TWST: Could you begin by giving us a brief overview of XAAR Plc? And then describe the business and company of today.

Mr. Wylie: XAAR is an ink-jet technology company. Technology is the focus of our business and has been since we formed about 10 years ago. We were originally developed as a company from an ink jet research project that was funded into a Cambridge company by, in fact, an American company called AMI. In the end, AMI sold the project, AMI themselves having gone into chapter 11. From that project, a company was formed, named XAAR, by some venture capitalists in the UK to exploit the fundamental research of ink-jet printing that was involved in the original research project. Xaar itself started and still operates from the Science Park in Cambridge. Xaar went through various stages of venture financing until the IPO on the main London exchange in October 1997. Now, we have made our first acquisition - we acquired a company in Sweden in March of 1999 - and now have 200 people in the group, split equally between Cambridge and Sweden. Our business is to license our technology to office equipment manufacturers who are interested in exploiting the big potential for ink-jet in the office and home-printer markets. To date, we have eight licensees who make ink-jet print-heads using our technology and two licensees who specifically concentrate on making ink. It is a well-known fact that ink is the more profitable side of the ink-jet business, and we have been keen to exploit that area by developing, in conjunction with some of our partners, inks that are specifically suited to the operation of our print heads and useful in various applications in the office. In addition, we've now diversified into manufacturing, on a limited scale, ink-jet print-heads that are directed towards industrial and commercial printing. That is now a major push of the company into being a supplier of ink-jet print-heads and ink-jet inks into industrial and commercial applications. For example, through our Swedish subsidiary, we are the technology behind the Xerox ColorgrafX wide-format printer, which is a market leader. It is Xaar technology and Xaar inks that are in that machine, which is actually manufactured by Olympus for Xerox. So we are expanding our move into this marketplace, and we have some exciting new developments going on which will take ink-jet into areas it's never been before, which is principally into commercial printing - magazines, brochures, that type of area, which has long been owned by offset litho-printing and is now beginning to accept the fact that with Xaar's developments it could become an ink-jet area in the future.

TWST: What is the competitive landscape today? What is the shift in technology or the shift in usage that plays into ink jets now, and what do you see down the road three years or five years as new technology that might be competitive?

Mr. Wylie: Currently, the technology of ink-jet is the fastest-growing area of office and home printing. Principally, this is because of its ability to print colour. Colour printing has been the major driver behind the growth of ink-jet. That is continuing to be even more of an accelerating trend now, as the quality of ink-jet printing in the office has reached the levels of laser printing. However in colour printing, laser is just not competitive on a price basis with ink-jet. In the office area, the competition was originally dot-matrix printers, which ink-jet has finally killed off, and it's now laser printers, where ink- jet is taking more market share because of its ability to print colour at the same cost as black-and-white. Now, if we were to look at the wider area of industrial and commercial printing, then ink jet is in its infancy in terms of colour printing in those areas. So what we are facing as competition there is the traditional methods of printing which have been established over many years and are good, reliable systems, but do not use the advantages of ink-jet, which is a digitalprinting based system. By that I mean that it is a printing system that is controlled largely by a computer and does not rely upon the interface of printing plates or printing screens. So the flexibility for printing with ink-jet is far and away greater than you would have, say, with traditional printing methods. Having said that, we are talking of an industry that does not change in a hurry. Therefore, there is still work to be done to persuade people that ink-jet is the way forward for most areas of industrial and commercial printing. In terms of the company itself, we believe Xaar is in the forefront of the switch to ink-jet printing in industrial and commercial sectors. In the office and home sector, we are reliant upon our licensees, who are principally major Japanese office-equipment companies, to compete in the office and home markets with the currently dominant majors of Hewlett-Packard, Epson and Canon. Xaar itself licenses technology for up-front license fees and downstream sales-related royalties. Product design and product launches are the territory of our licensees. So we do not see Xaar as a company competing directly in those markets. We are 200 people in total, so it hardly makes sense for us to try to compete with HP, so we don't. We give that capability to our licensees who are major Japanese companies that have got the ability in due course to challenge the dominance of those companies in the office and home market. But in industrial and commercial printing, we believe that we are in the forefront of the change to ink-jet.

TWST: When you look down the road, is there a challenge at all, or are the challenges more from perhaps consolidation or a shakeout in those distribution channels?

Mr. Wylie: I think the challenges in terms of technology will come from development of other systems. We're not arrogant enough to believe that we will be the only printing technology that will be used throughout the world. At the moment, we feel Xaar has a very big lead in some of these areas, because of the flexibility of the print-heads and inks that we sell. But really, our challenge in terms of competition is to convert the installed base of very traditional printing systems to take on the new challenge of the digital era. Xaar does not particularly see a threat from other ink jet technologies at the moment -though you should never say never in this business.

TWST: Overall, when you look at telecommunications and portability today, it translates into that little device that's on your wrist or in your pocket. Is printing technology able to address that anywhere-access requirement that's developing today in not only our personal lives but our business lives?

Mr. Wylie: I do not ever foresee you having a printer strapped to your wrist. That's not an area where we think there's any opportunity because, basically, you're going to need a paper-feed! But what we understand from industry research is that there is an increase in the amount of printing being done with the advent of e-commerce and of the Internet. Xaar sees there is still a desire amongst people to download and print out hard copies of information they receive electronically. So far from being a threat to the future of printing in the office and the home, we see this as being a definite advantage. In terms of portability, of course, it is difficult, because however clever your printing device may be you're probably still going to need a standard- width piece of paper, which is a drawback in itself. So we can't say that we are going to be part of that. But we believe there's big growth to come in printing electronic data, so to speak. There is a move to make the Internet much more accessible through television rather than through a PC where you can surf the Web through your remote control on a TV. The idea is that each Web-TV will have a printing device in it so that you can download and print when you've found the Web page you want. Now that's a big area! The idea that every TV in the world will have a printer attached to it in some shape or form is something that a year or two years ago was not even contemplated. So if the price can be made right, if the device can be reliable and the paper feed and the paper handling made simple, then, using ink-jet, you can have a colour printout of your Web page. That's how we see big growth, on getting on the back of the growth in the use of the Internet.

