by Océ in the TechnicalDocument Systems market is being reinforced bythe development of specific software.

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Display Graphics Even more than in othermarkets, the growth in Display Graphics will bedriven by consumables such as ink and media.Since advertisers are personalising their cam-paigns, this creates a demand for shorter print-runs. Thanks to new technologies, which enablelower costs, higher speeds and better quality,printers are being increasingly used to handle thiswork instead of traditional offset machines.Printers also make it possible to perform less com-plex print jobs in-house. In this highly fragmentedmarket a process of consolidation is occurring,partly due to the reduced advertising spend causedby the static economy.Océ is playing a leading role in this consolidationbattle.

Wide format media Although the total consump-tion of wide format media is growing slightly,major shifts are taking place in the market. Themarket for wide format paper rolls is shrinking.However, this is more than compensated by thegrowth in /inkjet rolls demand.The marketfor special media for Display Graphics appli-cations is growing strongly. On the distributionside, too, shifts are taking place as suppliers in-creasingly make direct deliveries to end-users.This is also being facilitated by web-basedordering systems.Océ, as a supplier of hardware products based onits own technology, is excellently positioned tostrengthen its leading position in this market viaits Imaging Supplies business group.

Digital Document Systems

During the year under review Océ combined thestrategic business units Document PrintingSystems () and Production Printing Systems() to form the strategic business unit DigitalDocument Systems (). By doing this Océ islinking up with the market developments whichresult, for example, from new technical possi-bilities that are leading to substantial changes inthe customer’s environment. Within the new strategic business unit four business groupshave been created which are tailored to servespecific types of customers or market activities.Océ is focusing in this environment particularlyon the print markets that require high volumesand speeds. The most important reasons for the reallocationof activities within were the convergence ofthe originally highly different markets on which and are active and the need for digitalprint solutions in the market for commercialprinting.This tendency was most noticeable in theoffice environment, where networks are causing ablurring of the borders between use in traditionaloffice environments, in repro departments and indata processing centres. In the new organi-sation structure a Corporate Printing businessgroup has therefore been formed. This concen-trates on organisations in which documentssupport the primary business processes. The market segments it serves are finance &communication, public services, educationalinstitutions and trade and industry.A second business group, Commercial Printing,focuses mainly on customers who use Océequipment for commercial applications, such asmarketing services, quick printers and copyshops, the printing industry and newspaperproduction.Separate business groups handle Facility Servicesand Software & Professional Services respectively;these are relatively new areas of activities whichplay an important role in Océ’s strategy in thearea of document management. Both thesebusiness groups emphasise the great importancethat Océ attaches to offering products andservices that meet the needs of customer-specificdocument processes.

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Software & Professional Services focuses on pro-viding support to customers in making the mosteffective change to digital solutions.Facility Services focuses on customers who wantto outsource printing and copying activities and,to an increasing extent, the complete documentmanagement process. Océ’s expertise in the fieldsof consultancy, software, machines and servicesgive the company a competitive edge.During the year under review Océ also intro-duced a complete range of new products whichcan be widely deployed in the markets selected by. Software and services are accurately tailoredto user needs in the various market segments.This was demonstrated during the Océ OpenHouse in Poing (Germany) in November 2002which was attended by a great many visitors.

Corporate Printing

Characteristics Print solutions for high-production environments and print managementsolutions, at both departmental and central level.

Océ’s role Providing innovative print anddocument management products and services tooffer organisations the possibility of managingtheir documents efficiently and effectively.

Customer environments Finance and communi-cation: banks, insurance companies, telecom andutility companies. Public services: government, health care andeducation. Trade and industry: manufacturing, retail andwholesale trade, transport, logistics and con-sultancy.

Applications Office applications, documentproduction and transaction printing.

During the year under review machine salesdecreased, partly as a result of the phasing-out ofactivities in the low volume segment. Against this,however, the print volume per machine increased.Océ is focusing on placements in higher volumeenvironments. Recent years have revealed a trend towards a con-traction of margins, notably in the low and mid-volumes. This is why a different market approach

is needed. This partly explains Océ’s choice forthe high and very high volumes. For thosevolume sectors Océ introduced a series of newproducts during the year which underline Océ’stighter market focus.

Launched in 2001, the Océ 700 colourprinter, with its seven-colour technology andstable colour quality, is being shipped to marketin increasingly bigger numbers. The number ofnew placements of the Océ 400 printerlagged behind expectations. This was due to thelimited willingness to invest on the part ofcustomers.Since 2002 the machines have been knownunder the family name of Océ VarioPrint(cutsheet) or Océ VarioStream (continuous feed).This relates to the Océ VarioPrint 2000 series fortypical office applications, which is available withvarious speeds. The latest machine in this series,the multifunctional Océ VarioPrint 2090 (up to85 ppm), will be brought to market in the firsthalf of 2003.The Océ VarioPrint 5000 (158 ppm)is a cutsheet machine that offers great versatilityand high flexibility in terms of input and output.This machine will serve as one of the company’sflagship products, notably in the insurance in-dustry and for printing in corporate data centres.For the most demanding applications the businessgroup can also offer the new Océ VarioStream6100 as an entry-level system as well as the OcéVarioStream 7000, the successor to the highlysuccessful PageStream series.The OcéVarioStream7000 is the very latest development in continuousfeed systems, featuring a faster speed and excel-lent print quality.

The existing range and the recent introductionsgive Océ a unique position in the market. Océ isthe only supplier able to offer a complete range ofprint engines operating at speeds from 45 to1,200 ppm.In continuous feed printers Océ is the leadingplayer not only in Europe but also in the UnitedStates. At Xplor, the biggest annual trade fairspecialising in document production, the Océrange made a big impression.

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In the corporate environment digitisation hasmeanwhile made great advances and its effectsare now making themselves clearly felt. Analoguecopying again declined during the year underreview by 4% as compared to 2001 and nowaccounts for 41% of revenues. Printers andscanners, incorporated in networks, are one of theunderlying reasons for the integration of docu-ment processes in the office and in document andtransaction print production. Printing is in-creasingly replacing copying. The use of colour isbecoming ever more popular and is expected tobe available to everyone in a few years’ time. The role of paper is meanwhile undergoing adistinct change. Paper remains important, but itis increasingly taking on the role of a workingand reading document. The creation and storageof documents will increasingly take place ondigital media. In the corporate environment more and moreactivities are being outsourced. In these cases whatare usually big companies hand over the respon-sibility for the management and production ofdocuments, for example, to Océ specialists inFacility Services. This task also entails the organi-sational component of document management.It is often also possible to achieve substantialprocess improvements over the short term via anefficient deployment of a network and hardwareand software.

Commercial Printing

Characteristics Print solutions for high-production environments and print managementsolutions.

Océ’s role Providing hardware, software andservices for the management, distribution andprinting of documents, with a focus on print-for-pay environments in which consultancy is pro-vided to create total solutions which – possibly incombination with partner solutions – are inte-grated within the customer’s infrastructure.

Customer environments Marketing services,newspaper publishers, printing industry, copyshops and quick printers.

Applications Personalised mailshots, time-criticaland cost-effective printing of limited print-runsof newspapers, printing-on-demand.

The Commercial Printing market has grownconsiderably in the past few years. Onthebasis of theposition ithasbuilt upamongstcopy shops and quick printers and thanks to itsleading position in the world of marketing ser-vices, Océ has successfully penetrated adjoiningareas within the commercial market. Due to thereluctance of most customers to make invest-ments, the number of new placements declinedduring the year under review. However, revenuesfrom software and services were maintained. Ofthe machines developed by Océ for this marketsegment over the past year, the most significantones are the Océ VarioPrint 5000, the OcéVarioStream 6100 and the Océ VarioStream7000. Thanks to its great input and outputflexibility the Océ VarioPrint 5000 is a strongproduct offering for the printing industry. OcéVarioStream forms the response to an ever higherdemand for print quality in combination withhigh speed. The Océ VarioStream 7000 (installedin a ‘twin’ configuration) can operate at a speedof 1,200 ppm and with a print resolution up to600 dpi. The resolution can be easily and quicklyadjusted to the required setting thanks to auniqueOcé invention. This brings a strong increase inthe machine’s productivity and flexibility.

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The growth of the digital print volume in theworking area of the Commercial Printing businessgroup is highest in the Graphic Arts industry andin the digital printing of newspapers. At themomentonly a limited proportion of this volumeis digitally printed.Together with several majorpublishing houses, Océ took major steps in 2002to replace offset with digital printing, whichmeans that making smaller print-runs can also beprofitably performed. By offering solutions thathelp customers to make the transition from offsetto digital printing, Océ is today setting the pacein the printing industry. An important development in the printingindustry is formed by the Océ Digital NewspaperNetwork. As part of this project Océ coordinatesa network of print shops which are located invarious big cities throughout the world and whichprint a number of newspapers that are suppliedin digital form. In this way newspapers can besupplied to readers all over the world on the dayof their original publication. The benefits are thatthe news is much more up-to-date and that con-siderable savings are possible on logistics costs.The potential for this service is considerable: at themoment in fact newspaper publishers earmark 5-10% of their print-runs for non-regional/national distribution.

Software & Professional Services

Characteristics System integration and support.

Océ’s role Offering customer-specific documentmanagement solutions.

Customer environments All (mostly bigger)organisations in Océ’s customer segments.

Applications Output management and workflowmanagement, archiving, character recognitionand document interpretation.

Digitisation has started to play a crucial role in alldocument environments over the past ten years.As a consequence the way in which documentsare created and their format and presentationhave likewise changed strongly. In many environ-ments extensive and complex paper flows haveemerged which need to be managed and steered.

This development will continue at a fast speed inthe years ahead. In its activities Océ is respondingto this development by placing ever greater em-phasis on document management as an over-arching discipline. This involves organising aswell as controlling digital document flows andpaper flows within a single integrated system.The possibilities in this area are primarily deter-mined by the functionality of the software. In recent years Océ has developed a series ofhighly varied software programs under the name, most of which are linked to the hard-ware solutions that it has to offer. These programscomprise a complete set of instruments thatenable the document flow to be managed andsteered at various levels within an organisation.Océ offers a complete package of closelylinked modules based on an open systems archi-tecture that can be used to configure the rightsolution for every user environment. In the formof Océ Océ provides a practical answerto the challenge of managing input and outputsystems in complicated document environmentsinvolving a wide variety of platforms. As a supplement to Océ , Océ offers acomplete range of software and services forcharacter recognition and the interpretation of adocument’s structure, with the aim of enablingthe automatic processing of big volumes of paperdocuments. Océ is one of the leading players inthis area.The use of these products is usually based onclose cooperation between the customer’s systemspecialists and those of Océ. The expertise withinOcé was bundled together during the year underreview and was placed within the business groupSoftware & Professional Services. This not onlyensures greater efficiency and responsiveness butalso forms the platform from which Océ cangrow further as a leading supplier of completedocument management solutions.

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Facility Services

Characteristics Outsourcing of printing andcopying activities and document management.

Océ’s role Integral handling of document pro-cessing, within the customer’s organisation, bothorganisational and operational: e.g. copying,scanning, printing and distribution.

Customer environments All (mostly bigger)organisations in Océ’s customer segments.

Applications Consultancy and design, imple-mentation and training, service and support,possibly in the form of Océ taking over full res-ponsibility for the total document management.

To an increasing extent organisations are optingto outsource their non-core activities to specia-lised companies. Printing and copying activitiesand, to an increasing extent, the complete docu-ment management process are no longer seen bymany organisations as a mainstream activity andare therefore mostly contracted out. All Océ’sactivities in this area have been combined withinits Facility Services business group. Facility Services is one of the fastest-growing acti-vities within the company. During the past finan-cial year Océ again achieved an undiminishedgrowth-rate of some 17%. Many facility servicescontracts were therefore concluded in 2002. The contract that was signed with the Bank ofAmerica is one of the most impressive in view ofits size.

One of the underlying reasons for the develop-ment of Facility Services as a separate activity is theclose contact it provides with the customer.Customers are assured of a service that links upperfectly with the needs of their business pro-cesses, whilst Océ can gain an in-depth knowledgeof that business and can closely monitor and im-prove the document flows within the business.This leads to the creation of new services, such asscanning and digital archiving, but it also involvesthe co-ordination and sourcing of non-digitalprint activities such as offset printing.

Océ presents its in-house service provision via thecustomer’s own intranet systems. By clicking on asimple menu, users can therefore perform every-day print jobs. But they can also initiate the mostcomplicated print assignments that may ulti-mately even take the form of completely finishedreports and manuals in the customer company’sown house style. The services supplied by Océ in this market linkup directly with the Solution Delivery Processsystem. That process ranges from consultancyand design via implementation and training toservice and support, and may also take the formof assuming overall responsibility for the totaldocument management. In Europe Océ has built up a good position in acomparatively short space of time, particularly inthe industrial, education and government servicessectors. In the United States Océ operates underthe name Archer Management Services, where ithas built up an excellent position in the financialservices sector. In the United States Océ has alsoachieved substantial growth particularly in cus-tomer organisations that have a large number ofbranches nation-wide.These are being approachedand coordinated in an increasingly focused way.Particularly in Europe Océ is increasingly beingconfronted by new competitors in the form of‘total facilities suppliers’ who, in addition to a bignumber of other services, also offer documentservices. However, Océ is able to offer and createclear-cut added value thanks to its dedicated focuson documents and document management.

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Wide Format Printing Systems

With effect from the 2003 financial year thestrategic business unit Wide Format PrintingSystems () will consist of three businessgroups. These are Technical Document Systems,Display Graphics Systems and Imaging Supplies.In 2002 the growth in the number of placementsstagnated both in Technical Document Systemsand in Display Graphics Systems. This was offset,however, by a constant flow of revenues fromservice. Especially in the second half of the yearunder review intensive sales efforts started to bearfruit.Thanks to the combination of these intensivesales efforts and stringent cost control the resultsremained stable. In the wide format markets theimportance of Software & Professional Services isalso increasing. This provides extra support toprofitability.

Technical Document Systems

Characteristics Scanning, printing, copying,archiving and managing wide format documentsin black-and-white and colour.

Océ’s role Offering hardware, software andsystems, consultancy and professional services.

Customer environments Architectural andengineering offices, construction companies,industrial companies, public utilities, telecoms,transport businesses and the government,specialised print shops and job printers.

Applications Building and construction drawings,design and production drawings, pipework andelectrical circuit diagrams, maps.

Specifically in this market the emphasis is on anintegral productivity concept, in which a centralrole is played by the total cost of ownership.Quality, reliability, speed and user-friendlinessform the building blocks for this, but service isalso crucial. Océ succeeded in achieving andmaintaining a high level of service world-wide. In October 2002 Océ-, Inc. was awarded aprestigious prize by the Association for ServiceManagement International for its Best-in-classservice organisation.

In the markets in which Océ is active with itsTechnical Document Systems two distinct trendsare emerging: colour and decentralisation. Although printing in design engineering offices isstill done predominantly in black-and-white, theuse of colour is advancing strongly. To ensurethey are prepared for this, more and more cus-tomers are asking for colour machines, whichmeans that inkjet printers are rapidly gainingground in the low volume segment. At the end ofNovember 2002 Océ responded to this by intro-ducing a colour machine, the Océ 400, speci-fically focused on meeting these needs. The Océ400 is a wide format colour printer that isdestined in particular for use in constructioncompanies and architectural and engineeringoffices.Due to a change in the way that documents aredistributed, decentralisation of the print volumeis increasing. In former days documents weregenerally printed first and then distributed, buttoday’s practice first involves their (digital)distribution, after which the image is viewedand/or printed as and when required. Within anorganisation this therefore creates a higherdemand for smaller machines. Especially the Océ400 and the Océ 600 fit well within thisapplication profile. The Océ 400 and theOcé 600 are wide format production systemsfor the printing, copying, scanning and finishingof technical documents. Thanks to internetprinting and scanning is possible at any location.The flow of documents in this segment of themarket is changing in character because paralleldesign processes are today often chosen (due to thegain in speed). That involves much consultationbetween designers and an intensive use of thedigital infrastructure. This is achieved by meansof data lines with a higher transmission capacity,the use of cheaper storage media, increasing thespeed of internet access and by means of specificapplications that facilitate such interactive team-work. Océ can see good opportunities for playingan important role in these processes via its docu-ment management software in combination withprinters.Océ has converted its partnership with Autodesk,the supplier of the popular Océ software programsRepro Desk and Plan Center, into an exclusivelicensing agreement. A dedicated team of experts

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within Autodesk’s Building CollaborationServices Division developed these programs.Within Océ this team will fulfil the role of aCompetence Centre in which know-how in thearea of on-line print management solutions willbe concentrated.

Display Graphics Systems

Characteristics Scanning, processing and printingof wide format display graphics images in colour.

Océ’s role Offering hardware, software, media,systems, consultancy and professional services.

Customer environments Print shops and jobprinters, sign shops, silk-screen printers and offsetprinters, photo processing laboratories, exhibi-tion and display constructors, graphic arts designstudios and advertising agencies.

Applications Posters, banners and billboards, fleetmarking, wide format displays for exhibitions,in-store presentations.

By far the most important development within theDisplay Graphics Systems business group was theintegration of the Gretag Professional ImagingDivision (), which was acquired in Decem-ber 2001 and now operates under the name OcéDisplay Graphics Systems, Inc. (). Thisbusiness, together with its machines and relatedcustomer base, forms a perfect supplement toOcé’s own activities and products. The Raster Graphics section of is the pro-ducer of a series of state-of-the-art piezo inkjetprinters under the name Arizona. Another of itsmajor products is the prominent and very widelyused Raster Imaging Process software of OnyxGraphics. The integration of the acquired opera-tions progressed favourably during 2002, despitethe fact that this integration process and therealignment of the business group called for agreat deal of management time and attention.In the market for Display Graphics Systems,which is fragmented in terms of both suppliersand customers, Océ has made a clear-cut choiceto concentrate on the mid-volume and highervolume segments. Within the total marketthe company is now one of the four biggest

players. Through the acquisition of , Océhas strengthened its position substantially, forexample in the fast-growing job printer market.This market is demanding for ever bigger printcapacity. The fastest machine of , the OcéArizona 500, is able to process around 50 squaremetres per hour. But Océ is also one of the mainsuppliers serving other large-scale users of wideformat colour printers, such as sign shops, silk-screen printers, photo processing laboratoriesand constructors of exhibition stands. As part ofits endeavours to offer complete solutions Océwill also continue its presence in the low volumesector by offering machines for outdoor appli-cations. In this segment, however, it will only sellthird-party machines.The basic position for Océ in the market forDisplay Graphics Systems is favourable, thanksto the strength of the brand, the company’sworld-wide presence and its own distributionchannels and service activities. Based on thesestrengths the company will work further toimprove profitability, amongst other things viaorganisational changes, and to secure growththrough an expansion of the range. Océ isworking on the further development of mid-volume machines for outdoor applications,featuring such variants as flatbed and roll-to-rollmachines. In the case of roll-to-roll the printedmaterial is rolled up again after printing and isthen processed in subsequent stages, for instanceso that it can be used in a billboard application.In the case of a flatbed it is possible to print directon the ultimate carrier material. A new flatbedmachine, the Océ 220, will be launched in thefirst quarter of 2003.In part of the market, particularly in digital printshops and job printers, a certain overlap exists withthe activities of Technical Document Systems.This overlap is used to create synergy effects be-tween the two business groups in providing theirshared customers with support in the develop-ment of wide format full colour applications.Thanks to its broad range for the very highproduction segment of the market and a series ofin-house technologies, supplemented in duecourse by the company’s own inkjet technology,Océ will be able to build a strong position inDisplay Graphics Systems and a clear profile ascompared to its main competing suppliers.

