1
EXHIBIT 10 (b) (1)
ANNUAL REPORT TO SHAREHOLDERS FOR 2000
--------------------------------------
Note: the Annual Report to Shareholders for 2000, consisting of the
Management Report and the Financial Statements, is furnished to the Securities
and Exchange Commission for information only and is not filed except for such
specific portions that are expressly incorporated by reference in this report on
Form 20-F.
2
ANNUAL REPORT 2000
MANAGEMENT REPORT
[Philips Logo]
PHILIPS
[Pages 1 through 41 intentionally omitted.]
MISCELLANEOUS
A sustained strong performance in the field of R&D is of the utmost importance
to strengthen Philips' competitiveness in its various markets and to open up new
markets. Philips Research's mission is to generate value for the Company through
technology-based innovations. By focusing not only on technical aspects,but also
on the business development side of the innovation process,we are constantly
improving our portfolio of Research projects.
The launch of new Research activities in China,India and Belgium has further
established Philips Research as one of the world's major global industrial
research laboratories. With facilities in three continents and over 3,000
staff,Philips Research is at the forefront in developing new technologies for
innovative products and is thus `shaping the future'.
Research innovations incorporated in consumer products include various
applications of optical storage technology,for example CD-RW. Philips continues
to play a major role in the further development of standards and technology for
CD applications. Research contributions to the Components and Semiconductors
businesses include the transfer of Polymer LED technology to Components, which
has in the meantime resulted in the first product introductions. Semiconductors
has achieved a large market share in RF power modules based on bipolar
transistor technology developed by Research.
PARTNERS IN INNOVATION
Dr Dago de Leeuw and his colleagues from Philips Research have succeeded in
making a 64-by-64-pixel display in which each pixel is turned on and off by a
switch based on plastic electronics. This is a major step towards the
realization of flexible displays made in plastic. Reloadable flexible displays
may even replace the daily newspaper one day.
[Picture of Dr Dago de Leeuw]
42 Miscellaneous
3
Patents have a significant commercial value. One of the ways Philips realizes
this value is by granting other companies licenses to use our patents in return
for payment of royalties. By exploiting every licensing opportunity, Philips is
generating a considerable amount of annual royalty income. Recent innovations in
optical storage, as found in the Super Audio CD, DVD and DVD-RW players shown
here, for example, represent a potential source of substantial revenues over the
coming years.
[Picture of Super Audio CD, DVD and DVD-RW players]
Other recent market successes based on Research innovations include Philips'
low-mercury Alto lamp technology and, in the medical field, software enabling
real-time interventional and cardiac magnetic resonance imaging.
Philips' policy in the field of intellectual property rights is to add value by
protecting and leveraging the innovations resulting from its substantial R&D
investments. Today, the Company has a patent portfolio of about 65,000 patent
rights, and we are stepping up our efforts to enlarge and strengthen this
portfolio. In 2000, Philips filed almost 2,100 new patent applications, up 35%
on the previous year. Currently about 1 new patent application is filed for
every million euros spent on R&D, which shows the high level of innovation
within the Philips R&D organization. Through these new patent filings, Philips
has secured solid positions in fields such as set-top boxes, digital video,
in-home networking, internet applications and other product areas. In 2000,
Philips' licensing activity generated substantially higher royalty income
compared with the previous year, mainly due to higher royalty income from our
optical recording, digital video and semiconductor patent portfolios.
Philips' Centre for Industrial Technology (CFT) supports the Group's businesses
in their business and product creation processes and with the design and
realization of advanced process technologies and innovative production
equipment. On the basis of its specific expertise, CFT contributes, as a
strategic partner, to the profitability of the businesses by creating a
competitive edge in speed and quality of innovation and in world-class
manufacturing.
In 2000, Philips Machinefabrieken changed its name to Philips Enabling
Technologies Group, a more accurate expression of the unit's competencies and
the competitive environment in which it operates, i.e. at the interface of high
technology and precision manufacturing. The unit's strategic focus is to
continuously enhance its technical capabilities in order to provide full-fledged
co-creation support to high-tech customers wishing to focus on their core
competencies and thus wishing to subcontract their manufacturing activities.
Philips Enabling Technologies Group seeks to build strategic alliances with
clients in carefully selected market segments that offer high growth potential,
e.g. front- and back-end semiconductor equipment, aerospace engine and airframe
parts, and plastic parts for the electronics and automotive industries.
Assembleon (formerly Electronic Manufacturing Technology) is a leading
manufacturer of SMT 'production-on-demand' assembly equipment and support
software. As of January 1, 2001, Assembleon has been made an independent unit
within the Philips Group with a view to a possible stock market flotation in the
course of 2001.
Philips Design is one of the largest design studios in the world and works
according to its proprietary High Design process, a human-focused,
multi-disciplinary, research-based approach whose purpose is to provide clients
with competitive and sustainable solutions, also in the field of e-design. The
quality of Philips Design's work is internationally recognized, as witnessed by
the dozens of design awards that it wins every year for its product and
interface design solutions. Philips Design's visionary projects, explorations of
future lifestyles aimed at supporting the creation of preferable solutions for
consumers, have also received international recognition (e.g. the Gold
Industrial Excellence Award of the Industrial Designers Society of America for
the Culinary Art project in 2000).
43
4
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion is based on the consolidated financial statements and
should be read in conjunction with those statements and the other financial
information.
The consolidated financial statements were prepared in accordance with generally
accepted accounting principles in the Netherlands (Dutch GAAP). These accounting
principles differ in some respects from generally accepted accounting principles
in the United States (US GAAP), which are discussed in note 28 to the
consolidated financial statements.
Because of the significant goodwill and other intangibles associated with the
Company's acquisitions, management believes income from operations excluding
amortization charges for goodwill and other intangibles arising from
acquisitions (Ebita) is an appropriate additional measure of operating
performance. However, the reader should know that this measurement is not a
substitute for operating income, net income, cash flows and other measures of
financial performance as defined by Dutch or US GAAP and may be defined
differently by other companies. In the income statement and sector reporting,
this supplemental financial information is presented separately and will be
referred to as Ebita.
Beginning in 1999, Philips' consolidated financial statements are reported in
euros. The previously presented financial statements for 1998, denominated in
Dutch guilders, have been translated into euros using the irrevocably fixed
conversion rate applicable since January 1, 1999 (EUR 1 = NLG 2.20371).
Management believes that the data denominated in euros reflect the same trends
as previously reported. Philips' financial data may not be comparable to those
of other companies that also report in euros if these other companies previously
reported in a currency other than the Dutch guilder.
From 2000 onwards, Philips has extended the sector reporting to nine sectors in
order to improve the financial transparency of the Company. Consumer Electronics
and Domestic Appliances and Personal Care (DAP), formerly part of Consumer
Products, are shown separately, as is Medical Systems, which previously was part
of Professional. Both DAP and Medical Systems now constitute sectors of their
own. Additionally, revenues and income from operations are presented separately
for the business groups within Consumer Electronics.
As part of an ongoing process of making Philips' financial reporting more
transparent and to provide better insight into the Company's earnings capacity,
financial position and cash flows, accounting changes and new accounting
pronouncements have been implemented in 2000, as outlined below:
o Beginning in 2000, for Dutch GAAP purposes, product development and process
development costs have been excluded from inventories. Such costs had
previously been excluded from inventories for US GAAP.
o For both Dutch GAAP and US GAAP, Philips has applied the Statement of
Financial Accounting Standards No. 133 (SFAS No. 133) effective January
1, 2000, and SFAS No. 138 since June 30, 2000. These statements require an
entity to recognize all derivatives as either assets or liabilities on the
balance sheet and measure those instruments at fair value. The statements
also prescribe the accounting for changes in the fair value of derivative
instruments (gains and losses) and the timing when such changes must be
recognized in earnings.
o Effective January 1, 2000, Philips has applied SEC Staff Accounting
Bulletin No. 101 (SAB 101),which provides detailed criteria for revenue
recognition, for both Dutch GAAP and US GAAP. These criteria did not
materially impact sales and revenue recognition.
- -- THE YEAR 2000
o Income from continuing operations: EUR 9,602 million (EUR 7.31 per common
share) -- excluding one-time gains, EUR 2,564 million (EUR 1.95 per common
share)
o Sales growth: 20%
o Income from operations: EUR 4,281 million, 11.3% of sales -- excluding
one-time gains, EUR 2,900 million, 7.7% of sales
o Ebita: EUR 4,623 million, 12.2% of sales
o Strong performance at Semiconductors, much improved results at Components
o Good overall performance across the sectors
o RONA: 35.7% -- excluding one-time gains, 24.2%
o Cash flow from operating activities: EUR 2,996 million
- -- SUMMARY
The year 2000 was a record year in almost every respect. Aided by favorable
economic conditions worldwide and a strong US dollar, the Company benefited from
strong demand for its products, especially components and semiconductors. Total
sales were up by 20%, and the overall profitability of continuing operations
improved further, enabling the Company to meet the targeted objective of 24%
return on net assets.
Net income from continuing operations amounted to EUR 9,602 million --
excluding one-time gains, EUR 2,564 million. The Company had a strong cash flow
from operations of EUR 2,996 million and enjoys a healthy balance sheet with
only 12% net debt.
Sales in 2000 totaled EUR 37,862 million, an increase of 20% over 1999.
Exchange rate developments had a favorable effect of 9%, which was partially
offset by a price erosion of 5%. The sales increase in 2000 mainly reflected an
upturn in Semiconductors, Components and Medical Systems, which achieved 55%,
22% and 22% growth respectively during this period. Sales growth diminished in
the second half of the year, but still amounted to a respectable 15% in the
fourth quarter.
44 Operating and Financial Review and Prospects
5
Income from continuing operations in 2000 improved to an all-time high of
EUR 9,602 million (EUR 7.31 per common share), compared with EUR 1,804 million
(EUR 1.31 per common share) in 1999 and EUR 541 million (EUR 0.38 per common
share) in 1998. The 2000 results were favorably impacted by a number of
significant one-time gains, which are presented in the table below.
INCOME FROM CONTINUING OPERATIONS EXCLUDING ONE-TIME GAINS
amounts in millions of euros (unless otherwise stated)
1998 1999 2000
------ ------ ------
As published 541 1,804 9,602
per common share 0.38 1.31 7.31
Affecting income from operations:
Atos Origin merger gain 1,072
Gain on sale of AC&M, net of taxes 247
Sale of Conventional Passive
Components, net of taxes 130
Dissolution of Lucent joint
venture (375)
Affecting financial income and
expenses:
Sale of JDS Uniphase shares 117 1,207
Seagram/Vivendi share exchange
gain, net of
hedge settlement and taxes 1,115
Affecting results relating to
unconsolidated companies:
Sale of ASML shares 2,595
Beltone/Great Nordic share
exchange gain 122
Gains related to TSMC's equity
transactions* 680
Excluding significant one-time
gains 916 1,557 2,564
per common share 0.64 1.13 1.95
* Represents gain recorded in conjunction with issuance of shares by TSMC at
a price in excess of the per share carrying value recognized by Philips.
Excluding these incidental items, income from continuing operations totaled
EUR 2,564 million (EUR 1.95 per common share) in 2000, which is EUR 1,007
million higher than income of EUR 1,557 million (EUR 1.13 per common share) in
1999, which in turn was EUR 641 million higher than income of EUR 916 million
(EUR 0.64 per common share) in 1998. The results for 2000 include an especially
strong contribution from Semiconductors and Components, whose income doubled
over prior-year levels. Lighting and Domestic Appliances and Personal Care
delivered record results. The 2000 results benefited from a good performance by
Taiwan Semiconductor Manufacturing Company (TSMC), an unconsolidated company.
The return on net assets (RONA) rose to 35.7% in 2000, compared to 17.5% in 1999
and 6.5% in 1998. Excluding significant one-time gains, RONA for 2000, 1999 and
1998 was 24.2%, 15.8% and 10.1% respectively. The increase was primarily
attributable to improved profitability.
Cash flows from operating activities totaled EUR 2,996 million, compared
with EUR 1,913 million in 1999 and EUR 2,140 million in 1998. The increase in
cash provided by operating activities is attributable to the increased
profitability of the Company, partially offset by higher working capital
requirements of the Company's growing businesses.
In 2000 net cash used for investing activities totaled EUR 2,404 million,
compared to EUR 3,834 million in 1999 and EUR 1,441 million in 1998.
Proceeds from the sale of businesses that no longer fit within the Company's
strategy, which totaled EUR 3,586 million, and cash generated from the sale of
securities, an amount of EUR 848 million, were used to fund the Company's
expansion by means of the purchase of businesses for an amount of EUR 3,209
million, particularly in the Medical Systems and Domestic Appliances and
Personal Care sectors.
Furthermore, the increased cash requirements compared to the last two years
were attributable to a higher level of capital expenditure, particularly at
Semiconductors and Components.
The net cash used for financing activities in 2000 totaled EUR 2,038
million, compared to EUR 2,606 million in 1999. Both years included cash
repayments to shareholders of EUR 1,673 million and EUR 1,490 million
respectively from the share reduction programs. The cash requirements in 1998
came to EUR 814 million.
45
6
Group performance in the respective quarters of the years 2000 and 1999:
amounts in millions of euros unless otherwise stated
2000
---------------------------------
1st 2nd 3rd 4th
quarter quarter quarter quarter
------- ------- ------- -------
Sales 8,329 9,155 9,371 11,007
Income from operations 663 724 945 1,949
- - excluding one-time gains 663 724 636 877
Income from continuing 1,140 3,604 2,066 2,792
operations
- - excluding one-time gains 614 698 647 605
Per common share* 0.86 2.71 1.58 2.16
- - excluding one-time gains 0.46 0.53 0.49 0.47
----- ------ ----- ------
* after 4-for-1 stock split
amounts in millions of euros unless otherwise stated
1999
------------------------------------
1st 2nd 3rd 4th
quarter quarter quarter quarter
------- ------- ------- -------
Sales 6,837 7,298 7,744 9,580
Income from operations 549 319 352 531
- - excluding one-time gains 380 319 352 531
Income from continuing 469 274 374 687
operations
- - excluding one-time gains 339 244 331 643
Per common share* 0.32 0.20 0.28 0.51
- - excluding one-time gains 0.23 0.18 0.25 0.47
------ ----- ----- ------
* after 4-for-1 stock split
GROUP SALES AND INCOME FROM OPERATIONS
amounts in millions of euros
1998 1999 2000
------- ------ ------
Sales 30,459 31,459 37,862
% nominal increase 3 3 20
Ebita 943 1,966 4,623
as a % of sales 3.1 6.2 12.2
Income from operations 685 1,751 4,281
as a % of sales 2.2 5.6 11.3
------ ------ ------
7
Sales in 2000 grew to EUR 37,862 million, 20% higher than the EUR 31,459
million in 1999, which in turn was 3% higher than the EUR 30,459 million in
1998. The growth was particularly strong at Semiconductors (55%), Components
(22%) and Medical Systems (22%). Currency fluctuations, primarily the strong
appreciation of the US dollar (16%) against the euro, had a positive effect of
9% on nominal sales. Various changes in consolidation had, on balance, a neutral
effect. Positive effects came from the consolidation of, among others, MiCRUS,
MedQuist and Optiva Corporation. Deconsolidations related mainly to Advanced
Ceramics & Modules (AC&M) as of July 1 and Origin as of October 1, 2000.
Excluding these effects, sales growth in 2000 was 11%, comprised of 16% volume
growth partially offset by 5% price erosion.
SALES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
in billions of euros 27.1 29.7 30.5 31.5 37.9
% growth 7 9 3 3 20
Geographically, sales growth in 2000 was strong in all regions, in
particular in Asia Pacific. Sales in Asia accelerated strongly and ended 29%
above the year before, with all sectors contributing, especially Semiconductors.
The sharp upturn in Europe (16%) was driven by Semiconductors, Components and
Consumer Electronics. In addition, Latin America recorded substantial positive
growth, recovering from the weak sales in the years before. The recovery is
headed by Brazil, benefiting from the upturn in economic conditions in that
country. North America recorded a 21% increase in sales, attributable to the
strong rise of the US dollar and the new acquisitions in the region.
In 1999, sales were 3% higher than in 1998. Changes in exchange rates,
particularly those of the US dollar and the Japanese yen against the euro, had a
positive effect of 2% on nominal sales. Changes in consolidation had an
unfavorable effect of 2%, primarily attributable to the divestment of the
non-ceramic activities of Passive Components and a significant proportion of the
46 Operating and Financial Review and Prospects
8
Miscellaneous sector's activities. Positive effects came from the
consolidation of VLSI, Construlita de Queretaro and Voice Control Systems.
Income from operations in 2000 totaled EUR 4,281 million, or 11.3% of
sales, as compared to EUR 1,751 million, or 5.6% of sales, and EUR 685 million,
or 2.2% of sales, in 1999 and 1998 respectively. The largest increase in income
from operations was realized by Semiconductors, whose results more than doubled
compared to 1999, reflecting the strong upturn in the market, which started in
the second half of 1999. Moreover, overall price erosion decreased
significantly, while improved efficiency and cost control had a positive impact
on income. In addition, reduced pension costs had a positive effect of EUR 403
million on income. All other sectors, except Origin, contributed to this year's
operational result improvement. Included in income were one-time gains of EUR
309 million related to the sale of the AC&M business and a gain of EUR 1,072
million related to the exchange of Origin shares into Atos Origin shares.
INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
as a % of net operating 4.2 16.4 6.5 17.5 35.7
capital (RONA)
Income from operations in 1999 was EUR 1,751 million, or 5.6% of sales, and
was favorably impacted by EUR 169 million income from the divestment of
Conventional Passive Components. Furthermore, income was positively influenced
by the capitalization of IT software (EUR 200 million). The largest increase in
income from operations was realized by PCC, whose results improved significantly
in 1999. Compared to 1998, overall wage costs decreased by 2% in 1999,
reflecting the reduction in the average number of personnel and lower pension
costs.
Income from operations in 1998 totaled EUR 685 million, or 2.2% of sales.
In addition to the acquisition-related charges for ATL Ultrasound and Active
Impulse Systems, 1998 income was adversely affected by the operational losses at
PCC and the special charges in connection with the dissolution of the PCC joint
venture with Lucent Technologies.
On a geographic basis, income from operations in 2000 improved in all
regions. Europe, Asia Pacific and North America showed strong increases in
income, driven by the favorable developments at Semiconductors. North America
was also positively influenced by the strong US dollar. Furthermore, income in
Europe increased due to the reduced pension costs in the Netherlands, while both
Europe and Asia Pacific were positively affected by the non-cash gain from the
sale of Origin and the sale of the AC&M business. Latin America became
profitable again, fully reflecting the higher activity level at Components.
INCOME FROM OPERATIONS PER GEOGRAPHIC AREA
in millions of euros
1998 1999 2000
------ ------ ------
Europe 1,084 1,124 3,246
USA and Canada (473) 82 186
Latin America (205) (41) 59
Africa (1) 1 3
Asia Pacific 280 585 787
------ ------ ------
685 1,751 4,281
====== ====== ======
The year-to-year comparisons of income from operations are impacted by the
amortization of goodwill and intangibles and the write-off of in-process R&D
resulting from recent acquisitions in the USA, such as MedQuist, ADAC and Optiva
in 2000, VLSI Technology, VCS and FEI/Micrion in 1999 and ATL Ultrasound in
1998. Moreover, comparisons are affected by the write-down of tangible fixed
assets at PCC in 1998. Amortization charges in 2000 arising from acquisitions
related to MedQuist (EUR 47 million), ADAC (EUR 44 million), ATL Ultrasound (EUR
48 million), VLSI (EUR 99 million), MiCRUS (EUR 2 million), VCS (EUR 44
million), FEI/Micrion (EUR 7 million), Optiva (EUR 4 million) and a number of
smaller items in various sectors totaling EUR 47 million.
47
9
Income from operations in 2000, excluding amortization charges arising from
acquisitions (Ebita), totaled EUR 4,623 million compared to EUR 1,966 million in
1999 and EUR 943 million in 1998.
RESTRUCTURING
The competitive environment in which Philips organizations operate requires
rapid adjustments in organizational structure, product portfolio and customer
orientation. The main loss-making operations that have been restructured
recently or are still in the process of being restructured are:
o the PCC operations following the dissolution of the joint venture with
Lucent;
o the HAPD activities in Japan;
o the Germany and Taiwan locations of Display Components.
Businesses that have been sold in the last three years include AC&M,
Philips Projects, Semiconductors' Complex Programmable Logic Devices,
Conventional Passive Components, Consumer Electronics' retail and rental
operations in Australia, and sundry activities such as Philips Hearing
Technologies, parts of Philips' Plastics and Metalware Factories, PolyGram and
Airpax.
Restructuring charges recorded against income from operations in 2000
totaled EUR 157 million, consisting of EUR 203 million for various new projects
partly offset by releases of provisions totaling EUR 46 million due to lower
expenditures as a result of the completion of restructuring projects.
The most significant new projects in 2000 were:
o closure of the large-screen operations of HAPD in Kobe, Japan (EUR 45
million);
o discontinuation of the 66-FS picture tube production in Aachen, Germany
(EUR 16 million);
o lay-offs in Display Components in Dapon and Chupei, Taiwan (EUR 29
million);
o closure of Research test facilities in the Netherlands (EUR 21 million);
o transfer of Mainstream CE's audio/video operations from Singapore to China
(EUR 19 million).
In 1999, overall net restructuring charges totaled EUR 45 million,
consisting of EUR 123 million for various projects in the sectors Lighting,
Components, Consumer Electronics and Miscellaneous partly offset by releases of
EUR 78 million. Individually, these projects were not of material significance,
the largest being the restructuring of the Flat Panel Display activities at
Waalre in the Netherlands (EUR 38 million).
In 1998, total restructuring charges, mainly relating to the Consumer
Electronics, Components and Lighting sectors, amounted to EUR 349 million,
partly offset by some minor releases.
Total restructuring charges in 2000, 1999 and 1998 can be specified as
follows:
amounts in millions of euros
1998 1999 2000
----- ----- -----
Personnel lay-off costs 124 71 125
Write-down of inventories 134 4 10
Write-down of fixed assets 58 36 42
Other costs 33 12 26
--- --- ---
349 123 203
=== === ===
In 2000, releases of surplus restructuring provisions totaled EUR 46
million. The releases were primarily related to Consumer Electronics, Lighting,
Components, Origin, Semiconductors and Miscellaneous. The releases were caused
by reduced severance requirements, due to the transfer of employees scheduled to
be laid-off to other positions within the Company, and by changes in
restructuring plans. In 1999, releases amounted to EUR 78 million, for Lighting,
Consumer Electronics and Components.
Total lay-offs as a result of new projects were projected at approximately
5,000 terminations, of which 3,900 relate to direct labor and 1,100 to indirect
labor (total planned lay-offs in 1999 approximately 1,500 persons, and in 1998
approximately 4,000 persons). The actual number of lay-offs effected during 2000
totaled approximately 5,100.
