124 180 192 244

US GAAP financial statements Sustainability performance IFRS financial statements Company financial statements

Company financial
statements
Balance sheets of Koninklijke Philips Electronics N.V. as of December 31
in millions of euros
20072) 2008
Assets
Current assets:
Cash and cash equivalents 7,519 2,675
A Receivables 17,149 1,356
24,668 4,031
Non-current assets:
B Investments in affiliated companies 17,095 17,957
C Other non-current financial assets 2,735 946
Property, plant and equipment 1 1
19,831 18,904
44,499 22,935
Liabilities and stockholders’ equity
Current liabilities:
D Other current liabilities 482 1,034
E Short-term debt 21,099 2,979
F Short-term provisions 5 −
21,586 4,013
Non-current liabilities:
G Long-term debt 1,123 3,311
F Long-term provisions 49 67
1,172 3,378
H Stockholders’ equity:
Preference shares, par value EUR 0.20 per share:
- Authorized: 2,000,000,000 shares (2007: 2,500,000,000 shares)
- Issued: none
Common shares, par value EUR 0.20 per share:
- Authorized: 2,000,000,000 shares (2007: 2,500,000,000 shares)
- Issued and fully paid: 972,411,769 shares (2007: 1,142,826,763 shares) 228 194
Capital in excess of par value − −
Legal reserve: revaluation 133 117
Legal reserve: available-for-sale securities 1,183 (25)
Legal reserve: cash flow hedges 28 (28)
Legal reserve: affiliated companies 1,343 985
Legal reserve: currency translation differences (613) (656)
Retained earnings 16,782 16,336
Net income (loss) 4,873 (91)1)
Treasury shares, at cost: 49,429,913 shares (2007: 77,933,509 shares) (2,216) (1,288)
21,741 15,544
44,499 22,935

1)
Prepared before appropriation of results. The net loss of 2008 will be accounted for in retained earnings. A distribution from retained earnings of EUR 0.70
per common share will be proposed to the Annual General Meeting of Shareholders.
2)
Prior-period amounts have been restated and revised; see Significant IFRS accounting policies, sections Change in accounting policy and Reclassifications
and revisions for more details.

244 Philips Annual Report 2008

250 254 262 266
Reconciliation of Corporate governance Ten-year overview Investor information
non-US GAAP information

Statements of income of Koninklijke Philips Electronics N.V. for the years ended December 31
in millions of euros
20071) 2008

Income (loss) after taxes from affiliated companies 999 (729)

Other income after taxes 3,874 638
Net income (loss) 4,873 (91)

1)
Prior-period amounts have been restated and revised; see Significant IFRS accounting policies, sections Change in accounting policy and Reclassifications
and revisions for more details.

Statement of changes in equity of Koninklijke Philips Electronics N.V.

in millions of euros unless otherwise stated
legal reserves
outstanding total
number of capital in available currency net treasury stock-
shares in common excess of for-sale cash flow affiliated translation retained income shares at holders’
thousands stock par value revaluation securities hedges companies differences earnings (loss) cost equity

Balance as of
January 1, 2008 1,064,893 228 − 133 1,183 28 1,343 (613) 15,546 4,655 (2,216) 20,287

Change in
accounting policy 1,270 226 1,496
Prior-period revisions (34) (8) (42)
Balance as of
January 1, 2008 - as
restated and revised1) 1,064,893 228 – 133 1,183 28 1,343 (613) 16,782 4,873 (2,216) 21,741

Net income (loss) (91) (91)

Release revaluation
reserve (16) 16 −
Net current
period change (269) (24) (358) (56) 3,201 (4,153) (1,659)
Income tax on net
current period change 18 5 406 429
Reclassification into
income (939) (50) 8 (981)
Dividend paid (720) (720)
Cancellation of
treasury shares (34) (4,062) 4,096 −
Purchase of treasury
stock (146,453) (3,298) (3,298)
Re-issuance of treasury
stock 4,542 (71) (7) 130 52
Share-based
compensation plans 106 106

Income tax share-based

compensation plans (35) (35)

Balance as of
December 31, 2008 922,982 194 − 117 (25) (28) 985 (656) 16,336 (91) (1,288) 15,544

1)
The balance as of January 1, 2008 has been restated and revised; see Significant IFRS accounting policies, sections Change in accounting policy and Reclassifications
and revisions for more details.