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Imaging Supplies

Characteristics Supplies (media, inks and toners)for wide format and small format documents,display graphics imaging and applications inblack-and-white and colour.

Océ’s role Provider of wide format supplies (, inkjet and diazo), Display Graphics supplies(water-based, oil-based, solvent-based) and officesupplies (4 bulk paper as well as specialities, e.g.for the Océ 700 colour printer).

Customer environments All environments men-tioned under Technical Document Systems,Display Graphics Systems and Digital DocumentSystems.

Applications All applications mentioned underTechnical Document Systems, Display GraphicsSystems and Digital Document Systems.

The Imaging Supplies () business group offerssupplies (media, inks and toners) for Océ’s owninstalled machine population. Offerings of sup-plies for competing machines are also showing asteady increase. Of importance here are the highquality of the products and the reliability of dis-tribution. In the meantime the level of incomingorders received via internet is clearly increasing. was placed within the organisation of the strategic business unit with effect fromDecember 1, 2002.

During 2002 the range was strongly expanded,especially in the form of Display Graphics and applications. In the market success-fully increased its market share in supplies, forexample by expanding further through indirectchannels, notably in the major European marketsof Germany, the United Kingdom and France.With a view to the Océ 400 wide formatcolour printer, introduced at the end of 2002, acomplete range of supplies has been developed.Alongside the water-based inkjet technology forwide format colour printers the main advancesfor Graphics outdoor applications relate to newqualities of ink and media, particularly those thatare oil-based and solvent-based. is closelyinvolved in this development. For example,

can now provide a range of inks and new mediafor the installed Océ Arizona population.Within the overall range the share of standard4-format paper still plays an important rolebecause of its volume; despite the relatively lowmargins, it still has a major influence on profita-bility. In the small format area an extensive range ofmedia has also been built to serve the Océ700 family, Océ’s colour printer.Logistics performances have been further im-proved, resulting in a high level of reliable andprompt deliveries. A new logistics centre in Venlonow handles direct deliveries to customers in theBenelux countries and Germany and ensures thatinventories are kept at the required level in theother countries throughout the world.During the course of the year under review thebusiness group was awarded 9001/2000certification.

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Océ's unique know-how and skills create value for its stakeholders.<<<

Critical success factors

Capital

Value creation Océ has always had a strong balancesheet thanks to a long standing conservativefinancing policy. The analysis of Océ’s balance sheet is somewhatcomplicated due to the fact that both commercialactivities and financing activities take placewithin the company. The latter activities relatechiefly to the provision of finance to customers(financial leases). The breakdown showing theeconomic consequences of these activities is givenon page 28 of this report. It is important to em-phasise that the cash flow before financing activi-ties (the free cash flow) from the commercialactivities has been positive over the past fiveyears.

Océ’s balance sheet is relatively ‘long’ if measuredby the rate of turnover of the assets. In 2002 thisrate amounted to 1.07. This was despite the on-going and successful emphasis on reducing in-ventories and debtors. The main cause is the sizeof the financial lease portfolio which comprisesabout one-third of the total assets.The strong balance-sheet position and also thesale of the lease portfolio that has already beenstarted will make it possible for Océ to invest inhigh-yield activities, which will bring the returnon assets to the desired level. Océ will alwaysadopt a conservative approach in this respect andwill not invest in activities or invest suchamounts which may endanger the company’scontinuity if the expected synergy does not mate-rialise. As regards this conservative approach thepast should also serve as an example for the future.

Finance At the end of 2002 interest-bearing loansamounted to € 843 million, a decrease of € 298million compared to the end of 2001. The causesof the decrease are described in detail elsewherein this annual report.The proceeds from the sale of the total lease port-folio could be used to repay all loans and deferredtax liabilities. Although every option will be con-sidered, the optimisation of the capital structurepleads against using financial resources in thisway. The possibilities of acquiring businesses oractivities are constantly looked at and it is certainthat acquisitions will take place in the years

ahead, provided that they ultimately bring anincrease in shareholders’ value and bring thereturn on total assets () to 12% or higher.Océ seeks to keep equity at a level of about one-third of total assets, and preferably at a level ofaround 40%.The percentage will depend verymuch, however, on the activities that are investedin and on the level of non-interest-bearingliabilities.In principle, therefore, the amount that can beraised in the form of interest-bearing debt for thepurpose of making acquisitions is very substan-tial. Apart from acquisitions, other uses for theproceeds that become available from the sale ofthe lease portfolio will also be considered.

Know-how and skills

The success of Océ’s products and services isattributable to the company’s ability to developand market machines, software and serviceswhich are not only of a very high technologicalstandard but also possess properties that link updirectly with the business processes of their users.That is largely due to the many years of inter-action between the practical experience of thecustomers and the product developers, in mostcases the departments of Océ. This inter-action is made possible because of the combi-nation of direct sales and the company’s ownservice organisation, which means that Océ cancount on regular feedback from its user environ-ment. More than any other company Océ canmake allowance for customer requirements anduse those as a basis for developing products thatare seen by customers as the solution for theirneeds and wishes. The know-how and skills that Océ possesses stemfrom various sources: first of all, from the practiceof the user, then from the technology itself vianew basic technologies and, lastly, from the un-remitting activities that are constantlygeared to innovation, yet without being afraid ofentering new and unexplored avenues.

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In the Group employs some 2,000 people.Each year Océ invests more than 6% of its reve-nues in . The activities are establishedin six countries. The centre in Venlo focuseson the development of cutsheet printers andwide format printers, strategic supplies (tonersand photoconductors) and software. In Poing(Germany) the activities concentrate on thedevelopment of fast, high-volume printers andsoftware. In the United States, the activitiesin San José concentrate on Display Graphicswide format colour printing. In Fiskeville, RhodeIsland is the location of the facility ofArkwright, the centre for the development ofspecialised carrier materials. In Créteil (France),Namur (Belgium), Konstanz (Germany), Cleve-land, Boise, Salt Lake City and Phoenix (UnitedStates) and Tokyo (Japan) there are centresthat work on the development of specialisedsoftware.Océ has manufacturing locations in Venlo(Netherlands), Poing (Germany), Pardubice(Czech Republic), San José and Fiskeville(United States) and in Vancouver (Canada).The logistics, both incoming and outgoing, havebeen largely outsourced to specialists, with delive-ries being made as much as possible direct fromthe factory so as to keep inventory levels low.

Océ develops machines which as a rule are better,more user-friendly, more reliable and more pro-ductive than competing products. In its searchfor alternative solutions over the years Océ hasdeveloped various innovative technologies of itsown. These technologies were leading-edge andhave helped considerably to enhance the distinc-tive characteristics of Océ products. The Copy-Press printing technique, the Direct ImagingProcess drum, the Organic Photoconductor andData Capturing Algorythms are typical examples.As things look at the moment Océ’s own variantof inkjet technology, currently being developed,will be another example of such innovativeadvances.

Developments The most important develop-ments at the present time are taking place in thearea of colour printing technology and softwaredevelopment. Obviously, these developmentsalso have an influence on the functionalities ofOcé machines, both the newly introduced onesand the older modular and upscaleable machinesthat are already installed in the market.For very high volume machines (continuousfeed), which work on the basis of electrophoto-graphy, what is known as spot colour was success-fully introduced during the past period. This is acolour that is used to support the basic colour. Inthe cutsheet segment the Océ 700 has set newstandards. On the basis of this machine a com-plete family is being developed with the aim toachieve further improvements in productivity,quality and, last but not least, to achieve a lowercost of ownership and a perfect link-up with thecustomer’s internal processes.The software of Océ has the ultimate task ofmaking the link between the customer’s workprocess and the Océ printers.This involves a com-plicated process, but one that has to be made assimple as possible for the user. Certainly now thatOcé is concentrating more and more on the highvolume end of the market it seems of importancethat Océ continuously studies the user’s way ofworking: in fact, the productivity of the user isjust as important as the productivity of the ma-chine. In the area of software development Océhas rapidly implemented a number of modifi-cations which guarantee that all components linkup and work well with each other, particularlywithin the system, the Océ architecturefor a closely related group of software programsfor document and output management.

The business processes in manufacturing andlogistics have been increasingly streamlined as aresult of which assembly and delivery of newmachines takes place in the most efficient way.Thanks to the introduction of Direct MachineDelivery to customers from the manufacturingcentres in Venlo and Poing, inventories have beensubstantially reduced. This goes hand in handwith an even stronger focus on the customer, withthe result that every machine is today in principlealready destined for a specific user and is alsoconstructed exactly in line with that user’s wishes.

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In September of the year under review the newprocess drum factory was opened in Venlo.Amongst other things, this plant produces the drums for the Océ 700 colour printer.Previously, likewise in Venlo, the new toner linehad been installed, where the colour toners areproduced for this machine. As a result majorbottlenecks in the production of the machinehave been eliminated.

Océ’s partners

As the world of Océ expanded, so did the com-pany’s cooperation with partners, the aim beingthat Océ could always continue to concentrate onits core skills and core activities. By transferring itsown activities to partners and also by initiatingnew activities together with partners, Océ hassucceeded in building up a flexible and alert busi-ness and in keeping pace with, what are in mostcases, bigger competitors. That process has takenplace continuously, from the disposal of its ownsheet metalworking plant many years ago up toand including the outsourcing of the leaseactivities during the year under review. Cooperation with external partners forms an in-separable part of the Océ business model.With theconsequence that in the year 2003 Océ operatesin a tightly-knit network of partnerships in count-less areas.

Product development In the earliest stage ofproduct development Océ works together withvarious universities and other knowledge centres.In product development, cooperation with tech-nology and system specialists has become thenormal procedure. Océ works together with allthe big names in the area of printer technologyand software and increasingly places developmentassignments in the hands of these specialists, yetwithout relinquishing overall control. One of thecomponents whose development is, in principle,not contracted out to third parties is the user inter-face.That part of the Océ product is regarded as astrategic component. In this way it is possible forOcé, also by using parallel development proce-dures, to bring new products incorporating themost advanced technology to market in good time.

Manufacturing Although Océ has its own manu-facturing function, production itself is not theprimary activity for Océ but, rather, the possibi-lity of generating, by means of tight overallcontrol, exactly those products that possess therequired qualities. Océ itself produces only afraction of all parts and components in themachines: a mere 5% of the production work isperformed in Océ’s factories. Machine parts,components and in a number of cases completesub-assemblies for machines are sourced fromsuppliers, who are not only carefully selected butare in most cases also intensively involved in thedevelopment of the relevant components. In principle Océ limits itself to supplying thespecifications, after which the partner is respon-sible for an optimum price/ quality ratio and forensuring the shortest possible time to productionon an industrial scale. A number of strategic components such as processdrums, toners and photoconductors are today stillproduced in the company’s own factories where –apart from the occasional exception – the finalassembly work also takes place. The effect of optimum cooperation with partnerswas reflected in an extremely tangible form duringthe year under review with the presentation ofseven completely new printing systems and anumber of software programs. At that presen-tation, which took place during the Océ OpenHouse event in November 2002, other partnerswere also present: the producers of pre-treatmentand finishing equipment who, together with Océ,supply the customer with complete high-volumeproduction systems.

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Sales and service Since Océ prefers to make use ofits own direct sales and service channels in mostcountries and for most products, commercialpartnerships are relatively limited in number, cer-tainly when compared to many of the company’scompeting suppliers. However, in a number ofcountries outside Western Europe, where the sizeof the sales market is still limited, Océ works to-gether closely with local dealers, in a number ofcases on the basis of exclusivity. In this way Océusually achieves excellent results because thedealers have a better knowledge of the localmarket.Since 2001 Océ has been building up an extensivenetwork of independent dealers in the UnitedStates. By the end of the year under review thisnetwork had been expanded to include fifty-sixdealers. This network serves as a complement tothe company’s own major sales and service orga-nisation comprising some fifty sales teams thatOcé has built up in the United States.

Employees

Océ aims to offer its employees an attractiveworking environment in which they developthemselves further to the best of their abilities.Via constant learning, the exchange of know-howand experiences and via international mobilityOcé strives to ensure that they remain competent,versatile, flexible and result-focussed.In that way they are also able to make the bestcontribution towards achieving Océ’s strategicobjectives.In 2002 Océ’s focus in the area of human resourcesmanagement () was chiefly on the furtherdevelopment and practical implementation of anefficient policy that should enable the organi-sation to implement the major changes that werescheduled to take place within the framework ofa tighter market focus. is one of Océ’s biggest challenges for theyears ahead. Partly because of the technologicaland market developments a need exists for an ex-pansion of and greater differentiation in manage-ment talent within the organisation. Especially inthe area of software and professional servicessome ground needs to be made up, but actionwill also be taken in other sectors of the organi-sation. The challenge that Océ has committed

itself to in the coming 5-year period is to becomeone of the ten most preferred employers for uni-versity graduates in general in the Netherlands;for technical specialists in particular a top-fiveposition will be sought. In other countries, es-pecially in Germany, Océ likewise aims to createa clearly positive profile in the labour market. Océ will focus, even more than in the past, onrecruiting the best employees and on structurallyoffering development opportunities in directionswhich are crucial for the future of the companyand which bring out each employee’s individualtalents to the full.

Restructuring 2002 The restructuring operationthat took place in 2002 will lead to a total re-duction of some 1,100 jobs. During the yearunder review 74% has been achieved, of whicharound 300 jobs were discontinued at head officeand in the strategic business units.

Corporate policy The success of this re-structuring process hinges on the ability to trans-late the company’s strategic ambitions into thecompetencies of the employees and teams thatplay a role in that change process. To achieve this,an policy has been formulated at corporatelevel that consists of four elements:

– products – processes – personnel: each change process and the realisation of the strategic goalsmust take place simultaneously along each ofthese three tracks;

– a strategic framework in which corporate objectives and developments in the area of

are constantly attuned to each other;– competency/performancemanagement: as a result

of the strategic choices the focus of Océ is moreand more on activities that require a higher andmore specific level of knowledgeon thepart of theemployees.Viacompetency/performancemanage-ment, supported by assessment and new formsand techniques of education and training, thecompetencies and quality of the work are beingsteered and made measurable more than before;

– gap approach: a structured bridging of the gap between the current position and the sought-after situation, in the area of know-how and skills.In implementing this policy, therefore, the em-phasis is not only on improvement in perfor-mance but also on boosting the efficiency and

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transparency of the organisation (operationalexcellence).

As a result of the strategic choices the companyhas made, Océ’s activities are increasingly movingin a direction which requires its employees topossess a highly specific know-how. Despite all the changes, Océ always continues tokeep a careful watch on the right balance betweenretaining and expanding its existing strengthsand entering new avenues, especially in the areasof software, services and consultancy. Océ hasdeveloped an innovative, integrated approachwhich ensures that the roles needed in sales,maintenance and consultancy can be translatedinto a unique set of uniform competencies. By referring to this system employees andmanagers can determine for themselves the levelat which they will be capable of fulfilling theirspecific role.

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Distribution of employees by 2002 2001geographical areas

number as % number as %

United States 8,730 39 8,234 37Netherlands 4,052 18 4,059 18Germany 3,199 14 3,299 15France 1,237 5 1,388 6United Kingdom 1,122 5 1,111 5Rest of Europe 3,069 14 3,301 14Rest of the world 1,080 5 1,080 5

Total 22,489 100 22,472 100

Distribution of employees by 2002 2001type of function

number as % number as %

Facility Services 6,611 29 6,046 27Service 4,617 21 4,914 22Sales 4,376 19 4,653 21Manufacturing & Logistics 2,809 13 2,887 13Accounting and other 2,131 9 2,132 9Research & Development 1,945 9 1,840 8

Total 22,489 100 22,472 100

Océ actively contributes to a sustainable society.<<<

Sustainable development

Océ’s position with regard to people, planet, profitis founded on a tradition of care that fits in withthe spirit of the relevant period but is in mostcases far ahead of its time.In the history of Océ a major role has alwaysbeen played by attention for people and, relatedto that, for issues in the areas of health, ergo-nomics, environmental and working conditionsand the safety of the local community. Thatattention stems from the sincere interest and careshown for employees within the family-ownedVan der Grinten business in which Océ has itsroots. The fact that the concern for people, theenvironment and society has also continued toplay a prominent role in the company’s recenthistory is inherent in the long-established cultureof the business. Océ’s advanced technologicalproducts possess characteristics that eliminateany harmful effects for people and the environ-ment as far as possible.Océ has for a great number of years required everyemployee to be fully aware of the company’s codeof ethics and to act accordingly.

Océ is not only innovative by nature but alsocaring by nature, for people and the environment.That Océ has never emphatically presented itselfas a champion in this field is, in turn attributableto that same basic fact: initiatives in this fieldhave always been part of normal practice at Océ. However, due to the intensified attention forsustainable development this normal companypractice has been given a new status. Recentresearch has shown that Océ is one of the bestperforming companies in its peer group.Obviously, Océ’s activities, their success and thewell-being of employees, environment andsociety cannot be seen separately from each other.During the year under review Océ became a sig-natory to the Global Compact. This initiativeof the United Nations is aimed at disseminatingbest practices for sustainable development andapplies universal principles that the affiliatedcompanies should subscribe to. These principlesrelate to human rights, working conditions andthe environment. Océ will indicate each yearwhich steps have been taken to achieve furtherprogress in these areas.

Human rights With regard to human rights Océoperates both in its home country and in othercountries fully in line with the stringent Dutchstandards and norms. This of course implies thatOcé complies with the internationally applicableconventions on human rights.