48 Operating and Financial Review and Prospects
10
Inventory write-off charges in 2000 primarily related to Consumer
Electronics. Charges for write-downs of fixed assets mainly occurred in Consumer
Electronics and Miscellaneous. In 1999, fixed-asset write-downs were primarily
in Components, Lighting and Miscellaneous, while in 1998 they largely related to
Components. Other charges mainly reflect the costs involved in the cancellation
of various contracts (building leases, car leases etc.).
In general, restructuring plans lead to cash outlays in the year in which
they are recognized or in the following year, and are financed from the normal
cash flow from operations. Management believes that in the future the Company's
earnings will benefit from the restructuring plans by approximately EUR 170
million per year, as a result of reduced salaries and wages, higher efficiencies
in production processes, as well as lower depreciation costs.
For further details on restructuring charges, see note 2 to the consolidated
financial statements.
Financial income and expenses amounted to income of EUR 1,988 million in 2000
and EUR 32 million in 1999, compared to expenses of EUR 312 million in 1998.
Beginning in 1999, the interest component of pension expense is no longer
included in financial income and expenses, but included in pension cost, which
is part of income from operations. This accounts for a positive variance in
financing costs of EUR 62 million in 1999. Net interest expenses amounted to EUR
167 million in 2000, compared with EUR 129 million in 1999 and EUR 244 million
in 1998. The net interest expenses were higher, mainly as a result of the higher
net debt level of the Group. The lower net interest expenses in 1999 reflected
the impact of the net cash position (cash exceeded debt) that prevailed during
the first half of 1999 as a result of the cash proceeds from the sale of
PolyGram at the end of 1998.
Financial income in each of the years includes gains from the sale of marketable
securities. During the year 2000 the Company sold a portion of the JDS Uniphase
shares that were received upon the sale of Philips Optoelectronics in the middle
of 1998. The income from the sale amounted to EUR 1,207 million, net of USD
hedge. Moreover, Seagram shares were exchanged for Vivendi Universal shares. The
shares in Seagram were obtained upon the sale of Philips' 75% stake in PolyGram
in 1998. The income from the exchange of Seagram shares amounted to EUR 966
million, net of US dollar hedge. In 1999 a gain of EUR 117 million was realized
on the sale of a portion of the JDS Uniphase shares. In addition, in 2000
dividends totaling EUR 32 million were received on the Seagram shares, while in
1999 EUR 28 million was received. The foreign exchange losses in 2000 amounted
to a loss of EUR 86 million, which was mainly related to hedging costs of
intercompany loans. By contrast, in 1999 a gain of EUR 7 million was reported.
In 1998 a loss of EUR 40 million was incurred.
Income tax charges totaled EUR 570 million in 2000, compared to EUR 336
million in 1999 and EUR 41 million in 1998. This corresponds to an effective tax
rate in 2000 of 9%, down from 19% in 1999 and 11% in 1998. The lower effective
tax rate in 2000 primarily resulted from the tax-exempt proceeds from the sale
of various securities (tax effect of 13%). The Company expects the tax rate to
go up to approximately 25% next year.
Results relating to unconsolidated companies in 2000 totaled EUR 3,970
million, compared to EUR 409 million in 1999 and EUR 39 million in 1998. Income
in 2000 was favorably impacted by a number of incidental items. In June, a
substantial portion of the ASM Lithography Holding N.V. (ASML) shares was sold,
resulting in a gain of EUR 2,595 million, while in the same month Philips' 33%
interest in Beltone Electronics was exchanged for GN Great Nordic shares,
resulting in a transaction gain of EUR 122 million. In 2000, several equity
transactions by Taiwan Semiconductor Manufacturing Company (TSMC) resulted in a
net gain of EUR 680 million. Excluding these items, results relating to
unconsolidated companies amounted to EUR 573 million, which was considerably
higher than the previous year, primarily due to TSMC's performance in the
favorable semiconductor market. LG.Philips LCD Co. contributed to income for the
full year in 2000, compared with only six months in 1999. The share in income of
ASML during the first five months
49
11
of 2000 was significantly higher than in the previous full year, reflecting
ASML's profitable situation. These income improvements were partly offset by our
share in the losses of Systems on Silicon Manufacturing Company (SSMC) due to
the high costs of ramping-up the factory, running-in expenses at LumiLeds and
increased funding requirements of NavTech.
Income in 1999 was considerably higher than in 1998 and was positively
influenced by the significant contribution from LG.Philips LCD Co. and improving
TSMC results, which reflected TSMC's capacity increase and the upturn in the
semiconductor industry in 1999. ASML reported a 31% increase in earnings in
1999, reflecting a particularly strong second half of the year. Finally, funding
costs incurred at NavTech were substantially in line with 1998, excluding the
one-time gain from the sale of a portion of the NavTech shares to a consortium
of investors in the first quarter of 1999.
In 1998, the results of TSMC and ASML were disappointing, due to the global
slowing in the semiconductor industry and the crisis in Asia.
The share of third-party minority interests in the income of Group
companies amounted to EUR 67 million in 2000, compared with EUR 52 million in
1999. The increase is fully attributable to the improved results of FEI Co. and
the China operations, partly offset by losses of HAPD absorbed by third-party
shareholders. In 1998 third-party shareholders absorbed EUR 170 million of the
net losses incurred by Group companies. This was substantially related to Lucent
Technologies' share in the losses of the PCC joint venture.
- -- NET INCOME
Income from continuing operations was EUR 9,602 million in 2000 (EUR 7.31
per common share), compared to EUR 1,804 million (EUR 1.31 per common share) in
1999 and EUR 541 million (EUR 0.38 per common share) in 1998.
Income from discontinued operations in 1998 represents Philips' 75% share
in the operations of PolyGram through December 10, 1998 and amounted to EUR 210
million, net of applicable income taxes. Philips sold its shares in PolyGram to
The Seagram Company on December 10, 1998. In connection with this sale, a gain
of EUR 4,844 million, free of taxes, was recognized in 1998.
There were no extraordinary items in 2000, whereas a loss of EUR 5 million
was recorded in 1999 and a net gain of EUR 458 million in 1998. The
extraordinary losses in 1999 relate entirely to premiums paid for the early
redemption of long-term debentures. Major items in 1998 were the sale of Philips
Car Systems at a net gain of EUR 379 million and Philips Optoelectronics at a
net gain of EUR 78 million.
Net income in 2000 amounted to EUR 9,602 million (EUR 7.31 per common
share) compared to EUR 1,799 million (EUR 1.31 per common share) in 1999. Net
income for 1998, including EUR 5,054 million relating to the discontinued
PolyGram operation and its related sale, totaled EUR 6,053 million (EUR 4.20 per
common share).
- -- US GAAP
The Group financial statements have been prepared in accordance with Dutch
GAAP, which differs in certain respects from US GAAP. Income from continuing
operations determined in accordance with US GAAP was EUR 9,577 million in 2000,
compared with EUR 1,595 million in 1999 and EUR 1,025 million in 1998. These
aggregate amounts correspond to basic earnings per common share of EUR 7.30 in
2000, EUR 1.16 in 1999 and EUR 0.71 in 1998. Diluted earnings per common share
amounted to EUR 7.22 in 2000, EUR 1.15 in 1999 and EUR 0.70 in 1998.
Please refer to note 28 to the consolidated financial statements for a
description of the primary differences between Dutch GAAP and US GAAP and the
earnings per common share information.
- -- DIVIDEND
A proposal will be submitted to the General Meeting of Shareholders to
declare a dividend of EUR 0.36 per common share (compared with the EUR 0.30
dividend per common share paid in 2000, reflecting the 1999 profit
distribution). The balance sheet presented in this report, as part of the
consolidated financial
50 Operating and Financial Review and Prospects
12
statements for the period ended December 31, 2000, is before profit
distribution which is subject to shareholder approval after year-end. Adoption
of the dividend proposal by the General Meeting of Shareholders will result in a
total dividend payment in the year 2001 of EUR 462 million (compared with EUR
399 million in 2000).
- -- EMPLOYMENT
The number of employees at the end of 2000 totaled 219,429, which is 7,445
lower than the position at the end of 1999. The reduction is principally
attributable to consolidation changes, reflecting a total decrease of 10,621
employees. The most significant divestment was that of Origin, involving a
reduction of 15,906 employees. In addition, the headcount was reduced by 3,258
following the divestment of AC&M. Various acquisitions added 10,065 persons to
the Company's payroll, the most important being MedQuist (6,742), MiCRUS (950),
ADAC (1,031) and Optiva (739). After adjustment for these consolidation changes,
the headcount increased by 3,176 persons. Of this number, the strongest
increases occurred at Semiconductors (4,285) and Components (1,499), while the
main reductions took place in the Miscellaneous activities (967) and at DAP
(816). Geographically, the headcount increased in Europe, Asia Pacific and Latin
America, while falling in North America.
SALES PER EMPLOYEE*
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in thousands of euros 107 119 124 143 171
*excluding Origin
- -- SALES AND INCOME FROM OPERATIONS PER SECTOR
As indicated in the introduction to the Operating and Financial Review and
Prospects, the following sectors are reported in 2000: Lighting, Consumer
Electronics, DAP, Components, Semiconductors, Medical Systems, Miscellaneous,
Unallocated and Origin (for nine months only). For a comprehensive business
description of the various sectors, please refer to the relevant section in the
consolidated financial statements (note 29).
For the convenience of the reader, the following comments on the business
performance per product sector are preceded by a table which includes certain
primary performance indicators for the respective years. Sales growth, as
mentioned in the performance indicators and comments, consists of the nominal
changes in sales (comparison of year-to-year euro amounts). Further sector
information is provided in the notes to the consolidated financial statements.
SALES PER SECTOR
Cons. Semi- Med
Lighting Electronics DAP Components conductors Systems Origins Miscellaneous
-------- ----------- --- ---------- ---------- ------- ------- -------------
% per sector 13 39 5 12 16 8 2 5
% change from 1999 11 18 18 22 55 22 (32) 16
LIGHTING
amounts in millions of euros
1998 1999 2000
------ ------ -------
Sales 4,453 4,548 5,052
% nominal increase (decrease) (2) 2 11
Ebita 601 609 677
as a % of sales 13.5 13.4 13.4
Income from operations 595 602 668
as a % of sales 13.4 13.2 13.2
Sales in the Lighting sector increased by 11% in 2000. Currency movements
had a positive impact of 8% on sales. Volume growth was 6%, which was partly
countered by increased price erosion (4%), particularly in Europe and North
America.
Geographically, sales growth was most apparent in Asia Pacific, Eastern
Europe and Latin America. The
51
13
growth in North America is entirely attributable to the steep increase in
the value of the US dollar.
The strongest sales growth was achieved by the Automotive business, which
significantly outperformed the market as a result of successful product
innovation.
LIGHTING SALES
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in billions of euros 4.0 4.5 4.5 4.5 5.1
Income from operations of EUR 668 million in 2000 represents an improvement
of almost 11% compared to 1999 and was mainly the result of the strong sales
growth, slightly offset by a net restructuring charge of EUR 17 million. The
largest income improvement was realized by the Lamps business, especially in
Europe. The Automotive & Special Lighting business also contributed to the
positive trend.
LIGHTING INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in millions of euros 319 522 595 602 668
as a % of sales 7.9 11.5 13.4 13.2 13.2
Sales in 1999 increased by 2% to EUR 4,548 million. Currency movements had
a positive impact of 1% on nominal sales. Volume growth was 4%, partly offset by
3% price erosion. Overall growth was strong in Asia, while lower sales were
posted in Latin America and Eastern Europe, caused by the weak economic
conditions in these regions.
Income from operations in 1999 improved marginally to EUR 602 million from
EUR 595 million in 1998. The 1999 figure was impacted by restructurings in both
Europe and Latin America. Excluding restructuring costs and incidental items,
the income improvement was due to slightly higher sales volume and the positive
effects of prior restructuring actions and cost efficiencies.
CONSUMER ELECTRONICS
amounts in millions of euros
1998 1999 2000
------ ------ ------
Sales 12,364 12,436 14,683
% nominal increase 10 1 18
Ebita (443) 276 420
as a % of sales (3.6) 2.2 2.9
Income from operations (447) 258 374
as a % of sales (3.6) 2.1 2.5
14
Details for two years per product division, established since January 1,
2000, are presented in the following table:
amounts in millions of euros
2000
--------------------------------------------
sales ebita income as a %
(loss) of sales
from
operations
------ ------ ---------- ---------
Mainstream CE 8,851 161 161 1.8
Digital Networks 845 (107) (107) (12.7)
Consumer Communications 2,207 1 1 0.0
Specialty Products 2,220 54 8 0.4
Licenses 560 311 311 55.5
Consumer Electronics 14,683 420 374 2.5
amounts in millions of euros
1999
-------------------------------------------
sales ebita income as a %
(loss) of sales
from
operations
------ ------ ---------- --------
Mainstream CE 7,932 97 97 1.2
Digital Networks 578 (86) (86) (14.9)
Consumer Communications 1,740 (52) (53) (3.0)
Specialty Products 1,801 54 38 2.1
Licenses 385 263 262 68.1
Consumer Electronics 12,436 276 258 2.1
52 Operating and Financial Review and Prospects
15
Sales in the Consumer Electronics sector totaled EUR 14,683 million in
2000, an increase of 18% on the year before. Changes in consolidation had a
minor negative effect of 1%, while currency movements had a positive effect of
9% on nominal sales. Sales volume increased by 18%, partly offset by an average
price decrease of 8%. The downward trend in prices eased somewhat compared with
the year before, when prices ended 12% lower. The improvement is particularly
related to more favorable market conditions for monitors. Digital Networks and
Consumer Communications recorded the strongest sales increase.
Geographically, sales increased most strongly in Asia Pacific and Europe,
while sales in Latin America rebounded to solid positive growth. Sales of
Mainstream CE's products were edged up by Consumer TV, in particular in the
upmarket segment, branded monitors, especially flat panel monitors, and DVD
Video, whose sales more than doubled. Digital Networks recorded sharply higher
sales, benefiting from the strong demand for set-top boxes.
Sales growth in Europe was primarily strong in satellite set-top boxes. In
addition, sales increased in the USA in Internet TV/Personal TV and satellite
set-top boxes as a result of the start of deliveries to America Online (AOL) and
DirecTV. The substantial rise in Consumer Communications is led by significant
growth of GSM sales in Europe and Asia Pacific, reaching more than 13 million
handsets in 2000. In addition, sales in Fax and DECT increased strongly. Sales
growth in Specialty Products was driven by Remote Control Systems, Speaker
Systems and Broadband Networks.
CONSUMER ELECTRONICS SALES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
in billions of euros 9.0 11.2 12.4 12.4 14.7
Sales in 1999 increased by 1% to EUR 12,436 million. Changes in
consolidation relating to the dissolution of the PCC joint venture with Lucent
reduced sales by 6%. Currency movements had a positive impact of 1%. Volume
growth was 18%, partly offset by 12% price erosion. Overall, growth was
particularly strong in North America and Asia. High sales in PC peripherals,
particularly in Monitors, contributed to the increase.
Income from operations in 2000 in the sector Consumer Electronics increased to
EUR 374 million, or 2.5% of sales, up from EUR 258 million in 1999. The
considerable increase was mainly attributable to the turnaround to a break-even
situation at Consumer Communications, due to higher GSM volume, new product
introductions resulting in a more favorable mix, and tight cost control. License
income increased, mainly due to the higher number of licenses in new programs.
However, license income in the fourth quarter of 2000 was reduced by
non-recurring items. From June 2001 onwards, income will be negatively impacted
due to the expiring CD-Audio patents in Europe and Asia Pacific. This is
expected to be partly compensated by higher income from CD-R/RW and DVD. Income
at Mainstream CE benefited from the higher sales level, especially in the
Monitor business, and tight cost control. At Digital Networks, the positive
contribution from certain satellite applications was more than offset by large
start-up costs in the cable segment and in new technologies for the delivery of
electronic content, both focused on the North American market. The decrease in
income from operations for Specialty Products primarily resulted
53
16
from charges related to the impairment of identified intangibles and goodwill
related to Voice Control Systems.
CONSUMER ELECTRONICS INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in millions of euros (48) 137 (447) 258 374
as a % of sales (0.5) 1.2 (3.6) 2.1 2.5
The significant improvement in income from operations in 1999 compared with
1998 was primarily attributable to a significant improvement in PCC's operating
performance. The improvement was aided by cost reductions and new product
offerings.
DOMESTIC APPLIANCES AND PERSONAL CARE
amounts in millions of euros
1998 1999 2000
------ ------ ------
Sales 1,746 1,791 2,107
% nominal increase (decrease) (4) 3 18
Ebita 200 221 292
as a % of sales 11.5 12.3 13.9
Income from operations 199 220 287
as a % of sales 11.4 12.3 13.6
Sales in the DAP sector in 2000 totaled EUR 2,107 million, representing 18%
growth. Currency movements had a strong positive impact of 8% on nominal sales.
Consolidation changes had a positive effect of 4%. Volume growth, at 8%, was
partly countered by an average price decrease of 2%. The sales growth is mostly
attributable to sustained strong growth of the Male Shaving and Grooming
business in all regions, reinforcing global market leadership. The Food and
Beverage and Home Environment Care businesses also achieved strong increases,
mainly related to substantially higher sales in Asia Pacific. Sales at Oral
Health Care were favorably impacted by the acquisition of Optiva Corporation in
October 2000.
Geographically, sales increased strongly in Europe, both Western and
Eastern, and in North America. In addition, sales in the Asia Pacific region
rebounded from the economic downturn in the years before, ending 32% higher than
in 1999.
DAP SALES
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in billions of euros 1.7 1.8 1.7 1.8 2.1
Income from operations increased by approximately 30%, driven by successful
product introductions, favorable currency developments and portfolio
rationalization in 2000. Growth came primarily from Male Shaving and Grooming
and the success of Quadra Action. Food and Beverage improved its profitability
significantly as a consequence of portfolio rationalization and strict cost
control. Excluding the amortization of intangible assets, goodwill and certain
other acquisition-related charges, Optiva contributed positively to the income
of the sector.
DAP INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in millions of euros 123 233 199 220 287
as a % of sales 7.5 12.8 11.4 12.3 13.6
54 Operating and Financial Review and Prospects
17
Sales in 1999 increased by 3% to EUR 1,791 million. Currency movements and
consolidation changes were neutral. Volume growth, at 4%, was partly offset by
2% average lower prices. The increase in sales was mainly attributable to a
strong performance of the Male Shaving and Grooming business in all regions.
Income from operations in 1999 improved, benefiting from the positive
effect of prior-year restructurings and new product introductions. Additional
positive effects arose from stricter cost controls and lower incidental costs.
The income improvement was primarily attributable to stronger results in Male
Shaving and Grooming and Food Preparation.
COMPONENTS
amounts in millions of euros
1998 1999 2000
----- ------ ------
Sales 3,814 3,754 4,562
% nominal increase (decrease) 4 (2) 22
Segment revenues 5,259 5,325 6,332
Ebita 46 289 570
as a % of sales 1.2 7.7 12.5
as a % of segment revenues 0.9 5.4 9.0
Income from operations 44 286 569
as a % of sales 1.2 7.6 12.5
as a % of segment revenues 0.8 5.4 9.0
As a result of the high level of sales of products and services to other
product sectors, income from operations is also expressed as a percentage of
segment revenues. Segment revenues are the total of sales to third parties and
intersegment sales.
Sales in the Components sector in 2000 totaled EUR 4,562 million, a sharp
rise (22%) on the year before. Changes in consolidation had a negative effect of
5%, particularly related to the divestment of AC&M as of July 1, 2000. Currency
movements had a positive effect of 13% on nominal sales. Volume growth was 20%,
partially offset by a 6% reduction in average selling prices. Price pressure in
2000 eased compared with the year earlier as a result of improved balance
between the supply and demand for monitor tubes. The larger part of the sector's
growth was realized in Optical Storage, whose sales were more than 80% higher
than the year before. In addition, strong growth was realized by Flat Display
Systems, notably Mobile Display Systems, whose components are used in mobile
phones and other mobile applications. Geographically, the main growth was
realized in Europe, Latin America and North America. Segment revenues were 19%
higher than in the previous year.
COMPONENTS SALES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
intersegment sales in
billions of euros 1.5 1.4 1.4 1.6 1.8
sales in billions of euros 2.9 3.7 3.8 3.8 4.6
Income from operations almost doubled from 1999's EUR 286 million to EUR 569
million. In 2000 the divestment of AC&M had a positive effect of EUR 309
million, which was partly offset by the EUR 78 million net restructuring charges
related to Display Components and Flat Display Systems. Income in 1999 was
positively impacted by the EUR 169 million gain on the divestment of
Conventional Passive Components, partly offset by the restructuring charges of
EUR 38 million in relation to the Active Matrix Liquid Crystal Displays
business. Excluding restructuring charges, all businesses except Flat Display
Systems improved their performance in 2000, with Optical Storage posting a major
improvement, especially in the first half of the year.
COMPONENTS INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
in millions of euros 316 255 44 286 569
as a % of segment revenues 7.3 5.0 0.8 5.4 9.0
55
18
Sales in 1999 declined by 2% to less than EUR 3.8 billion. Consolidation
changes, notably the sales of Conventional Passive Components at the end of
1998, reduced sales by 9%, while currency fluctuations had a positive effect of
4%. Volume growth of 13% was for the most part offset by the average price
decrease of 10%. The division's sales increased strongly in Asia Pacific and
North America. Segment revenues in 1999 were 5% higher than in the previous
year.
Income from operations in 1999 improved substantially to EUR 286 million,
up from EUR 44 million a year earlier. Disregarding the gains from the sale of
participations, largely the EUR 169 million gain on the sale of the Conventional
Passive Components business, and restructuring charges for the Flat Display
business in both years, income in 1999 improved. Various product groups,
particularly Flat Display Systems, accounted for the increase in income from
operations. The results of the HAPD joint venture steadily improved to reach
break-even during the second half of the year.
SEMICONDUCTORS
amounts in millions of euros
1998 1999 2000
----- ----- -----
Sales 3,212 3,796 5,879
% nominal increase 2 18 55
Segment revenues 3,963 4,557 6,812
Ebita 769 716 1,451
as a % of sales 23.9 18.9 24.7
as a % of segment revenues 19.4 15.7 21.3
Income from operations 765 614 1,346
as a % of sales 23.8 16.2 22.9
as a % of segment revenues 19.3 13.5 19.8
As a result of the high level of sales of products and services to other
product sectors,income from operations is also expressed as a percentage of
segment revenues. Segment revenues are the total of sales to third parties and
intersegment sales.
Sales in the Semiconductors sector in 2000 came to EUR 5,879 million, an
increase of 55% over 1999. Through the acquisition of MiCRUS as of June 1, 2000,
sales increased by 3%. In addition, 2000 contains the full-year sales of VLSI,
compared to seven months in 1999 (a positive effect of 8%). Furthermore,
currency movements had a substantial positive effect of 14% on nominal sales.