Philips Annual Report 2008 245

124 180 192 145
US GAAP financial statements Sustainability performance IFRS financial statements Company financial statements
- Introduction
- Notes to the Company financial statements

Introduction Notes to the Company financial statements

All amounts in millions of euros unless otherwise stated

Statutory financial statements

The chapters IFRS financial statements and Company financial
statements contain the statutory financial statements of Koninklijke A
Philips Electronics N.V. (the ‘Company’).
Receivables
Accounting policies applied
The financial statements of the Company included in this chapter 2007 2008
are prepared in accordance with Part 9 of Book 2 of the Dutch
Civil Code. Section 362 (8), Book 2, Dutch Civil Code, which allows
companies that apply IFRS as adopted by the European Union in their Trade accounts receivable 169 104
consolidated financial statements to use the same measurement
Affiliated companies 16,481 613
principles in their company financial statements. The Company has
prepared these Company financial statements using this provision. Other receivables 97 87
Advances and prepaid expenses 61 42
The accounting policies are described in the section Significant IFRS
accounting policies that begins on page 209 of this Annual Report. Deferred tax assets 65 32
Derivative instruments - assets 276 478
Subsidiaries are accounted for using the net equity value in these
Company financial statements. 17,149 1,356

Presentation of Company financial statements

The balance sheet presentation deviates from Dutch regulations and
is more in line with common practice in the US in order to achieve
optimal transparency for Dutch and US shareholders.
Under this format, the order of presentation of assets and liabilities is
based on the decreasing degree of liquidity, which is common practice
in the US.
The income statement has been prepared in accordance with
Section 2:402 of the Dutch Civil Code, which allows a simplified
income statement in the Company financial statements in the event
a comprehensive income statement is included in the
consolidated statements.
Additional information
For ‘Additional information’ within the meaning of Section 2:392 of the
Dutch Civil Code, please refer to the Auditor’s report on page 243,
the Auditor’s report on page 249 and the section Proposed distribution
to shareholders on page 68 of this Annual Report.
An amount of EUR 45 million included in receivables is due after one
year (2007: EUR 65 million).
Until June 2008, cash transactions with US-based group companies
were executed through Koninklijke Philips Electronics N.V. (KPENV),
which resulted in significant individual short-term intercompany
receivables and payables. As from that date, and in line with the
standard practice in other countries, these intercompany receivables
and payables are periodically cleared via Philips Electronics North
America Corporation, a subsidiary of KPENV. Consequently, the
intercompany receivables stated under ‘Affiliated companies’ are
significantly lower compared to previous years.
B
Investments in affiliated companies
The investments in affiliated companies are included in the balance
sheet based on either their net asset value in accordance with the
aforementioned accounting principles of the consolidated financial
statements, or at amortized cost.

equity
investments loans total

Balance as of
January 1, 20081) 16,089 1,006 17,095
Changes:
Transferred to other
non-current financial assets (1,524) − (1,524)
Acquisitions/additions 2,453 4,140 6,593
Sales/redemptions (189) (151) (340)
After-tax income (loss)
from affiliated companies (729) − (729)
Dividends received (2,216) − (2,216)
Translation differences (161) 234 73
Other (995) − (995)
Balance as of
December 31, 2008 12,728 5,229 17,957

1)
The balance as of January 1, 2008 has been restated and revised; see
Significant IFRS accounting policies, sections Change in accounting policy
and Reclassifications and revisions for more details.