TWST: Is there room for merger and acquisition activity between your company and others out there for technology, for relationships, for people resources?

Mr. Wylie: There certainly is. I think mergers and acquisitions are always a possibility, and Xaar is always on the lookout for ones that would make strategic, long-term sense for us. We have a strong stock price at the moment which could be used to great effect in an acquisition.. However there aren't that many obvious candidates around that fit our strategy for the moment. Having said that, we do go along the road of determinedly making long-term relationships with companies that are majors in various areas of the printing industry. For example, we have joint development agreements with DuPont, who are developing specialist inks for our new printing system, and with Kyocera in Japan. And Agfa, one of the biggest manufacturers of imaging systems in the world have also joined this program. Xaar is co-ordinating this party of three huge multi national companies, working together to produce very fast commercial printers. Xaar is leveraging on much bigger companies to gain access to their expertise and channels to market. In return they can get access to our technology for products that in the end, we think, will benefit all companies in the group. So we look at the idea of partnering developments and partnering ways to market as being a very key part of our future. We've got ongoing discussions with a couple of other major companies in the States and Europe. This is all part of our push towards globalising our technology, which we cannot do from our own base here in Cambridge. However we can use these well-established, famous companies around the world to do partnership with Xaar.

TWST: Is cash or capital a limitation as you address not only the growth opportunities but potential mergers and acquisitions?

Mr. Wylie: For our operations at the moment we are very well placed with cash. We've got sufficient cash for our current needs, and we don't envisage any problem in that area at all. We're trading very successfully at the moment. We have a strong stock price and therefore we could raise cash, if we needed to, from the London market. Xaar could also contemplate taking what would be a sensible step for the company in the longer term - to look at NASDAQ as a dual-quotation base for the stock. So we currently believe that access to capital for Xaar would be available if we chose to go that route. We have a very good story to tell, and it gets a very good hearing amongst investment bankers and institutional financiers. We've done a little bit of missionary work in the States, but not very much. That's a major decision for us to take. NASDAQ Europe might be of interest to us!

TWST: As you approach that investment community, what are the misperceptions or the misconceptions that they have about Xaar or about the industry and the opportunities? Are there any boxes that they build around you that don't fit, or are there others they throw into that box with you that don't belong?

Mr. Wylie: I think, again, that is something that we've been very wary of. We have made it absolutely clear that Xaar is not a printing company. Our job is to develop and supply technology. We are using the manufacturing route to exploit our own technology and to get the word around amongst other companies about what we can do. So we are very careful to guard against the misconception that we intend to be a printing company. We are a technology-based company. Well over 60% of our staff are development engineers. We are careful not to be bracketed as anything other than a technology company that makes a little bit of product to spread the word about how good the technology is.

TWST: Assess top management at this point? Do you have the bench strength and skill sets on board? Are there areas there you're looking at for changes or additions?

Mr. Wylie: Currently, we have a very good management team. We acquired a couple of people last year that strengthened that team, one in Japan and the manager of the Swedish subsidiary we acquired last year. I feel we are well-placed at the moment. But we're always on the lookout for good talent, and we haven't closed our minds to the possibility of taking on board some new people, if the timing is right.

TWST: What's the vision? When you look long term, how do you describe the ultimate enterprise?

Mr. Wylie: Our vision is really very focused. Our vision is that we are in the very fortunate situation of being the owners of what we believe is one of the best ink-jet printing technologies that's ever been invented. The opportunity is there for it to be introduced into areas of the marketplace not currently using ink-jet. Our vision is to see the Xaar technology emerging in areas where people would not imagine ink-jet would be used. Also if you prove your ability to do high-quality/high- speed printing, then you don't have to constrict yourself to just firing ink through an ink-jet print-head - there are many other processes that require accurate placement of dots of a substance of some sort. that is a focus of part of our development team - looking at future market opportunities that are not directly related to putting an image on a substrate.

TWST: What's the summary statement for an investor? If you had that individual or institutional investor sitting in front of you, what's the short list, strengths and highlights that you feel would compel an investor to make the decision today to buy in?

Mr. Wylie: I think a couple of things. We are now seeing proof of how well the Xaar technology works in licensees' products that have been launched over the last couple of years.. So this is now a proven technology . It is being proven in products that have a high degree of market acceptability. So from that point of view, there is a reduction in the risk for an investor in that we have now got a proven technology. But the exciting part for an investor is that we are taking our technology into new areas and new developments all the time - it's an exciting journey that we're on. We believe that the potential of the company is still very much in its infancy, and that there is a lot more to go. So what Xaar is saying to potential investors is that this is a technology company with a proven technology, but one that has not really reached anywhere near the limits of its potential for exploitation in what is a very fast-growing market sector.

TWST: Thank you.

GRAHAM WYLIE Chief Executive Officer Xaar Plc 2 Science Park Cambridge CB4 OXR United Kingdom Tel: 0044 1223 423 663 Fax:0044 1223 420 820

Each Chief Executive who is the featured subject of a TWST Interview is offered the opportunity to include an Investors Brief or other highlight material to be provided and sponsored by and for the company.

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