Volume growth was 33%, while average prices decreased by 3%. Price erosion was
substantially lower than in the previous year, reflecting strongly improved
markets. All regions contributed to the large sales increase. All businesses
improved due to the steep overall growth, most predominantly Telecom Terminals
and Emerging Businesses. Segment revenues increased by 49% in 2000 compared to
the previous year.
SEMICONDUCTORS SALES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
intersegment sales in
billions of euros 0.5 0.6 0.8 0.8 0.9
sales in billions of euros 2.5 3.1 3.2 3.8 5.9
Income from operations in 2000 was more than double the 1999 amount and
totaled EUR 1,346 million. The main reason for the improvement was the
substantially higher sales level due to the general upturn in the industry,
which led to shortages in the market during the year. The acquisition of MiCRUS
increased capacity.
Income in all businesses benefited from strong sales. The VLSI acquisition
was successfully integrated into the existing businesses.
SEMICONDUCTORS INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
---- ---- ---- ---- -----
in millions of euros 363 771 765 614 1,346
as a % of segment revenues 11.8 20.3 19.3 13.5 19.8
56 Operating and Financial Review and Prospects
19
Sales in 1999 increased by 18% to EUR 3.8 billion. The consolidation of
VLSI from June 1, 1999 had a positive effect of 10% on nominal sales, while
fluctuations in exchange rates had a positive effect of 3%. Volume growth was
14%, partly offset by 9% price erosion. The first half of 1999 was negatively
affected by the global crisis in the semiconductor industry, in addition to the
economic crisis in Asia. The sector saw a strong upturn in the second half,
following the recovery in the market.
Full-year income from operations in 1999 was significantly below 1998,
entirely due to the acquisition of VLSI. The consolidation of VLSI as from June
1 had an unfavorable impact on the income of this sector of EUR 201 million, due
to VLSI's acquisition-related charges and operational losses.
MEDICAL SYSTEMS
amounts in millions of euros
1998 1999 2000
----- ----- -----
Sales 1,950 2,493 3,031
% nominal increase 11 28 22
Ebita 152 219 308
as a % of sales 7.8 8.8 10.2
Income from operations (49) 181 169
as a % of sales (2.5) 7.3 5.6
Sales in the Medical Systems sector in 2000 totaled EUR 3,031 million,
representing 22% growth. The acquisition of MedQuist as of July 1, 2000 lifted
sales by 8%. In addition, currency movements had a positive effect of 10% on
nominal sales. Volume growth was 7%, while prices decreased by, on average, 3%.
Sales growth was particularly strong in Asia Pacific and North America. In
product terms, the main growth areas are magnetic resonance, cardio/vascular,
ultrasound and the customer support business.
Order intake in 2000 increased, clearly exceeding the market trend. The
order intake was particularly strong in North America and Asia Pacific and in
the product areas magnetic resonance, computed tomography, ultrasound and
imaging IT.
MEDICAL SYSTEMS SALES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
in billions of euros 1.7 1.8 2.0 2.5 3.0
Income from operations in 2000 amounted to EUR 169 million, compared to EUR 181
million in 1999. The acquisition of ADAC resulted in a fourth-quarter charge of
EUR 44 million for the write-off of the in-process R&D obtained in this
strategic acquisition. Excluding amortization of goodwill and other identified
intangible assets related to the acquisitions of MedQuist and ADAC in 2000 and
ATL Ultrasound in 1998, income was EUR 308 million, which was a EUR 89 million
improvement over 1999. In addition to the positive contribution of MedQuist,
North America in particular contributed to this improvement, partly due to the
strong US dollar. Income from operations of ATL Ultrasound improved over 1999,
despite the negative effects of the strong US dollar due to ATL's US-based
production facilities. Income performance in Eastern Europe was weak due to a
lower sales level.
MEDICAL SYSTEMS INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
in millions of euros 145 147 (49) 181 169
as a % of sales 8.5 8.4 (2.5) 7.3 5.6
Sales in 1999 increased by 28% to EUR 2,493 million, exceeding the market
trend. The acquisition of ATL in
57
20
1998 had a substantial positive impact on sales growth (16%). Currency
movements had a 3% positive impact on nominal sales. Sales growth was
particularly strong in Western Europe and Asia Pacific.
Income from operations in 1999 improved significantly compared to 1998,
which had been negatively affected by fourth-quarter charges of EUR 233 million
for the write-off of in-process R&D obtained in the strategic acquisition of ATL
Ultrasound and other acquisition-related charges. Income in 1999 benefited from
a strong sales performance and stricter cost control, especially in Western
Europe and Asia Pacific. ATL Ultrasound made a significant positive contribution
to income in 1999 (excluding acquisition-related charges).
ORIGIN
amounts in millions of euros
1998 1999 2000*
------ ------ -------
Sales 1,059 1,056 717
% nominal increase (decrease) 25 0 (32)
Segment revenues 1,654 1,735 1,164
Ebita 77 125 1,089**
as a % of sales 7.3 11.8 .
as a % of segment revenues 4.7 7.2 93.6
Income from operations 59 97 1,063**
as a % of sales 5.6 9.2 .
as a % of segment revenues 3.6 5.6 91.3
As a result of the high level of sales of products and services to other
product sectors,income from operations is also expressed as a percentage of
segment revenues. Segment revenues are the total of sales to third parties and
intersegment sales.
* Due to the Atos Origin merger,the financial data relating to Origin have
been included in the consolidated Philips accounts of 2000 for nine months
until October 1. With effect from that date the Philips share in the
results relating to the merged activities of Atos Origin will be included
in the results relating to unconsolidated companies as from January 1,2001
on a three-month delayed basis due to Atos Origin's different reporting
cycle.
** Includes gain of EUR 1,072 million related to the Atos Origin merger
Sales in the Origin sector have been consolidated for only nine months in
2000 and totaled EUR 717 million. Sales from January 1 through the moment of
divestment, September 30, were 12% lower than in the corresponding period of the
year before. The reduction in sales was due to the reduced market demand in the
IT industry following the Y2K investment boom, as customers were hesitant in
defining their future IT plans, especially in the field of e-business.
ORIGIN SALES
1996 1997 1998 1999 2000*
---- ---- ---- ---- -----
intersegment sales in
billions of euros 0.5 0.5 0.6 0.7 0.4
sales in billions of euros 0.7 0.8 1.1 1.1 0.7
<FN>
*nine months only
</FN>
21
Income from operations for the first nine months of 2000 amounted to a loss
of EUR 9 million, compared to a profit of EUR 97 million the previous year. In
October, the Origin shares were exchanged for a participation in Atos Origin.
This resulted in a onetime gain of EUR 1,072 million.
Sales in 1999 totaled EUR 1,056 million, virtually unchanged from the year
earlier. The strong growth in the first half of the year turned into negative
growth in the second half, because of lower IT expenditures by companies in
anticipation of the millennium.
Income from operations increased in 1999, reflecting improved capacity
utilization and cost efficiency resulting from headcount reductions and
cost-saving measures.
MISCELLANEOUS
amounts in millions of euros
1998 1999 2000
----- ----- -----
Sales 1,861 1,585 1,831
% nominal increase (decrease) (30) (15) 16
Ebita (67) (78) (105)
as a % of sales (3.6) (4.9) (5.7)
Income from operations (82) (94) (113)
as a % of sales (4.4) (5.9) (6.2)
This sector comprises various activities and businesses from the former
Professional sector, such as FEI
58 Operating and Financial Review and Prospects
22
Company, Electronic Manufacturing Technology (EMT) and Analytical, as well
as activities not belonging to a product division such as Philips Research,
Corporate Intellectual Property, Philips Centre for Industrial Technology,
Philips Enabling Technologies Group (formerly Philips Machinefabrieken) and
Philips Design.
Sales in the Miscellaneous sector in 2000 totaled EUR 1,831 million,
representing a 16% increase over 1999. Changes in consolidation had a downward
effect of 4%, while the appreciation of currencies had a positive effect of 8%.
Sales growth was particularly strong at EMT, FEI and Philips Enabling
Technologies Group. Geographically, Asia recorded the most significant sales
growth.
MISCELLANEOUS SALES
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in billions of euros 4.6 2.7 1.9 1.6 1.8
Income from operations in 2000 amounted to a loss of EUR 113 million, or
6.2% of sales, compared to a loss of EUR 94 million, or 5.9% of sales, in 1999.
Total income in 2000 benefited from higher pension credits compared to the
previous year.
The income of the Miscellaneous activities was affected by provisions for
disentanglement costs related to the sale of Philips Projects and for
restructuring at Philips Research. Strong results were achieved by the former
Business Electronics businesses EMT and FEI. EMT (renamed Assembleon) is in the
process of evaluating the scope for a public offering in the course of 2001.
MISCELLANEOUS INCOME FROM OPERATIONS
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
in millions of euros (339) 39 (82) (94) (113)
as a % of sales (7.3) 1.5 (4.4) (5.9) (6.2)
Income from operations in 1999 amounted to a loss of EUR 94 million, or
5.9% of sales, compared to a loss of EUR 82 million, or 4.4% of sales, in 1998.
This was primarily due to Philips Enabling Technologies Group posting lower
income in 1999 as a consequence of the divestment of certain activities, higher
costs incurred for the aviation project, and investments in software. Total
income was partly compensated by higher income of FEI and EMT, compared to 1998.
- -- UNALLOCATED
Costs -- net of revenues -- not allocated to a specific product sector
comprise the costs of the corporate center -- including the Company's initial
funding of e-business and global brand management costs -- as well as country
and regional overhead costs. Income from operations amounted to a loss of EUR 82
million in 2000 compared to losses of EUR 413 million and EUR 399 million in
1999 and 1998 respectively.
In 2000, income was positively impacted by a reduction in pension costs of
EUR 406 million, compared to EUR 124 million in 1999 and EUR 53 million in 1998.
Other incidental items had a negative impact of EUR 40 million. In 1999 these
items accounted for a negative impact of EUR 61 million, while in 1998 other
incidental items resulted in a gain of EUR 26 million.
- -- RESEARCH AND DEVELOPMENT
Continuous efforts to sustain a strong performance in the field of R&D are
of the utmost importance to strengthen Philips' competitiveness in its various
markets. The launch of new research activities in
59
23
China, India and Belgium has further established Philips Research as one of
the world's major global industrial research laboratories with expenditures for
R&D activities in 2000 amounting to EUR 2,766 million, representing 7.3% of
sales, compared to EUR 2,284 million, or 7.3% of sales, in 1999 and EUR 2,048
million, or 6.7% of sales, in 1998.
RESEARCH AND DEVELOPMENT EXPENDITURES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
as a % of sales 6.8 6.2 6.7 7.3 7.3
- -- COOPERATIVE BUSINESS ACTIVITIES AND UNCONSOLIDATED COMPANIES
Philips has engaged from time to time in cooperative activities with other
companies. Philips' principal cooperative business activities and
participations, and the main changes therein, are set out below.
Taiwan Semiconductor Manufacturing Company Limited (TSMC) is a
semiconductor foundry operation in which Philips currently holds 22.5% of the
total number of outstanding common shares. Additionally, the Company has
purchased redeemable preferred shares, bringing its total holding in TSMC to
approximately 30%. The principal reasons for this shareholding are to secure a
strategic supply of wafers and the ability to limit capital expenditures. During
2000, Philips' interest was diluted by 3.5%, due to various share issues by
TSMC, primarily in conjunction with two acquisitions. Since the price received
for the shares issued was in excess of the per common share book value
recognized by Philips, this resulted in a one-time gain of EUR 680 million. As a
result of the aforementioned acquisitions, for each of the next five years
Philips' results for TSMC, based on Philips' accounting policies, will include a
EUR 76 million charge for amortization of goodwill per year.
Operating income in 2000 increased significantly, compared to 1999, due to
the ongoing favorable market situation in the semiconductor business.
Systems on Silicon Manufacturing Company (SSMC) is a Singapore-based wafer
fabrication firm established by Philips (48%), TSMC (32%) and the Economic
Development Board of Singapore (20%) to secure a strategic supply of wafers,
diversify loading risks and limit capital expenditures. A USD 1.2 billion wafer
fab (MOS-5), construction of which started in 1999, is in the ramping-up phase,
and the first wafers were produced in the third quarter. A large number of key
technical personnel has been trained at Philips' facilities in the Netherlands
and at TSMC in Taiwan. Philips is entitled to 60% of the fab output of 0.25
micron wafers.
Atos Origin started on October 1, 2000, when Origin was merged with Atos of
France. The merger has created a leader in end-to-end business and e-business
solutions. The company is operational in 30 countries and employs 27,000 people.
Philips holds a 48.7% stake in Atos Origin. Within two years Philips
intends to reduce its stake in the combined entity to below 35%. Philips has
also received two tranches of stock warrants, each representing approximately
2.4 million Atos Origin shares, which may be exercised only on certain
conditions subject to the development of the Atos Origin share price.
Origin's operating results over the first nine months of 2000 (pre-merger)
have been consolidated in the Philips accounts, whereas Philips' share in the
results of Atos Origin will be included in results relating to unconsolidated
companies on a delayed basis of three months from January 1, 2001 onwards.
Additionally, based on Philips' accounting policies, Philips' results for
Atos Origin will include a charge of approximately EUR 80 million for
amortization of goodwill per year.
In the People's Republic of China, Philips currently has a large number of
operational business alliances that engage in manufacturing and marketing
activities. Generally, these companies are not wholly owned; most of them are
consolidated. Philips, which is one
60 Operating and Financial Review and Prospects
24
of the larger private employers, currently employs more than 20,000 people
in China and approximately 5,000 people in Hong Kong. Philips is active in a
wide range of activities, but has particularly strengthened its position in
display components, flat panel displays, cellular phones and shavers, while
maintaining strong positions in CD, energy-saving lamps and monitors. All
product divisions in China are profitable and posted considerable sales growth
in 2000.
Navigation Technologies Corporation (NavTech) of the USA is a 50.5%
shareholding that is engaged in the development of software databases for
digital maps to be used for car navigation purposes. NavTech is planning to go
public in the course of 2001.
LG.Philips LCD Co is a 50/50 manufacturing joint venture with LG
Electronics of South Korea, and the world's second-largest supplier of active
matrix liquid crystal displays. This joint venture has enabled Philips to become
a leading company in the area of active matrix LCDs, a display technology that
is rapidly migrating from notebook displays to desktop monitors and in the near
future to other areas, such as TV. As a consequence, the Company believes this
business has potential for fast growth. The capacity of the two existing fabs at
Kumi has been expanded, while a third facility became fully operational in 2000.
A fourth facility is under construction and is expected to become fully
operational in the year 2001. At yearend 2000, the joint venture employed
approximately 3,500 people.
In the LumiLeds Lighting 50/50 joint venture, Philips and Hewlett
Packard/Agilent have the complementary strengths and positions to successfully
develop the market for LED-based lighting products. Both companies have expanded
the scope of their existing activities. Both parties hold equal shares in the
venture, whose product portfolio has been extended from LED traffic signal
products to a variety of other applications, including automotive, signalling,
contour lighting and signs, illumination and LCD backlighting, demonstrating
both parties' confidence in the new technology. At year-end 2000, the worldwide
operations, located in California, Malaysia and the Netherlands, involved about
600 employees.
LG Electronics and Philips Display Components. In November 2000, Philips
announced the intended merger of its CRT business with that of LG Electronics of
South Korea in a 50/50 joint venture, that is expected to create the world
leader in this line of business. Both companies will be able to combine
complementary strengths and create strong synergy potential in the mature CRT
display market. The joint venture will employ 36,000 people worldwide.
- -- CORPORATE VENTURING
In order to exploit the opportunities in terms of new technology, time to
market and return on investment, Philips has started a program to identify
promising start-up companies in the technology 'fashion' centers in the USA,
Israel and Europe. Around the world, a team of specialists identify start-up
companies that are active in areas of strategic importance to Philips. If there
is a clear strategic match and the financial underpinning of the company in
question is sound, a business arrangement and an equity stake are considered.
The corporate venturing program is focused on a limited number of strategic
clusters, including display technologies, storage solutions, (in-home)
networking, value-added services for consumer electronics devices, personal
health monitoring and digital rights management. By year-end 2000 the corporate
venturing portfolio comprised some 25 companies in which Philips has both a
minority stake and a business relationship.
- -- CASH FLOWS
The cash flow from operating activities in 2000 of EUR 2,996 million
exceeded the levels generated in the preceding two years (EUR 1,913 million and
EUR 2,140 million in 1999 and 1998 respectively). Changes in working capital
reduced the year 2000's cash flow from operations by EUR 1,069 million, as a
result of increases in the amounts of capital invested in inventories and
increased accounts receivable, partly offset by higher accounts payable. Higher
working capital should be seen against the background of the increased sales
level. In 1999 the working capital requirements amounted to EUR 469 million.
61
25
Expressed as a percentage of sales, inventories at the end of 2000 were
13.9% of sales, compared to 14.5% a year earlier and 14.0% at the end of 1998.
Outstanding trade receivables at year-end 2000 were the equivalent of 1.5
months' sales, compared to 1.4 months' at the end of 1999 and 1.3 months' a year
earlier.
INVENTORIES
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
as a % of sales 16.0 15.2 14.0 14.5 13.9
Cash flow from investing activities in 2000 required EUR 2,404 million,
compared with EUR 3,834 million in 1999. In 1998 these activities resulted in a
cash outflow of EUR 1,441 million.
During the year 2000, Philips invested EUR 3,209 million in businesses operating
in strategic areas where Philips wants to improve its global market position.
The investments included the purchase of a majority interest of 71% in MedQuist
(EUR 1,339 million), the acquisition of Optiva (EUR 291 million), payments for
the acquisition of MiCRUS (EUR 228 million), the purchase of ADAC (EUR 437
million), the purchase of 3.5% redeemable preferred shares in TSMC (EUR 458
million), and investments in a number of smaller corporate venturing (EUR 126
million) and other businesses (EUR 330 million). Moreover, Philips invested EUR
505 million in the purchase of 7.5% redeemable preferred shares in LG
Electronics, which are classified under other non-current financial assets. The
divestment of Philips' AC&M business yielded a net amount of EUR 658 million in
cash. A positive cash flow of EUR 2,710 million was generated by the sale of
16.51% of the shares in ASM Lithography.
Furthermore, an amount of EUR 1,272 million was generated by the sale of a
portion of the JDS Uniphase shares, one tranche of EUR 550 million in the first
quarter of 2000 and one tranche of EUR 722 million in the third quarter of the
year.
During 1999, the Company's investment in businesses amounted to EUR 2,993
million. These investments included the purchase of VLSI Technology of the USA
(EUR 976 million) and of a 50% share in LG. Philips LCD Co. of Korea (EUR 1,496
million), as well as the acquisition of an additional 10% of the shares in
Origin (EUR 124 million) and of a number of smaller businesses (EUR 397
million). The largest divestment, that of Philips' Conventional Passive
Components business, yielded a net amount of EUR 323 million in cash.
Additionally, the sale of a minority interest in Navigation Technologies
(NavTech) generated a positive cash flow of EUR 98 million. Furthermore, EUR 158
million was generated by the sale of a portion of the JDS Uniphase shares.
In 1998, the net cash outflow from acquisitions and divestments was EUR 111
million, primarily resulting from the acquisitions of ATL Ultrasound and Active
Impulse Systems, partially offset by the sale of Philips Car Systems. It should
be noted that the 1998 sale of Philips' 75% stake in PolyGram was accounted for
as a discontinued operation, which is not reported in the investment activities
section.
Gross capital spending on property, plant and equipment of EUR 3,170
million in 2000 exceeded the spending in the two preceding years (EUR 1,662
million and EUR 1,634 million in 1999 and 1998 respectively). The ratio of gross
investments to depreciation was 1.8, compared to 1.1 in 1999 and 1.0 in 1998,
reflecting the effect of Philips' policy of increasing capital expenditures to
shape the Company for the future.
62 Operating and Financial Review and Prospects
26
CAPITAL EXPENDITURES: DEPRECIATION
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
[Description to come] 1.5 1.1 1.0 1.1 1.8
CAPITAL EXPENDITURES PER GEOGRAPHIC AREA
in millions of euros
1998 1999 2000
------ ------ ------
Europe 977 926 1,466
USA and Canada 158 246 573
Latin America 74 62 133
Africa 4 2 2
Asia Pacific 421 426 996
------ ------ ------
1,634 1,662 3,170
====== ====== ======
As a result of the items mentioned above, the cash flow before financing
activities was positive EUR 592 million in 2000, compared with negative EUR
1,921 million in 1999 and positive EUR 699 million in 1998. In 2000, the net
cash flow used for financing activities amounted to EUR 2,038 million, of which
EUR 1,673 million was used for a 3% share reduction program. Additionally, EUR
612 million was used to repay interest-bearing debt and EUR 399 million was used
for the payment of dividends to Philips shareholders. Furthermore, treasury
stock transactions required EUR 578 million.
In 1999, the net cash flow used for financing activities was EUR 2,606
million, of which EUR 1,490 million was used for the 8% share reduction program.
Additionally, EUR 717 million was used to repay interest-bearing debt and EUR
361 million was used for the payment of dividends to Philips shareholders in
1999. An amount of EUR 38 million net cash was used for treasury stock
transactions. In 1998, the larger part of the net cash flow used for financing
activities of EUR 814 million was used to repay interest-bearing debt (EUR 445
million) and for dividend payments (EUR 326 million).
- -- FINANCING
Total debt outstanding at the end of 2000 was EUR 4,027 million, compared
with EUR 3,314 million at year-end 1999 and EUR 3,587 million at the end of
1998.
In 2000, long-term debt decreased by EUR 453 million to EUR 2,284 million.
This decrease is the result of new borrowings of EUR 203 million, repayments
totaling EUR 325 million and reclassification of long-term debt into short-term
debt for an amount of EUR 377 million, offset by currency, consolidation and
other effects of EUR 46 million. In 1999, long-term debt was reduced by EUR 49
million to EUR 2,737 million. The reduction was the result of net repayments
totaling EUR 460 million, offset by currency, consolidation and other effects of
EUR 411 million.
Philips had two 'putable' US dollar bonds outstanding at year-end 2000 for
a total amount of EUR 288 million. The investors may require repayment at one
specific month during the lifetime of the respective bonds. Assuming that
investors require payment at the relevant put dates, the average remaining tenor
of the long-term debt was 5.9 years, compared to 5.4 years in 1999. However,
assuming that the 'putable' bonds will be repaid at maturity, the average
remaining tenor at the end of 2000 was 8.4 years, compared to 7.4 years at the
end of 1999. Long-term debt as a proportion of the total debt at the end of 2000
was 57%, compared to 83% at the end of 1999.
At the end of 2000 the Group had long-term committed and undrawn credit
lines available of USD 2.5 billion, unchanged from a year earlier. The USD 2.5
billion committed credit line is a multi-currency revolving standby credit
facility, which was signed in July 1996 and will expire in July 2003.