Environment The practice at Océ is based on aclose interrelationship between health, safety andenvironment. Within the framework of the

Global Compact the emphasis is on the preventionof environmental damage and the developmentand dissemination of environmentally friendlytechnologies. In both areas Océ is well advanced.In its major manufacturing sites Océ has since1997 had an environmental care system, whichhas an 14001 certification and which alsocomprises a consistent assessment of risks. This leads to preventive actions to keep the riskswithin acceptable limits and monitor them con-stantly. The entire process of product develop-ment, manufacturing, possible re-use and theprocessing of waste and residual materials issubjected to a lifecycle analysis. New products aredeveloped and produced as much as possibleaccording to the design for re-use principle.That means that as from the initial design stage achoice is made for safe materials, for maximumpossibilities for the re-use of materials and com-ponents, for safe processes and for the safe pro-cessing of residual and waste materials by recog-nised recyclers. A not inconsiderable environ-mental benefit is achieved because Océ incorpo-rates a number of basic technologies, such as theCopyPress technology, in particularly durablemachine components that can be used again innew machines. To measure its environmental performances Océhas identified a number of environmental per-formance indicators which are analysed each yearand published in the Netherlands in an annualreport. The environmentally friendly methodsthat Océ applies are also exchanged with and ex-plained to other companies. The use of environ-mental performance indicators is a good way ofestablishing and quantifying the differencebetween the existing and the desired situation.That also means that an environmentally awarecompany like Océ is always alert to the improve-ments that must be continuously sought.

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Sustainable development

Working conditions At Océ the care for a safe andproper place of work for all its employees in linewith current ideas is part of the normal conductof its business. When choices are being made, thehealth and safety of employees is not open todiscussion but takes priority over the choiceprocesses. For many years a materials policy hasbeen in force to guarantee the safety of materialsand processes for people and the environment.The working conditions of employees are inten-sively screened. Apart from technical measuresmuch attention is also paid to managing theorganisational risks, the aim being to improve thestate of mind and well-being of employees.

Labour relations and social responsibility One ofthe aspects that is explicitly formulated in Océ’shuman resources policy is how employees aredeployed and with what purpose in mind. The basic principle is to provide support to em-ployees in their self-development, for instance viatraining and education, in such a way that theycan help achieve the company’s strategic objec-tives. To this end Océ offers favourable employ-ment conditions and safe working conditions ina pleasant working environment. The dedicationand commitment of employees, major pillars forthe company’s success, are encouraged by meansof open communication. Employee participation and representation isstructured within the companies via workscouncils which are organised on a Europe-widescale within a European Works Council.

In addition to the care devoted to its ownemployees, Océ organises activities in manycountries which contribute to the social well-being of their citizens. Although in many casesthis involves sponsorship, in which the Océ brandusually plays a modest yet clear role, Océ as a goodcorporate citizen also provides help, both finan-cially and in kind, to a range of local activities inwhich no reference is made to the brand at all. Inthe Netherlands this has been the case virtuallyever since the company’s foundation. Océ’s sup-port for the arts is reflected in the Netherlands,for example, by its annual purchases of works byyoung artists. In 2002 Océ helped to make pos-sible an exhibition in the Bonnefanten Museumin Maastricht, devoted, very appropriately, to the‘art of copying’ of Pieter Brueghel the Younger.The world of sport can also count on the com-pany’s support. In 2003 Océ is one of the mainsponsors of the Special Olympics in Ireland, asports event for athletes with mental limitationsfrom all over the world.

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Management aspects

Corporate Governance

In managing the company the Board of ExecutiveDirectors and the Supervisory Board attach im-portance to compliance with the principles ofCorporate Governance: integrity, accountabilityand transparency. Corporate Governance is struc-tured within Océ by the legislation, jurisdictionand codes of best practices in the countries inwhich the company performs its activities, suchas the Sarbanes-Oxley Act which entered intoforce in the United States in July 2002.Océ .. is an international holding companywithin the meaning of Article 153, para. 3b, ofBook 2 of the Dutch Civil Code. This impliesthat shareholder rights are not restricted by therules that are applicable in the Netherlands withregard to what is known as the ‘structure regime’.

Board of Executive Directors

The Board of Executive Directors consists of fourmembers who are appointed by the GeneralMeeting of Shareholders.In the case of every appointment the holders ofthe priority shares have the right to draw up abinding nomination, which can be cancelled by aresolution of the General Meeting of Share-holders that has been adopted by a majority of atleast two-thirds of the votes cast, provided thatsuch votes represent at least one-half of the issuedshare capital. If no binding nomination has beendrawn up, the General Meeting is free in its choice.The Supervisory Board appoints the chairman ofthe Board of Executive Directors and decides onthe allocation of the tasks of the Executive Boardmembers in consultation with the Board ofExecutive Directors.The allocation of tasks speci-fically identifies the posts of Chief ExecutiveOfficer () and Chief Financial Officer ().In addition, one Executive Board member hassince 1998 been specifically entrusted with res-ponsibility for the activities in the United States,Canada and Mexico.Regardless of the allocation of tasks the Board ofExecutive Directors acts as a body with collectiveresponsibility.

The Board of Executive Directors currentlyconsists of Messrs. R.L. van Iperen (), J. van den Belt () and J.F. Dix.Mr. G.B. Pelizzari, who had special responsibilityfor the activities in the United States, Canada andMexico,retiredwitheffect fromDecember1,2002.Mr. Ronald E. Daly succeeded Mr. Pelizzari as of Océ Holding, Inc. on December 1,2002; he will be proposed for nomination as amember of the Board of Executive Directors witheffect from March 12, 2003.An overview of the present composition and res-ponsibilities of the Board of Executive Directorscan be found on page 109 of this annual report.

Supervisory Board

The Supervisory Board currently comprises sixmembers who are appointed in the same way asthe members of the Board of Executive Directors.The Supervisory Board supervises the policy ofthe Board of Executive Directors and the courseof business in the company and the activities re-lating thereto. The Supervisory Board is suppliedin good time by the Board of Executive Directorswith all information that it requires for the per-formance of its task. The Supervisory Directorsappoint a chairman from amongst their midst.

Basic principles upon (re-)appointment Super-visory Directors are appointed by the AnnualMeeting of Shareholders. They cease in any eventto be a Supervisory Director after the close of thefirst meeting of shareholders that is held afterthey have reached the age of 70 years.Each year, as at the close of the annual meeting ofshareholders, at least one Supervisory Boardmember retires by rotation in accordance with aroster to be drawn up by the Board of ExecutiveDirectors. This provision is not applicable if inthe interim the relevant Supervisory Boardmember has already resigned prior to suchGeneral Meeting.If an interim vacancy occurs in the SupervisoryBoard, the Board can continue to function but adefinitive filling of the vacancy should take placewithin twelve months.

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Transparency and accountability is the aim of Océ Corporate Governance<<<

Management aspects

Each Supervisory Director is appointed for amaximum period of four years, after which re-appointment may or may not take place. If therelevant Supervisory Director would have toresign one year after the 4-year period, thereappointment is valid for five years.A period of office amounts to at most twelveyears, though an exception may be made for the(newly appointed) chairman or for a memberwho has a highly specific expertise provided thatsuch is necessary in connection with suchmember’s succession.

Profile of the Supervisory Board In consultationwith the Board of Executive Directors, the Super-visory Board has drawn up the following profilefor its own composition. The Board consists of atleast three and at most eight members.The members should operate independently ofand critically with regard to each other, within agood relationship of mutual trust. They shouldbe experienced in the management of an inter-national, publicly listed company. The membersshould have sufficient time available to fulfil thefunction of Supervisory Director. As to ensurecontinuity a spread in ages is aimed at.Endeavours are made to establish a broad repre-sentation of know-how and experience in one ormore of the disciplines that are relevant to Océ;in particular: research and development (),the production of advanced machines andmaterials, international marketing of high-valueproducts and services, the environment, finance,government policy, human resources and socialpolicy.This outline profile is periodically evaluated andadapted where necessary. In doing so, the factorsthat are taken into account include the develop-ments in the nature and the size of the companyand its business activities, the degree of inter-nationalisation, and the extent of the specificrisks over the medium and long term.

Composition of the Board of Supervisory Direc-tors An overview of the current composition of theSupervisory Board and details about its memberscan be found on pages 107 and 108 of thisannual report.

Supervisory Board Committees The committeeon Corporate Governance in the Netherlandsrecommended in its 1997 report that a selectionand nomination committee, a remunerationcommittee and an audit committee should be setup within the Board of Supervisory Directors.At that time the customary practice within Océwas that the Supervisory Board always acted as acollegiate body. In view of the Board’s limitedsize at the time the need did not exist to set upseparate committees. This policy was continuedunchanged but, as a result of the growth of thecompany, the complexity of business develop-ments and the intensification of the supervisoryduties of the Supervisory Board, there has been agradual change in this policy. In practice thefollowing committees are now operative:

Selection and Nomination Committee This selectsand nominates candidates for appointment as amember of the Board of Executive Directors andas a member of the Supervisory Board.This com-mittee consists of the chairman of the SupervisoryBoard and of one or two other Supervisory Boardmembers and as an advisory member the chair-man of the Board of Executive Directors sup-ported by the director Corporate Personnel &Organisation.

Remuneration Committee This committee advisesthe Supervisory Board on matters relating to theremuneration of the members of the Board ofExecutive Directors and monitors and evaluatesthe remuneration policy for the managing direc-tors of the Océ Group.This committee consists ofthe chairman and vice-chairman of the Super-visory Board. It is supported and assisted in itswork by the chairman of the Board of ExecutiveDirectors and by the Director Corporate Person-nel & Organisation. Decisions on the level ofremuneration, the Océ StockOptionPlans andthe granting of stock options fall within thecompetencies of the entire Board of SupervisoryDirectors.

Audit Committee This committee has a super-visory task as regards monitoring the integrity ofthe company’s financial reports. It also devotesspecific attention to the effectiveness of riskmanagement and internal control processes.

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Management aspects

Other areas that are discussed are the periodicalfinancial reports, including the reports by thecompany’s internal audit department and those ofthe external auditor. The committee assesses thefindings of the internal and external audit activi-ties.This committee was officially established inOctober 2002 and is subject to its own set of regu-lations (in the form of a separate charter). It con-sists of three Supervisory Directors and holds atleast four meetings each year.

General Meeting of Shareholders

A General Meeting of Shareholders is held eachyear. Other meetings of shareholders may be heldat the request of the Board of Executive Directors,the chairman of the Supervisory Board or twoSupervisory Directors.Shareholders who represent at least 10% of thecompany’s issued capital can convene a meeting.The agenda for the meeting is drawn up by theparty that convenes the meeting. Shareholderstoo may submit proposals up to thirty days priorto the meeting. All shares carry a voting right prorata to the nominal value of such shares.Resolutions are adopted by an absolute majorityof votes unless a qualified majority is prescribedby law or in the company’s articles of association.

Capital and shares The company’s authorisedcapital consists of ordinary shares, priority sharesand preference shares. For an explanation of thepriority shares and preference shares reference ismade to page 104 of this annual report.

Substantial Shareholdings Notification ActOn the basis of the Substantial ShareholdingsNotification Act (Dutch abbr. ) which wasintroduced in the Netherlands in 1992 and whichrequires, inter alia, that shareholders must notifyany holdings of more than 5% of the ordinary out-standing shares, the following holder of ordinaryshares is known: Internationale NederlandenGroep (6.33%), notification February 28, 1992.Depositary receipts with limited cancellabilityfor financing preference shares are held by: Rabo-bank Nederland (6.25%), notification May 31,1996; Fortis .. (5.68%), notification May 10,1999; and - Capital Holdings ..(5.81%), notification June 14, 1999.

Proxy solicitation Since the 1980s Americaninstitutional investors have been making wide-scale use of proxies to participate in the decision-making at the General Meeting.Since December1999 it has been legally possible inthe Netherlands to use a record date, which bringsa considerable reduction in the period duringwhich shareholders do not have their shares attheir disposal because those shares have to beplaced in deposit. To apply this record date aprovision in the articles of association is requiredor an authorisation from the General Meeting ofShareholders for a maximum period of five years.Currently Océ has an authorisation until March7, 2006. Upon the next alteration of the articlesof association a change to this effect will be pro-posed. No use has yet been made of the authori-sation that was granted.

Dividend policy Océ seeks to distribute aboutone-third of the net income attributable to holdersof ordinary shares to this category of share-holders. This policy is based on the convictionthat Océ will continue to grow.The resultant retention of two-thirds of net in-come then ensures that this growth can beachieved, whilst simultaneously maintaining therequired balance-sheet ratios.Océ seeks to make no reduction in the dividendper ordinary share. In the past ten years the com-pany has succeeded in this.

Issuing policy Each year the General Meeting ofShareholders is asked for its authorisation for theissue of shares and for the limiting or preclusionof the related statutory pre-emptive right.Each year this item on the agenda is accompaniedby an explanation of the purposes and restrictionsthat the Board of Executive Directors and theSupervisory Board will abide by if they make useof the authorisation that has been granted.

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Management aspects

Investor Relations () policy and communi-cation with shareholders Océ pursues an active policy aimed at providing shareholders withregular and extensive information about develop-ments within the company. The and the are primarily responsible for relations withshareholders, other providers of capital, theirintermediaries and financial journalists. For moredetailed information about Océ’s policy seepage 113 of the annual report.

Remuneration of the Supervisory Board

and the Board of Executive Directors

Supervisory Board In 1998 the General Meetingof Shareholders fixed the remuneration of theSupervisory Board at € 40,840 for the chairmanand € 27,227 for the members.The remunerationfor any financial year is automatically increased ifthe Price Index figure for household con-sumption in September of the preceding year isat least 10% higher than the index figure that waslast used as a criterion. This increase correspondsto the percentage increase in the most recentlypublished index figure. No payments are made inrespect of the membership of committees.

Remuneration for the 2002 financial year andholdings of shares The remuneration for the 2002financial year of the present and former membersof the Supervisory Board amounts to € 205,903(2001: € 196,714). At the end of the financialyear the members of the Supervisory Board held2,969 ordinary Océ shares (2001: 2,969) and norights arising from options listed on the EuronextOptions Exchange.

Board of Executive Directors The SupervisoryBoard fixes the remuneration of the members ofthe Board of Executive Directors on the basis of theadvice given by the Remuneration Committee.The remuneration policy is in conformity withmarket practice and is aimed at attracting, moti-vating and retaining highly qualified executivesof a publicly listed, internationally operatingcompany that conducts technological activities.

The composition of the remuneration package issuch that it supports both the short-term and thelong-term objectives. In addition to a fixed salarycomponent the package for all members com-prises an element whose level is determined bythe net operating income as a percentage of totalassets. The results for 2001 led to a pay-out in the formof variable pay amounting to 27.2% of the fixedsalary. Based on the results for 2002, the variablepay to be distributed in 2003 will amount to27.95% of the fixed salary.To support the long-term objectives the Super-visory Board can make grants under a Stock-OptionPlan. This StockOptionPlan consists of anumber of conditional options and a number ofunconditional options. The number of condi-tional options that ultimately will be awarded isdetermined by the extent to which the objectivesare achieved during a three-year period subsequentto the date of fixation of the StockOptionPlanThe objective for the 2003 plan is an average of10% growth in operating income over the three-year period 2003/2005.

Remuneration of the Board of Executive Directorsfor the 2002 financial year For an overview of theindividual remuneration of the members of theBoard of Executive Directors please refer to pages78 and 79 of the annual report. An overview ofthe unconditional options granted to them underthe Océ StockOptionPlans can be found on page94 of the annual report.

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Management aspects

Risks and risk management

Market risks

The economic cycle Océ’s revenues flow com-prises the sale of machines and, to an increasinglyimportant extent, revenues that are generated byservices, i.e. maintenance activities, facilityservices and professional services.The latter con-sist of software and consultancy activities, whichas a result of the increasing level of digitisation,constitute a growing proportion of Océ’s offeringsof products and services.The economic climate and the related willingnessto invest that is related to that have an immediateimpact on the number of machine placementsand therefore on the degree of capacity utilisationin the company’s manufacturing facilities.Outsourcing of production activities and flexibledeployment of personnel in the production loca-tions help to offset some of the negative effects ofa downturn in the economic cycle.Revenues from services are much less affected bythe economic cycle. At the moment the ratio be-tween hardware and software & services amountsto about 30:70 and is estimated to rise to 20:80in 2005. The decline in machine placements in2002 was therefore largely compensated for bythe growth in revenues from software andservices. As service activities are handled by theoperating companies, these companies provedover the past period to be less affected by theslowdown in growth than the productionlocations. The year 2002 was characterised bygood results in the operating companies and byunder-utilisation in the production locations;ultimately this yielded an overall result that,given the prevailing market conditions, can bedescribed as good.

Spread of revenues Océ’s strong technology base,the markets in which Océ operates and the com-pany’s long-term relationship with diverse cate-gories of customers ensure a spread of the risks.The revenues from service, facility services, soft-ware and professional services as well as the salesof supplies and the company’s geographical spreadhelp to create stability in the total revenue flow.On a geographical basis Océ’s revenues are spreadbetween Europe (52%), the United States (41%)

and the rest of the world (7%). In recent years theresults in a number of European countries wereless satisfactory. For Océ a balanced spread ofrevenues and income between the various coun-tries is essential so as to ensure that it is not de-pendent on the results in a limited number ofcountries. In 2002 this situation showed a clearimprovement compared to the preceding year.

Competitive position In terms of size Océ occu-pies a mid-position in the market as compared tothe other players. The difference in size betweenOcé and its main competitors has a direct influ-ence on the company’s competitive position. In principle, the bigger companies have a larger budget, are more easily able to invest in newactivities and products and are, in theory, moreresilient to cope with setbacks. The size of Océ’s business presents a risk whenlarge-scale investments or major acquisitions aremade. Decisions in this area have a relatively bigimpact on results. Océ’s answer to this risk is tomaintain a strong focus. To reduce this risk evenfurther Océ’s policy is to evaluate such movesextremely carefully.Océ’s competitive strength hinges on its ability toput distinctive systems on the market. This is thereason why Océ concentrates mainly on profes-sional markets that have high quality requirements.It does this chiefly by offering technologicalconcepts which it has developed itself and whichgive the company a clear and distinctive profile.The most important elements here are reliability,productivity, ease of use and environmentalfriendliness and a low total cost of ownership.The business model that is applied by Océ isfounded on a differentiated in-house technologyportfolio combined with the company’s owndirect sales and service organisations. In totalabout 15,600 Océ employees are in constantcontact with customers: 4,400 in sales, 4,600 inservice and 6,600 in Facility Services. Theinteraction between , direct sales andservices is crucial for the quality of the productsand services. In the markets in which Océ operates the com-pany seeks to achieve a top-three position. In those segments where this proves impossible,Océ will in principle not participate.