246 Philips Annual Report 2008

250 254 262 266
Reconciliation of Corporate governance Ten-year overview Investor information
non-US GAAP information

A list of subsidiaries and affiliated companies, prepared in accordance E

with the relevant legal requirements (Dutch Civil Code, Book 2,
Short-term debt A
Sections 379 and 414), is deposited at the office of the Commercial
Register in Eindhoven, Netherlands. Short-term debt includes the current portion of outstanding long-term
B
debt of EUR 126 million (2007: EUR 1,840 million) and debt to other
The transfer to Other non-current financial assets mainly relates group companies totaling EUR 2,792 million (2007: EUR 19,193
C
to the financial interest in LG Display. At the end of February 2008, million). Institutional financing amounts to EUR 61 million (2007:
Philips’ influence on LG Display’s operating and financial policies EUR 66 million).
D
including representation on the LG Display board, was reduced.
Consequently, the 19.9% investment in LG Display was transferred Debt to other group companies is significantly lower compared to
E
from Investments in affiliated companies to Other non-current financial previous years as a result of the adoption of a new practice to clear
assets effective March 1, 2008, as Philips was no longer able to exercise cash transactions with US-based subsidiaries (see note A for a further
F
significant influence. Philips ceased to apply equity accounting for its explanation).
LG Display shares as of that date.
F
The line Acquisitions/additions especially reflects the impact of equity
Provisions
injections and intercompany funding provided by the Company to
US-based group companies. These transactions enabled the group
companies to finance the three major acquisitions in 2008 (Genlyte 2007 2008
group Inc., Respironics Inc. and VISICU Inc.).

The line Other especially reflects actuarial gains and losses related Pensions 5 −
to defined-benefit plans of group companies.
Deferred tax liabilities 37 48
C Other 12 19
Other non-current financial assets Total provisions 54 67
of which long-term 49 67
other
of which short-term 5 −
investments receivables total

Balance as of
January 1, 2008 2,730 5 2,735

Changes:
Transferred from
Investments in affiliated
companies 1,524 − 1,524
Acquisitions/additions 79 50 129
Sales/redemptions (2,515) − (2,515)
Value adjustments/
impairments (925) (2) (927)

Balance as of
December 31, 2008 893 53 946

Other non-current financial assets include available-for-sale securities

and cost method investments that generate income unrelated to the
normal business operations.

The transfer from investments in affiliated companies mainly relates

to the interest in LG Display (see note B).

Sales/redemptions reflect the reduction of Philips’ interest in TSMC,

LG Display and D&M Holdings.

Value adjustments/impairments mainly relate to the interests in

LG Display, TPO Displays, Pace Micro Technology and NXP.

D
Other current liabilities

2007 2008

Income tax payable 25 12

Other short-term liabilities 85 107
Deferred income and accrued expenses 227 209
Derivative instruments – liabilities 145 706
482 1,034

Philips Annual Report 2008 247

124 180 192 145
US GAAP financial statements Sustainability performance IFRS financial statements Company financial statements
- Notes to the Company financial statements
- Auditor’s report

G
Long-term debt
Long-term debt and short-term-debt are uncollateralized.

average
remaining amount
(range of) average amount due in due after due after term out-standing
interest rates interest rate outstanding 1 year 1 year 5 years (in years) 2007

Eurobonds 6.1% 6.1% 750 − 750 − 2.4 2,442

USD bonds 3.3-7.8% 5.9% 2,547 − 2,547 1,841 14.0 357
Convertible debentures 1.7% 1.7% 81 72 9 − 2.6 103
Intercompany financing 2.2-4.9% 3.0% 718 718 − − − 2,161
Other long-term debt 4.7-16.4% 5.9% 59 54 5 − 1.4 61
4,155 844 3,311 1,841 5,124