Short-term debt increased by EUR 1,166 million in 2000 to EUR 1,743 million
at year-end. This increase was due to new net borrowings of EUR 734 million, the
reclassification of long-term debt to short-term debt for an amount of EUR 377
million, and an increase of EUR 55 million as a result of currency and
consolidation effects.
63
27
The cash position was reduced by EUR 1,242 million in 2000 to EUR 1,089
million at year-end. This reduction was mainly related to the increased level of
capital expenditures and to the investments in MedQuist, Optiva, ADAC, SSMC and
redeemable preferred stock in LG Electronics and TSMC, as well as the 3% share
reduction program and the settlement of US dollar hedges related to securities.
The currency and consolidation changes caused a EUR 204 million increase. The
EUR 4,222 million decrease in the cash position in 1999 was to a large extent
related to the investments in VLSI, LG.Philips LCD Co. and Origin, as well as an
8% share reduction program.
The Company had a net debt position (debt, net of cash and cash
equivalents) of EUR 2,938 million at the end of 2000. The net debt position at
the end of 1999 amounted to EUR 983 million. This compares to a net cash
position, with cash exceeding total debt, of EUR 2,966 million, following the
sale of PolyGram at the end of 1998. The net debt to group equity ratio amounted
to 12:88 at the end of 2000, compared to a ratio of 6:94 at the end of 1999. The
net cash position rendered this ratio meaningless in 1998.
5-YEAR RELATIVE PERFORMANCE: PHILIPS AND AEX
base 100 = Jan 2, 1996
Date Philips AEX Date Philips AEX Date Philips AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
2-Jan-96 100.00 100.00 22-Apr-96 97.32 111.53 9-Aug-96 88.93 110.80
3-Jan-96 101.68 100.84 23-Apr-96 96.31 111.51 12-Aug-96 89.26 110.91
4-Jan-96 103.69 101.18 24-Apr-96 98.32 111.84 13-Aug-96 87.92 110.95
5-Jan-96 104.36 100.47 25-Apr-96 97.65 111.33 14-Aug-96 88.93 112.03
8-Jan-96 106.38 101.69 26-Apr-96 95.64 111.71 15-Aug-96 89.26 112.56
9-Jan-96 102.01 101.14 29-Apr-96 95.64 111.99 16-Aug-96 89.26 113.25
10-Jan-96 100.67 100.80 30-Apr-96 96.31 112.21 19-Aug-96 88.93 114.23
11-Jan-96 104.70 100.72 1-May-96 96.64 112.73 20-Aug-96 89.93 112.97
12-Jan-96 104.36 101.53 2-May-96 95.97 111.90 21-Aug-96 89.93 114.08
15-Jan-96 102.35 101.32 3-May-96 96.31 113.04 22-Aug-96 92.28 113.22
16-Jan-96 105.03 101.88 6-May-96 96.64 112.99 23-Aug-96 91.28 112.31
17-Jan-96 103.36 101.97 7-May-96 95.97 111.37 26-Aug-96 90.94 113.16
18-Jan-96 103.02 101.96 8-May-96 96.64 112.20 27-Aug-96 91.95 113.76
19-Jan-96 104.03 102.69 9-May-96 95.30 112.05 28-Aug-96 91.95 112.86
22-Jan-96 104.70 102.66 10-May-96 95.30 112.20 29-Aug-96 91.28 111.26
23-Jan-96 103.36 101.93 13-May-96 95.64 112.65 30-Aug-96 90.94 112.06
24-Jan-96 108.05 102.72 14-May-96 94.63 112.86 3-Sep-96 89.93 111.26
25-Jan-96 107.05 102.58 15-May-96 96.31 111.91 4-Sep-96 89.60 111.90
26-Jan-96 107.38 102.27 16-May-96 95.64 112.71 5-Sep-96 88.93 111.68
29-Jan-96 107.05 102.09 17-May-96 95.30 113.45 6-Sep-96 89.26 111.74
30-Jan-96 106.71 101.51 20-May-96 95.97 113.34 9-Sep-96 88.93 113.41
31-Jan-96 107.72 101.64 21-May-96 95.30 113.84 10-Sep-96 88.59 113.53
1-Feb-96 107.38 101.72 22-May-96 95.64 113.94 11-Sep-96 89.26 113.49
2-Feb-96 108.39 101.89 23-May-96 95.30 114.71 12-Sep-96 88.59 114.07
5-Feb-96 111.74 100.63 24-May-96 95.64 114.43 13-Sep-96 88.59 114.30
6-Feb-96 111.74 101.51 28-May-96 94.29 114.09 16-Sep-96 89.26 114.73
7-Feb-96 110.07 101.93 29-May-96 93.62 115.11 17-Sep-96 91.61 113.94
8-Feb-96 110.74 101.31 30-May-96 94.29 114.93 18-Sep-96 91.95 113.71
9-Feb-96 108.05 101.36 31-May-96 94.29 114.82 19-Sep-96 93.62 113.85
12-Feb-96 108.39 101.68 3-Jun-96 93.29 115.24 20-Sep-96 93.96 114.23
13-Feb-96 106.04 102.98 4-Jun-96 94.29 115.45 23-Sep-96 95.30 114.23
14-Feb-96 107.05 103.13 5-Jun-96 94.63 114.19 24-Sep-96 96.98 113.88
15-Feb-96 107.38 103.21 6-Jun-96 94.29 115.16 25-Sep-96 99.33 115.22
16-Feb-96 108.39 102.69 7-Jun-96 93.62 115.13 26-Sep-96 97.65 115.37
20-Feb-96 108.72 101.51 10-Jun-96 93.29 115.01 27-Sep-96 96.31 115.48
21-Feb-96 112.08 100.89 11-Jun-96 93.29 113.39 30-Sep-96 96.31 116.50
22-Feb-96 114.77 101.76 12-Jun-96 93.29 112.73 1-Oct-96 96.64 116.50
23-Feb-96 114.43 102.48 13-Jun-96 92.28 113.29 2-Oct-96 95.97 117.50
26-Feb-96 113.76 103.10 14-Jun-96 92.62 113.87 3-Oct-96 95.64 117.44
27-Feb-96 113.76 102.43 17-Jun-96 92.28 112.69 4-Oct-96 96.98 118.11
28-Feb-96 113.09 102.50 18-Jun-96 90.94 112.04 7-Oct-96 97.32 118.62
29-Feb-96 111.07 103.55 19-Jun-96 90.27 111.89 8-Oct-96 98.32 118.96
1-Mar-96 111.41 103.63 20-Jun-96 89.60 111.96 9-Oct-96 100.67 118.70
4-Mar-96 111.07 104.31 21-Jun-96 87.25 112.38 10-Oct-96 100.34 118.00
5-Mar-96 111.41 104.81 24-Jun-96 85.57 112.97 11-Oct-96 101.68 118.57
6-Mar-96 110.40 104.83 25-Jun-96 85.23 112.37 14-Oct-96 98.99 118.91
7-Mar-96 108.05 104.64 26-Jun-96 85.23 113.14 15-Oct-96 96.31 119.63
8-Mar-96 104.03 104.87 27-Jun-96 87.25 113.08 16-Oct-96 95.30 119.23
11-Mar-96 106.04 103.85 28-Jun-96 87.58 112.97 17-Oct-96 95.30 119.08
12-Mar-96 105.71 102.51 1-Jul-96 87.92 113.14 18-Oct-96 94.63 120.01
13-Mar-96 105.71 103.01 2-Jul-96 87.58 113.67 21-Oct-96 92.62 119.62
14-Mar-96 107.05 103.86 3-Jul-96 87.58 112.86 22-Oct-96 91.61 119.76
15-Mar-96 107.05 105.11 5-Jul-96 85.23 111.96 23-Oct-96 88.59 117.84
18-Mar-96 109.40 105.04 8-Jul-96 86.24 112.42 24-Oct-96 94.29 118.16
19-Mar-96 110.07 105.97 9-Jul-96 87.58 111.97 25-Oct-96 97.99 119.17
20-Mar-96 108.39 106.60 10-Jul-96 86.58 110.93 28-Oct-96 95.64 119.37
21-Mar-96 107.38 106.56 11-Jul-96 84.23 110.45 29-Oct-96 93.96 117.47
22-Mar-96 108.39 106.46 12-Jul-96 82.89 108.88 30-Oct-96 93.29 116.53
25-Mar-96 95.97 106.66 15-Jul-96 78.52 106.67 31-Oct-96 94.63 116.51
26-Mar-96 96.31 106.51 16-Jul-96 81.21 106.44 1-Nov-96 95.64 117.38
27-Mar-96 95.30 106.13 17-Jul-96 82.21 106.90 4-Nov-96 95.30 117.38
28-Mar-96 97.65 106.84 18-Jul-96 83.22 107.84 5-Nov-96 94.97 118.33
29-Mar-96 97.65 106.39 19-Jul-96 83.22 106.13 6-Nov-96 95.97 119.02
1-Apr-96 95.64 107.35 22-Jul-96 80.20 106.09 7-Nov-96 96.64 118.85
2-Apr-96 96.98 108.49 23-Jul-96 79.87 103.55 8-Nov-96 96.64 119.68
3-Apr-96 96.64 108.53 24-Jul-96 78.57 105.73 11-Nov-96 97.65 120.57
4-Apr-96 95.97 107.90 25-Jul-96 83.22 105.24 12-Nov-96 97.65 120.67
8-Apr-96 94.63 108.42 26-Jul-96 81.54 106.19 13-Nov-96 97.65 121.56
9-Apr-96 93.96 108.45 29-Jul-96 82.21 106.31 14-Nov-96 98.66 122.14
10-Apr-96 93.29 110.00 30-Jul-96 85.57 108.18 15-Nov-96 99.33 122.95
11-Apr-96 94.63 109.70 31-Jul-96 88.93 109.05 18-Nov-96 98.99 123.18
12-Apr-96 94.29 109.42 1-Aug-96 89.60 111.15 19-Nov-96 101.01 123.06
15-Apr-96 96.31 110.86 2-Aug-96 89.93 111.08 20-Nov-96 101.01 122.48
16-Apr-96 97.65 110.70 5-Aug-96 87.58 110.61 21-Nov-96 101.34 122.82
17-Apr-96 96.64 110.19 6-Aug-96 88.26 111.75 22-Nov-96 104.36 124.28
18-Apr-96 98.66 109.76 7-Aug-96 89.26 111.10 25-Nov-96 103.69 125.85
19-Apr-96 98.32 110.38 8-Aug-96 88.59 110.95 26-Nov-96 108.39 126.63
28
Date Philips AEX Date Philips AEX Date Philips AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
27-Nov-96 106.38 124.87 21-Mar-97 116.78 143.43 14-Jul-97 198.66 191.46
29-Nov-96 109.06 126.05 24-Mar-97 114.77 146.86 15-Jul-97 201.85 191.66
2-Dec-96 107.05 127.43 25-Mar-97 118.46 144.42 16-Jul-97 211.58 194.91
3-Dec-96 107.72 126.65 26-Mar-97 122.48 146.97 17-Jul-97 208.56 192.51
4-Dec-96 107.05 128.50 27-Mar-97 122.15 148.29 18-Jul-97 204.03 190.17
5-Dec-96 107.38 127.37 31-Mar-97 119.13 149.62 21-Jul-97 195.97 188.06
6-Dec-96 105.71 126.90 1-Apr-97 119.13 143.08 22-Jul-97 203.69 193.97
9-Dec-96 106.71 124.44 2-Apr-97 116.11 143.07 23-Jul-97 211.24 199.60
10-Dec-96 105.71 125.98 3-Apr-97 117.79 141.77 24-Jul-97 224.16 198.94
11-Dec-96 102.68 125.66 4-Apr-97 121.48 143.05 25-Jul-97 223.32 199.71
12-Dec-96 104.36 123.29 7-Apr-97 122.82 146.92 28-Jul-97 217.45 200.49
13-Dec-96 104.36 123.46 8-Apr-97 124.83 146.92 29-Jul-97 214.26 196.87
16-Dec-96 104.36 122.50 9-Apr-97 123.82 149.16 30-Jul-97 220.47 196.94
17-Dec-96 105.03 124.41 10-Apr-97 122.82 148.10 31-Jul-97 219.63 198.56
18-Dec-96 105.71 123.77 11-Apr-97 118.12 146.27 1-Aug-97 214.26 198.03
19-Dec-96 107.72 124.88 14-Apr-97 121.48 144.62 4-Aug-97 214.77 197.75
20-Dec-96 107.38 126.31 15-Apr-97 123.15 148.69 5-Aug-97 211.75 197.80
23-Dec-96 107.72 127.76 16-Apr-97 123.15 147.32 6-Aug-97 216.61 200.49
24-Dec-96 107.72 128.23 17-Apr-97 125.17 149.35 7-Aug-97 219.13 204.14
27-Dec-96 107.72 128.01 18-Apr-97 125.84 149.78 8-Aug-97 215.77 201.15
30-Dec-96 107.05 129.05 21-Apr-97 126.85 150.42 11-Aug-97 210.07 196.48
31-Dec-96 107.38 130.89 22-Apr-97 127.85 151.18 12-Aug-97 206.38 197.56
2-Jan-97 105.71 128.10 23-Apr-97 134.56 153.25 13-Aug-97 202.52 188.95
3-Jan-97 107.38 130.43 24-Apr-97 135.91 154.10 14-Aug-97 203.02 188.92
6-Jan-97 106.71 131.82 25-Apr-97 134.90 151.97 15-Aug-97 191.61 180.60
7-Jan-97 106.71 130.90 28-Apr-97 137.25 151.39 18-Aug-97 198.32 185.26
8-Jan-97 109.06 131.72 29-Apr-97 141.95 154.14 19-Aug-97 198.15 191.31
9-Jan-97 110.74 131.27 30-Apr-97 143.62 154.14 20-Aug-97 207.72 193.79
10-Jan-97 111.74 130.58 1-May-97 147.32 156.03 21-Aug-97 204.03 191.88
13-Jan-97 111.41 131.81 2-May-97 149.66 155.80 22-Aug-97 199.33 185.45
14-Jan-97 111.74 132.83 5-May-97 148.99 157.41 25-Aug-97 199.16 186.21
15-Jan-97 111.74 133.61 6-May-97 145.64 157.85 26-Aug-97 196.98 182.42
16-Jan-97 115.77 135.20 7-May-97 144.63 156.69 27-Aug-97 198.15 183.21
17-Jan-97 114.43 135.30 9-May-97 149.33 157.66 28-Aug-97 194.30 177.14
20-Jan-97 113.09 136.02 12-May-97 149.33 159.13 29-Aug-97 192.28 175.33
21-Jan-97 112.42 135.76 13-May-97 150.67 158.72 2-Sep-97 205.20 186.82
22-Jan-97 109.73 137.57 14-May-97 152.69 160.90 3-Sep-97 209.90 187.51
23-Jan-97 109.06 138.32 15-May-97 154.70 160.53 4-Sep-97 207.55 185.02
24-Jan-97 108.39 136.64 16-May-97 154.70 160.39 5-Sep-97 204.87 185.06
27-Jan-97 108.39 137.81 19-May-97 155.37 159.00 8-Sep-97 203.19 182.78
28-Jan-97 107.38 137.95 20-May-97 156.71 162.33 9-Sep-97 201.68 180.75
29-Jan-97 106.71 135.82 21-May-97 157.05 161.71 10-Sep-97 195.47 177.20
30-Jan-97 106.71 136.32 22-May-97 155.37 162.34 11-Sep-97 195.13 172.85
31-Jan-97 107.38 136.44 23-May-97 156.38 164.00 12-Sep-97 200.17 174.61
3-Feb-97 111.07 136.25 27-May-97 154.03 162.78 15-Sep-97 198.83 175.57
4-Feb-97 110.40 137.35 28-May-97 152.01 162.54 16-Sep-97 200.00 178.12
5-Feb-97 108.72 139.22 29-May-97 153.36 162.47 17-Sep-97 203.69 181.35
6-Feb-97 108.05 138.77 30-May-97 150.34 159.71 18-Sep-97 202.01 182.29
7-Feb-97 108.72 140.18 2-Jun-97 153.69 163.05 19-Sep-97 201.01 181.55
10-Feb-97 107.05 140.34 3-Jun-97 155.03 163.96 22-Sep-97 207.05 183.84
11-Feb-97 105.37 141.09 4-Jun-97 161.74 165.00 23-Sep-97 207.38 183.58
12-Feb-97 110.74 142.47 5-Jun-97 164.43 165.72 24-Sep-97 210.57 182.77
13-Feb-97 115.44 143.87 6-Jun-97 164.09 166.47 25-Sep-97 213.42 182.64
14-Feb-97 112.75 145.28 9-Jun-97 163.42 167.46 26-Sep-97 214.93 182.64
18-Feb-97 117.11 147.81 10-Jun-97 162.75 167.75 29-Sep-97 218.62 182.73
19-Feb-97 119.80 148.50 11-Jun-97 158.72 167.02 30-Sep-97 225.50 185.77
20-Feb-97 117.11 149.07 12-Jun-97 161.07 169.49 1-Oct-97 237.92 190.58
21-Feb-97 117.45 148.15 13-Jun-97 162.75 170.84 2-Oct-97 233.05 189.86
24-Feb-97 118.12 147.19 16-Jun-97 169.80 171.63 3-Oct-97 236.24 194.52
25-Feb-97 119.80 148.11 17-Jun-97 177.85 171.06 6-Oct-97 232.89 194.21
26-Feb-97 121.14 151.48 18-Jun-97 186.91 171.46 7-Oct-97 229.53 191.95
27-Feb-97 122.48 151.54 19-Jun-97 185.23 171.46 8-Oct-97 228.19 190.83
28-Feb-97 120.81 150.87 20-Jun-97 185.23 174.10 9-Oct-97 229.53 184.99
3-Mar-97 121.81 148.91 23-Jun-97 185.23 173.83 10-Oct-97 222.48 183.30
4-Mar-97 125.84 148.67 24-Jun-97 188.93 173.87 13-Oct-97 222.65 189.45
5-Mar-97 130.54 152.13 25-Jun-97 194.63 175.97 14-Oct-97 222.15 188.82
6-Mar-97 127.52 152.50 26-Jun-97 192.28 175.80 15-Oct-97 221.81 186.50
7-Mar-97 126.51 154.40 27-Jun-97 194.30 175.76 16-Oct-97 217.78 184.16
10-Mar-97 125.84 154.46 30-Jun-97 192.95 173.97 17-Oct-97 215.60 182.66
11-Mar-97 126.85 155.47 1-Jul-97 189.26 175.94 20-Oct-97 219.80 183.22
12-Mar-97 123.82 156.33 2-Jul-97 188.09 177.49 21-Oct-97 231.21 186.28
13-Mar-97 119.13 153.34 3-Jul-97 192.95 181.14 22-Oct-97 230.66 184.85
14-Mar-97 120.47 153.06 7-Jul-97 198.32 185.54 23-Oct-97 218.12 178.18
17-Mar-97 120.13 154.68 8-Jul-97 197.15 185.37 24-Oct-97 215.10 179.98
18-Mar-97 119.80 152.13 9-Jul-97 196.31 188.87 27-Oct-97 195.13 173.89
19-Mar-97 120.13 149.77 10-Jul-97 199.33 186.72 28-Oct-97 208.72 168.77
20-Mar-97 115.10 148.42 11-Jul-97 199.50 189.10 29-Oct-97 211.41 177.57
29
Date Philips AEX Date Philips AEX Date Philips AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
30-Oct-97 205.03 172.73 24-Feb-98 209.73 209.53 15-Jun-98 224.16 234.68
31-Oct-97 210.40 173.57 25-Feb-98 208.56 211.16 16-Jun-98 228.86 237.23
3-Nov-97 215.94 178.25 26-Feb-98 211.41 214.16 17-Jun-98 237.75 234.45
4-Nov-97 211.24 175.46 27-Feb-98 209.06 215.58 18-Jun-98 234.06 232.79
5-Nov-97 217.11 177.40 2-Mar-98 211.07 216.12 19-Jun-98 230.37 231.05
6-Nov-97 213.76 175.69 3-Mar-98 204.19 220.04 22-Jun-98 234.23 234.33
7-Nov-97 209.56 171.47 4-Mar-98 203.36 217.93 23-Jun-98 224.16 233.25
10-Nov-97 203.52 173.06 5-Mar-98 195.47 217.01 24-Jun-98 232.38 237.42
11-Nov-97 203.02 172.79 6-Mar-98 196.81 214.17 25-Jun-98 230.37 238.73
12-Nov-97 189.26 170.53 9-Mar-98 202.52 219.87 26-Jun-98 224.66 241.87
13-Nov-97 185.23 171.02 10-Mar-98 202.68 221.92 29-Jun-98 221.31 242.37
14-Nov-97 186.58 172.05 11-Mar-98 202.18 220.85 30-Jun-98 227.85 246.66
17-Nov-97 190.94 177.09 12-Mar-98 200.67 221.62 1-Jul-98 238.59 248.17
18-Nov-97 191.61 177.69 13-Mar-98 202.68 219.95 2-Jul-98 235.57 251.04
19-Nov-97 190.10 175.82 16-Mar-98 200.67 223.89 6-Jul-98 235.07 250.73
20-Nov-97 193.46 178.68 17-Mar-98 195.64 225.51 7-Jul-98 236.24 251.54
21-Nov-97 197.15 181.45 18-Mar-98 193.29 226.03 8-Jul-98 237.25 254.39
24-Nov-97 184.56 176.77 19-Mar-98 192.11 223.22 9-Jul-98 232.05 253.93
25-Nov-97 180.20 175.92 20-Mar-98 193.29 222.46 10-Jul-98 230.87 252.09
26-Nov-97 181.21 178.17 23-Mar-98 193.96 226.35 13-Jul-98 235.74 256.05
28-Nov-97 179.87 178.04 24-Mar-98 199.66 226.74 14-Jul-98 242.45 260.18
1-Dec-97 189.09 183.77 25-Mar-98 205.37 228.20 15-Jul-98 251.34 260.98
2-Dec-97 181.04 184.50 26-Mar-98 205.70 230.44 16-Jul-98 252.01 258.91
3-Dec-97 175.50 183.64 27-Mar-98 203.36 227.99 17-Jul-98 243.96 262.10
4-Dec-97 179.36 185.51 30-Mar-98 198.99 230.36 20-Jul-98 237.75 265.66
5-Dec-97 180.20 185.87 31-Mar-98 197.15 227.97 21-Jul-98 230.87 264.63
8-Dec-97 181.88 187.08 1-Apr-98 197.32 227.45 22-Jul-98 232.21 262.07
9-Dec-97 180.03 186.58 2-Apr-98 195.64 230.74 23-Jul-98 221.31 258.47
10-Dec-97 171.81 183.81 3-Apr-98 190.94 232.82 24-Jul-98 216.78 256.86
11-Dec-97 161.07 178.40 6-Apr-98 196.98 234.66 27-Jul-98 216.44 253.11
12-Dec-97 149.33 179.25 7-Apr-98 193.12 239.39 28-Jul-98 217.45 253.20
15-Dec-97 151.01 179.46 8-Apr-98 198.66 235.51 29-Jul-98 220.81 251.37
16-Dec-97 152.52 182.69 9-Apr-98 200.17 235.24 30-Jul-98 223.49 251.93
17-Dec-97 160.24 184.71 13-Apr-98 202.85 236.02 31-Jul-98 219.30 248.23
18-Dec-97 160.40 183.25 14-Apr-98 206.21 237.23 3-Aug-98 217.95 242.42
19-Dec-97 158.39 177.59 15-Apr-98 206.04 237.73 4-Aug-98 215.27 244.76
22-Dec-97 162.42 178.67 16-Apr-98 201.85 233.64 5-Aug-98 219.46 239.64
23-Dec-97 155.70 177.04 17-Apr-98 201.51 234.59 6-Aug-98 222.82 234.82
24-Dec-97 159.56 177.76 20-Apr-98 213.59 238.55 7-Aug-98 220.97 238.15
29-Dec-97 161.41 183.39 21-Apr-98 223.32 239.88 10-Aug-98 214.60 235.77
30-Dec-97 163.42 184.49 22-Apr-98 244.46 239.60 11-Aug-98 207.05 227.16
31-Dec-97 162.42 184.49 23-Apr-98 240.10 236.56 12-Aug-98 210.23 232.07
2-Jan-98 164.09 187.18 24-Apr-98 242.28 235.59 13-Aug-98 206.21 231.31
5-Jan-98 170.13 189.63 27-Apr-98 239.26 223.73 14-Aug-98 206.21 233.17
6-Jan-98 165.10 187.84 28-Apr-98 236.91 227.92 17-Aug-98 209.40 230.81
7-Jan-98 166.61 188.21 29-Apr-98 237.75 227.69 18-Aug-98 219.30 239.26
8-Jan-98 164.26 186.86 30-Apr-98 241.95 227.69 19-Aug-98 220.30 242.30
9-Jan-98 153.52 184.52 1-May-98 255.54 239.85 20-Aug-98 211.41 239.80
12-Jan-98 153.52 180.10 4-May-98 252.01 241.75 21-Aug-98 204.36 233.12
13-Jan-98 156.38 184.06 5-May-98 258.05 237.13 24-Aug-98 197.48 229.45
14-Jan-98 158.39 186.49 6-May-98 261.74 234.98 25-Aug-98 194.97 234.87
15-Jan-98 155.87 186.12 7-May-98 257.72 230.87 26-Aug-98 189.26 228.89