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Management aspects

Operational risks

Partners Working together with outside partnersis of great importance for Océ. In this area Océconcentrates on overall management, whichmakes it possible to control a large number ofactivities in line with exact Océ specifications.By far the greater part of the hardware developedby Océ is manufactured by external suppliers inthe form of sub-assemblies and modules. Onlythe strategic components and supplies such asprocess drums, photoconductors and toners aremanufactured by Océ itself. Final assembly ofmost machines takes place almost entirely in theNetherlands and Germany, with the productsbeing configured in line with customer specifica-tions. Most of the suppliers are located within aradius of150 kilometres from the production sites.The supply and delivery of components andmachines is largely handled by external logisticsspecialists. As a result the reliability of deliveries,delivery speed and costs are kept well under control.

Safety, health and the environment Océ sets thehighest demands with regard to the safety andenvironmental aspects of its products. Each pro-duct should amply comply with the internationalseals of approval in these areas before it is releasedfor production and sale.In addition, much attention is devoted specifi-cally in the design stage to user-friendliness,producibility and ease of servicing.The environmental and safety risks during theproduction of the machines and supplies areminimised in terms of their scope and nature.Nevertheless the company regularly conductsrisk assessments and evaluations. The aim is toidentify any risk in the above areas and to takeappropriate measures in good time.

Technological risks

Research & Development () is one ofthe critical success factors for the company. The development of new technologies and pro-ducts takes a lot of time. Depending on the tech-nology that is involved, this process can takebetween four and eight years. This means highlevels of investment and a low tolerance forfailures or for the delayed introduction of newproducts.

Regardless of the level of its income, Océ spendsmore than 6% of revenues on . In absoluteterms this is a substantially lower amount than anumber of the company’s competitors spend inthis area. That forces Océ to maintain a tightfocus and to enter into effective alliances withoutside partners.Since major differences in approach exist betweenthe successful development of hardware productsand software products, an director, withspecial responsibility for software product deve-lopment, was recruited from the industry in2002. Together with the two directors who areresponsible for the development of hardwareproducts (printers, scanners, finishers), thiscorporate software director is in charge of Océ’sdevelopment programmes.

Product portfolio Océ’s product portfolio con-sists of black-and-white and colour printers/copiers for small and wide format, scanners andsoftware.The market for black-and-white and printers hasreached maturity. As a result product develop-ment is now being focused on such aspects ascost-price, cost of ownership, operational relia-bility, user-friendliness and productivity.Such a situation does not call for major techno-logical advances but for optimisation of existingtechnologies. Océ invests sufficient

resources in all technologies so as to maintainand improve its competitive position.The mega-trends for the future are colour printersand document management software. Most ofthe resources are therefore invested in thesetechnologies.In 2002 Océ introduced wide format colourprinters for the design engineering market (theOcé 400) and the display graphics market(the Océ Arizona 500). Work is under way todevelop more products based on these techno-logies. In addition, Océ is developing its ownwide format inkjet technology for the longerterm launch. In the small format market Océintroduced the Océ 700 in 2001. This isfounded on the company’s own colour techno-logy. Various printers based on this technologyare planned for introduction in both the shortand the long term.

65

Management aspects

The market for document management softwareis very much on the move. At the current timeonly a few companies are successful in this area.Océ has concentrated its software portfolio oninput and output management software, which isused to support the customer’s total printingprocess. Before making significant investments inthis area the strategy will first be carefully fine-tuned.

Financial risks

Leasing For various reasons described earlier inthis annual report it has been decided tooutsource the lease activities.In 2003 and 2004 most of the lease portfolio willbe sold on a non-recourse basis. For Océ this willhave the following financial implications:

– the return on assets () of the lease activities is currently between 7 and 8%. In view of Océ’s ob-jective of 12% , this is structurally too low;

– the balance sheet will be shortened, which will create capacity for financing new, higher-yieldactivities;

– the debtors risk linked to the lease activities will be eliminated.

The consequences of the sale of the lease activi-ties are:

– leasing yields a very stable revenue flow. The vola-tility of Océ’s results may therefore increase;

– the profitability (/) will increase as a result of the outsourcing of the lease portfolio. In the first instance the transfer of the leaseactivities will have the effect of depressing the netresult and hence earnings per share. This effectwill have to be offset by making effective use ofthe funds that are released.

Foreign exchange risks/interest risks Océ largelyachieved its revenues in: the countries within theEurozone (37%), the United States (41%) andthe United Kingdom (7%). Revenues in othercurrencies amounted to 15% in 2002.Competing suppliers of relevance for Océ aremainly based in the United States and Japan.The prices that Océ charges its customers for itsproducts and services are denominated in thecustomer’s local currency. The biggest possibleproportion of the costs is also incurred in thatlocal currency. As the production and develop-ment of new products mainly takes place in theEurozone, with some of the purchasing costsbeing denominated in other currencies, a foreignexchange risk arises in respect of the flows ofgoods from the Eurozone to countries outside theEurozone. At Océ these net currency flows arethe subject of an active foreign exchange manage-ment policy. This is implemented in close con-sultation with the Board of Executive Directors. To control the effects of short-term exchange ratefluctuations on the margin, these positions arehedged up to a maximum of 80% (principallythe dollar, pound sterling and Japanese yen).For several years now it has been company policyalways to manage the 12-months position of the dollar and the pound sterling on a roll-overbasis, with hedging being applied up to a maxi-mum of 80%. At balance sheet date the contractvalue of the forward foreign exchange contractswas € 210 million.Interest risks relate to a possible mismatch inexposures to fixed interest rates.Fixed-interest revenues originate from lease andrental contracts, whilst fixed interest charges arisefrom the financing of these contracts. The extentto which this risk is hedged depends on the de-sired risk profile. Endeavours are made to achievea ratio of 60-80% between these fixed-interestassets and liabilities.

66

Management aspects

Internal management and control systems

Océ has drawn up a framework in which it haslaid down the various aspects of internal controland the related procedures. This framework isperiodically evaluated and tightened up furtherwhere required.

Operational plans Océ uses an annual planningcycle in which action plans, targets and budgetsare set on the basis of the overall strategic plan.In implementing the agreed plans the relevantmanagers are responsible not only for the finan-cial results but also for measures to ensure themanagement and control of risks. This involvesensuring that such control measures are put inplace and complied with, and that their imple-mentation is effectively monitored.This independent responsibility is performedwithin the framework of Group policy as set outin the Océ policy principles, which were lastrevised in June 2002.Further fine-tuning of Group policy is carriedout on the basis of general and specific instructionsto the managing directors of the Group com-panies. Each managing director renders accountfor his actions via representation letters. He isdischarged from his responsibility for the policypursued on the basis of a discharge procedurethat is standardised for the entire Group.

In the most important Group companies amember of the Board of Executive Directors holdsoffice in the board of the local company as a non-executive director or in the supervisory board,which also comprises local experts. Each quarterthese boards discuss the results and, where rele-vant, the internal controls. This direct line pro-vides effective insight into the progress of theprocesses and into the risks that are being faced,both at the level of the sub-activity and at Grouplevel.The above-mentioned framework will be scruti-nised once again in 2003 in the light of the re-commendations made by the Winter Committeeand the provisions of the Sarbanes-Oxley Act.

Financial reporting Financial reporting withinthe Group takes place in accordance with theInformation Manual. This manual is continu-ously updated as regards the internal proceduresthat are in force and also to keep it in line withthe accounting standards that are applicable orwill be applicable to Océ in future. As Océ islisted on , the company has to complynot only with the Dutch Guidelines on AnnualReporting (Dutch ) but also with .The fact that the Dutch guidelines are developingin the direction of (which will become com-pulsory for Océ as from the 2006 financial year)and the fact that and accountingstandards differ from each other implies that theaccounting process for Océ is complicated.Each quarter a consolidation of results at Grouplevel is drawn up and this is evaluated by theBoard of Executive Directors together with themanagement of the strategic business units andthe staff directors. The consolidated results arethen discussed with the Supervisory Board.

As part of the monitoring mechanisms andcontrol processes an audit plan is drawn up eachyear focused on the most important business pro-cesses and the related risks. This plan is imple-mented in a structure of cooperation between theinternal audit department and the external audi-tor. To ensure an independent monitoring of therisk management process, an Audit Committeewas set up within the Supervisory Board in 2002.

Venlo, January 30, 2003

The Board of Executive Directors

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

67

Annual Financial Statements

Consolidated Statement of Operations

2002 2001 › € 1,000

Net sales 1,792,144 1,836,061Rentals and service 1,267,485 1,272,467Interest from financial leases 116,514 125,109

Total revenues [1] 3,176,143 3,233,637Cost of sales 1,076,531 1,100,111Cost of rentals and service 771,117 816,401

1,847,648 1,916,512

Gross margin 1,328,495 1,317,125Selling expenses 704,847 728,423Research and development expenses [2] 212,830 199,585General and administrative expenses 184,747 164,411

1,102,424 1,092,419

Operating income 226,071 224,706Financial expense (net) [3] 54,101 68,925

Income before income taxes, equity in income of unconsolidated companies and minority interest 171,970 155,781

Income taxes [4] 57,425 48,484

Income before equity in income of unconsolidated companies and minority interest 114,545 107,297

Equity in income of unconsolidated companies 279 121

Income before minority interest 114,824 107,418

Minority interest in net income of subsidiaries 2,293 2,348

Net income before exceptional items 112,531 105,070

Exceptional items (net of tax) [5] – 95,000

Net income 112,531 10,070Dividend preference shares 3,551 3,551

Net income attributable to holders of ordinary shares 108,980 6,519

69

The figures [ ] refer tothe notes

Consolidated Balance Sheet November 30

Assets 2002 2001 › € 1,000

Intangible fixed assets [8] 86,138 43,352

Tangible fixed assets Property, plant and equipment [9] 458,852 458,006Rental equipment [10] 118,942 179,153

577,794 637,159

Financial fixed assets Unconsolidated companies [11] 2,902 3,881Financial lease receivables [12] 590,707 663,239Other long term assets [13] 87,277 84,032

680,886 751,152

Current assets Inventories [14] 345,588 364,721Accounts receivable [15] 1,093,163 1,260,950Prepaid expenses 30,388 30,036Cash and cash equivalents [16] 37,385 40,133

1,506,524 1,695,840

Total assets 2,851,342 3,127,503

70

After net incomeappropriation

Consolidated Balance Sheet November 30

Liabilities 2002 2001 › € 1,000

Group equity Ordinary shares [17] 43,631 43,630Priority shares [18] 2 2Financing preference shares [19] 10,000 10,000Paid-in capital [20] 511,400 511,392Legal reserve [21] 1,295 1,679Translation differences [22] –47,879 876Other reserves [23] 390,476 340,998

Total shareholders’ equity 908,925 908,577

Minority interest [24] 39,798 40,802

948,723 949,379

Long term liabilities (provisions) [25] 451,714 425,874

Long term debt [26] 756,558 754,132

Current liabilities Short term debt [27] 86,888 387,274Other liabilities [28] 303,598 312,855Accrued liabilities [29] 251,621 250,407Deferred income 52,240 47,582

694,347 998,118

Total liabilities 2,851,342 3,127,503

71

Consolidated Statement of Cash Flow

2002 2001 › € 1,000

Cash flow from Net income 112,531 10,070operating activities Adjustments for:

Depreciation 197,150 194,191Installed in rental equipment –106,884 –136,503Divestments in rental equipment 77,181 86,038Financial lease receivables –11,143 –455Equity in income of unconsolidated companies –3 208Long term liabilities (provisions) 27,633 110,112Provisions for financial lease, inventoriesand trade accounts receivable 59,162 74,508Trade accounts receivable and other receivables 69,888 20,297Inventories 20,525 42,102Trade accounts payable 4,901 –20,926Net change in other working capital accounts* –4,687 –31,197

Total cash flow from operating activities 446,254 348,445

Cash flow from Capital expenditure:investing activities Intangible assets (software) –19,370 –15,178

Property, plant and equipment –115,936 –130,329Other investments –4,635 –22,362

Divestments:Property, plant and equipment 14,684 23,931

Acquisition of unconsolidated companies –23 –Disposal of unconsolidated companies 930 –Sale of financial lease portfolio 70,800 –Acquisitions (net of cash) –55,008 –30,941

Total cash flow from investing activities –108,558 –174,879

72

* See page 73 for the specification of net change in other working capital accounts.


2002 2001 › € 1,000

Cash flow from Long term debt:financing activities Proceeds from long term debt 132,904 82,330

Repayment of long term debt –123,635 –172,624Borrowings and current portion of long term debts –300,386 20,833Repurchase of shares –6,047 –24,081Dividends paid –52,336 –52,943Minority interest –1,004 –1,066Other –5,320 –

Total cash flow from financing activities –355,824 –147,551

Effect of exchange rate changes 15,380 –7,007

Changes in cash and cash equivalents –2,748 19,008

Cash and cash equivalentsat start of financial year 40,133 21,125

Cash and cash equivalentsat end of financial year 37,385 40,133

Specification of net change in other 20o2 2001 › € 1,000working capital accounts:Prepaid expenses 410 –2,338Income taxes 24,896 –10,259Value added taxes, social security and other taxes payable –1,176 –628Pension liabilities –3,779 6,190Other liabilities –24,551 –9,391Accrued liabilities –5,146 –12,203Deferred income 4,659 –2,568

Balance –4,687 –31,197

73

Summary of Significant Accounting Principles

Introduction

The following summary of significant accountingprinciples is intended as a guide in interpreting thefinancial statements. Compared to the previousfinancial year, the accounting principles have under-gone the following changes. Upon acquisition theassets and liabilities of the acquired company areincluded at real value, with all intangible assetsbeing identified separately so that the final resultrepresents the goodwill. For each category ofintangible assets the useful lifetime is determined.External experts are called in to establish the valueand useful lifetime. If an indication exists thatintangible and tangible fixed assets will be subject toexceptional value impairment, their value is assessedand any value impairment is, where necessary,charged direct to the Consolidated Statement ofOperations. For comparison purposes some of the2001 figures have been restated.

The Group’s financial year commences on December 1and closes on November 30 of the subsequent year.

Principles of consolidation

The consolidated financial statements comprise thefinancial data for Océ . . and its Group com-panies.The financial data of subsidiaries are fully con-solidated; the minority interest is stated separately.Joint ventures are consolidated pro rata. A company is considered to be a Group company ifOcé directly or indirectly holds a majority con-trolling interest in it. As from the date of acquisitionthe financial position of the relevant company isincluded in the consolidation.Where the acquisition cost is higher than the netasset value determined on the basis of the account-ing principles, then the intangible fixed assets havebeen capitalised with effect from December 1,2000. Previously this goodwill was charged directlyto Shareholders’ equity.The principal companies affiliated to the Group arelisted on pages 111 and 112 of this report. A number of affiliated companies of minor import-ance have been omitted by virtue of the provisionsof Article 379, para. 2c, Book 2 of the Dutch CivilCode.Balance sheet items of Group companies are trans-lated into euro. As the opening assets and move-

ments in assets during the year are recalculated onthe basis of the closing exchange rate at the end ofthe reporting period, differences arise as comparedto the calculation based on the exchange rate usedfor the previous period. Such differences are chargedagainst or added to the Shareholders’ equity (undertranslation differences).Statements of operations items of group companiesare translated into euro at the average exchange rateduring the reporting period. The result calculatedon this basis differs from that calculated on the basisof the closing exchange rate for the reporting period.This difference is debited or credited directly to theShareholders’ equity (under translation differences).

Consolidated Statement of Operations

Foreign currencies Transactions denominated inforeign currencies are included at the exchange rateapplicable at the moment when the transactionstook place.

Total revenues These are the proceeds from the saleof goods and services to third parties, excludingturnover taxes. Receipts from sales also include thereceipts from the financial leasing contracts con-cluded during the financial year. Interest incomearising from these contracts is included under totalrevenues. Receipts from rental and service contractsfor equipment are included in revenues as far as theyrelate to the reporting period. Where rental andservice contracts have been invoiced in advance, therelevant amounts are shown in the balance sheetunder ‘Deferred income’.

Costs Consumption of raw materials and other costitems are based on historic costs.Depreciation on fixed production assets is chargedat a fixed percentage of the acquisition value of therelevant asset. Depreciation on rental equipment ischarged at a fixed percentage of the all-in manufac-turing cost. Government contributions to operatingcosts are deducted directly from these costs.

74


Research and development expenses Research costsare charged direct to the results. Product develop-ment costs are capitalised if they comply with therelevant criteria.

Development credits and subsidies Developmentcredits received from the government are subject toa contingent repayment liability. This contingentliability, to which a contractual mark-up is appliedeach year, is not included in the balance sheet.According, as the relevant projects prove successful,the liability ceases to be contingent in nature and areal liability arises. Subsidies received from thegovernment are deducted from the related costs inthe year of the entitlement thereto.

Financial expense (net) Besides interest received andinterest paid, also expenses relating to raising of loancapital are included. The effect of interest rate in-struments and interest on loans are also includedunder this heading.

Income tax This is calculated on the commercialresults at the rates applicable in the variouscountries. This method implies that provisions aremade for deferred income taxes. The entitlement toloss compensation is taken into consideration in sofar as there is a reasonable expectation that it can berealised. Allowance is made for non-offsettabledividend withholding tax at the moment of divi-dend distribution by an affiliated company.

Earnings per share Earnings per ordinary share arecalculated by dividing the net income attributableto holders of ordinary shares by the weightedaverage number of ordinary shares oustandingduring the year. In making this calculation theordinary shares bought in by the company arededucted from the number of ordinary sharesoutstanding.To calculate the average number of outstandingshares on the basis of full conversion, the basis isformed by the weighted average number of shares inissue and the potential increase as a result of con-version and outstanding options. The assumptionapplied for the conversion arising from convertibledebenture loans is that these are converted in full.An adjustment is also made to net income toeliminate interest charges, whilst allowing for theeffect of taxation.

The calculation of the increase arising from optionsis based on the value of the options granted, i.e.the number of options times the exercise price,divided by the average share price during the finan-cial year. This increase is only applied if the averageshare price is higher than the exercise price of theoptions upon grant. In making this calculation noadjustment is made to net income.

Consolidated Balance Sheet

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

Foreign currencies Receivables and payables de-nominated in a foreign currency are translated intolocal currency at the exchange rate ruling at yearend. These exchange rate differences, includingresults on forward exchange contracts relating tothe positions of subsidiaries are recorded underShareholders’ equity. The differences relating tooperational cash flows, including those arising onthe relevant forward exchange contracts, areincluded in income.

Intangible fixed assets Intangible fixed assets arevalued at acquisition or manufacturing cost.Goodwill and other intangible assets arising uponthe acquisition of participations are written off ona straight-line basis over their estimated economiclifetime, subject to a maximum of twenty years.Software developed and purchased for internal useis capitalised and written off over a period of threeor five years after first use provided it complieswith the relevant criteria.Intangible fixed assets are reviewed each year toassess whether any decrease in value has occurred.Product development costs are capitalised if theydo comply with the relevant criteria.