Corresponding data
previous year 5,124 4,001 1,123 357 4,769

The following amounts of the long-term debt as of December 31, Any difference between the cost and the cash received at the time
2008, are due in the next five years: treasury shares are issued, is recorded in capital in excess of par
value, except in the situation in which the cash received is lower
than cost, and capital in excess of par has been depleted.
2009 844
2010 8 In order to reduce potential dilution effects, the following
transactions took place:
2011 1,001
2012 3
2007 2008
2013 458
2,314
Shares acquired 27,326,969 273
Corresponding amount previous year 4,767
Average market
price EUR 29.65 EUR 24.61
Convertible debentures include Philips personnel debentures.
Amount paid EUR 810 million −
For more information, please refer to note 58 and note 59.
Shares delivered 11,140,884 4,541,969
H
Average market
Stockholders’ equity price EUR 30.46 EUR 23.44
Common shares Amount received EUR 199 million EUR 52 million
In 2008, the Company’s issued share capital was reduced by
Total shares in
170,414,994 shares, which were acquired pursuant to the EUR 5 billion
treasury at year-end 52,119,611 47,577,915
share repurchase program. As of December 31, 2008, the issued share
capital consists of 972,411,769 common shares, each share having Total cost EUR 1,393 million EUR 1,263 million
a par value of EUR 0.20, which shares have been paid-in in full.

Preference shares In order to reduce capital stock, the following transactions took
The ‘Stichting Preferente Aandelen Philips’ has been granted the right place in 2007 and 2008:
to acquire preference shares in the Company. Such right has not been
exercised. As a means to protect the Company and its stakeholders
2007 2008
against an unsolicited attempt to (de facto) take over control of the
Company, the General Meeting of Shareholders in 1989 adopted
amendments to the Company’s articles of association that allow the
Shares acquired 25,813,898 146,453,094
Board of Management and the Supervisory Board to issue (rights to
acquire) preference shares to a third party. As of December 31, 2008, Average market
no preference shares have been issued. price EUR 31.87 EUR 22.52
Amount paid EUR 823 million EUR 3,298 million
Option rights/restricted shares
The Company has granted stock options on its common shares Reduction of capital
and rights to receive common shares in the future. Please refer stock − 170,414,994
to note 33, which is deemed incorporated and repeated herein
Total shares in
by reference.
treasury at year-end 25,813,898 1,851,998
Treasury shares Total cost EUR 823 million EUR 25 million
In connection with the Company’s share repurchase programs, shares
which have been repurchased and are held in treasury for (i) delivery
upon exercise of options and convertible personnel debentures and Net income (loss) and distribution to shareholders
under, restricted share programs and employee share purchase The net loss of 2008 will be accounted for in retained earnings.
programs, and (ii) capital reduction purposes are accounted for as A distribution of EUR 0.70 per common share will be proposed
a reduction of stockholders’ equity. Treasury shares are recorded at to the 2009 Annual General Meeting of Shareholders.
cost, representing the market price on the acquisition date. When
issued, shares are removed from treasury stock on a FIFO basis.