16-Jan-98 163.76 189.41 8-May-98 259.73 235.03 27-Aug-98 177.18 223.90
20-Jan-98 172.32 192.47 11-May-98 264.93 238.74 28-Aug-98 178.02 220.78
21-Jan-98 169.80 191.91 12-May-98 265.60 235.59 31-Aug-98 160.91 219.41
22-Jan-98 166.28 189.61 13-May-98 263.25 237.05 1-Sep-98 169.97 215.70
23-Jan-98 166.95 188.43 14-May-98 270.81 235.06 2-Sep-98 170.64 222.17
26-Jan-98 170.80 189.29 15-May-98 269.80 236.00 3-Sep-98 169.13 216.02
27-Jan-98 171.98 189.70 18-May-98 261.24 232.53 4-Sep-98 161.91 216.60
28-Jan-98 178.19 191.78 19-May-98 272.82 237.74 8-Sep-98 174.50 221.24
29-Jan-98 182.05 193.10 20-May-98 267.45 241.14 9-Sep-98 169.80 217.39
30-Jan-98 178.86 193.17 21-May-98 267.28 241.18 10-Sep-98 163.25 206.23
2-Feb-98 184.40 194.90 22-May-98 264.60 246.31 11-Sep-98 164.43 204.03
3-Feb-98 182.55 193.94 26-May-98 262.08 245.72 14-Sep-98 160.40 208.72
4-Feb-98 175.84 192.38 27-May-98 255.03 241.95 15-Sep-98 158.56 204.89
5-Feb-98 181.38 194.78 28-May-98 254.36 240.02 16-Sep-98 157.05 207.44
6-Feb-98 182.55 196.27 29-May-98 255.37 242.00 17-Sep-98 142.79 199.41
9-Feb-98 176.01 196.67 1-Jun-98 253.02 242.40 18-Sep-98 136.91 193.76
10-Feb-98 179.53 195.89 2-Jun-98 248.83 243.85 21-Sep-98 123.49 182.26
11-Feb-98 184.06 197.81 3-Jun-98 245.30 240.94 22-Sep-98 129.03 190.59
12-Feb-98 197.32 196.48 4-Jun-98 247.99 242.93 23-Sep-98 143.96 195.99
13-Feb-98 194.80 196.80 5-Jun-98 246.98 244.98 24-Sep-98 135.57 195.74
17-Feb-98 204.87 199.06 8-Jun-98 256.38 243.62 25-Sep-98 142.28 191.39
18-Feb-98 203.02 203.23 9-Jun-98 254.19 243.45 28-Sep-98 143.29 195.74
19-Feb-98 201.68 205.21 10-Jun-98 247.99 242.97 29-Sep-98 145.47 193.42
20-Feb-98 201.85 205.03 11-Jun-98 235.91 236.73 30-Sep-98 143.29 188.63
23-Feb-98 205.37 205.91 12-Jun-98 231.71 233.15 1-Oct-98 136.41 180.92
30
Date Philips AEX Date Philips AEX Date Philips AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
2-Oct-98 134.06 171.35 25-Jan-99 215.44 233.77 14-May-99 245.13 242.00
5-Oct-98 130.20 167.46 26-Jan-99 204.70 234.34 17-May-99 244.80 244.83
6-Oct-98 132.21 177.32 27-Jan-99 199.66 236.55 18-May-99 244.30 248.30
7-Oct-98 128.36 173.07 28-Jan-99 197.65 239.83 19-May-99 247.31 251.36
8-Oct-98 122.48 167.13 29-Jan-99 195.47 236.77 20-May-99 239.09 252.38
9-Oct-98 134.23 171.86 1-Feb-99 190.94 240.29 21-May-99 239.26 249.61
12-Oct-98 140.27 181.66 2-Feb-99 192.45 237.08 24-May-99 233.56 249.14
13-Oct-98 141.95 185.28 3-Feb-99 196.31 234.56 25-May-99 227.68 246.13
14-Oct-98 149.33 188.59 4-Feb-99 193.29 236.40 26-May-99 231.54 245.80
15-Oct-98 158.39 190.08 5-Feb-99 190.44 237.78 27-May-99 231.38 246.54
16-Oct-98 156.71 192.38 8-Feb-99 193.96 235.05 28-May-99 231.21 246.16
19-Oct-98 151.34 190.10 9-Feb-99 192.78 230.52 1-Jun-99 242.11 247.66
20-Oct-98 159.23 196.88 10-Feb-99 193.46 228.05 2-Jun-99 238.93 250.98
21-Oct-98 167.62 196.00 11-Feb-99 192.28 230.53 3-Jun-99 237.75 252.09
22-Oct-98 148.32 196.34 12-Feb-99 187.25 232.87 4-Jun-99 238.26 252.96
23-Oct-98 140.77 194.42 16-Feb-99 185.23 232.86 7-Jun-99 242.28 252.17
26-Oct-98 144.13 194.93 17-Feb-99 181.71 232.65 8-Jun-99 252.18 253.08
27-Oct-98 148.83 201.02 18-Feb-99 184.23 228.78 9-Jun-99 253.02 251.09
28-Oct-98 146.14 196.95 19-Feb-99 186.91 227.91 10-Jun-99 255.03 252.50
29-Oct-98 141.95 196.41 22-Feb-99 195.13 230.33 11-Jun-99 254.03 251.69
30-Oct-98 148.32 200.54 23-Feb-99 197.15 235.09 14-Jun-99 249.33 251.60
2-Nov-98 159.23 208.10 24-Feb-99 191.11 238.81 15-Jun-99 249.50 253.96
3-Nov-98 154.36 208.87 25-Feb-99 188.25 239.77 16-Jun-99 254.03 254.89
4-Nov-98 163.59 214.00 26-Feb-99 186.91 237.84 17-Jun-99 254.19 256.32
5-Nov-98 166.61 210.98 1-Mar-99 184.90 238.56 18-Jun-99 251.34 259.30
6-Nov-98 165.94 213.49 2-Mar-99 183.39 234.64 21-Jun-99 256.21 257.05
9-Nov-98 159.23 214.10 3-Mar-99 183.89 234.10 22-Jun-99 261.58 254.48
10-Nov-98 157.21 210.56 4-Mar-99 181.54 231.01 23-Jun-99 262.58 252.36
11-Nov-98 160.40 212.49 5-Mar-99 187.42 229.57 24-Jun-99 261.24 249.92
12-Nov-98 162.42 209.74 8-Mar-99 187.08 235.63 25-Jun-99 259.23 250.84
13-Nov-98 163.93 208.66 9-Mar-99 187.75 233.84 28-Jun-99 261.91 251.66
16-Nov-98 169.46 213.80 10-Mar-99 191.44 232.40 29-Jun-99 266.61 249.72
17-Nov-98 172.32 213.09 11-Mar-99 197.32 231.68 30-Jun-99 270.81 253.84
18-Nov-98 182.22 212.75 12-Mar-99 194.63 234.76 1-Jul-99 267.79 254.54
19-Nov-98 184.06 216.70 15-Mar-99 200.34 237.18 2-Jul-99 268.96 259.00
20-Nov-98 187.08 224.10 16-Mar-99 205.87 238.08 6-Jul-99 273.83 258.65
23-Nov-98 187.75 228.34 17-Mar-99 209.56 240.57 7-Jul-99 272.48 257.65
24-Nov-98 180.03 225.45 18-Mar-99 214.09 240.27 8-Jul-99 270.81 257.55
25-Nov-98 172.48 225.09 19-Mar-99 212.92 239.21 9-Jul-99 272.82 261.15
27-Nov-98 177.01 229.30 22-Mar-99 214.60 243.48 12-Jul-99 264.60 261.80
30-Nov-98 169.97 222.24 23-Mar-99 207.38 242.19 13-Jul-99 273.66 259.05
1-Dec-98 170.47 211.76 24-Mar-99 207.38 237.03 14-Jul-99 284.56 262.26
2-Dec-98 166.78 207.51 25-Mar-99 216.44 233.94 15-Jul-99 292.45 264.47
3-Dec-98 173.99 212.57 26-Mar-99 210.91 237.61 16-Jul-99 290.77 261.93
4-Dec-98 181.88 215.63 29-Mar-99 217.28 233.86 19-Jul-99 294.46 262.03
7-Dec-98 180.70 216.79 30-Mar-99 214.77 237.87 20-Jul-99 278.86 255.97
8-Dec-98 180.54 217.74 31-Mar-99 221.31 237.80 21-Jul-99 278.19 252.63
9-Dec-98 187.25 220.50 1-Apr-99 218.12 238.92 22-Jul-99 254.70 248.96
10-Dec-98 178.36 220.63 5-Apr-99 222.15 237.45 23-Jul-99 259.90 247.60
11-Dec-98 178.19 216.30 6-Apr-99 217.28 238.66 26-Jul-99 255.70 244.09
14-Dec-98 170.47 215.17 7-Apr-99 221.48 241.42 27-Jul-99 263.76 245.37
15-Dec-98 175.67 218.86 8-Apr-99 220.30 239.25 28-Jul-99 268.96 247.49
16-Dec-98 166.44 221.53 9-Apr-99 211.75 239.28 29-Jul-99 268.46 242.98
17-Dec-98 173.49 224.80 12-Apr-99 214.77 238.58 30-Jul-99 271.48 245.97
18-Dec-98 184.23 225.72 13-Apr-99 216.27 240.73 2-Aug-99 266.95 242.18
21-Dec-98 182.22 232.71 14-Apr-99 214.93 241.89 3-Aug-99 264.76 240.26
22-Dec-98 179.53 233.29 15-Apr-99 217.11 241.27 4-Aug-99 260.74 240.59
23-Dec-98 180.37 237.08 16-Apr-99 223.99 244.04 5-Aug-99 259.90 235.40
24-Dec-98 181.21 237.99 19-Apr-99 225.67 248.92 6-Aug-99 254.87 238.11
28-Dec-98 179.03 240.77 20-Apr-99 218.29 244.57 9-Aug-99 253.52 241.80
29-Dec-98 180.20 241.23 21-Apr-99 226.51 247.06 10-Aug-99 247.99 238.86
30-Dec-98 179.70 239.56 22-Apr-99 240.60 249.88 11-Aug-99 259.73 241.11
31-Dec-98 181.71 239.56 23-Apr-99 237.08 249.73 12-Aug-99 262.58 246.21
4-Jan-99 187.92 248.72 26-Apr-99 240.94 251.76 13-Aug-99 272.99 251.16
5-Jan-99 194.97 252.08 27-Apr-99 239.26 255.60 16-Aug-99 269.63 252.05
6-Jan-99 206.38 259.71 28-Apr-99 231.21 255.87 17-Aug-99 273.32 254.98
7-Jan-99 202.01 249.67 29-Apr-99 229.87 255.20 18-Aug-99 266.61 253.68
8-Jan-99 203.52 248.86 30-Apr-99 228.52 255.20 19-Aug-99 267.11 249.42
11-Jan-99 199.33 242.85 3-May-99 236.91 256.20 20-Aug-99 267.62 251.21
12-Jan-99 193.96 238.61 4-May-99 233.05 257.49 23-Aug-99 268.96 254.25
13-Jan-99 187.58 225.73 5-May-99 233.72 253.67 24-Aug-99 277.18 254.80
14-Jan-99 184.73 228.77 6-May-99 231.21 251.22 25-Aug-99 285.40 259.78
15-Jan-99 193.29 235.20 7-May-99 236.58 251.83 26-Aug-99 280.87 260.81
19-Jan-99 199.33 244.24 10-May-99 240.10 250.08 27-Aug-99 280.37 260.26
20-Jan-99 209.23 246.15 11-May-99 243.29 249.08 30-Aug-99 277.68 260.03
21-Jan-99 204.03 241.97 12-May-99 247.99 247.78 31-Aug-99 276.01 254.71
22-Jan-99 207.89 230.82 13-May-99 250.67 245.69 1-Sep-99 276.18 254.67
31
Date Philips AEX Date Philips AEX Date Philips AEX
- --------- ------- ------ --------- ------- ------ --------- ------- ------
2-Sep-99 267.62 251.41 15-Feb-00 458.39 290.28 28-Jul-00 444.30 295.34
3-Sep-99 278.69 257.48 16-Feb-00 452.85 294.00 31-Jul-00 482.55 297.32
7-Sep-99 290.77 261.01 17-Feb-00 429.53 297.23 1-Aug-00 492.62 298.53
8-Sep-99 280.87 259.11 18-Feb-00 433.05 291.54 2-Aug-00 475.17 300.79
9-Sep-99 280.87 261.38 22-Feb-00 463.09 288.94 3-Aug-00 457.72 296.69
10-Sep-99 291.11 263.28 23-Feb-00 483.05 288.02 4-Aug-00 448.32 299.67
13-Sep-99 285.23 261.46 24-Feb-00 481.88 290.36 7-Aug-00 451.01 302.84
14-Sep-99 286.07 259.31 25-Feb-00 503.69 290.81 8-Aug-00 444.30 301.84
15-Sep-99 283.89 259.35 28-Feb-00 502.35 294.82 9-Aug-00 472.48 304.30
16-Sep-99 281.04 256.62 29-Feb-00 514.09 291.25 10-Aug-00 470.47 304.19
17-Sep-99 279.87 254.58 1-Mar-00 542.62 295.59 11-Aug-00 470.47 304.36
20-Sep-99 275.34 256.56 2-Mar-00 530.87 297.53 14-Aug-00 499.33 305.73
21-Sep-99 263.93 251.30 3-Mar-00 556.88 299.29 15-Aug-00 493.29 306.02
22-Sep-99 270.64 251.02 6-Mar-00 545.30 302.81 16-Aug-00 501.34 306.95
23-Sep-99 268.29 251.63 7-Mar-00 514.09 302.68 17-Aug-00 513.42 307.89
24-Sep-99 262.92 246.66 8-Mar-00 517.11 301.34 18-Aug-00 522.82 308.70
27-Sep-99 270.30 250.25 9-Mar-00 528.52 300.25 21-Aug-00 516.78 308.57
28-Sep-99 270.30 246.94 10-Mar-00 520.13 297.28 22-Aug-00 518.12 309.72
29-Sep-99 269.63 246.61 13-Mar-00 509.06 301.08 23-Aug-00 510.74 309.45
30-Sep-99 271.14 243.60 14-Mar-00 491.95 292.82 24-Aug-00 516.78 309.78
1-Oct-99 266.11 239.88 15-Mar-00 468.46 294.21 25-Aug-00 526.17 307.63
4-Oct-99 275.84 243.73 16-Mar-00 483.22 286.58 28-Aug-00 530.87 309.53
5-Oct-99 273.15 246.19 17-Mar-00 469.97 295.19 29-Aug-00 525.50 307.64
6-Oct-99 282.21 246.73 20-Mar-00 479.70 299.10 30-Aug-00 510.74 304.95
7-Oct-99 281.71 247.30 21-Mar-00 496.64 298.87 31-Aug-00 529.53 306.82
8-Oct-99 282.89 246.89 22-Mar-00 489.60 299.29 1-Sep-00 546.98 309.34
11-Oct-99 281.88 249.08 23-Mar-00 477.01 302.29 5-Sep-00 540.27 310.60
12-Oct-99 270.47 247.46 24-Mar-00 483.39 298.98 6-Sep-00 500.00 309.26
13-Oct-99 263.76 245.63 27-Mar-00 488.09 304.13 7-Sep-00 506.71 309.21
14-Oct-99 261.91 243.51 28-Mar-00 496.81 303.53 8-Sep-00 493.96 305.47
15-Oct-99 259.90 239.38 29-Mar-00 487.42 306.12 11-Sep-00 479.87 305.97
18-Oct-99 252.35 235.45 30-Mar-00 464.09 303.80 12-Sep-00 477.85 303.61
19-Oct-99 256.04 239.58 31-Mar-00 459.90 295.67 13-Sep-00 487.92 301.40
20-Oct-99 251.85 242.16 3-Apr-00 428.02 294.70 14-Sep-00 499.33 301.39
21-Oct-99 267.62 239.21 4-Apr-00 423.99 289.64 15-Sep-00 493.96 300.99
22-Oct-99 270.64 244.41 5-Apr-00 416.27 291.84 18-Sep-00 480.54 297.44
25-Oct-99 270.13 243.77 6-Apr-00 457.21 285.04 19-Sep-00 491.95 296.77
26-Oct-99 263.42 245.75 7-Apr-00 482.55 293.07 20-Sep-00 481.88 295.66
27-Oct-99 258.22 245.80 10-Apr-00 453.69 298.73 21-Sep-00 475.84 291.90
28-Oct-99 265.27 252.81 11-Apr-00 435.23 299.04 22-Sep-00 455.70 290.55
29-Oct-99 279.03 254.45 12-Apr-00 401.68 293.96 25-Sep-00 456.38 293.04
1-Nov-99 268.96 253.28 13-Apr-00 416.11 294.26 26-Sep-00 454.36 290.66
2-Nov-99 272.65 253.19 14-Apr-00 400.00 293.80 27-Sep-00 464.43 291.94
3-Nov-99 284.90 257.72 17-Apr-00 425.50 289.47 28-Sep-00 471.14 293.12
4-Nov-99 295.30 260.20 18-Apr-00 447.65 283.84 29-Sep-00 456.38 294.36
5-Nov-99 295.13 259.39 19-Apr-00 473.83 287.65 2-Oct-00 457.05 296.34
8-Nov-99 287.75 259.03 20-Apr-00 478.52 291.09 3-Oct-00 448.32 298.21
9-Nov-99 294.80 259.59 24-Apr-00 455.03 292.78 4-Oct-00 450.34 297.66
10-Nov-99 307.89 261.28 25-Apr-00 491.28 293.38 5-Oct-00 436.24 298.94
11-Nov-99 325.84 264.67 26-Apr-00 474.50 296.51 6-Oct-00 413.42 295.95
12-Nov-99 312.25 262.48 27-Apr-00 479.19 289.20 9-Oct-00 409.40 291.41
15-Nov-99 314.93 266.86 28-Apr-00 479.19 294.30 10-Oct-00 387.25 291.29
16-Nov-99 314.09 268.81 1-May-00 485.23 297.01 24-Oct-00 426.17 300.26
17-Nov-99 312.75 268.56 2-May-00 476.51 299.71 25-Oct-00 395.97 297.66
18-Nov-99 313.09 270.38 3-May-00 459.73 298.06 26-Oct-00 410.07 297.89
19-Nov-99 312.42 270.18 4-May-00 455.70 295.94 27-Oct-00 414.77 299.68
22-Nov-99 305.87 267.68 5-May-00 467.79 298.25 30-Oct-00 408.72 300.63
23-Nov-99 300.67 267.04 8-May-00 459.06 297.63 31-Oct-00 428.86 302.83
24-Nov-99 310.40 266.53 9-May-00 451.01 295.22 1-Nov-00 429.53 304.67
26-Nov-99 327.35 271.44 10-May-00 432.21 292.57 2-Nov-00 430.87 304.15
29-Nov-99 324.16 271.92 11-May-00 452.35 293.16 3-Nov-00 432.89 305.76
30-Nov-99 320.81 267.92 12-May-00 469.13 297.38 6-Nov-00 435.57 307.18
1-Dec-99 335.57 268.13 15-May-00 468.46 296.83 7-Nov-00 422.15 305.80
2-Dec-99 332.38 269.74 16-May-00 482.55 301.16 8-Nov-00 408.72 306.28
3-Dec-99 336.24 274.78 17-May-00 465.77 297.32 9-Nov-00 398.66 303.41
6-Dec-99 344.13 272.21 18-May-00 459.06 297.34 10-Nov-00 370.47 300.14
7-Dec-99 345.30 272.32 19-May-00 440.27 290.32 13-Nov-00 375.17 295.63
8-Dec-99 351.34 271.68 22-May-00 420.81 285.59 14-Nov-00 402.01 302.13
9-Dec-99 359.06 275.03 23-May-00 416.11 286.71 15-Nov-00 404.70 303.29
10-Dec-99 355.37 275.60 24-May-00 418.79 285.88 16-Nov-00 381.21 301.37
13-Dec-99 345.81 277.79 25-May-00 430.20 287.25 17-Nov-00 384.56 302.66
14-Dec-99 334.23 278.40 26-May-00 444.30 287.41 20-Nov-00 355.03 296.33
15-Dec-99 324.83 276.85 30-May-00 471.14 291.79 21-Nov-00 357.05 297.38
16-Dec-99 348.99 279.38 31-May-00 474.50 291.49 11-Oct-00 374.50 283.57
17-Dec-99 353.36 282.44 1-Jun-00 499.33 291.68 12-Oct-00 377.18 285.33
20-Dec-99 344.97 286.35 2-Jun-00 534.23 301.66 13-Oct-00 418.12 285.67
21-Dec-99 351.68 286.39 5-Jun-00 520.13 299.32 16-Oct-00 402.01 286.53
22-Dec-99 355.03 290.86 6-Jun-00 510.07 297.56 17-Oct-00 378.52 284.54
23-Dec-99 357.21 293.29 7-Jun-00 520.13 296.60 18-Oct-00 369.80 281.93
27-Dec-99 356.54 293.88 8-Jun-00 525.50 299.08 19-Oct-00 419.46 288.88
28-Dec-99 353.69 293.85 9-Jun-00 513.42 299.80 20-Oct-00 416.11 291.96
29-Dec-99 352.18 293.01 12-Jun-00 507.38 299.35 23-Oct-00 419.46 295.01
30-Dec-99 358.22 294.77 13-Jun-00 521.48 300.66 22-Nov-00 336.24 290.23
31-Dec-99 362.42 298.76 14-Jun-00 528.86 304.04 24-Nov-00 375.84 288.66
3-Jan-00 378.52 300.55 15-Jun-00 526.17 305.04 27-Nov-00 386.58 293.83
4-Jan-00 355.37 285.79 16-Jun-00 520.13 303.67 28-Nov-00 364.43 296.93
5-Jan-00 366.95 281.36 19-Jun-00 538.93 301.33 29-Nov-00 379.19 294.55
6-Jan-00 343.62 277.76 20-Jun-00 554.36 303.47 30-Nov-00 352.35 294.73
7-Jan-00 365.77 286.95 21-Jun-00 570.80 304.76 1-Dec-00 376.51 289.20
10-Jan-00 373.49 291.52 22-Jun-00 540.27 304.44 4-Dec-00 383.89 293.83
11-Jan-00 375.84 288.76 23-Jun-00 536.24 303.79 5-Dec-00 422.82 288.83
12-Jan-00 388.25 284.07 26-Jun-00 539.26 305.26 6-Dec-00 416.78 294.42
13-Jan-00 399.66 285.77 27-Jun-00 528.52 304.10 7-Dec-00 408.05 293.21
14-Jan-00 412.42 291.73 28-Jun-00 533.89 303.99 8-Dec-00 431.54 292.06
18-Jan-00 410.07 288.22 29-Jun-00 496.98 296.67 11-Dec-00 442.95 292.46
19-Jan-00 399.50 285.94 30-Jun-00 509.73 299.09 12-Dec-00 426.17 295.54
20-Jan-00 414.93 286.92 3-Jul-00 517.11 297.25 13-Dec-00 402.01 293.40
21-Jan-00 406.21 285.44 5-Jul-00 486.91 297.17 14-Dec-00 393.96 290.11
24-Jan-00 403.69 287.25 6-Jul-00 489.93 296.18 15-Dec-00 385.91 284.33
25-Jan-00 416.11 284.80 7-Jul-00 509.73 300.35 18-Dec-00 377.85 277.88
26-Jan-00 408.05 283.62 10-Jul-00 515.77 302.06 19-Dec-00 369.13 281.07
27-Jan-00 400.17 282.50 11-Jul-00 518.79 302.85 20-Dec-00 338.26 284.06
28-Jan-00 396.81 281.43 12-Jul-00 535.24 305.40 21-Dec-00 345.64 277.58
31-Jan-00 396.64 272.49 13-Jul-00 547.65 305.70 22-Dec-00 361.74 276.98
1-Feb-00 403.52 275.54 14-Jul-00 557.38 305.86 26-Dec-00 365.77 278.94
2-Feb-00 415.44 279.96 17-Jul-00 578.19 306.63 27-Dec-00 380.54 282.63
3-Feb-00 452.01 289.05 18-Jul-00 538.93 304.17 28-Dec-00 381.88 285.12
4-Feb-00 446.64 294.11 19-Jul-00 531.54 302.73 29-Dec-00 389.26 283.72
7-Feb-00 443.62 290.31 20-Jul-00 546.98 304.52 2-Jan-01 377.85 282.19
8-Feb-00 469.30 297.09 21-Jul-00 540.27 302.13 3-Jan-01 400.00 280.27
9-Feb-00 465.44 296.87 24-Jul-00 528.86 304.17 4-Jan-01 401.34 284.33
10-Feb-00 487.25 294.26 25-Jul-00 522.82 303.99 5-Jan-01 408.72 282.92
11-Feb-00 466.44 294.88 26-Jul-00 515.44 302.79 8-Jan-01 426.17 280.85
14-Feb-00 467.11 291.33 27-Jul-00 466.44 299.06 9-Jan-01 422.15 281.70
32
Stockholders' equity increased by EUR 6,979 million to a level of EUR 21,736
million at year-end 2000. The effect of the net income of EUR 9,602 million in
2000 was partly offset by the 3% share reduction program, which reduced equity
by EUR 1,673 million. The currency effects on equity resulted in an increase of
EUR 96 million, while the deferred results of financial derivative transactions
within equity increased equity by EUR 159 million. Furthermore, equity was
reduced by treasury stock transactions of EUR 578 million and by dividend
payments of EUR 399 million, related to the profit distribution for the year
1999. As a consequence of a change in accounting policies, product/process
development costs, previously included in inventories, have been excluded and
charged to equity for an amount of EUR 241 million on January 1, 2000.