Property, plant and equipment ‘Property, plantand equipment’ are valued at acquisition value, lesscumulative depreciation. Depreciation is providedfor according to the straight-line method based onthe expected useful lifetime of the relevant asset.Depreciation of specific pieces of equipment usedfor the manufacture of machines takes place prorata to the expected number of units to bemanufactured.

75


Rental equipment These are valued at the all-in costless cumulative depreciation on a straight-line basis.

Unconsolidated companies These are included atthe attributable net asset value, calculated wherepossible on the basis of the valuation principles ap-plied in these Financial Statements.

Financial lease receivables These comprise the long-term receivables and residual values in respect offinancial lease contracts. They are valued at thepresent value of the contracted receivables, takinginto account the risk of uncollectability.

Other long term assets These comprise assets such asmortgage debtors, cash advances and guaranteedeposits as well as deferred tax benefits. These areincluded at nominal value, after taking into accountthe risk of uncollectability.

Inventories Purchased inventories are valued atpurchase price, and any additional costs, by theFirst-in-First-out method. Inventories of finishedand semi-finished products and spare parts arevalued at manufacturing cost inclusive of a surchargefor indirect costs related to the manufacturing, nointerest being charged. The risk of obsolescence isallowed for. Results arising from transactionsbetween the principal affiliated companies areeliminated in consolidation.

Accounts receivable Trade debtors, financial leases,other debtors and amounts receivable fromunconsolidated companies are shown at face valueless an allowance for bad and doubtful accounts.

Minority interest The minority interest in groupcompanies is included at the net asset value deter-mined in accordance with the valuation principlesused in these Financial Statements.

Long term liabilities (provisions) The provision fordeferred income taxes is calculated on the diffe-rences between valuation of assets and liabilities forcommercial and tax purposes, based on the effectiverate of income tax in the various countries and isstated at face value. Deferred tax claims are included to the extent thatthey are considered to be realisable.

The self insurance franchise provision relates touninsured potential future losses that have not yetoccurred.The provision for retirement benefits and severancepayments relates to the commitments, determinedon an actuarial basis, which are not covered byseparate pension or redundancy funds, as well as toother non-activity schemes. In the Netherlands andin most other countries the pension schemes areadministered by separate funds, which apply to localarrangements and practices. The provision for non-activity schemes relates to employees who haveopted to make use of such a scheme.The restructuring provision relates to costs con-nected with the reorganisation of business activities. Other long term liabilities (provisions) amongothers relate to (legal) proceedings and guaranteecommitments.

Long term debt These include liabilities that fall dueafter more than one year.

Current liabilities These commitments compriseliabilities falling due within one year.

Commitments and contingent liabilities not statedin the balance sheet These are commitments andcontingent liabilities arising from contracts, mostlyof more than one year (leasing contracts, rental con-tracts, capital expenditure commitments, repayabledevelopment credits, financial instruments, etc.).


The figures in this statement are derived from themovements in the Consolidated Balance Sheet. In the event of a major acquisition, however, theacquired net asset value, net of cash, is shownseparately. As a result, the changes in the cash flowstatement cannot be derived directly from thechanges in the relevant balance-sheet items.The movement in the portions of long term debtfalling due within one year is shown under ‘Longterm debt: repayment of long term debt’.

76

Notes to the Consolidated Statement of Operations

Total revenues 2002 2001 › € 1,000

[1] Total revenues 3,176,143 3,233,637

Segmental Wide Format Printing Systems Digital Document Systems total

information › € million › € million

2002 2001 2002 2001 2002 2001

Total revenues 1,021 1,012 2,155 2,222 3,176 3,234Operating income 97 98 129 127 226 225Assets 803 809 2,048 2,319 2,851 3,128

Following the change in the organisation structure there are now two strategic business units (as against three in the previous year).

revenues per geographical area geographical spread of assets investments by geographical area*

› € million › € million › € million

2002 2001 2002 2001 2002 2001

Countries United States 1,298 1,333 885 1,000 35 42Germany 371 392 450 538 18 26Netherlands 278 279 625 586 75 72United Kingdom 238 219 237 262 – 40France 209 220 178 201 3 4Rest of Europe 554 568 361 422 14 14Rest of the world 228 223 115 119 5 2

Total 3,176 3,234 2,851 3,128 150 200

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

number of currenciesof importance to Océ 2002 2001 2002 2001

Pound sterling 0.63 0.62 0.64 0.62American dollar 0.93 0.89 0.99 0.89Australian dollar 1.72 1.72 1.77 1.71Swiss franc 1.47 1.50 1.48 1.47Japanese yen (10,000) 117.12 107.53 121.76 109.82

77

* Investments in intangible and tangible fixed assets.


Costs and expenses 2002 2001 › € 1,000

Depreciation Intangible assets 14,927 112Property, plant and equipment 94,934 91,372Rental equipment 87,289 102,707

197,150 194,191

Payroll expenses Wages and salaries 1,076,679 1,051,528Social security 212,112 206,283Pensions 57,848 51,901

1,346,639 1,309,712

The individual remuneration of the members of the Board of Executive Directors in function this year is:

periodic pay performance related total pension contributions in euro

pay

R.L. van Iperen 503,027 124,615 627,642 163,980J. van den Belt 323,425 95,511 418,936 48,488J.F. Dix 361,628 95,511 457,139 451,892G.B. Pelizzari 361,734 95,511 457,245 588,086

The remuneration costs and pension schemecontributions of former Executive Boardmembers are nil (2001: € 111,174). Under the Océ StockOptionPlan 2003 56,000unconditional options were granted to themembers of the Board of Executive Directors(2002: 126,000 units). A table showing theinterests of the Executive Board members in theoption plans can be found on page 94 of thisannual report. At the end of the financial year the members ofthe Board of Executive Directors held no ordi-nary shares in Océ (2001: nil) and no rights tooptions listed on the Euronext OptionsExchange.

78


age on final pension age increase in accrued accrued pension in euro

November 30, 2002 entitlements 2002 rights as at

November 30, 2002

R.L. van Iperen 49 60 21,441 190,069J. van den Belt 56 62 20,815 26,923J.F. Dix 56 62 40,439 173,094G.B. Pelizzari 60 62 41,289 200,338

79

Pension entitlements The table below shows theaccrued pension entitlements of the members ofthe Board of Executive Directors currently inoffice and the pension amounts that would bepaid to them annually on the basis of their yearsof service as at the end of 2002.

The remuneration for the 2002 financial year ofthe present and former members of the Board ofSupervisory Directors amounted to € 205,903(2001: € 196,714). At the end of the financialyear the members of the Board of SupervisoryDirectors held 2,969 ordinary shares in Océ(2001: 2,969) and no rights to options listed onthe Euronext Options Exchange.


2002 2001 › € 1,000

[2] Research and Total expenditure on research and development 214,595 203,254development Development credits repayable and net subsidies received –1,765 –3,669

212,830 199,585

[3]Financial expense(net) Interest and similar income items - –4,422 –5,404Interest charges and similar expenses 56,751 72,125Other financial expenses 1,772 2,204

54,101 68,925

[4] Income taxes A reconciliation of the Dutch statutory income tax rate to the effective income tax rate is set forth below:Dutch statutory tax rate 35.0 35.0 per centNon-deductible expenses 1.7 2.1Foreign tax rate deviating from the Dutch tax rate 2.1 2.8Tax credits –1.9 –2.0Change valuation allowance –4.5 –5.8Other 1.0 –1.0

Effective income tax rate 33.4 31.1

[5] Exceptional items The extraordinary charges relate to a restructuring pro-vision for redundancy costs of employees and the intended write-off of assets that will be taken out of use.

Restructuring provision – 125,000Income taxes – 30,000

Exceptional items (net) – 95,000

[6] Earnings per share Net income attributable to holders of ordinary shares 108,980 6,519Weighted average number of ordinary shares outstanding ( › 1,000) 84,086 85,241 shares

Net income per ordinary share 1.30 0.08 euro

80


2002 2001 › € 1,000

Net income attributable to holders of ordinary shares 108,980 6,519Interest costs of convertible loans (net) 322 270

Net income based on full conversion 109,302 6,789

Weighted average number of ordinary shares outstanding (› 1,000) 84,086 85,241 shares

Adjustment for assumed conversion 568 714Adjustment for options 125 –

Weighted average number of ordinary shares outstandingon the basis of full conversion (› 1,000) 84,779 85,955

Net income per ordinary share on the basis of full conversion 1.29 0.08 euro

[7] Employees by category 2002 2001 number

Facility Services 6,611 6,046Service 4,617 4,914Sales 4,376 4,653Manufacturing and Logistics 2,809 2,887Accounting and other 2,131 2,132Research and Development 1,945 1,840

Number of employees at November 30 22,489 22,472

Average number of employees 22,480 22,363

81

82

Notes to the Consolidated Balance Sheet

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

base and other

› € 1,000

At December 1, 2001

Acquisition value 28,286 15,178 – – – 43,464Accumulated depreciation 85 27 – – – 112

Book value 28,201 15,151 – – – 43,352

Movements in book valueExpenditure – 19,370 – – – 19,370Divestments – – – – – –

Net investments – 19,370 – – – 19,370

Acquisition of participations 4,216 8,548 8,112 13,324 5,731 39,931Accumulated amortisation 3,220 7,051 1,644 2,378 634 14,927Exchange rate changes –691 –1,175 100 140 38 –1,588

At November 30, 2002 28,506 34,843 6,568 11,086 5,135 86,138

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

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

The estimated useful lives of the various classes of assets are as follows:– goodwill: 10 to 20 years;– software: 3 to 5 years;– technology: 5 to 10 years;– customer base: 6 years;– trade marks: 10 years;– other: 3 years.

83


Tangible fixed assets property and production other fixed under fixed assets total

plant equipment assets construction and not in

› € 1,000 prepayments production

process

[9] Property, plant At December 1, 2001and equipment

Acquisition value 334,360 413,875 405,215 46,006 5,436 1,204,892Accumulated depreciation 147,040 309,537 287,166 – 3,143 746,886

Book value 187,320 104,338 118,049 46,006 2,293 458,006

Movements in book valueExpenditure 10,689 47,056 53,518 4,673 – 115,936Divestments 366 3,516 7,864 2,938 – 14,684

Net expenditure 10,323 43,540 45,654 1,735 – 101,252

Acquisition of companies 72 1,538 1,460 – – 3,070Depreciation 9,827 35,822 49,205 80 – 94,934Foreign currency translations –1,979 –2,568 –2,947 –963 –85 –8,542

At November 30, 2002 185,909 111,026 113,011 46,698 2,208 458,852

Acquisition value 341,659 432,621 417,387 46,781 4,545 1,242,993Accumulated depreciation 155,750 321,595 304,376 83 2,337 784,141

Book value 185,909 111,026 113,011 46,698 2,208 458,852

The estimated useful lives of the various classes of fixed assets are as follows:– property and plant: 20 to 50 years; – production machines: 8 to 10 years; – equipment: 3 to 10 years; – vehicles: 4 or 5 years.

The above overview contains an amount of € 11.0 million for financial leases (2001: € 11.6 million).


2002 2001 › € 1,000

[10] Rental equipment At December 1, 2001/2000Cost 551,656 596,304Accumulated depreciation 372,503 362,829

Book value 179,153 233,475

Movements in book valueInstalled on rental 106,884 136,513Divestments –77,181 –86,038Depreciation 87,289 102,707Foreign currency translations –2,625 –2,090

At November 30 118,942 179,153

Cost 469,131 551,656Accumulated depreciation 350,189 372,503

Book value 118,942 179,153

The estimated useful life of the various types of machines ranges from 3 to 5 years.

Financial fixed assets 2002 2001 › € 1,000

[11] Unconsolidated Book value at December 1, 2001/2000 3,881 4,321companies

Changes due toEquity in income 279 121Increase in/acquisition of companies 23 –Divestments –930 –Dividends declared –276 –329Foreign currency translations –75 –232

Book value at November 30 2,902 3,881

[12] Financial lease Financial lease receivables comprise the receivables following components:

Financial lease receivables (gross) 1,231,769 1,389,092Unrealised interest –197,538 –232,240Residual values 10,825 20,890

1,045,056 1,177,742Provision for lease receivables –31,884 –24,860

Financial lease receivables (net) 1,013,172 1,152,882To short term lease receivables –422,465 –489,643

Long term financial lease receivables 590,707 663,239

84


2002 2001 › € 1,000

The gross financial lease receivables can be subdivided into the following durations:Less than one year [15] 422,465 489,643More than one year but less than five years 795,116 871,578More than five years 14,188 27,871

1,231,769 1,389,092

[13] Other long Book value at December 1, 2001/2000 84,032 62,519term assets New amounts receivable 8,552 26,148

Repayments –3,228 –3,647Foreign currency translations –2,079 –988


Other financial assets include an amount of € 0.4 million (2001: € 0.4 million) for loans provided to the Board of Executive Directors. An amount of € 2.1 million (2001: € 2.1 million) was provided to personnel in the form of loans.

Current assets 2002 2001 › € 1,000

[14] Inventories Raw and other materials 34,427 31,147Semi-finished products and spare parts 116,666 130,922Finished products and trade stock 194,495 202,652

Total 345,588 364,721

[15] Accounts receivable Trade accounts receivable 574,119 649,169Discounted trade bills –38 –179Lease receivables 422,465 489,643Income taxes 10,480 27,324Other 86,137 94,993

Total 1,093,163 1,260,950

[16] Cash and cash Cash and bank balances 34,975 35,948equivalents Time deposits 2,410 4,185

Total 37,385 40,133

85


Group equity 2002 2001 › € 1,000

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

Total 175,002 175,002

Paid-up share capital [17] Ordinary sharesAmount at December 1, 2001/2000 43,630 43,337Conversion of convertible loans 1 293

Amount at November 30 43,631 43,630

Number at December 1, 2001/2000 87,261,509 86,674,380 sharesConversion of convertible loans 1,016 587,129

Number at November 30 87,262,525 87,261,509

[18] Priority sharesAmount at November 30 2 2Number at November 30 30 30 shares

[19] Financing preference sharesAmount at November 30 10,000 10,000Number at November 30 20,000,000 20,000,000 shares

[20] Paid-in capital Amount at December 1, 2001/2000 511,392 505,387Conversion of convertible loans 8 6,005

Amount at November 30** 511,400 511,392

[21] Legal reserve Reserve for non-distributed income of unconsolidated companiesAt December 1, 2001/2000 1,679 1,750To Retained earnings –384 –71

At November 30 1,295 1,679

[22] Translation At December 1, 2001/2000 876 21,695differences Exchange rate changes –48,755 –20,819

At November 30 –47,879 876

86

* For further information about the authorised capital see page 104.

** If distributed in the form of shares, this amount is available to shareholders without

attracting Dutch income tax.


2002 2001 › € 1,000

[23] Other reserves Retained earningsAt December 1, 2001/2000 387,628 429,823From legal reserve 384 71Added from net income 112,531 10,070Repurchase of shares –18 –Dividend –52,070 –52,336Adjustment for deferred liability* –5,320 –

At November 30 443,135 387,628

Repurchased shares relating to the stock 0ption planAmount at December 1, 2001/2000 –46,630 –22,549Repurchased –6,029 –24,081

Amount at November 30 –52,659 –46,630

Repurchased shares are valued at cost.

Number at December 1, 2001/2000 3,149,840 1,149,840 sharesRepurchased 619,102 2,000,000

Number at November 30 3,768,942 3,149,840

Total other reserves 390,476 340,998

[24] Minority interest At December 1, 2001/2000 40,802 41,868Capital distribution/contribution –3,113 –3,102Share in income 2,293 2,348Foreign currency translations –184 –312

At November 30 39,798 40,802

87

* Adjustment for deferred taxation in 2000.


[25] Long term liabilities (provisions) 2002 2001 › € 1,000

Provision for deferred The composition of deferred income tax assets liabilities assets liabilities

income taxes assets and liabilities is as follows:Intangible fixed assets 32,346 – 38,477 –Leasing – 98,037 – 112,123Other fixed assets 2,367 12,349 14,059 4,471Current assets 45,819 – 52,740 671Long term liabilities and provisions 25,137 207 45,039 98Current liabilities 1,803 2,040 23,292 21,433

Total deferred assets/liabilities 107,472 112,633 173,607 138,796

Deferred assets/liabilities (netted by fiscal entity) 96,621 101,782 93,294 58,483Carry forward losses 19,790 – 23,676 –Valuation allowance –52,448 – –53,265 –

Provision for deferred income tax assets and liabilities 63,963 101,782 63,705 58,483

Deferred tax assets form part of the balance sheet caption ‘Other long term assets’.

The claim for loss compensation as at November 30, 2002 falls due as follows:

Year 2003 2006 2007 after 2007 unlimited total

Amount (› € million) 0.1 0.6 1.2 3.8 14.1 19.8

Other provisions The composition of the other provisions self retirement- reorganisation other total

is as follows (› € 1,000) insurance benefits and provision provisions

severance

payments

At December 1, 2001 908 201,813 126,514 38,156 367,391

Movements due toAdditions –908 38,763 1,808 6,632 46,295Withdrawals – –19,937 –38,709 –1,016 –59,662Foreign currency translations – –3,389 – –703 –4,092

At November 30, 2002 – 217,250 89,613 43,069 349,932

The short term part of these provisions is approximately € 67 million.

2002 2001 › € 1,000

Total long term liabilities (provisions) 451,714 425,874

88

[26] Long term debt 2002 2001 › € 1,000

Convertible euro debentures to Company personnel 10,555 9,726Loans 744,552 742,791Capitalised lease obligations 1,451 1,615

Total 756,558 754,132

Convertible eurodebentures to Companypersonnel The average conversion price is € 19.17 (2001: € 20.31).

Loans principal amount average interest redemption amounts due after › € 1,000

rate (%) more than five years

at November 30

Euro debenture loan 113,445 6.38 2006 –Euro debenture loan 136,134 6.25 2007 –Euro 4,538 6.74 2004 –Euro 3,602 5.12 2005 –Euro 22,689 6.84 2005 –Euro 77,143 5.78 2006 –Euro 4,538 5.84 2013 4,538American dollars 43,342 1.83 2003/5 –American dollars 128,721 2.12 2004 –American dollars 50,282 1.72 2005 –American dollars 50,282 2.27 2006 –British pounds 33,360 4.08 2003/5 –Swiss francs 56,059 0.98 2003/5 –Norwegian crowns 15,095 7.20 2005 –Other 5,322 4.00 2003/5 –

Total 744,552 4.20 4,538

The fixed interest rates of the euro (debenture) loans have been fully swapped into variable interest rates. The heading ‘Loans’ also includes multi-year stand-by credit facilities.