248 Philips Annual Report 2008

250 254
Reconciliation of Corporate governance
non-US GAAP information
Legal reserves
As of December 31, 2008, legal reserves relate to the revaluation of
assets and liabilities of acquired companies in the context of multi-stage
acquisitions of EUR 117 million (2007: EUR 133 million), unrealized
losses on available-for-sale securities of EUR 25 million (2007: gains of
EUR 1,183 million), unrealized losses on cash flow hedges of
EUR 28 million (2007: gains of EUR 28 million), ‘affiliated companies’ of
EUR 985 million (2007: EUR 1,343 million) and currency translation
losses of EUR 656 million (2007: losses of EUR 613 million).
The movement in unrealized results on available-for-sales securities
are especially due to the sale of shares (TSMC and LG Display) and
the recognition of impairment charges (see note 48). The item
‘affiliated companies’ relates to the ‘wettelijke reserve deelnemingen’,
which is required by Dutch law.
Limitations in the distribution of stockholders’ equity
Pursuant to Dutch law, limitations exist relating to the distribution of
stockholders’ equity of EUR 1,296 million (2007: EUR 2,915 million).
At December 31, 2008, such limitations relate to common stock of
EUR 194 million (2007: EUR 228 million) as well as to legal reserves
included under ‘affiliated companies’ of EUR 985 million (2007:
EUR 1,343 million) and ‘revaluation’ of EUR 117 million (2007:
EUR 1,344 million).
In general, gains related to available-for-sale securities, cash flow
hedges and currency translation differences reduce the distributable
stockholders’ equity. By their nature, losses relating to available-for-
sale securities, cash flow hedges and currency translation differences
automatically reduce stockholders’ equity, and thereby distributable
amounts.
I material misstatement.
Net income
Net income in 2008 amounted to a loss of EUR 91 million
(2007: a profit of EUR 4,873 million).
J financial statements, whether due to fraud or error. In making those
Employees
The number of persons employed by the Company at year-end 2008
was 11 (2007: 13) and included the members of the Board of
Management and most members of the Group Management Committee.
For the remuneration of past and present members of both the Board
of Management and the Supervisory Board, please refer to note 34,
which is deemed incorporated and repeated herein by reference.
K We believe that the audit evidence we have obtained is sufficient
Obligations not appearing in the balance sheet
General guarantees as referred to in Section 403, Book 2, of the
Dutch Civil Code, have been given by the Company on behalf of
several group companies in the Netherlands. The liabilities of these
companies to third parties and equity-accounted investees totaled
EUR 1,249 million as of year-end 2008 (2007: EUR 1,232 million).
Guarantees totaling EUR 266 million (2007: EUR 256 million) have
also been given on behalf of other group companies, and guarantees
totaling EUR 42 million (2007: EUR 44 million) on behalf of
unconsolidated companies and third parties. The Company is the
head of a fiscal unity that contains the most significant Dutch
wholly-owned group companies. The company is therefore jointly
and severally liable for the tax liabilities of the tax entity as a whole.
For additional information, please refer to note 62.
L
Audit fees
For a summary of the audit fees, please refer to the Report of the
Supervisory Board, table ‘Aggregated fees KPMG’ in the section
‘Report of Audit Committee’.
M
Subsequent events
On January 26, 2009, the Company announced that it had stopped
the EUR 5 billion share repurchase program, which was announced
on December 19, 2007, until further notice.
February 23, 2009
The Supervisory Board
The Board of Management
262 266
Ten-year overview Investor information
Auditor’s report
To the Supervisory Board and Shareholders of Koninklijke Philips
Electronics N.V.:
Report on the Company financial statements
We have audited the accompanying Company financial statements
2008 which are part of the financial statements 2008 of Koninklijke
Philips Electronics N.V., Eindhoven, the Netherlands, which comprise
the balance sheet as at December 31, 2008, statement of income and
the statement of changes in equity for the year then ended, and the
notes as set out on page 244 to 249.
G
Management’s responsibility
The Board of Management is responsible for the preparation and
H
fair presentation of the Company financial statements and for the
preparation of the Management report, both in accordance with
I
Part 9 of Book 2 of the Dutch Civil Code. This responsibility includes:
designing, implementing and maintaining internal control relevant
J
to the preparation and fair presentation of the Company financial
statements that are free from material misstatement, whether due
K
to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in
L
the circumstances.
M
Auditor’s responsibility
Our responsibility is to express an opinion on the Company financial
statements based on our audit. We conducted our audit in accordance
with Dutch law. This law requires that we comply with ethical
requirements and plan and perform the audit to obtain reasonable
assurance whether the Company financial statements are free from
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the Company financial statements.
The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the Company
risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the Company financial
statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the Company
financial statements.
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Company financial statements give a true and fair
view of the financial position of Koninklijke Philips Electronics N.V.
as at December 31, 2008, and of its result for the year then ended
in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under 2:393 sub 5 part f of the
Dutch Civil Code, we report, to the extent of our competence, that
the Management report as set out on page 192 to 197, is consistent
with the Company financial statements as required by 2:391 sub 4
of the Dutch Civil Code.
Amsterdam, February 23, 2009
KPMG Accountants N.V.
M.A. Soeting RA
Philips Annual Report 2008 249