The EUR 197 million increase in equity in 1999 was mainly due to 1999 net
income of EUR 1,799 million, to a large extent offset by an 8% share reduction
program (EUR 1,490 million).
The number of outstanding common shares of Royal Philips Electronics at
December 31, 2000 was 1,284 million (1999: 1,332 million shares -- after stock
split) in 2000.
5-YEAR RELATIVE PERFORMANCE: PHILIPS, S&P 100, S&P 500, Soxx
base 100 = Jan 3, 1996
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
2-Jan-96 100.00 100.00 100.00 100.00 22-Apr-96 97.32 104.38 105.67 97.08 9-Aug-96 88.93 106.66 108.09 85.24
3-Jan-96 101.68 100.10 100.15 96.01 23-Apr-96 96.31 104.97 106.23 100.24 12-Aug-96 89.26 107.26 109.07 84.82
4-Jan-96 103.69 99.51 99.53 97.39 24-Apr-96 98.32 104.74 106.08 105.01 13-Aug-96 87.92 106.36 108.16 82.40
5-Jan-96 104.36 99.35 99.56 97.17 25-Apr-96 97.65 105.18 106.32 106.00 14-Aug-96 88.93 106.66 108.56 83.71
8-Jan-96 106.38 99.63 99.88 96.39 26-Apr-96 95.64 105.27 106.39 105.25 15-Aug-96 89.26 106.69 108.66 84.25
9-Jan-96 102.01 98.18 98.48 88.96 29-Apr-96 95.64 105.39 106.53 102.47 16-Aug-96 89.26 107.17 108.91 83.33
10-Jan-96 100.67 96.42 96.58 87.58 30-Apr-96 96.31 105.39 106.54 102.09 19-Aug-96 88.93 107.39 108.92 83.19
11-Jan-96 104.70 97.09 97.37 91.63 1-May-96 96.64 105.45 106.49 103.10 20-Aug-96 89.93 107.24 108.81 82.52
12-Jan-96 104.36 96.95 97.15 89.05 2-May-96 95.97 103.65 104.78 104.10 21-Aug-96 89.93 107.14 108.63 84.50
15-Jan-96 102.35 96.63 96.93 82.11 3-May-96 96.31 103.37 104.44 104.97 22-Aug-96 92.28 108.05 109.55 85.78
16-Jan-96 105.03 98.02 98.35 85.53 6-May-96 96.64 103.23 104.36 104.81 23-Aug-96 91.28 107.46 109.01 84.53
17-Jan-96 103.36 97.69 97.82 84.36 7-May-96 95.97 102.82 103.97 102.86 26-Aug-96 90.94 106.95 108.41 83.67
18-Jan-96 103.02 97.99 98.12 85.08 8-May-96 96.64 103.87 105.14 103.46 27-Aug-96 91.95 107.36 108.73 84.53
19-Jan-96 104.03 98.57 98.74 86.13 9-May-96 95.30 103.98 105.13 101.81 28-Aug-96 91.95 107.10 108.41 83.90
22-Jan-96 104.70 98.82 99.01 88.93 10-May-96 95.30 105.05 106.11 101.34 29-Aug-96 91.28 105.91 107.15 84.80
23-Jan-96 103.36 98.72 98.97 88.88 13-May-96 95.64 106.57 107.68 105.95 30-Aug-96 90.94 105.04 106.39 83.94
24-Jan-96 108.05 99.88 100.25 94.72 14-May-96 94.63 107.23 108.51 106.94 3-Sep-96 89.93 105.48 106.93 83.79
25-Jan-96 107.05 99.40 99.79 92.95 15-May-96 96.31 107.20 108.38 105.22 4-Sep-96 89.60 105.62 107.03 83.25
26-Jan-96 107.38 100.14 100.65 93.07 16-May-96 95.64 107.11 108.23 105.51 5-Sep-96 88.93 104.63 105.95 79.56
29-Jan-96 107.05 100.56 101.22 91.40 17-May-96 95.30 107.76 109.07 105.30 6-Sep-96 89.26 105.63 106.93 80.19
30-Jan-96 106.71 101.52 102.20 92.28 20-May-96 95.97 108.44 110.14 104.89 9-Sep-96 88.93 106.93 108.24 79.94
31-Jan-96 107.72 102.46 103.07 92.50 21-May-96 95.30 108.38 109.90 102.05 10-Sep-96 88.59 106.94 108.31 80.07
1-Feb-96 107.38 102.86 103.40 96.16 22-May-96 95.64 109.29 110.74 100.54 11-Sep-96 89.26 107.50 108.82 80.53
2-Feb-96 108.39 102.43 102.93 97.07 23-May-96 95.30 108.90 110.28 99.32 12-Sep-96 88.59 108.12 109.45 81.33
5-Feb-96 111.74 103.33 103.88 102.28 24-May-96 95.64 109.31 110.65 97.89 13-Sep-96 88.59 109.64 111.00 83.23
6-Feb-96 111.74 104.12 104.90 104.58 28-May-96 94.29 108.30 109.82 99.34 16-Sep-96 89.26 110.19 111.57 85.73
7-Feb-96 110.07 104.70 105.62 100.75 29-May-96 93.62 107.60 109.13 97.92 17-Sep-96 91.61 110.02 111.54 90.09
8-Feb-96 110.74 105.69 106.52 99.97 30-May-96 94.29 108.21 109.68 100.41 18-Sep-96 91.95 109.79 111.43 89.15
9-Feb-96 108.05 105.74 106.35 98.89 31-May-96 94.29 107.80 109.17 102.00 19-Sep-96 93.62 110.03 111.61 91.22
12-Feb-96 108.39 106.56 107.24 99.02 3-Jun-96 93.29 107.56 109.01 100.22 20-Sep-96 93.96 110.68 112.44 90.66
13-Feb-96 106.04 106.41 107.05 96.03 4-Jun-96 94.29 108.35 109.68 99.70 23-Sep-96 95.30 110.59 112.23 89.50
14-Feb-96 107.05 105.61 106.43 96.23 5-Jun-96 94.63 109.30 110.55 98.59 24-Sep-96 96.98 110.45 111.80 94.96
15-Feb-96 107.38 104.93 105.48 94.97 6-Jun-96 94.29 108.43 109.57 95.72 25-Sep-96 99.33 110.49 111.81 95.69
16-Feb-96 108.39 104.39 104.85 95.80 7-Jun-96 93.62 108.47 109.84 98.23 26-Sep-96 97.65 110.49 111.79 95.08
20-Feb-96 108.72 103.21 103.85 96.45 10-Jun-96 93.29 108.29 109.60 96.06 27-Sep-96 96.31 110.55 111.71 93.67
21-Feb-96 112.08 104.41 105.33 98.26 11-Jun-96 93.29 108.09 109.41 96.04 30-Sep-96 96.31 110.73 111.83 92.86
22-Feb-96 114.77 106.14 107.19 102.75 12-Jun-96 93.29 107.78 109.13 98.01 1-Oct-96 96.64 111.01 112.18 90.83
23-Feb-96 114.43 106.18 107.25 101.56 13-Jun-96 92.28 107.60 108.92 96.75 2-Oct-96 95.97 111.81 113.06 92.08
26-Feb-96 113.76 104.79 105.73 100.80 14-Jun-96 92.62 107.27 108.54 94.77 3-Oct-96 95.64 111.61 112.97 91.20
27-Feb-96 113.76 104.27 105.31 97.54 17-Jun-96 92.28 107.16 108.52 93.55 4-Oct-96 96.98 113.01 114.40 91.82
28-Feb-96 113.09 103.87 104.94 97.31 18-Jun-96 90.94 106.66 108.06 88.66 7-Oct-96 97.32 113.31 114.82 93.76
29-Feb-96 111.07 103.17 104.27 92.22 19-Jun-96 90.27 106.64 107.92 88.63 8-Oct-96 98.32 112.87 114.33 94.26
1-Mar-96 111.41 103.81 104.94 88.55 20-Jun-96 89.60 106.66 108.10 89.00 9-Oct-96 100.67 112.25 113.66 96.91
4-Mar-96 111.07 104.85 105.75 87.44 21-Jun-96 87.25 107.43 109.19 87.39 10-Oct-96 100.34 111.90 113.26 95.17
5-Mar-96 111.41 105.65 106.64 89.25 24-Jun-96 85.57 107.75 109.41 87.83 11-Oct-96 101.68 112.88 114.45 96.94
6-Mar-96 110.40 105.04 105.94 85.01 25-Jun-96 85.23 107.69 109.36 86.44 14-Oct-96 98.99 113.34 115.04 98.92
7-Mar-96 108.05 105.30 106.28 84.67 26-Jun-96 85.23 107.03 108.70 84.62 15-Oct-96 96.31 113.18 114.98 98.85
8-Mar-96 104.03 102.06 102.96 85.55 27-Jun-96 87.25 107.70 109.34 86.68 16-Oct-96 95.30 113.48 115.36 98.67
11-Mar-96 106.04 103.11 104.23 86.45 28-Jun-96 87.58 108.04 109.42 86.54 17-Oct-96 95.30 113.90 115.85 97.68
12-Mar-96 105.71 102.64 103.81 85.55 1-Jul-96 87.92 108.88 110.48 89.44 18-Oct-96 94.63 114.51 116.60 97.30
13-Mar-96 105.71 102.87 104.11 86.94 2-Jul-96 87.58 108.52 110.02 88.06 21-Oct-96 92.62 114.36 115.98 95.25
14-Mar-96 107.05 103.24 104.66 85.86 3-Jul-96 87.58 108.32 109.54 87.53 22-Oct-96 91.61 113.83 115.58 93.67
15-Mar-96 107.05 103.33 104.89 90.56 5-Jul-96 85.23 105.91 107.03 86.12 23-Oct-96 88.59 113.94 115.75 95.84
18-Mar-96 109.40 105.14 106.74 93.61 8-Jul-96 86.24 105.12 106.24 86.03 24-Oct-96 94.29 113.14 114.63 93.88
19-Mar-96 110.07 104.99 106.59 92.49 9-Jul-96 87.58 105.48 106.46 84.98 25-Oct-96 97.99 112.92 114.35 93.27
20-Mar-96 108.39 104.71 106.13 89.15 10-Jul-96 86.58 105.69 107.04 82.66 28-Oct-96 95.64 112.33 113.79 92.77
21-Mar-96 107.38 104.58 105.99 88.70 11-Jul-96 84.23 104.02 105.26 78.96 29-Oct-96 93.96 113.01 114.34 90.88
22-Mar-96 108.39 104.82 106.18 88.70 12-Jul-96 82.89 104.10 105.36 78.60 30-Oct-96 93.29 112.92 114.16 91.66
25-Mar-96 95.97 104.72 106.03 86.13 15-Jul-96 78.52 101.46 102.42 73.59 31-Oct-96 94.63 113.62 115.03 92.68
26-Mar-96 96.31 105.19 106.55 86.85 16-Jul-96 81.21 101.23 102.35 74.41 1-Nov-96 95.64 113.38 114.82 93.14
27-Mar-96 95.30 104.54 105.78 87.90 17-Jul-96 82.21 102.15 103.48 76.10 4-Nov-96 95.30 113.85 115.49 94.58
28-Mar-96 97.65 104.54 105.86 86.97 18-Jul-96 83.22 103.68 104.82 77.49 5-Nov-96 94.97 115.05 116.52 97.02
29-Mar-96 97.65 103.99 105.14 87.18 19-Jul-96 83.22 102.90 104.21 75.64 6-Nov-96 95.97 116.73 118.36 100.39
1-Apr-96 95.64 105.32 106.59 87.27 22-Jul-96 80.20 102.10 103.28 74.29 7-Nov-96 96.64 117.22 118.98 102.70
2-Apr-96 96.98 105.56 106.94 86.54 23-Jul-96 79.87 100.99 101.85 71.92 8-Nov-96 96.64 117.74 119.60 102.69
3-Apr-96 96.64 105.66 106.98 88.69 24-Jul-96 78.57 100.95 101.89 71.23 11-Nov-96 97.65 117.90 119.85 105.39
4-Apr-96 95.97 105.66 107.06 88.30 25-Jul-96 83.22 101.68 102.75 73.12 12-Nov-96 97.65 117.53 119.45 105.09
8-Apr-96 94.63 103.79 105.13 92.16 26-Jul-96 81.54 102.44 103.59 77.64 13-Nov-96 97.65 117.79 119.62 105.14
9-Apr-96 93.96 103.46 104.83 91.47 29-Jul-96 82.21 101.64 102.63 75.72 14-Nov-96 98.66 118.55 120.28 108.35
10-Apr-96 93.29 102.06 103.35 93.03 30-Jul-96 85.57 102.34 103.40 77.70 15-Nov-96 99.33 118.83 120.41 107.26
11-Apr-96 94.63 101.68 103.06 90.82 31-Jul-96 88.93 103.10 104.15 77.24 18-Nov-96 98.99 118.73 120.24 105.81
12-Apr-96 94.29 102.57 103.98 89.27 1-Aug-96 89.60 104.72 106.01 78.96 19-Nov-96 101.01 119.56 121.07 107.85
15-Apr-96 96.31 103.51 104.84 91.12 2-Aug-96 89.93 106.73 108.08 82.96 20-Nov-96 101.01 119.85 121.40 108.31
16-Apr-96 97.65 103.91 105.39 94.98 5-Aug-96 87.58 106.36 107.74 81.15 21-Nov-96 101.34 119.66 121.11 108.94
17-Apr-96 96.64 103.36 104.79 93.33 6-Aug-96 88.26 106.71 108.24 83.83 22-Nov-96 104.36 120.62 122.19 115.44
18-Apr-96 98.66 103.69 104.98 96.36 7-Aug-96 89.26 107.00 108.56 88.47 25-Nov-96 103.69 121.96 123.69 114.88
19-Apr-96 98.32 103.92 105.17 95.63 8-Aug-96 88.59 106.74 108.26 87.23 26-Nov-96 108.39 121.79 123.58 115.68
33
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
27-Nov-96 106.38 121.63 123.61 118.02 21-Mar-97 116.78 126.32 128.97 128.33 14-Jul-97 198.66 147.95 151.50 172.55
29-Nov-96 109.06 121.96 123.93 117.86 24-Mar-97 114.77 127.41 129.93 127.98 15-Jul-97 201.85 149.14 152.80 178.57
2-Dec-96 107.05 121.88 124.13 121.34 25-Mar-97 118.46 127.12 129.73 131.25 16-Jul-97 211.58 150.89 154.43 182.49
3-Dec-96 107.72 120.55 122.79 121.38 26-Mar-97 122.48 127.35 129.99 138.66 17-Jul-97 208.56 150.08 153.87 179.96
4-Dec-96 107.05 120.04 122.50 121.87 27-Mar-97 122.15 124.67 127.45 135.04 18-Jul-97 204.03 147.46 151.38 173.80
5-Dec-96 107.38 119.92 122.19 120.44 31-Mar-97 119.13 121.97 124.57 133.17 21-Jul-97 195.97 147.08 151.09 170.99
6-Dec-96 105.71 119.15 121.22 120.58 1-Apr-97 119.13 122.38 124.85 131.84 22-Jul-97 203.69 150.46 154.57 176.93
9-Dec-96 106.71 120.79 122.78 124.97 2-Apr-97 116.11 120.84 123.27 130.75 23-Jul-97 211.24 150.88 154.85 180.49
10-Dec-96 105.71 120.43 122.23 122.48 3-Apr-97 117.79 120.88 123.15 133.98 24-Jul-97 224.16 151.48 155.27 181.63
11-Dec-96 102.68 119.33 121.17 124.37 4-Apr-97 121.48 122.10 124.54 141.63 25-Jul-97 223.32 151.24 155.09 178.26
12-Dec-96 104.36 117.49 119.37 124.60 7-Apr-97 122.82 122.78 125.30 144.55 28-Jul-97 217.45 150.86 154.64 177.96
13-Dec-96 104.36 117.38 119.27 122.24 8-Apr-97 124.83 123.42 126.07 147.25 29-Jul-97 214.26 151.80 155.23 175.06
16-Dec-96 104.36 116.15 118.04 117.00 9-Apr-97 123.82 122.53 125.02 143.16 30-Jul-97 220.47 153.41 156.86 179.30
17-Dec-96 105.03 116.97 119.01 117.80 10-Apr-97 122.82 122.17 124.44 138.49 31-Jul-97 219.63 153.74 157.13 181.41
18-Dec-96 105.71 117.85 120.00 121.49 11-Apr-97 118.12 118.84 120.89 135.27 1-Aug-97 214.26 152.58 156.01 186.84
19-Dec-96 107.72 120.14 122.42 122.24 14-Apr-97 121.48 119.82 122.17 133.25 4-Aug-97 214.77 153.09 156.82 191.50
20-Dec-96 107.38 120.64 123.17 120.67 15-Apr-97 123.15 121.59 124.27 130.31 5-Aug-97 211.75 153.43 157.04 196.83
23-Dec-96 107.72 120.33 122.70 119.35 16-Apr-97 123.15 123.01 125.45 129.36 6-Aug-97 216.61 154.71 158.60 195.05
24-Dec-96 107.72 120.99 123.47 120.22 17-Apr-97 125.17 122.72 125.42 132.38 7-Aug-97 219.13 153.24 156.85 193.50
27-Dec-96 107.72 121.92 124.48 121.10 18-Apr-97 125.84 123.46 126.20 130.37 8-Aug-97 215.77 150.39 153.66 189.94
30-Dec-96 107.05 121.45 123.90 120.09 21-Apr-97 126.85 122.50 125.44 128.74 11-Aug-97 210.07 150.95 153.89 186.20
31-Dec-96 107.38 119.33 121.66 119.03 22-Apr-97 127.85 124.79 128.07 131.33 12-Aug-97 206.38 149.26 152.12 185.39
2-Jan-97 105.71 118.73 121.41 118.16 23-Apr-97 134.56 124.63 127.72 133.73 13-Aug-97 202.52 148.54 151.41 188.36
3-Jan-97 107.38 120.51 123.35 124.22 24-Apr-97 135.91 124.24 127.45 134.73 14-Aug-97 203.02 148.98 151.60 189.71
6-Jan-97 106.71 120.45 123.63 124.82 25-Apr-97 134.90 123.30 126.42 130.31 15-Aug-97 191.61 145.12 146.91 185.25
7-Jan-97 106.71 121.35 124.85 127.67 28-Apr-97 137.25 124.52 127.72 133.09 18-Aug-97 198.32 147.00 150.02 188.83
8-Jan-97 109.06 120.57 123.90 127.10 29-Apr-97 141.95 127.92 131.53 138.80 19-Aug-97 198.15 149.18 152.24 195.45
9-Jan-97 110.74 121.61 124.95 126.58 30-Apr-97 143.62 129.10 132.77 140.31 20-Aug-97 207.72 151.33 154.56 199.94
10-Jan-97 111.74 122.36 125.88 128.76 1-May-97 147.32 128.64 131.98 142.89 21-Aug-97 204.03 149.03 151.97 196.69
13-Jan-97 111.41 122.36 125.97 129.71 2-May-97 149.66 130.97 134.41 150.04 22-Aug-97 199.33 148.78 151.56 193.99
14-Jan-97 111.74 123.86 127.47 132.36 5-May-97 148.99 133.76 137.27 155.77 25-Aug-97 199.16 148.24 150.87 195.30
15-Jan-97 111.74 123.60 127.39 131.93 6-May-97 145.64 133.35 137.14 151.23 26-Aug-97 196.98 147.09 149.43 191.62
16-Jan-97 115.77 124.01 127.53 133.16 7-May-97 144.63 131.40 135.00 151.54 27-Aug-97 198.15 147.20 149.60 191.49
17-Jan-97 114.43 125.04 128.79 132.25 9-May-97 149.33 132.87 136.62 156.08 28-Aug-97 194.30 145.58 147.79 187.26
20-Jan-97 113.09 125.13 128.73 132.97 12-May-97 149.33 134.95 139.16 153.02 29-Aug-97 192.28 144.91 146.83 184.86
21-Jan-97 112.42 126.10 129.81 134.05 13-May-97 150.67 134.22 138.38 149.57 2-Sep-97 205.20 149.43 151.79 191.99
22-Jan-97 109.73 126.66 130.32 135.74 14-May-97 152.69 134.69 138.91 151.01 3-Sep-97 209.90 149.48 151.90 190.86
23-Jan-97 109.06 125.27 128.80 136.22 15-May-97 154.70 135.63 139.98 156.50 4-Sep-97 207.55 149.96 152.51 191.25
24-Jan-97 108.39 124.13 127.53 134.11 16-May-97 154.70 133.67 137.31 151.87 5-Sep-97 204.87 149.67 152.33 192.82
27-Jan-97 108.39 123.25 126.60 133.12 19-May-97 155.37 134.24 138.30 151.06 8-Sep-97 203.19 150.02 152.69 188.68
28-Jan-97 107.38 123.25 126.51 133.81 20-May-97 156.71 135.59 139.97 157.35 9-Sep-97 201.68 150.41 153.13 190.04
29-Jan-97 106.71 124.45 128.16 134.39 21-May-97 157.05 135.22 139.63 157.29 10-Sep-97 195.47 148.06 150.66 185.49
30-Jan-97 106.71 126.33 130.06 140.46 22-May-97 155.37 134.63 138.68 155.36 11-Sep-97 195.13 147.02 149.63 187.45