89


Current liabilities 2002 2001 › € 1,000

[27] Short term debt Borrowings under bank lines of credit 14,858 4,638Current portion of long term debt 57,094 136,115Short term borrowings 14,936 246,521

Total 86,888 387,274

In 2001 under ‘Short term borrowings’ loans payable on call amounting to € 84 million are included after deduction of a deposit in respect of such loans which was settled on the first working day after balance sheet date.

[28] Other liabilities Trade accounts payable 156,923 143,330Notes payable 8,321 9,423Income taxes 15,392 7,923Value added taxes, social security and other taxes payable 53,917 54,321Pension liabilities 4,906 8,685Dividend 39,453 39,719Other 24,686 49,454

Total 303,598 312,855

[29] Accrued liabilities Salary expenses and payroll taxes 157,865 140,951Other 93,756 109,456

Total 251,621 250,407

90

Commitments and contingent liabilities

not stated in the Balance Sheet

Operational lease receivables These are lease re-ceivables arising from contracts for the machinesrented out to third parties. The future minimumrental revenues from non-terminable contractsamount to:


Financial instruments

Financial instruments are used to hedge againstthe financial risks that are inherent to the Group’sunderlying commercial activities. For an explana-tion of the foreign exchange management policy,see page 66.

Foreign exchange risks The policy for the man-agement of foreign exchange risks is aimed at pro-tecting the operating income and participationsheld in foreign currencies. Forward foreign ex-change contracts have been entered into to con-trol these foreign exchange risks. The contractvalue and the result of forward foreign exchangecontracts at balance sheet date were as follows (in millions):

– in respect of cash flows: € 210.5 and € 7.3 (2001: € 228.6 and € 0.2);

– in respect of participations: € 172.7 and € 11.3 (2001: € 465.9 and € 9.2).

Interest risks Interest rate instruments are used toachieve the desired risk profile in terms of fixedand variable interest exposures. A central ob-jective of the policy is to prevent a mismatchbetween the portfolio of rentals and leases andthe financing of the Group. Efforts are made toachieve a ratio of 60 to 80% between the abovefixed-interest assets and liabilities. At balancesheet date the contract value/notional principalamount and the market value of interest rateinstruments (interest rate swaps) were as follows(in millions): € 1,050.1 and € 5.7 (2001:€ 1,311.2 and € 18.3).

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

91

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

› € million 2002 2001

Less than one year 100 143More than one year but less than 5 years 123 185More than 5 years – –

223 328

› € million 2002 2001

Collateral securityCollateral security for liabilities 0.4 0.1

Contingent liabilitiesGuarantee commitments 3.8 2.7Government develop-ment credits 47.2 47.8


Other commitments Repurchase commitmentsof € 5.5 million (2001: € 10.1 million) exist onthe lease contracts with third parties. Of thisamount, the expected amount to be paid withinone year is nil (2001: € 0.4 million) and € 5.5million within five years (2001: € 9.7 million). As a result of these commitments the machinescan be sold again upon their return. The esti-mated market value upon return is higher thanthe repurchase commitment. Recourse liabilities in respect of bills discountedamount to € 0.1 million (2001: € 0.2 million).Total contracted lease commitments amount to€ 357 million (2001: € 316 million).These commitments fall due over the next 20years. The maturity dates over the next years areas follows:

2003 90 › € million2004 652005 462006 292007 29after 2007 98

Total 357

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

Option plan

To encourage the long term achievement of theCompany’s objectives Océ operates a Stock-OptionPlan under which decisions are takeneach year on the granting to directors and certainsenior company executives of option rights and/or Share Appreciation Rights (s) in respect ofordinary shares in Océ. A is the right to re-ceive payment of the share price gain, wherebythe share price gain is the difference between thestock market price of the share on the day of exer-cise and the exercise price that was fixed on theday of granting the options. Instead of receivingpayment of the share price gain, a participantmay also request delivery of a share.With effect from the Océ StockOptionPlan 2002a limited number of participants have also beengranted conditional options.

Unconditional option rights/s During thefinancial year an aggregate of 772,000 uncon-ditional options and 21,000 s were grantedto a total of 186 participants under the OcéStockOptionPlan 2003.For participants in the Netherlands and Belgiumthe unconditional options have a duration ofnine years, whilst their duration for participantsin other countries is eight years. The s weregranted to the Swiss participants and likewisehave a duration of eight years.Participants who hold unconditional options ors are required to abide by a code of conductand observe a waiting period, which means thatthey must not exercise any rights within two andthree years after grant if their rights have theduration of eight and nine years respectively.

Conditional option rights A limited category ofparticipants has been awarded conditional optionrights in addition to unconditional option rights.In cases where conditional options are granted,the number of unconditional options awarded isreduced pro rata. The duration of the conditionaloption rights is likewise nine years for Dutchparticipants and eight years for non-Dutch parti-cipants. The conditions attaching to these optionrights are that exercise is only possible three yearsafter granting the options and provided that aperformance criterion has been met. For the Océ

92


StockOptionPlan 2002 the basis for the perfor-mance criterion is Earnings Per Share (),whilst the basis for the Océ StockOptionPlan2003 is formed by Operating Income Per Share(). If the average growth in or overthe three financial years subsequent to the date ofgrant amounts to less than 5%, the conditionaloption rights will lapse; if growth amounts to10% (= the norm) the option rights becomeunconditional, and if growth amounts to 15% ormore, the number of unconditional options maybe doubled. In the event of growth percentagesbetween the figures mentioned above, optionrights become unconditional pro rata.In the Océ StockOptionPlan 2003 conditionaloption rights were granted to 36 participants. If the norm of 10% is achieved, 235,000 optionrights will become unconditional. The maximumpossible number of option rights that maybecome unconditional is 470,000.

Exercise price For the conditional and uncondi-tional options or s granted in the financialyear to participants outside the Netherlands theexercise price is equal to the opening share planof the Océ share on Euronext Amsterdam on thedate of grant and amounts to € 10.75.When participants in the Netherlands weregranted the unconditional option rights, theywere offered a choice between an exercise price of€ 10.75, € 11.83, € 12.90 or € 14.51. The higherthe exercise price compared to the price of theOcé share upon grant, the lower the amount thathas to be added to taxable income for Dutchparticipants. Against this, however, the potentialresult upon exercise will also be lower. Since 2001,as a consequence of the new tax legislation in theNetherlands, it has also been possible to opt notto pay wages tax upon grant, but to pay tax uponexercise over the entire benefit actually receivedas a result of the exercise of the option rights.

Regulations Participation in the Océ Stock-OptionPlan is subject to regulations so as to pre-vent the misuse of inside information. Partici-pants are prohibited from trading in Océ optionson the Euronext Options Exchange in Amsterdamand are not allowed to dispose of or pledge theoptions that they have been granted.

Participants have to transfer the exercise of theiroptions to an independent Trustee designated bythe company. This Trustee will then exercise theoptions according to the instructions given by theparticipants. Participants can only give such in-structions if they are not in possession of inside in-formation during the designated exercise periods.A designated period is a period of at most 9 stockexchange trading days after publication of thequarterly results.

Total number of options/s As at November30, 2002 a total of 3,790,000 unconditionaloption rights or s in respect of ordinary shareswere outstanding at an average exercise price of€ 17.82, whilst a total of 850,000 unconditionaloption rights, based on an norm or

norm of at least 10%, had been granted at an ave-rage exercise price of € 10.30.The average remaining duration of these optionsis five years.

Purchase of shares The company’s policy is topurchase the shares required to satisfy the OcéStockOptionPlan either before or upon exercise.Shares may also be issued to cover commitmentsunder existing stock option plans.For the delivery of ordinary shares as a result ofthe exercise of options, 7,000 shares were pur-chased in 2002 (2001: nil shares) and nil shares(2001: nil shares) were issued at the moment ofexercise.The table on the next page gives an overview ofthe information relating to the outstandingoptions and s in respect of shares as atNovember 30, 2002.During 2002 619,102 shares were bought in tocover commitments under the existing Stock-OptionPlan, which means that the total numberof shares purchased amounts to 3,768,942.

93

Stock- number of options granted exercise price in euro options forfeited exercised outstanding at expiration date

OptionPlan number of November 30,

in year options 2002

1999 872,500 30.40-41.15 92,000 – 780,500 29-11-2003/20042000 791,000 16.85-22.98 71,000 – 720,000 26-11-2004/20052001 847,500 18.10-24.44 45,000 – 802,500 29-11-2005/20062002 fixed 716,000 9.77-13.19 15,000 7,000 694,000 28-11-2009/20102002 variable 392,000 9.77 12,000 – 380,000 28-11-2009/20102003 fixed 793,000 10.75-14.51 – – 793,000 27-11-2010/20112003 variable 470,000 10.75 – – 470,000 27-11-2010/2011

4,882,000 235,000 7,000 4,640,000

The table below shows the rights granted under this option planto the members of the Executive Board after their appointment.

Stock- number of options granted exercise price outstanding at expiration date

OptionPlan in euro November 30,

in year 2002

R.L. van Iperen 1999 35,000 30.40 35,000 29-11-20042000 42,000 17.02 42,000 26-11-20052001 42,000 18.10 42,000 29-11-20062002 fixed 21,000 9.77 21,000 28-11-20102002 variable 42,000 9.77 42,000 28-11-20102003 fixed 21,000 10.75 21,000 27-11-20112003 variable 42,000 10.75 42,000 27-11-2011

J. van den Belt 2002 fixed 17,500 9.77 17,500 28-11-20102002 variable 35,000 9.77 35,000 28-11-20102003 fixed 17,500 10.75 17,500 27-11-20112003 variable 35,000 10.75 35,000 27-11-2011

J.F. Dix 1999 35,000 30.40 35,000 29-11-20042000 35,000 17.02 35,000 26-11-20052001 35,000 18.10 35,000 29-11-20062002 fixed 17,500 9.77 17,500 28-11-20102002 variable 35,000 9.77 35,000 28-11-20102003 fixed 17,500 10.75 17,500 27-11-20112003 variable 35,000 10.75 35,000 27-11-2011

G.B. Pelizzari 1999 35,000 30.40 35,000 29-11-20042000 35,000 17.02 35,000 26-11-20052001 35,000 18.10 35,000 29-11-20062002 fixed 70,000 9.77 70,000 28-11-2010


94

The members of the Board of Executive Directors hold 84,000 options which were granted prior to their appointment to the Executive Board.

2002 2001* › € 1,000

Net income and share- Net income as reported in the Consolidated holders’ equity under Statement of Operations 112,531 10,070US GAAP

US GAAP adjustments Business combinations –8,130 –11,949Reorganisation costs –43,511 40,099Self insurance –907 –908Pensions 2,633 11,726Use of tax-deductible goodwill –7,721 –14,800Derivatives –4,230 53,277Option plan –598 –Deferred income taxes on above adjustments 14,941 –35,833

Net income under 65,008 51,682

Earnings per ordinary Based on average number of shares outstanding (basic) 0.73 0.56 euroshare of € 0.50 nominal Based on increase upon conversion/options (diluted) 0.73 0.56 eurounder US GAAP

Shareholders’ equity as reported in the Consolidated Balance Sheet 908,925 908,577

US GAAP adjustments Intangible fixed assets 198,558 206,688Reorganisation provision 39,846 83,357Pension provision 52,707 51,539Additional minimum pension liability –137,358 –9,857Self insurance franchise – 908Final dividend 39,453 39,719Accrued liabilities

option plan –598 –derivatives/financial instruments 16,876 13,830

Deferred income taxes on above adjustments –8,226 –12,900

Shareholders’ equity under 1,110,183 1,281,861

United States generally accepted

accounting principles (US GAAP)

Océ’s consolidated financial statements are drawnup on the basis of the accounting principles ap-plied in the Netherlands, which differs in a numberof respects from United States generally acceptedaccounting principles ( ). The statements

below give an approximate indication of the effectthat application of would have on net in-come, earnings per share and shareholders’ equity.This information will be presented in more detailin the 20- statement which will be submitted tothe Securities and Exchange Commission andwhich will be available on request by the end ofMay 2003 at the latest.

Net income and share-holders’ equity based onUnited States accountingprinciples


95

* The figures of 2001 are modified in relation to the first implementation of 133 ‘Accounting forDerivate Instruments and Hedging Activities’ sinceDecember 1, 2000 instead of November 30, 2001.The impact on the comparative figures of 2001 ofthis adaptation based on is as follows:

– Increase of net income (from € 17.1 million to € 51.7 million).

– Increase of basic earnings per ordinary share (from € 0.16 to € 0.56).

– Increase of shareholders’ equity per November 30, 2001 (from € 1,269 million to € 1,282 million).

The main differences between the accountingprinciples applied by Océ (Dutch ) and

are summarised below:– Goodwill Goodwill paid has been capitalised by

Océ since December 1, 2000. Previously thisgoodwill was charged directly to shareholders’equity. Under goodwill is capitalised asintangible fixed assets and then amortised on astraight-line basis over a period of 10 to 40 years.The goodwill arising on acquisitions made afterJune 15, 2000 is no longer amortised under

but is reviewed for exceptional valueimpairments.

– Reorganisation provision Under the for-mation of a provision is subject to more stringentcriteria. For this reason often a part of a provisionis not yet recognised under .

– Self insurance franchise Under a pro-vision for self insurance is not permitted.

– Dividends The final dividend on ordinary shares that are submitted to the shareholders’ meetingfor approval is included under ‘Current liabili-ties’ in the financial statements. Under

this amount should be classified under share-holders’ equity until the moment when the netincome appropriation has been approved by theshareholders.

– Pensions Under , pension costs are cal-culated according to 87. As this method ofcalculation differs from the local calculations, theresult is a variation in charges and balance sheetpositions.


2002 2001 › € 1,000

Under the Consolidated Balance Sheet items set out below would be:

Balance sheet items Intangible fixed assets (net) 288,168 251,005under US GAAP

Long term liabilities Provision for deferred income taxes 110,008 71,383Reorganisation provision 56,139 56,907Pension provision 164,543 150,274Other long term liabilities (provisions) 36,697 24,406

Current liabilities Other accrued liabilities (dividend) – –Other liabilities 149,238 44,316

96

2002 2001 per cent

A summary is given below (for more details please see the 20- statement that will be published by the end of May 2003 at the latest).

Assumptions:Discount rate 5.70 6.10Expected return on pension assets 7.32 7.92Expected increase in salaries 3.23 3.29Expected increase in benefits 2.59 3.04


2002 2001 › € 1,000

Pension liabilities –1,148,372 –1,010,666Real value of pension assets 731,943 782,578

Funded status –416,429 –228,088Transitional obligations not yet included –3,266 –6,503Back service not yet included 2,568 1,767Actuarial losses not yet included 311,432 128,312

–105,695 –104,512Pension provision according to Dutch of the relevant companies –158,402 –156,051

Lower pension provision according to 52,707 51,539

97

Use of tax-deductible goodwill In a previous acquisition a provision was made for the capital-ised claims in respect of deferred taxation. If the claims are realised, the amounts are releasedto the Consolidated Statement of Operationsunder Income taxes. Under , if theclaims are realised, they must first be deductedfrom Goodwill and then from other intangiblefixed assets and, after these intangibles have beenamortised in full, the gain resulting from thisclaim is allowed to be released and credited to theConsolidated Statement of Operations underIncome taxes.

Derivatives Under Dutch , receivables andliabilities, denominated in a foreign currency, in-cluding derivative contracts, are in principle carriedat cost, converted into euros at the exchange ratesprevailing at the end of the year. requiresvaluation of derivatives at fair value. Furthermorefor 2001 hedge accounting is applied in the Dutch financial statements to a larger extent thenallowed by 133.

Option plan Under certain of Océ’s optionplans are subject to variable plan accountingwhereby the options intrinsic value is remeasuredand expensed.

In most countries the pension fund premium isborne by both the company and the employees. In the Netherlands the ratio is 60% versus 40%. It should also be noted that under

actuarial losses are charged to the Statement ofOperations for the average remaining service periodof the participants (approximately 20 years).

2002 2001 › € 1,000

The components of pension costs are:Service costs –39,237 –37,651Interest costs –61,690 –57,804Expected return on pension assets 60,147 64,722Amortisation of transitional assets 4,494 3,338Amortisation of service costs 204 –178Amortisation of actuarial gains/losses –3,927 –52Other –2 15

Pension costs according to –40,011 –27,610Pension costs of the relevant companies –42,644 –39,336

Difference 2,633 11,726

Océ .. / Statement of Operations 2002 2001 › € 1,000

Income of consolidated companies 107,419 23,011Other net income 5,112 –12,941

Net income 112,531 10,070

Océ .. / Balance Sheet November 30

Assets 2002 2001 › € 1,000

Financial fixed assets Consolidated companies [30] 840,526 789,989Amounts receivable from consolidated companies [31] 891,307 1,061,998Unconsolidated companies [32] 2,680 3,661Other long term assets 303 11

1,734,816 1,855,659

Current assets Amounts receivable from consolidated companies 102,486 65,326Other amounts receivable 11,798 25,765Cash and cash equivalents [33] 17,104 27,662

131,388 118,753

Total assets 1,866,204 1,974,412

98

After net incomeappropriation

Océ .. / Balance Sheet November 30

Liabilities 2002 2001 › € 1,000

Shareholders’ equity Ordinary shares 43,631 43,630Priority shares 2 2Financing preference shares 10,000 10,000Paid-in capital 511,400 511,392Legal reserve 1,295 1,679Translation differences –47,879 876Other reserves 390,476 340,998

908,925 908,577

Long term liabilities Provision for deferred taxes 2,622 4,919

Long term debt Amounts payable to consolidated companies 18,844 18,844Long term liabilities [34] 598,327 522,098

617,171 540,942

Current liabilities Amounts payable to consolidated companies 208,504 127,436Short term debt [35] 65,260 331,863Other liabilities [36] 47,376 39,743Accrued liabilities 16,346 20,932

337,486 519,974

Total liabilities 1,866,204 1,974,412

99

Océ .. / Notes to the Balance Sheet and the Statement of Operations

Financial fixed assets 2002 2001 › € 1,000

Affiliated companies For a list of companies affiliated to the Group in the Netherlands and elsewhere see pages 111 and 112. Principal affiliated companies are included at the pro rata value of Océ’s share in their net asset value.

[30] Consolidated Book value at December 1, 2001/2000 789,989 895,243companies

Changes due toEquity in income 107,419 23,011Capital increase 190,318 38,746Capital decrease –37,756 –16,818Dividends declared –164,770 –134,100Foreign currency translations –44,674 –16,093


[31] Amounts receivable At December 1, 2001/2000 1,061,998 976,866from consolidated Prepayments 33,477 113,165companies Repayments –147,804 –14,972

Foreign currency translations –56,364 –13,061

At November 30 891,307 1,061,998

[32] Unconsolidated Book value at December 1, 2001/2000 3,661 4,100companies

Changes due toEquity in income 279 122Dividends declared –276 –329Other –902 –Foreign currency translations –82 –232


100


The accounting principles are the same as those used forthe consolidated financial statements. The Statement of Operations has been drawn up inaccordance with the provisions of Article 402, Book 2, of the Dutch Civil Code.


Current assets 2002 2001 › € 1,000

[33] Cash and cash Cash and bank balances 17,104 27,662equivalents

Shareholders’ equity

For specifications see pages 86 and 87.

Long term debt

[34] Long term Convertible euro debentures to Company personnel 10,555 9,726liabilities Loans 587,772 512,372

Total 598,327 522,098

The average conversion price of the convertible euro debentures to Company personnel is € 19.17 (2001: € 20.31).

Loans principal amount average interest rate redemption amounts due after x € 1,000

at November 30 (%) more than five years

Euro debenture loan 113,445 6.38 2006 –Euro debenture loan 136,134 6.25 2007 –Euro 4,538 6.74 2004 –Euro 22,689 6.84 2005 –Euro 77,143 5.78 2006 –Euro 4,538 5.84 2013 4,538American dollars 128,721 2.12 2004 –American dollars 50,282 1.72 2005 –American dollars 50,282 2.27 2006 –

Total 587,772 4.60 4,538

The fixed interest rates of the euro (debenture) loans have been fully swapped into variable interest rates.

101


Current liabilities 2002 2001 › € 1,000

[35] Short term debt Borrowings under bank lines of credit 8,538 12,817Current portion of long term debt 41,019 117,890Other interest-bearing debts 15,703 201,156

Total 65,260 331,863

In 2001 ‘Other interest-bearing debts’ also includedcall-money loans amounting to € 84 million; these were set off against an equivalent deposit that was settled on the first working day after balance sheet date.

[36] Other liabilities Dividend 39,453 39,719Income taxes 7,489 –Other 434 24

Total 47,376 39,743

Commitments and contingent liabilities 2002 2001 › € millionnot stated in the balance sheet

Contingent liabilities Government development credits 47.2 47.8

Other commitments Bank guarantees for Group companies 122.8 171.5Collateral security provided for Group companies 51.7 49.9

For an explanation of the financial instruments see page 91.

102

103

Net income appropriation 2002 2001 › € 1,000

Preference dividend 3,551 3,551

Cash dividend 48,519 48,785

Added to Retained earnings:To (from) Retained earnings 60,461 –42,266

Total net income 112,531 10,070

Other information

Upon adoption of this proposed net incomeappropriation, the dividend for the 2002 finan-cial year will be: € 2 per priority share of € 50,€ 0.18 (rounded) per financing preference shareof € 0.50 and € 0.58 per ordinary share of € 0.50.The final dividend per ordinary share for the2002 financial year will be € 0.43, as a paymentof € 0.15 per ordinary share was made onOctober 23, 2002 on account of the expecteddividend. It is proposed to make the final dividendavailable fully in cash. This proposed net incomeappropriation is in conformity with Article 36 ofthe Company’s Articles of Association.

Extract from the Articles of Association relatingto net income appropriation The rules for netincome appropriation as laid down in the Articlesof Association can – where of relevance at thepresent time – be summarised as follows (forliteral text see Article 36 of the Articles of Asso-ciation). Where possible, the following dividendsshall be distributed in turn from the net income:first, on the protective preference shares: a per-centage of the paid-up amount equal to the ave-rage three-month percentage, weightedaccording to the number of days during which it

was applicable, increased or reduced wherenecessary by at most two percentage points; thenon the financing preference shares: 6.26% of thepaid-up amount including share premium, whichpercentage shall be adapted on December 1,2004 and subsequently each time eight yearsthereafter; then on the priority shares: 4% andthen on the ordinary shares: 5% of the nominalvalue. Subsequently, of the net income thenremaining, as much shall be reserved as may bedeemed necessary by the Executive Board, sub-ject to approval of the Supervisory Board. In sofar as the net income has not been set aside in theform of reserves, it shall be at the disposal of theholders of ordinary shares.

Other information

Authorised capital

Priority shares All priority shares are issued. They are held by Foundation Fort Ginkel, Venlo,the directors of which are: J.L. Brentjens(Chairman), R.L. van Iperen and M. Ververs.The Articles of Association grant certain rights tothe holders of priority shares, including thefollowing:

– they determine the number of members of the Supervisory and Executive Boards;

– they draw up a binding nomination list for share-holders for the appointment of Supervisory andExecutive 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 dis-tributed on all the priority shares together. TheBoard of Executive Directors of Océ .. and thedirectors of Foundation Fort Ginkel are jointly ofthe opinion that, as regards the exercise of thevoting rights attaching to the priority shares,Foundation Fort Ginkel has complied with therequirements set in respect hereof in Appendix Xto the Securities Regulations of the stock ex-change Euronext Amsterdam.

Preference shares Since 1979 the Company hasbeen under the irrevocable obligation to issueprotective preference shares to the LodewijkFoundation, Venlo, on the latter’s first request. As to the nominal value of the said issue, theCompany’s obligation has since February 1997related to at most an amount equal to the totalnominal value of the ordinary and financingpreference shares of the Company issued at thetime of the request. The directors of the Lodewijk Foundation are:N.J. Westdijk (Chairman), S.D. de Bree, J.M.M. Maeijer, L. Timmerman, J.L. Brentjensand R.L. van Iperen.The Board of Executive Directors of Océ ..and the directors of the Lodewijk Foundation arejointly of the opinion that, as regards theindependence of the directors of the LodewijkFoundation, the requirements set in respect here-of in Appendix X to the Securities Regulations ofthe stock exchange Euronext Amsterdam have

been complied with. In 1996 5,000,000 finan-cing preference shares were placed with theFoundation ‘Stichting AdministratiekantoorPreferente Aandelen Océ’ in return for the issueto a number of institutional investors of regis-tered depositary receipts with limited cancel-lability.As a result of the share split the number offinancing preference shares currently placedamounts to 20,000,000. The directors of the Foundation ‘StichtingAdministratiekantoor Preferente Aandelen Océ’are: H. de Ruiter (Chairman), S. Bergsma, J.M. Boll, L. Traas and D.M.N. van Wensveen.

104

Signatures to the financial statements and otherinformation set out on pages 69 to 104:

January 30, 2003

The Supervisory Directors

J.L. BrentjensL.J.M. BerndsenP. BouwJ.V.H. PenningsM. VerversF.J. de Wit

The Executive Directors

R.L. van IperenJ. van den BeltJ.F. Dix

Auditors’ report

Introduction We have audited the financialstatements as included in the annual report forthe year ended November 30, 2002 of Océ ..,Venlo. These financial statements are the respon-sibility of the company’s management. Our res-ponsibility is to express an opinion on thesefinancial statements based on our audit.

Scope We conducted our audit in accordancewith auditing standards generally accepted in theNetherlands. Those standards require that weplan and perform the audit to obtain reasonableassurance about whether the financial statementsare free of material misstatement. An audit in-cludes examining, on a test basis, evidence sup-porting the amounts and disclosures in the finan-cial statements. An audit also includes assessingthe accounting principles used and significantestimates made by management, as well as evalu-ating the overall financial statement presentation.We believe that our audit provides a reasonablebasis for our opinion.

Opinion In our opinion, the financial statementsgive a true and fair view of the financial positionof the company as of November 30, 2002 and ofthe result for the year then ended in accordancewith accounting principles generally accepted inthe Netherlands and comply with the financialreporting requirements included in Part 9, Book2 of the Dutch Civil Code.

Amsterdam, January 30, 2003

PricewaterhouseCoopers Accountants ..

105

Other information

Board of Supervisory Directors as at January 30, 2003

J.L. Brentjens, Chairman (1940),

Bloemendaal

Post(s) held former Chairman of the Board ofDirectors of ..

Nationality Dutch.Appointed in 2001. Current term of office until 2005.Maximum period of office until 2011 (age limit).Supervisory Directorships Chairman of theSupervisory Board of Heijmans .. andArboNed .., vice-chairman of the SupervisoryBoard of Roto Smeets De Boer .. and memberof the Supervisory Board of .., Fortis .. and Holdingmaatschappij P. BakkerHillegom ..

Other posts vice-chairman of Van Leer GroupFoundation, Chairman of the Board of theNijmegen Catholic University Foundation andboard member of several foundations.

M. Ververs, vice-chairman (1933), Hattem

Post(s) held former Chairman of the Board ofDirectors of Wolters Kluwer ..

Nationality Dutch.Appointed in 1995.Current term of office until 2003.Maximum period of office until 2003 (age limit).Supervisory Directorships Chairman of theSupervisory Board of Getronics .., vice-chairman of the Supervisory Board of Groep.. and member of the Supervisory Board of .. and Laurus ..

Other posts Chairman of the Board of Trustees ofIsala Clinics, Zwolle.

L.J.M. Berndsen (1942), Antwerp (Belgium)

Post(s) held former Chairman of the Board ofDirectors of Koninklijke Nedlloyd .. and co-chairman of Nedlloyd Container Line Ltd.Nationality Dutch.Appointed in 1996.Current term of office until 2004.Maximum period of office until 2008 (12-year period).Supervisory Directorships Chairman of theSupervisory Board of Corus Nederland .. andmember of the Supervisory Board of Holdings .., Koninklijke Nedlloyd ..,Rabobank .. and Netherlands State LotteryManagement Foundation.

P. Bouw (1941), Amsterdam

Post(s) held former Chairman of KoninklijkeLuchtvaart Maatschappij .. (). Nationality Dutch.Appointed in 1998.Current term of office until 2006.Maximum period of office until 2010 (12-year period).Supervisory Directorships Chairman of theSupervisory Board of .. and Swiss Inter-national Airlines .. (Switzerland) and memberof the Supervisory Board of Koninklijke Vopak.., Getronics .., .., and De Neder-landsche Bank ..

Other posts part-time professor in BusinessAdministration at Twente University, member ofthe Board of Trustees of Amsterdam FreeReformed University, Chairman of the BankingCouncil and Chairman of the Board of Trusteesof the Professional Football Association.

107

Board of Supervisory Directors as at January 30, 2003

J.V.H. Pennings (1934), Maaseik (Belgium)

Post(s) held former Chairman of the Board ofExecutive Directors of Océ ..

Nationality Dutch.Appointed in 1998.Current term of office until 2005.Maximum period of office until 2005 (age limit).Supervisory Directorships Chairman of theSupervisory Board of Koninklijke Grolsch ..,Koninklijke Ahrend .., Essent .. and .. Industriebank Liof, vice-chairman of theSupervisory Board of Wolters Kluwer .. andmember of the Supervisory Board of Heijmans.. and Berenschot Beheer.Other posts board member of severalfoundations.

F.J. de Wit (1939), Amsterdam

Post(s) held former Chairman of the Board ofDirectors of .. .. Nationality Dutch.Appointed in 1997.Current term of office until 2005.Maximum period of office until 2009 (age limit and 12-year period).Supervisory Directorships Chairman of theSupervisory Board of PontEecen .. andmember of the Supervisory Board of ..

Other posts member of the Advisory Board ofDeloitte & Touche and Keyser & Mackay(International) .., honorary consul general ofFinland and board member of severalfoundations.

108

Board of Executive Directors as at January 30, 2003

R.L. van Iperen (1953), Venlo

Post Chairman Board of Executive Directors.Nationality Dutch.Appointed as member of the Board of ExecutiveDirectors in May 1995 and as Chairman of theBoard of Executive Directors in September 1999.Functional responsibilities Strategy, CorporatePersonnel and Organisation, Research &Development, Secretariat of the Company andLegal Affairs, Corporate Communications.Geographical The Netherlands, United States(Chairman), Germany, Belgium and Japan.

J. van den Belt (1946), Venlo

Post member Board of Executive Directors.Nationality Dutch.Appointed March 2001. Functional responsibilities Finance and Admini-stration, Tax, Internal Audit, Corporate Infor-mation Department, Investor Relations and leaseactivities.Geographical France, Spain and Portugal.

J.F. Dix (1946), Schoten (Belgium)

Post member Board of Executive Directors.Nationality Dutch.Appointed May 1998.Functional responsibilities Direct Export,Emerging Markets, Marketing Communications,strategic business unit Digital Document Systems(ad interim).Geographical United Kingdom, Scandinavia,Switzerland, Italy, Austria, Australia, EasternEurope, Far East and Brazil.

The strategic business unit directors report to theBoard of Executive Directors as a whole.

109

Directors central services

110

Strategic business units

Digital Document Systems J.F. DixWide Format Printing Systems M.J.A. Frequin

Digital Document Systems

Corporate Printing J. Bjørkmann*Commercial Printing H. Würges*Software and Professional Services J.F. DixFacility Services M.C. Kingmans*

Wide Format Printing Systems

Technical Document Systems G. Rongen*Display Graphics Systems W.J. Verheyen*Imaging Supplies A.P. Langendoen*

Research and Development (R&D)

Wide Format Systems and Cutsheet Systems W.H.M. OrbonsContinuous Feed Systems P. FeldwegSoftware M. Pracchi (as from October 1, 2002)

Manufacturing and Logistics N.J. Koole

Central Operating Company Venlo

Executive Committee P.H.G.M. Creemers, chairmanJ. Bjørkmann*H. Blekman (as from January 1, 2003)M.J.A. FrequinP. Hagedoorn (as from January 1, 2003)H.J. HuibertsN.J. KooleC.F. LindenhoviusW.H.M. OrbonsG. Wilbrink*

Central Operating Company Poing (Germany)

Executive Committee P. FeldwegM. Meyer

Corporate Staff

Secretariat of the Company, Legal Affairs H.J. HuibertsCorporate Personnel and Organisation P.H.G.M. CreemersFinance and Administration C.F. LindenhoviusChief Information Officer P. Hagedoorn (as from January 1, 2003)

January 2003

* Assistent Director.

Europe

Belgium Océ-Belgium ../.. J. van Boerdonk Brussels 2 7294811Océ-Interservices ../.. J. van Boerdonk Brussels 2 7294992Océ Software Laboratories Namur .. M. Mühe Namur 81 559611

Denmark Océ-Danmark a/s H. Risør Copenhagen 43 297000Germany Océ Holding Deutschland A.A.J. van Driel and Mülheim/Ruhr 208 48450

Verwaltungsgesellschaft m.b.H. P. FeldwegOcé-Deutschland G.m.b.H. A.A.J. van Driel, Mülheim/Ruhr 208 48450

S. Landesberger and D. Pott

Océ Printing Systems G.m.b.H. P. Feldweg and Poing 8121 724031M. Meyer

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

Océ Print Logic Technologies .. R. Balmès Créteil 1 48988000Espace Graphic .. J.G. Higel Saint-Ouen 1 49212345

Hungary Océ-Hungária Kft. G. Németh Budapest 1 2361040Ireland Océ-Ireland Ltd. C. O’Boyle Dublin 1 4039100Italy Océ-Italia S.p.A. G. Seno Milan 02 927261Netherlands Océ-Technologies .. P.H.G.M. Creemers Venlo 77 3592222

Océ-Nederland .. J.J. Kwaak ’s-Hertogenbosch 73 6815815Arkwright Europe .. J.R. Marciano Venlo 77 3209020

Norway Océ-Norge .. F.O. Nilsen Oslo 2 2027000Austria Océ-Österreich Ges.m.b.H. G. Schennet Vienna 1 86336Poland Océ-Poland Limited, Sp. Z o.o. M. Kozlowski Warsaw 2 28683079Portugal Océ-Lima Mayer .. F. Calvache Lisbon 21 4125700Spain Océ-España .. I. Esteve Barcelona 93 4844800Czech Republic Océ-Czech republic s.r.o. I. Konecny Prague 2 44010111United Kingdom Océ () Limited M.J. Cornish Loughton 870 6005544

Practical Print Solutions Ltd. S. Neal Reigate 1737 237000Sweden Océ Svenska M. Kullerstrand Stockholm 8 7034000Switzerland Océ (Schweiz) .. J.Th.M. van der Mars Glattbrugg 1 8291111

North America

United States Océ- Holding, Inc. R.E. Daly Chicago, 773 7144408Océ-, Inc. M. Baboyian Chicago, 773 7148500Océ Printing Systems , Inc. T. Long Boca Raton, 561 9973100Arkwright, Inc. J.R. Marciano Fiskeville, 401 8211000Archer Management Services, Inc. M.D. Weiner New York, 212 5022100Océ Groupware Technology, Inc. E. Wagner Cleveland, 216 6879970Océ Display Graphics Systems, Inc. R. Kumar San José, 408 2201533Océ Reprographic Technologies, Inc. E. Wagner Phoenix, 602 7441353

Canada Océ-Canada, Inc. S. Goodall Toronto 416 2245600Mexico Océ-Mexico .. de .. J. Colin Mexico City 52 5550898710

Principal group companies and their chief executives*

111

January 2003

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

A list of affiliated companies is available for public inspection at the Commercial Registry, Venlo,

in conformity with the provisions of Article 379, Book 2 of the Dutch Civil Code.

Principal group companies and their chief executives

Asia / Pacific

Australia Océ-Australia Ltd. P.W.M. Thomassen Scoresby 3 97303333China Océ Office Equipment (Beijing) Co.,Ltd. N.W. Kooij Beijing 10 65281200

Océ Office Equipment (Shanghai) Co.,Ltd. N.W. Kooij Shanghai 21 62729698Hong Kong Océ (Hong Kong China) Ltd. N.W. Kooij Hong Kong 25776064Japan Océ-Japan Corporation (85%) O. Suruga Tokyo 3 54026112Malaysia Océ Malaysia Sdn. Bhd. M. Sak Petaling Jaya 603 79668000Singapore Océ (Singapore) Pte. Ltd. C. Wilson Singapore 6 8462381Thailand Océ (Thailand) Ltd. M.A.M.E. van Mierlo Bangkok 2 2607133

Other countries

Brazil Océ-Brasil Comércio e Indústria Ltda. S. Notermans São Paulo 11 30535300South Africa Océ Printing Systems M. Broude Johannesburg 11 2586000

(South Africa) (Pty.) Ltd.