31-Jan-97 107.38 126.65 130.42 143.02 23-May-97 156.38 136.46 140.58 158.47 12-Sep-97 200.17 148.84 151.23 185.95
3-Feb-97 111.07 126.74 130.49 140.99 27-May-97 154.03 136.89 141.20 163.73 15-Sep-97 198.83 148.18 150.10 183.45
4-Feb-97 110.40 127.15 130.97 140.29 28-May-97 152.01 136.49 140.47 162.44 16-Sep-97 200.00 152.34 154.05 189.68
5-Feb-97 108.72 125.38 128.82 134.52 29-May-97 153.36 135.98 139.80 158.03 17-Sep-97 203.69 151.92 153.90 188.62
6-Feb-97 108.05 125.68 128.98 136.29 30-May-97 150.34 136.66 139.70 154.18 18-Sep-97 202.01 152.61 154.27 187.24
7-Feb-97 108.72 127.20 130.46 139.82 2-Jun-97 153.69 136.35 139.74 155.40 19-Sep-97 201.01 153.13 154.86 189.57
10-Feb-97 107.05 126.53 129.31 134.82 3-Jun-97 155.03 136.21 139.72 147.91 22-Sep-97 207.05 153.92 155.78 194.74
11-Feb-97 105.37 127.20 130.16 132.80 4-Jun-97 161.74 135.34 138.63 146.23 23-Sep-97 207.38 153.36 155.42 196.73
12-Feb-97 110.74 129.33 132.34 141.76 5-Jun-97 164.43 135.88 139.04 147.25 24-Sep-97 210.57 152.16 154.20 191.00
13-Feb-97 115.44 130.78 133.70 142.75 6-Jun-97 164.09 138.23 141.46 148.70 25-Sep-97 213.42 151.10 153.09 189.85
14-Feb-97 112.75 130.25 133.05 142.22 9-Jun-97 163.42 139.02 142.35 151.63 26-Sep-97 214.93 152.28 154.39 187.53
18-Feb-97 117.11 131.50 134.10 141.18 10-Jun-97 162.75 139.40 142.54 145.20 29-Sep-97 218.62 153.58 155.76 191.33
19-Feb-97 119.80 130.89 133.62 143.43 11-Jun-97 158.72 140.09 143.28 144.68 30-Sep-97 225.50 152.61 154.42 189.02
20-Feb-97 117.11 129.33 132.14 140.35 12-Jun-97 161.07 142.33 145.36 142.64 1-Oct-97 237.92 153.92 155.73 185.11
21-Feb-97 117.45 129.17 131.97 136.43 13-Jun-97 162.75 143.91 147.00 146.06 2-Oct-97 233.05 154.73 156.36 187.17
24-Feb-97 118.12 130.54 133.30 138.44 16-Jun-97 169.80 144.01 147.42 149.91 3-Oct-97 236.24 155.47 156.85 187.54
25-Feb-97 119.80 130.82 133.71 140.77 17-Jun-97 177.85 144.09 147.50 153.62 6-Oct-97 232.89 156.70 157.93 184.74
26-Feb-97 121.14 129.80 132.58 139.39 18-Jun-97 186.91 143.23 146.51 151.69 7-Oct-97 229.53 158.38 159.92 188.06
27-Feb-97 122.48 128.09 130.65 133.10 19-Jun-97 185.23 144.67 147.68 152.62 8-Oct-97 228.19 156.89 158.66 191.67
28-Feb-97 120.81 127.40 129.87 135.19 20-Jun-97 185.23 144.78 148.11 152.23 9-Oct-97 229.53 156.37 158.05 191.54
3-Mar-97 121.81 128.12 130.58 137.58 23-Jun-97 185.23 141.55 144.78 151.37 10-Oct-97 222.48 155.78 157.27 193.09
4-Mar-97 125.84 127.42 129.60 140.33 24-Jun-97 188.93 144.40 147.96 154.72 13-Oct-97 222.65 155.96 157.54 193.12
5-Mar-97 130.54 129.20 131.58 142.39 25-Jun-97 194.63 143.22 146.36 155.15 14-Oct-97 222.15 156.31 157.51 187.61
6-Mar-97 127.52 128.65 131.18 138.72 26-Jun-97 192.28 142.36 145.50 152.85 15-Oct-97 221.81 155.58 156.42 185.38
7-Mar-97 126.51 129.68 131.85 138.39 27-Jun-97 194.30 142.94 146.00 152.12 16-Oct-97 217.78 153.89 154.49 177.73
10-Mar-97 125.84 131.08 133.08 138.26 30-Jun-97 192.95 142.60 145.52 151.45 17-Oct-97 215.60 152.10 152.92 171.89
11-Mar-97 126.85 130.71 132.80 139.34 1-Jul-97 189.26 143.55 146.74 152.62 20-Oct-97 219.80 153.95 154.78 172.45
12-Mar-97 123.82 129.57 131.56 139.67 2-Jul-97 188.09 145.64 148.90 155.06 21-Oct-97 231.21 156.63 157.68 175.05
13-Mar-97 119.13 127.20 129.58 138.44 3-Jul-97 192.95 147.72 151.01 156.88 22-Oct-97 230.66 156.02 156.85 172.85
14-Mar-97 120.47 127.78 129.66 139.72 7-Jul-97 198.32 146.96 150.46 157.69 23-Oct-97 218.12 153.16 153.52 164.88
17-Mar-97 120.13 128.19 130.48 136.27 8-Jul-97 197.15 148.01 151.62 161.91 24-Oct-97 215.10 151.70 151.51 156.24
18-Mar-97 119.80 127.21 129.82 132.74 9-Jul-97 196.31 146.21 149.61 165.38 27-Oct-97 195.13 141.28 141.13 141.00
19-Mar-97 120.13 126.59 129.29 128.43 10-Jul-97 199.33 147.21 150.43 165.04 28-Oct-97 208.72 148.51 149.27 155.33
20-Mar-97 115.10 126.09 128.91 130.52 11-Jul-97 199.50 147.68 151.00 168.35 29-Oct-97 211.41 148.08 148.61 154.68
34
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
30-Oct-97 205.03 145.58 145.80 144.95 24-Feb-98 209.73 166.02 166.89 153.80 15-Jun-98 224.16 173.51 176.71 115.23
31-Oct-97 210.40 147.35 147.59 149.54 25-Feb-98 208.56 168.01 169.00 161.38 16-Jun-98 228.86 175.21 178.58 120.70
3-Nov-97 215.94 151.27 151.58 158.05 26-Feb-98 211.41 168.94 169.50 163.36 17-Jun-98 237.75 178.36 181.65 116.23
4-Nov-97 211.24 151.56 151.61 160.27 27-Feb-98 209.06 169.05 169.63 156.74 18-Jun-98 234.06 178.24 181.49 118.42
5-Nov-97 217.11 151.88 151.64 161.48 2-Mar-98 211.07 168.79 169.27 150.90 19-Jun-98 230.37 177.32 180.97 116.95
6-Nov-97 213.76 151.12 150.93 154.98 3-Mar-98 204.19 169.48 170.22 149.18 22-Jun-98 234.23 177.73 181.18 121.99
7-Nov-97 209.56 149.42 149.48 152.47 4-Mar-98 203.36 168.73 169.32 152.68 23-Jun-98 224.16 180.35 184.40 125.40
10-Nov-97 203.52 148.39 148.29 147.22 5-Mar-98 195.47 166.75 166.66 142.62 24-Jun-98 232.38 182.51 186.94 128.30
11-Nov-97 203.02 148.82 148.85 145.74 6-Mar-98 196.81 170.07 169.92 145.15 25-Jun-98 230.37 181.93 186.10 125.40
12-Nov-97 189.26 145.95 146.09 137.73 9-Mar-98 202.52 169.53 169.28 139.81 26-Jun-98 224.66 182.56 186.92 124.35
13-Nov-97 185.23 147.67 148.13 142.05 10-Mar-98 202.68 171.45 170.99 142.94 29-Jun-98 221.31 183.41 188.45 123.90
14-Nov-97 186.58 149.56 150.13 145.46 11-Mar-98 202.18 172.13 171.59 144.81 30-Jun-98 227.85 182.66 187.42 121.82
17-Nov-97 190.94 152.43 153.10 151.81 12-Mar-98 200.67 172.36 172.02 146.21 1-Jul-98 238.59 185.03 189.46 125.20
18-Nov-97 191.61 151.15 151.90 147.68 13-Mar-98 202.68 172.15 171.84 146.12 2-Jul-98 235.57 184.69 189.05 121.66
19-Nov-97 190.10 152.17 153.11 146.82 16-Mar-98 200.67 173.87 173.57 147.99 6-Jul-98 235.07 186.45 190.55 121.26
20-Nov-97 193.46 154.49 155.41 154.33 17-Mar-98 195.64 174.06 173.87 145.24 7-Jul-98 236.24 186.02 190.37 126.25
21-Nov-97 197.15 155.15 156.64 152.54 18-Mar-98 193.29 174.88 175.02 144.67 8-Jul-98 237.25 187.90 192.54 128.30
24-Nov-97 184.56 152.51 153.66 145.02 19-Mar-98 192.11 175.56 175.64 145.52 9-Jul-98 232.05 186.64 191.24 126.39
25-Nov-97 180.20 153.18 154.48 145.96 20-Mar-98 193.29 177.08 177.51 141.30 10-Jul-98 230.87 187.57 192.06 126.73
26-Nov-97 181.21 153.31 154.46 143.53 23-Mar-98 193.96 176.49 176.48 142.12 13-Jul-98 235.74 187.71 192.63 127.72
28-Nov-97 179.87 153.92 155.16 143.97 24-Mar-98 199.66 178.12 178.27 142.34 14-Jul-98 242.45 189.71 194.75 126.39
1-Dec-97 189.09 157.04 158.21 151.16 25-Mar-98 205.37 177.52 178.38 145.82 15-Jul-98 251.34 189.26 194.56 135.34
2-Dec-97 181.04 156.54 157.54 141.64 26-Mar-98 205.70 177.34 178.31 147.33 16-Jul-98 252.01 190.74 195.79 136.29
3-Dec-97 175.50 157.36 158.23 142.82 27-Mar-98 203.36 176.48 177.49 147.35 17-Jul-98 243.96 191.19 196.47 131.99
4-Dec-97 179.36 156.77 158.00 140.63 30-Mar-98 198.99 176.18 177.58 145.44 20-Jul-98 237.75 190.76 195.49 128.02
5-Dec-97 180.20 158.49 160.04 144.18 31-Mar-98 197.15 177.49 178.75 147.96 21-Jul-98 230.87 187.69 192.25 129.30
8-Dec-97 181.88 158.26 159.68 146.39 1-Apr-98 197.32 178.52 180.11 153.70 22-Jul-98 232.21 187.53 191.88 125.46
9-Dec-97 180.03 157.20 158.08 140.97 2-Apr-98 195.64 180.43 181.78 153.22 23-Jul-98 221.31 183.61 187.94 124.02
10-Dec-97 171.81 156.23 157.19 137.23 3-Apr-98 190.94 180.87 182.08 151.34 24-Jul-98 216.78 183.78 188.66 123.35
11-Dec-97 161.07 153.84 154.38 128.54 6-Apr-98 196.98 180.66 181.36 149.73 27-Jul-98 216.44 184.83 190.52 124.73
12-Dec-97 149.33 153.59 153.65 122.93 7-Apr-98 193.12 178.75 180.00 143.43 28-Jul-98 217.45 182.08 187.78 125.85
15-Dec-97 151.01 155.20 155.42 125.48 8-Apr-98 198.66 177.48 178.57 143.62 29-Jul-98 220.81 181.27 186.81 123.59
16-Dec-97 152.52 155.95 156.36 126.87 9-Apr-98 200.17 178.93 180.20 142.81 30-Jul-98 223.49 184.13 190.02 127.79
17-Dec-97 160.24 155.55 155.63 126.05 13-Apr-98 202.85 178.77 180.38 142.80 31-Jul-98 219.30 180.54 186.19 126.39
18-Dec-97 160.40 153.90 153.61 125.47 14-Apr-98 206.21 179.75 181.32 146.78 3-Aug-98 217.95 179.21 184.46 126.64
19-Dec-97 158.39 152.53 152.26 132.22 15-Apr-98 206.04 180.32 182.52 152.56 4-Aug-98 215.27 172.72 177.65 122.75
22-Dec-97 162.42 153.64 153.37 133.63 16-Apr-98 201.85 178.53 181.15 149.83 5-Aug-98 219.46 174.22 179.67 124.60
23-Dec-97 155.70 151.29 150.48 128.20 17-Apr-98 201.51 180.87 183.47 149.19 6-Aug-98 222.82 175.54 181.38 130.32
24-Dec-97 159.56 150.26 149.56 127.41 20-Apr-98 213.59 181.02 183.35 153.96 7-Aug-98 220.97 175.51 180.91 133.61
29-Dec-97 161.41 153.59 153.10 128.37 21-Apr-98 223.32 181.51 183.84 155.61 10-Aug-98 214.60 174.49 179.95 130.15
30-Dec-97 163.42 156.40 155.91 129.57 22-Apr-98 244.46 182.13 184.59 160.79 11-Aug-98 207.05 172.21 177.85 125.75
31-Dec-97 162.42 156.34 155.44 130.59 23-Apr-98 240.10 180.37 182.89 157.12 12-Aug-98 210.23 174.67 180.32 128.27
2-Jan-98 164.09 157.08 156.55 136.23 24-Apr-98 242.28 178.48 180.87 159.10 13-Aug-98 206.21 173.17 178.65 125.65
5-Jan-98 170.13 157.41 156.56 138.24 27-Apr-98 239.26 175.04 177.74 154.18 14-Aug-98 206.21 171.21 176.68 125.16
6-Jan-98 165.10 155.72 154.67 134.32 28-Apr-98 236.91 174.81 177.19 154.87 17-Aug-98 209.40 174.58 180.49 130.31
7-Jan-98 166.61 155.30 154.29 129.79 29-Apr-98 237.75 176.34 178.66 155.15 18-Aug-98 219.30 177.40 183.70 133.14
8-Jan-98 164.26 154.02 153.08 130.57 30-Apr-98 241.95 179.10 181.31 156.47 19-Aug-98 220.30 176.90 183.23 127.21
9-Jan-98 153.52 149.45 148.54 123.29 1-May-98 255.54 180.59 183.00 157.03 20-Aug-98 211.41 175.86 182.01 121.59
12-Jan-98 153.52 151.31 150.58 124.10 4-May-98 252.01 180.77 183.13 157.03 21-Aug-98 204.36 174.19 180.54 119.49
13-Jan-98 156.38 153.39 152.42 132.26 5-May-98 258.05 179.71 182.15 157.62 24-Aug-98 197.48 175.30 181.72 119.59
14-Jan-98 158.39 154.32 153.43 131.24 6-May-98 261.74 178.00 180.60 154.98 25-Aug-98 194.97 176.06 182.76 119.24
15-Jan-98 155.87 153.16 152.38 131.01 7-May-98 257.72 176.43 178.78 153.14 26-Aug-98 189.26 174.66 181.42 115.68
16-Jan-98 163.76 154.90 154.13 129.19 8-May-98 259.73 178.52 181.13 156.59 27-Aug-98 177.18 167.96 174.36 107.75
20-Jan-98 172.32 157.65 157.10 135.18 11-May-98 264.93 178.28 181.11 153.43 28-Aug-98 178.02 165.47 171.57 104.50
21-Jan-98 169.80 156.40 155.78 136.14 12-May-98 265.60 179.75 182.90 155.13 31-Aug-98 160.91 154.22 159.15 95.83
22-Jan-98 166.28 155.15 154.53 134.26 13-May-98 263.25 180.25 183.71 154.74 1-Sep-98 169.97 160.18 165.96 101.00
23-Jan-98 166.95 154.27 153.80 134.49 14-May-98 270.81 180.01 183.58 152.15 2-Sep-98 170.64 159.57 164.25 101.06
26-Jan-98 170.80 154.17 154.04 132.90 15-May-98 269.80 178.62 181.98 145.05 3-Sep-98 169.13 158.24 162.67 98.62
27-Jan-98 171.98 156.11 156.09 135.79 18-May-98 261.24 178.15 180.94 145.30 4-Sep-98 161.91 156.89 161.36 98.49
28-Jan-98 178.19 157.47 157.91 142.91 19-May-98 272.82 178.74 181.46 145.65 8-Sep-98 174.50 164.88 169.06 105.79
29-Jan-98 182.05 158.76 159.31 142.53 20-May-98 267.45 180.28 183.30 140.47 9-Sep-98 169.80 162.10 166.44 103.94
30-Jan-98 178.86 157.92 158.43 143.22 21-May-98 267.28 179.57 182.45 136.27 10-Sep-98 163.25 157.91 161.82 100.47
2-Feb-98 184.40 161.31 161.86 147.14 22-May-98 264.60 178.90 182.17 134.52 11-Sep-98 164.43 162.56 166.61 104.78
3-Feb-98 182.55 162.07 162.50 153.01 26-May-98 262.08 176.25 179.58 132.74 14-Sep-98 160.40 165.89 169.54 106.03
4-Feb-98 175.84 162.21 162.67 153.26 27-May-98 255.03 175.96 179.80 132.09 15-Sep-98 158.56 167.17 170.58 104.49
5-Feb-98 181.38 161.67 162.15 147.96 28-May-98 254.36 176.82 180.49 132.63 16-Sep-98 157.05 168.43 171.68 106.05
6-Feb-98 182.55 163.11 163.49 149.50 29-May-98 255.37 175.73 178.80 128.45 17-Sep-98 142.79 164.14 167.07 105.14
9-Feb-98 176.01 162.83 163.10 147.64 1-Jun-98 253.02 175.76 178.30 124.12 18-Sep-98 136.91 164.34 167.38 105.11
10-Feb-98 179.53 164.16 164.68 152.01 2-Jun-98 248.83 176.12 178.76 124.85 21-Sep-98 123.49 164.95 168.07 108.38
11-Feb-98 184.06 164.32 165.02 151.08 3-Jun-98 245.30 174.43 176.79 120.94 22-Sep-98 129.03 165.87 168.19 106.76
12-Feb-98 197.32 164.99 165.77 152.67 4-Jun-98 247.99 176.38 179.34 124.73 23-Sep-98 143.96 171.75 174.20 111.55
13-Feb-98 194.80 164.34 165.18 151.98 5-Jun-98 246.98 179.44 182.43 126.02 24-Sep-98 135.57 167.98 170.56 109.35
17-Feb-98 204.87 164.77 165.48 149.87 8-Jun-98 256.38 179.74 182.68 126.33 25-Sep-98 142.28 168.31 171.10 112.57
18-Feb-98 203.02 166.27 167.00 153.70 9-Jun-98 254.19 180.18 183.19 129.18 28-Sep-98 143.29 168.94 171.76 110.78
19-Feb-98 201.68 165.66 166.39 157.05 10-Jun-98 247.99 179.19 182.43 120.29 29-Sep-98 145.47 169.00 171.99 109.60
20-Feb-98 201.85 166.61 167.19 155.61 11-Jun-98 235.91 176.34 179.74 117.99 30-Sep-98 143.29 163.84 166.65 105.39
23-Feb-98 205.37 167.25 168.04 158.64 12-Jun-98 231.71 177.02 180.67 116.71 1-Oct-98 136.41 158.91 161.80 101.28
35
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
2-Oct-98 134.06 161.52 164.42 100.88 25-Jan-99 215.44 198.79 208.21 193.25 14-May-99 245.13 215.52 227.64 196.72
5-Oct-98 130.20 159.26 162.46 96.47 26-Jan-99 204.70 201.75 211.96 201.72 17-May-99 244.80 215.79 228.15 200.94
6-Oct-98 132.21 158.62 162.29 98.23 27-Jan-99 199.66 200.28 209.99 195.06 18-May-99 244.30 214.80 227.45 204.59
7-Oct-98 128.36 156.38 161.15 94.90 28-Jan-99 197.65 203.85 213.67 201.35 19-May-99 247.31 216.56 229.46 212.66
8-Oct-98 122.48 154.57 159.46 94.07 29-Jan-99 195.47 206.15 216.45 208.27 20-May-99 239.09 215.69 228.19 205.91
9-Oct-98 134.23 158.59 163.48 99.47 1-Feb-99 190.94 205.08 214.83 203.85 21-May-99 239.26 214.31 227.03 202.30
12-Oct-98 140.27 160.73 165.67 106.23 2-Feb-99 192.45 203.31 212.67 199.36 24-May-99 233.56 210.50 222.51 195.68
13-Oct-98 141.95 160.26 164.85 103.18 3-Feb-99 196.31 204.93 214.83 207.34 25-May-99 227.68 206.92 218.81 184.90
14-Oct-98 149.33 161.99 166.20 108.39 4-Feb-99 193.29 201.13 210.31 196.81 26-May-99 231.54 210.20 222.91 188.08
15-Oct-98 158.39 168.75 173.77 112.93 5-Feb-99 190.44 199.67 208.75 191.23 27-May-99 231.38 206.44 218.93 192.11