Direct Export

Netherlands Océ Direct Export J.W. Verschaeren Venlo 77 3592222

Lease companies

Australia Océ-Australia Finance Pty. Ltd. P.W.M. Thomassen Scoresby 3 97303333Germany Océ-Deutschland Financial A.A.J. van Driel Mülheim/Ruhr 208 48450

Services G.m.b.HFrance Océ-France Financement .. M. Gianfermi Saint-Cloud 1 45925055Spain Océ-Renting .. E. de Sus Barcelona 93 4844800United Kingdom Océ () Finance Ltd. N. Anderson Loughton 870 6005544United States Océ-Credit Corporation S. Schulein Boca Raton, 1 5619973100

Minority holdings

Cyprus Heliozid Océ-Reprographic (Cyprus) Ltd. 25%Germany Interface .. 11%Singapore Datapost Pte. Ltd. 30%

112

Supplementary information for shareholders

Investor Relations () policy The aim of Océ’s policy is to keep financial stakeholders informedin good time and in the most effective possibleway about developments within the company, theobjective being to provide them with a clear pictureon which to base their investment decisions withregard to Océ. Not only information about thefinancial results and prospects is of key impor-tance, but also the provision of information in thebroadest sense about the company’s strategicchoices and objectives and about social aspectssuch as sustainable development.

The principal document for the provision ofinformation is the annual report. In addition Océregularly organises roadshows and other informa-tive meetings for institutional investors and ana-lysts. A total of 18 meetings with analysts and in-vestors were held in 2002, including the meetingthat was staged in November to mark the launchof a big number of new products during the OcéOpen House event in Poing (Germany).

When the annual results are published Océ holdsa press conference. Following publication of theannual (and six-monthly) results Océ also orga-nises a number of meetings for analysts. The presentations given on those occasions arepublished immediately afterwards on our website(http://www.oce.com). After the announcementof the results for the first and the third quarterOcé holds a conference call for analysts. Océ opts to interact pro-actively with its share-holders. By maintaining regular and direct con-tacts with institutional investors that hold or haveheld substantial blocks of shares, Océ is able toform a picture of the wishes and ideas that suchinvestors have. These dialogues are an extremelyuseful way of gaining an insight into how Océ isperceived by these institutional investors.An intensification of the contact with privateshareholders is also being sought. Since November2002 Océ publishes a magazine that is especiallyfocused on private investors who are interested inOcé. This magazine, called Inside Océ, is aimed atgiving private investors a better insight into Océ.

Efforts are being made to find further possi-bilities of reaching private investors even moreeffectively by expanding and improving theclarity and accessibility of the information on theOcé website. Via the Investor Information link onthat site all sorts of relevant information can befound, such as quarterly and annual figures, pressreleases and background information and links toother sources. On the website it is also possible totake out a subscription to the Inside Océ magazine. The agenda for the Annual General Meeting ofShareholders can also be found on the Océ web-site. This agenda is also issued in the form of aninsert in the printed version of this annual report.In agenda item 6, in which authorisation isrequested, inter alia, for the issue of shares andthe restriction or preclusion of the pre-emptiveright, an explanation is given of the objectivesand restrictions that the Board of ExecutiveDirectors and the Supervisory Board will complywith in the event that they make use of suchauthorisation.

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

113


http://www.oce.com

Distribution of ordinary shares as % 2002 2001at end of financial year (indication based on information provided by banks) private institutional total private institutional total

Netherlands 25 24 49 33 18 51United Kingdom 1 17 18 – 18 18United States 1 16 17 1 12 13Belgium / Luxemburg 1 11 12 1 10 11Other – 4 4 1 6 7

Total 28 72 100 36 64 100


Quarterly results (net income) 2002 2001*

› € million % increase on › € million % increase on

previous year previous year

First quarter 25.8 –8 28.1 –13Second quarter 27.9 +11 25.1 –37Third quarter 21.0 –1 21.2 –29Fourth quarter 37.8 +23 30.7 –38

Year 112.5 +7 105.1 –31

Quarterly results (basic earnings per 2002 2001*ordinary share, calculated on the basis ofthe weighted average number of shares › € million % increase on › € million % increase on

outstanding) previous year previous year

First quarter 0.30 –7 0.32 –16Second quarter 0.32 +14 0.28 –40Third quarter 0.24 – 0.24 –29Fourth quarter 0.44 +24 0.35 –38

Year 1.30 +9 1.19 –32

114

* Before exceptional items.


Important (publication) dates (subject tomodification)

March 12, 2003 meeting of shareholdersApril 11, 2003 first quarter results 2003July 8, 2003 second quarter / first half year results 2003October 10, 2003 third quarter / nine months results 2003January 2004 provisional results for 2003February 2004 publication of 2003 annual report

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

115115

year’s highest

year’s lowest

Share price development

index December 1,1997 = 100

Océ

Euronext Amsterdam

200

150

100

50

0 35.00

14.00

18.90

11.55

18.90

6.15

14.05

6.80

40.93

18.47

98 99 00 01 02

Océ 1993-2002

Consolidated Statement of Operations 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Total revenues 3,176 3,234 3,224 2,838 2,753 2,469 1,894 1,330 1,257 1,192Operating income 226 225 282 248 245 200 145 101 84 75Net income 113 10 152 77 129 108 77 49 41 28

Key figuresTotal revenues

Increase/decrease in (%) –2 – 14 3 12 30 42 6 6 –4Expenditure on research and development 215 203 199 167 155 139 111 84 84 84

As % of total revenues 6.8 6.3 6.2 5.9 5.6 5.6 5.9 6.3 6.7 7.1Operating income

As % of total revenues 7.1 6.9 8.8 8.7 8.9 8.1 7.6 7.6 6.7 6.3As % of average balance sheet total 7.6 7.1 9.1 8.8 9.5 8.6 7.9 6.9 6.2 5.7

Net incomeAs % of total revenues 3.5 *3.2 4.7 *4.6 4.7 4.4 4.1 3.7 3.3 2.4As % of average shareholders’ equity 12.4 *11.1 16.8 *17.1 18.1 16.5 14.2 10.3 8.9 6.3

Net income retained 60 *53 99 *87 84 70 48 30 25 12As % of net income 55.5 *51.9 66.6 *67.6 67.2 67.3 64.1 62.3 59.3 42.1

Payroll expenses 1,347 1,310 1,242 1,122 1,034 869 689 481 458 455As % of total revenues 42.4 40.5 38.5 39.5 37.6 35.2 36.4 36.2 36.5 38.2

Number of employees 22,489 22,472 22,253 21,757 20,978 17,754 16,495 12,633 11,718 11,666

Per € 0.50 ordinary share (in euro)Basic earnings** 1.30 *1.19 1.76 *1.54 1.53 1.30 1.03 0.75 0.64 0.44Diluted earnings 1.29 *1.18 1.74 *1.53 1.50 1.26 0.96 0.70 0.62 0.44Cash flow** 3.64 *3.47 4.06 *3.80 3.62 3.26 2.81 2.45 2.35 2.24Shareholders’ equity 10.21 10.13 10.91 9.14 8.09 7.96 6.92 7.34 7.22 7.07Dividend 0.58 0.58 0.58 0.50 0.50 0.42 0.34 0.29 0.25 0.25

Average number of ordinary shares outstanding (› 1,000) 84,086 85,241 84,401 83,191 81,955 79,913 73,136 65,224 64,680 63,696Increase from dilution (› 1,000) 693 714 1,131 1,282 2,129 2,997 6,452 7,740 3,292 1,840

Share price (in euro)Year’s highest 14.05 18.90 18.90 35.00 40.93 30.11 22.44 11.23 10.16 6.85Year’s lowest 6.80 6.15 11.55 14.00 18.47 20.42 10.85 8.45 6.78 4.38Year end 11.45 10.20 17.75 17.30 30.49 25.70 21.33 11.23 8.73 6.85

116

Amounts › € million

* Before exceptional items.

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

Cash flow after exceptional items amounts to € 2.35 in 2001.

Océ 1993-2002

Consolidated Balance Sheet 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

AssetsIntangible fixed assets 86 44 – – – – – – – –Tangible fixed assets 577 637 679 707 687 672 599 420 408 413Financial fixed assets 681 751 799 686 587 568 402 343 299 264

Fixed assets 1,344 1,432 1,478 1,393 1,274 1,240 1,001 763 707 677

Current assets 1,507 1,696 1,738 1,575 1,361 1,275 1,125 778 684 647

Total 2,851 3,128 3,216 2,968 2,635 2,515 2,126 1,541 1,391 1,324

LiabilitiesGroup equity 949 949 1,031 860 766 740 646 480 471 453Long term liabilities (provisions) 452 426 320 313 214 225 178 112 106 104Long term debts 756 754 853 884 860 749 546 471 284 309Current liabilities 694 999 1,012 911 795 801 756 478 530 458

Total 2,851 3,128 3,216 2,968 2,635 2,515 2,126 1,541 1,391 1,324

Key figuresProperty, plant and equipment 459 458 445 450 446 453 396 255 253 254

Net expenditure 101 106 65 81 87 87 74 53 50 38Depreciation 95 91 86 90 83 72 59 45 48 50

Rental equipment 119 179 233 257 241 219 203 165 159 166Net expenditure 30 50 80 107 113 79 97 76 57 55Depreciation 87 103 108 98 88 85 72 65 63 64

Financial lease receivables (including short term financial leases) 1,013 1,153 1,175 1,026 908 806 565 453 416 360

As % of balance sheet total 36 37 37 35 34 32 26 29 30 27Inventories 346 365 442 395 366 363 359 257 202 196

As % of total revenues 11 11 14 14 13 15 18 19 16 16Trade accounts receivable 574 649 696 635 527 530 447 299 256 241

As % of total revenues 18 20 22 22 19 21 22 22 20 20

Ratio of current assets to current liabilities 2.2 1.7 1.7 1.7 1.7 1.6 1.6 1.7 1.3 1.5Group equity as % of balance sheet total 33 30 32 29 29 29 30 31 34 34

117

List of terms and abbreviations

Analogue In relation to copiers: non-digital production of a copy with the

aid of a photo-lens; analogue machines cannot communicate with other

copying machines (see also digital below).

Best practices Used within Océ to mean: the best results that have been

achieved as a result of a specific strategy and that are suitable for more

widespread application within the organisation.

Computer Aided Design: designing with the aid of the computer.

Captive lease companies Lease companies which are owned by or are linked

via fixed contracts to a bigger company, often a financial institution.

Commercial Printing Printing activities for commercial purposes, i.e. the

prints are produced for and sold to third parties.

Commodity In relation to printers: a machine that is regarded by the market

as a commodity article.

Competence Centre Used within Océ to mean: knowledge centre within the

Océ organisation in which technological expertise and specialisations are

concentrated.

Competency/performance management Personnel policy aimed at

ensuring that the know-how and performance of employees at Océ is

maintained at the required level and is in line with the technological

progress of the business.

Corporate Governance The controls, checks & balances and supervision

systems in place within a company to safeguard the integrity and ethics of

decision-making by company bodies.

Corporate Printing Printing activities in environments (such as offices)

where such activities are solely linked to in-house activities.

Conference call Used within Océ to mean: a telephone conference organised

by Océ with investment analysts to explain and provide background

information about the financial results.

Continuous feed Paper that is fed through printers on rolls or in the form

of concertina-folded forms (see also fanfold).

CopyPress printing technology System for producing copies of offset print

quality in which the toner is ‘pressed’ onto the paper.

Copy shop Business that specialises in making copies and prints for third

parties (see also print shops and job printers).

Corporate segment Used here to mean: printing and copying activities in

office environments (see also Corporate Printing).

Cost of ownership The ongoing fixed and variable costs relating to a

product after it has passed into customer ownership.

Cutsheet printing Printing operation in which separate sheets of paper are

fed into the machine (as opposed to fanfold and roll feed).

Digital In relation to printers and copiers: producing a print or copy by

means of laser or exposure in a computer-controlled machine which

can also communicate via a network; used here as the opposite to analogue

(see above).

Digital Document Systems () Océ’s strategic business unit that is active

in the productive segments of the corporate and commercial printmarket.

Digitisation The conversion of information into digital, computer-

readable codes.

Dpi Dots per inch: indicates the resolution of a scan or print, i.e. the

number of dots scanned or displayed per inch.

Direct Imaging Process () drum System in which the image is formed

in one single pass on a drum before being transferred to the copying

material.

Display Graphics Systems () The Océ business group that is active on

the market for wide format colour prints such as posters, banners and

billboards.

Document management All activities required for the preparation,

copying/printing and finishing of documents.

Term used to describe the financial results: Earnings Before

Interest, Tax, Depreciation and Amortisation of goodwill.

Engineering segment Used here to mean: printing and copying activities in

industry, mostly involving wide formats.

Facility Services Having the supplier of certain products handle the work

involved in the use of those products. Used here to mean: the Océ business

group that performs printing, copying and document flow management

activities on a customer’s premises at that customer’s request. In the

‘outsourcing’ is the term used to describe Facility Services.

Fanfold machine High volume printer for processing concertina-folded

(continuous-feed) forms.

Finishing The subsequent processing of prints, such as binding, folding

and stapling.

Flatbed machine Machine in which the material to be printed on is placed

on a horizontal print bed.

Fleetmarking Painting or lettering of vehicle fleets in the house style of a

company or organisation.

Full colour Image reproduced entirely in colour.

Hedging policy Providing cover against the risk of future purchases of

shares by entering into contracts for the future sale of shares.

Human Resources Management Policy developed for the recruitment and

further training of personnel to fulfil posts within a business.

Imaging Supplies The Océ business group that specialises in offering

materials which are used in printing, copying and plotting, e.g. paper,

films, labels, toners etc.

Inkjet technology Printing technique in which fine droplets of ink are

used to build up the printed image.

Input and output management All activities involved in preparing for and

executing print jobs.

Job printer A business that specialises in making copies and prints for

third parties.

118

List of terms and abbreviations

‘One-stop shopping’ Buying in as many services as possible from one

single supplier, e.g. printers, systems application software, service, support

and their financing.

Organic Photoconductor (): light-sensitive and durable photocon-

ductor (drum or belt) for transferring the image onto the carrier material.

Outsourcing Used here to mean: Contracting out a package of activities to

third parties that are specialised in handling this type of work.

Personalised mail Prints (usually for advertising purposes) that carry the

recipient’s personal data (such as customer name and address).

Photoconductor () See Organic photoconductor.

Piezo inkjet printer Inkjet printer (see above) that operates by means of

piezo-electricity, which is produced by bringing local pressure to bear on

crystals.

Plotter system System that enables analogue or digital printing of a design

drawing generated with the aid of systems.

Ppm Prints per minute: used to denote the speed of a machine’s output.

Print engine Complete drive and control unit for a printer.

Print-for-pay environment Environment in which the cost of the prints

that have been produced can be charged to the client.

Printing-on-demand Digital printing system which, on the basis of an

updated document or a database, can generate a print-run of any required

size at the moment when this is needed for immediate use.

Proxy solicitation The granting of proxy to the company by the

shareholder, enabling the company to vote on behalf of that shareholder.

Quick printers Businesses that can produce prints immediately and

without waiting times.

Raster Imaging Process software Software required for the printing

technique in which image transfer takes place by means of raster screens.

Representation letter Used at Océ to mean: a report by a manager to senior

management about the policy pursued and the performances delivered

during a set period in the past.

Scanning The digital reading of an image, followed by its storage in a

memory device.

Sign shops Businesses that produce wide format colour prints for

advertising purposes, warning signs, road signs and direction signs.

Software & Professional Services Business group within Océ that

concentrates on the organisation and digital management of a customer's

document flows and their component parts.

Stakeholders All those who have an interest (financial or otherwise) in

Océ’s activities.

Stand-alone machine Copier or printer that is not linked to a network.

Swap Interest rate management instrument used to change the type of

interest rate (fixed or floating) on a loan.

Technical Document Systems Business group within Océ that

concentrates on the printing and copying of wide format drawings in

technical environments, factories and architectural firms.

Transaction print production Production of prints and copies on request

in either big or small print-runs.

Twin configuration Two printers installed in line, the aim being to

increase the print production per unit of time. This configuration also

enables extra colours to be added during a single printing operation.

User interface Link between the user and a computer (system), both in

hardware and software, enabling the user to communicate with the system

in the way that is easiest and fits in best with the activities that are being

performed.

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 prints or copies produced per machine per month.

Wide Format Printing Systems () Océ’s strategic business unit that is

active in the market for printing, copying and plotting of wide format

documents.

Workflow Used at Océ to mean: the volume of print assignments and the

related activities to be carried out within an organisation.

119

Design Baer Cornet / Marcel Beemer, Venlo

Illustrations Geert Setola, Oirsbeek

Photography Egon Notermans (Zebra Fotostudio’s), Venlo /

Jean Smeets, Grave (page 13)

Text consultants Jonkergouw & Van den Akker

Financial Communication Consultants, Amsterdam

Translation Alan Hemingway, Rijsoord

Printing Drukkerij Lecturis .., Eindhoven

© 2003 Océ ..

Safe Harbor Statement

This annual report contains certain forward-looking statements within the meaning of the

Private Securities Litigation Reform Act 1995.Océ has based these forward-looking statementson its current expectations and projections aboutfuture events. Océ’s expectations and projectionsmay change and its actual results may differsubstantially from those projected in the forward-looking statements based on various importantfactors (some of which are beyond Océ’s control)and which are neither manageable nor foresee-able by Océ.These factors include, but are not limited to,changes in economic and business conditions,customer demand in competitive markets, thesuccessful introduction of new products andservices into the markets, developments intechnology, adequate pricing of products andservices, competitive pricing pressures within theCompany’s markets, financing the Company’soperations, efficient and cost-effective operations,changes in foreign currency exchange rates,fluctuations in interest rates, uncertainty ofpolitical situations, changes in governmentalregulations and laws, tax rates, successful acqui-sitions, joint ventures and dispositions andeffects of recent and further terrorists attacks andthe war on terrorism.For a more detailed discussion of the risks andother factors that may affect the Company’sresults, business or financial condition, the pages64 till 66 of this annual report, Océ’s AnnualReport on Form 20- and any other filings madeby Océ with the Securities and ExchangeCommission should be consulted. Océ’s forward-looking statements speak only as ofthe date on which the statements are made, andOcé undertakes no obligation to update or revisepublicly any forward-looking statement, whetheras a result of new information, future events orotherwise.

This is an English translation of the official AnnualReport which was published in the Dutchlanguage.In the event of textual inconsistencies between theEnglish and the Dutch version the latter shallprevail.

Océ, Océ VarioPrint, Océ VarioStream, Océ PageStream and Océ are registeredtrade marks of Océ-Technologies ..RecoStar is a registered trade mark of Océ Document Technologies G.m.b.H.Océ Arizona is a registered trade mark of Océ Display Graphics Systems, Inc.

Océ Annual Report 2002 - KU Leuven · P. Bouw J.V.H. Pennings F.J. de Wit Board of Executive R.L....

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Transcript of Océ Annual Report 2002 - KU Leuven · P. Bouw J.V.H. Pennings F.J. de Wit Board of Executive R.L....