16-Oct-98 156.71 170.19 176.06 114.41 8-Feb-99 193.96 200.37 210.11 198.25 28-May-99 231.21 209.73 222.60 192.26
19-Oct-98 151.34 171.15 176.56 116.78 9-Feb-99 192.78 195.92 204.98 185.28 1-Jun-99 242.11 208.51 221.10 186.03
20-Oct-98 159.23 171.40 176.51 116.20 10-Feb-99 193.46 197.11 206.98 186.86 2-Jun-99 238.93 208.59 221.60 196.11
21-Oct-98 167.62 172.36 177.69 119.91 11-Feb-99 192.28 202.03 212.33 199.06 3-Jun-99 237.75 209.36 222.27 191.72
22-Oct-98 148.32 173.74 179.43 122.50 12-Feb-99 187.25 198.17 208.23 194.14 4-Jun-99 238.26 213.90 227.25 202.58
23-Oct-98 140.77 172.49 178.37 123.79 16-Feb-99 185.23 200.07 209.45 195.32 7-Jun-99 242.28 214.99 228.51 204.66
26-Oct-98 144.13 172.75 178.38 124.97 17-Feb-99 181.71 197.19 207.05 188.85 8-Jun-99 252.18 212.22 224.91 204.26
27-Oct-98 148.83 171.63 176.58 123.01 18-Feb-99 184.23 199.33 208.92 189.96 9-Jun-99 253.02 212.43 225.55 213.34
28-Oct-98 146.14 172.07 176.80 126.14 19-Feb-99 186.91 199.64 209.64 193.18 10-Jun-99 255.03 209.89 222.93 216.47
29-Oct-98 141.95 174.94 179.79 129.93 22-Feb-99 195.13 204.94 214.69 203.49 11-Jun-99 254.03 208.41 221.32 216.42
30-Oct-98 148.32 177.00 181.48 130.09 23-Feb-99 197.15 204.79 214.76 202.52 14-Jun-99 249.33 208.46 221.79 217.49
2-Nov-98 159.23 179.08 183.87 130.77 24-Feb-99 191.11 201.93 211.21 202.41 15-Jun-99 249.50 209.62 223.19 223.45
3-Nov-98 154.36 178.96 183.94 127.03 25-Feb-99 188.25 200.57 210.64 192.50 16-Jun-99 254.03 214.33 228.77 229.58
4-Nov-98 163.59 180.22 184.88 133.69 26-Feb-99 186.91 199.50 209.00 176.47 17-Jun-99 254.19 215.86 230.61 229.70
5-Nov-98 166.61 182.66 187.56 133.33 1-Mar-99 184.90 199.15 208.88 178.30 18-Jun-99 251.34 216.33 230.99 226.39
6-Nov-98 165.94 183.82 188.88 136.68 2-Mar-99 183.39 197.43 206.63 171.97 21-Jun-99 256.21 217.32 232.31 236.30
9-Nov-98 159.23 182.08 187.10 136.61 3-Mar-99 183.89 197.78 206.83 175.05 22-Jun-99 261.58 215.21 230.01 231.29
10-Nov-98 157.21 181.76 187.03 136.70 4-Mar-99 181.54 200.83 210.63 176.08 23-Jun-99 262.58 214.76 229.34 235.38
11-Nov-98 160.40 180.59 186.07 143.28 5-Mar-99 187.42 205.48 215.96 187.03 24-Jun-99 261.24 211.97 226.72 225.20
12-Nov-98 162.42 180.06 185.36 144.98 8-Mar-99 187.08 206.65 217.33 192.05 25-Jun-99 259.23 211.90 226.87 224.16
13-Nov-98 163.93 181.35 187.32 144.46 9-Mar-99 187.75 206.18 216.61 184.35 28-Jun-99 261.91 214.48 229.73 227.66
16-Nov-98 169.46 182.99 189.10 145.39 10-Mar-99 191.44 207.31 217.78 188.87 29-Jun-99 266.61 217.72 233.71 234.81
17-Nov-98 172.32 183.55 189.57 146.70 11-Mar-99 197.32 209.06 219.63 185.11 30-Jun-99 270.81 221.14 238.09 239.97
18-Nov-98 182.22 184.38 190.82 149.83 12-Mar-99 194.63 208.56 219.09 181.12 1-Jul-99 267.79 222.47 239.78 243.68
19-Nov-98 184.06 185.69 192.17 152.61 15-Mar-99 200.34 210.60 221.53 180.90 2-Jul-99 268.96 224.13 242.08 244.15
20-Nov-98 187.08 187.45 194.32 153.37 16-Mar-99 205.87 210.46 221.59 188.95 6-Jul-99 273.83 223.63 241.40 245.64
23-Nov-98 187.75 191.42 198.72 157.55 17-Mar-99 209.56 209.08 219.97 189.78 7-Jul-99 272.48 224.87 243.25 243.41
24-Nov-98 180.03 190.58 197.87 155.63 18-Mar-99 214.09 212.10 222.80 191.55 8-Jul-99 270.81 224.64 242.76 252.59
25-Nov-98 172.48 191.21 198.60 156.76 19-Mar-99 212.92 209.32 219.71 185.74 9-Jul-99 272.82 226.07 244.31 252.23
27-Nov-98 177.01 192.09 199.68 158.78 22-Mar-99 214.60 208.95 219.52 183.19 12-Jul-99 264.60 225.40 243.96 252.42
30-Nov-98 169.97 187.46 195.07 151.65 23-Mar-99 207.38 203.33 213.56 175.29 13-Jul-99 273.66 224.50 243.26 249.70
1-Dec-98 170.47 189.34 197.14 155.55 24-Mar-99 207.38 204.37 214.78 178.23 14-Jul-99 284.56 225.25 243.87 260.09
2-Dec-98 166.78 188.69 195.63 161.87 25-Mar-99 216.44 207.82 218.84 183.05 15-Jul-99 292.45 227.09 245.66 261.91
3-Dec-98 173.99 185.29 191.67 164.81 26-Mar-99 210.91 206.66 217.54 180.13 16-Jul-99 290.77 228.57 247.99 262.57
4-Dec-98 181.88 189.57 196.07 170.73 29-Mar-99 217.28 211.07 222.88 186.52 19-Jul-99 294.46 226.77 246.05 252.68
7-Dec-98 180.70 191.34 198.10 172.81 30-Mar-99 214.77 209.55 221.70 183.34 20-Jul-99 278.86 221.85 239.96 241.31
8-Dec-98 180.54 190.32 197.41 174.76 31-Mar-99 221.31 207.24 218.52 183.64 21-Jul-99 278.19 222.20 240.05 245.71
9-Dec-98 187.25 190.66 197.39 171.71 1-Apr-99 218.12 208.42 219.65 191.88 22-Jul-99 254.70 219.25 236.88 235.58
10-Dec-98 178.36 187.69 194.05 164.28 5-Apr-99 222.15 212.83 224.70 200.18 23-Jul-99 259.90 218.60 236.20 239.38
11-Dec-98 178.19 187.92 194.22 164.30 6-Apr-99 217.28 212.31 224.84 204.48 26-Jul-99 255.70 217.12 234.18 232.76
14-Dec-98 170.47 183.85 190.15 158.03 7-Apr-99 221.48 213.76 227.40 201.55 27-Jul-99 263.76 219.55 237.08 245.64
15-Dec-98 175.67 187.33 194.71 163.40 8-Apr-99 220.30 216.52 229.64 203.22 28-Jul-99 268.96 219.97 237.60 252.48
16-Dec-98 166.44 187.19 194.37 160.83 9-Apr-99 211.75 217.22 230.27 203.13 29-Jul-99 268.46 216.04 233.33 244.03
17-Dec-98 173.49 190.10 197.25 168.41 12-Apr-99 214.77 218.88 231.66 192.03 30-Jul-99 271.48 214.06 230.93 244.68
18-Dec-98 184.23 191.39 199.34 173.00 13-Apr-99 216.27 217.46 230.31 188.11 2-Aug-99 266.95 213.95 230.60 242.81
21-Dec-98 182.22 193.78 201.48 175.53 14-Apr-99 214.93 214.01 226.07 190.57 3-Aug-99 264.76 213.00 230.34 243.67
22-Dec-98 179.53 193.90 201.50 170.53 15-Apr-99 217.11 213.11 226.30 198.94 4-Aug-99 260.74 210.29 227.88 240.76
23-Dec-98 180.37 197.92 206.32 173.12 16-Apr-99 223.99 212.49 225.98 195.83 5-Aug-99 259.90 211.64 230.22 241.67
24-Dec-98 181.21 197.55 205.79 173.03 19-Apr-99 225.67 207.74 220.65 186.15 6-Aug-99 254.87 209.48 227.83 245.88
28-Dec-98 179.03 197.43 205.49 170.66 20-Apr-99 218.29 210.42 223.76 188.80 9-Aug-99 253.52 209.08 227.02 250.28
29-Dec-98 180.20 200.06 207.44 168.12 21-Apr-99 226.51 215.25 228.69 201.46 10-Aug-99 247.99 206.44 224.88 247.20
30-Dec-98 179.70 198.46 205.26 171.39 22-Apr-99 240.60 218.91 233.20 199.69 11-Aug-99 259.73 209.74 228.60 258.42
31-Dec-98 181.71 198.03 204.14 173.65 23-Apr-99 237.08 218.59 232.32 195.84 12-Aug-99 262.58 209.13 227.47 250.93
4-Jan-99 187.92 197.85 204.44 175.56 26-Apr-99 240.94 219.10 233.19 194.83 13-Aug-99 272.99 213.89 232.80 257.41
5-Jan-99 194.97 200.53 207.98 186.50 27-Apr-99 239.26 219.55 232.98 191.11 16-Aug-99 269.63 214.39 234.10 255.71
6-Jan-99 206.38 204.97 213.25 192.91 28-Apr-99 231.21 217.63 231.11 187.45 17-Aug-99 273.32 216.55 236.33 253.65
7-Jan-99 202.01 204.55 213.85 194.37 29-Apr-99 229.87 216.33 229.66 184.38 18-Aug-99 266.61 214.72 234.24 245.22
8-Jan-99 203.52 205.42 214.95 193.89 30-Apr-99 228.52 215.10 228.34 183.41 19-Aug-99 267.11 213.23 232.46 243.93
11-Jan-99 199.33 203.61 212.72 199.51 3-May-99 236.91 218.23 231.53 188.56 20-Aug-99 267.62 215.33 235.42 247.92
12-Jan-99 193.96 199.69 208.35 192.41 4-May-99 233.05 214.59 227.54 186.29 23-Aug-99 268.96 219.13 239.93 255.75
13-Jan-99 187.58 198.86 207.11 199.81 5-May-99 233.72 217.05 230.61 195.96 24-Aug-99 277.18 219.66 241.16 262.60
14-Jan-99 184.73 195.28 203.07 194.15 6-May-99 231.21 214.59 227.97 188.34 25-Aug-99 285.40 222.61 244.63 261.16
15-Jan-99 193.29 200.29 208.34 199.76 7-May-99 236.58 216.68 230.40 191.68 26-Aug-99 280.87 219.42 241.51 257.81
19-Jan-99 199.33 201.70 210.66 198.93 10-May-99 240.10 215.92 229.11 192.24 27-Aug-99 280.37 217.21 239.27 259.57
20-Jan-99 209.23 202.44 211.57 206.45 11-May-99 243.29 218.39 231.09 195.82 30-Aug-99 277.68 213.30 234.97 257.63
21-Jan-99 204.03 198.99 208.55 197.08 12-May-99 247.99 219.74 232.33 204.49 31-Aug-99 276.01 212.72 233.95 258.55
22-Jan-99 207.89 197.38 206.29 194.55 13-May-99 250.67 220.31 232.94 201.27 1-Sep-99 276.18 214.44 235.97 262.58
36
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
2-Sep-99 267.62 212.51 234.45 264.09 22-Dec-99 355.03 231.34 264.26 346.84 12-Apr-00 401.68 236.36 267.97 514.02
3-Sep-99 278.69 218.65 241.27 277.84 23-Dec-99 357.21 234.94 268.06 344.74 13-Apr-00 416.11 232.07 262.70 500.15
7-Sep-99 290.77 217.56 240.42 279.24 27-Dec-99 356.54 234.74 268.54 348.76 14-Apr-00 400.00 218.54 247.38 441.93
8-Sep-99 280.87 216.54 239.16 274.39 28-Dec-99 353.69 234.83 268.58 346.26 17-Apr-00 425.50 225.77 257.69 500.24
9-Sep-99 280.87 217.11 239.89 276.83 29-Dec-99 352.18 235.76 268.22 347.31 18-Apr-00 447.65 232.24 265.61 521.39
10-Sep-99 291.11 217.75 240.90 279.76 30-Dec-99 358.22 235.93 267.71 344.45 19-Apr-00 473.83 229.97 260.78 501.72
13-Sep-99 285.23 216.54 239.53 270.51 31-Dec-99 362.42 236.70 267.95 349.00 20-Apr-00 478.52 231.11 262.64 507.37
14-Sep-99 286.07 215.28 238.20 284.36 3-Jan-00 378.52 234.44 266.58 353.28 24-Apr-00 455.03 230.35 261.09 492.19
15-Sep-99 283.89 212.33 234.48 271.44 4-Jan-00 355.37 225.45 256.52 340.46 25-Apr-00 491.28 238.02 268.87 536.18
16-Sep-99 281.04 212.41 234.85 273.40 5-Jan-00 366.95 225.88 257.37 336.11 26-Apr-00 474.50 235.37 266.68 525.48
17-Sep-99 279.87 215.14 238.25 279.98 6-Jan-00 343.62 226.10 257.74 331.55 27-Apr-00 479.19 236.00 267.23 562.27
20-Sep-99 275.34 215.15 238.24 277.53 7-Jan-00 365.77 232.22 264.79 342.16 28-Apr-00 479.19 233.99 264.09 580.36
21-Sep-99 263.93 210.65 233.13 269.06 10-Jan-00 373.49 234.82 267.30 367.39 1-May-00 485.23 236.54 267.37 576.61
22-Sep-99 270.64 211.12 233.60 273.49 11-Jan-00 375.84 231.75 265.39 355.21 2-May-00 476.51 233.00 263.36 549.21
23-Sep-99 268.29 206.27 227.87 258.42 12-Jan-00 388.25 230.74 264.53 367.34 3-May-00 459.73 227.97 257.25 530.18
24-Sep-99 262.92 205.78 227.38 255.80 13-Jan-00 399.66 233.54 266.30 371.00 4-May-00 455.70 227.08 255.77 538.77
27-Sep-99 270.30 206.74 228.30 258.99 14-Jan-00 412.42 236.04 269.53 401.16 5-May-00 467.79 230.80 260.16 547.42
28-Sep-99 270.30 206.56 228.28 260.16 18-Jan-00 410.07 234.42 268.91 397.94 8-May-00 459.06 229.43 258.07 518.63
29-Sep-99 269.63 204.34 224.32 256.37 19-Jan-00 399.50 234.55 267.10 398.96 9-May-00 451.01 227.50 256.12 492.39
30-Sep-99 271.14 206.65 227.24 247.21 20-Jan-00 414.93 232.88 264.74 402.50 10-May-00 432.21 222.81 250.06 450.24
1-Oct-99 266.11 206.66 226.54 251.85 21-Jan-00 406.21 232.20 263.54 398.33 11-May-00 452.35 226.80 255.07 478.39
4-Oct-99 275.84 210.17 230.69 263.36 24-Jan-00 403.69 225.79 256.43 390.86 12-May-00 469.13 228.92 257.42 486.50
5-Oct-99 273.15 209.65 230.80 271.80 25-Jan-00 416.11 227.16 259.32 403.97 15-May-00 468.46 233.98 262.44 499.89
6-Oct-99 282.21 213.52 234.83 273.83 26-Jan-00 408.05 226.20 257.80 387.93 16-May-00 482.55 236.18 265.04 518.47
7-Oct-99 281.71 212.27 233.11 262.43 27-Jan-00 400.17 225.31 256.72 385.70 17-May-00 465.77 233.24 261.09 509.08
8-Oct-99 282.89 215.23 236.05 256.05 28-Jan-00 396.81 219.12 249.43 371.02 18-May-00 459.06 231.54 259.16 496.54
11-Oct-99 281.88 215.10 235.82 261.81 31-Jan-00 396.64 224.65 254.91 385.41 19-May-00 440.27 226.66 254.47 470.70
12-Oct-99 270.47 211.53 231.92 259.04 1-Feb-00 403.52 227.04 259.18 397.48 22-May-00 420.81 225.66 252.81 466.94
13-Oct-99 263.76 207.10 226.84 252.45 2-Feb-00 415.44 227.01 258.18 409.13 23-May-00 416.11 221.33 247.58 430.82
14-Oct-99 261.91 206.76 227.12 256.42 3-Feb-00 452.01 229.56 260.89 431.18 24-May-00 418.79 225.39 252.49 453.34
15-Oct-99 259.90 200.96 220.27 253.87 4-Feb-00 446.64 229.47 262.09 429.97 25-May-00 430.20 222.56 249.06 446.66
18-Oct-99 252.35 202.04 221.97 247.27 7-Feb-00 443.62 229.45 261.65 447.29 26-May-00 444.30 222.00 248.77 450.59
19-Oct-99 256.04 203.20 223.15 239.29 8-Feb-00 469.30 232.26 264.36 455.75 30-May-00 471.14 229.16 257.33 500.45
20-Oct-99 251.85 207.73 229.56 245.21 9-Feb-00 465.44 227.43 258.70 447.55 31-May-00 474.50 228.86 257.38 494.57
21-Oct-99 267.62 206.79 228.69 250.45 10-Feb-00 487.25 228.25 259.89 467.15 1-Jun-00 499.33 233.40 262.80 528.67
22-Oct-99 270.64 209.70 231.72 254.49 11-Feb-00 466.44 223.47 254.16 451.85 2-Jun-00 534.23 237.99 267.90 573.48
25-Oct-99 270.13 208.40 230.62 250.78 14-Feb-00 467.11 223.92 255.77 458.54 5-Jun-00 520.13 236.44 267.24 571.11
26-Oct-99 263.42 206.52 229.37 249.43 15-Feb-00 458.39 225.87 257.89 472.67 6-Jun-00 510.07 234.86 264.76 550.91
27-Oct-99 258.22 208.90 231.10 244.49 16-Feb-00 452.85 223.55 254.89 472.52 7-Jun-00 520.13 237.04 267.37 559.54
28-Oct-99 265.27 216.27 238.00 258.90 17-Feb-00 429.53 223.65 254.21 484.84 8-Jun-00 525.50 235.48 265.41 566.00
29-Oct-99 279.03 219.57 242.33 275.33 18-Feb-00 433.05 216.86 246.21 463.61 9-Jun-00 513.42 234.72 263.51 578.97
1-Nov-99 268.96 218.15 240.70 275.17 22-Feb-00 463.09 217.84 247.25 490.36 12-Jun-00 507.38 232.95 261.67 551.93
2-Nov-99 272.65 217.12 239.22 283.12 23-Feb-00 483.05 219.21 248.84 499.05 13-Jun-00 521.48 236.73 266.80 579.81
3-Nov-99 284.90 218.28 240.23 296.08 24-Feb-00 481.88 218.04 247.11 526.90 14-Jun-00 528.86 236.90 267.11 554.85
4-Nov-99 295.30 219.52 241.59 299.10 25-Feb-00 503.69 214.81 243.26 511.20 15-Jun-00 526.17 238.22 269.99 560.98
5-Nov-99 295.13 220.74 242.93 307.71 28-Feb-00 502.35 217.17 245.95 528.25 16-Jun-00 520.13 235.93 266.57 573.76
8-Nov-99 287.75 221.84 244.90 307.27 29-Feb-00 514.09 220.13 249.63 579.78 19-Jun-00 538.93 239.40 271.35 611.69
9-Nov-99 294.80 219.95 242.59 306.70 1-Mar-00 542.62 222.19 251.29 580.63 20-Jun-00 554.36 237.78 269.55 626.48
10-Nov-99 307.89 221.27 243.63 317.42 2-Mar-00 530.87 222.60 253.56 562.69 21-Jun-00 570.80 238.29 270.37 628.74
11-Nov-99 325.84 222.55 245.06 327.07 3-Mar-00 556.88 227.02 258.86 600.03 22-Jun-00 540.27 233.95 265.33 599.52
12-Nov-99 312.25 224.91 247.09 325.00 6-Mar-00 545.30 224.14 254.47 616.10 23-Jun-00 536.24 232.22 263.97 602.97
15-Nov-99 314.93 224.64 246.29 316.72 7-Mar-00 514.09 218.39 247.47 625.99 26-Jun-00 539.26 234.45 266.72 602.62
16-Nov-99 314.09 228.77 251.08 318.81 8-Mar-00 517.11 220.18 250.05 615.30 27-Jun-00 528.52 233.68 265.28 581.01
17-Nov-99 312.75 227.27 250.02 312.63 9-Mar-00 528.52 225.81 255.83 639.10 28-Jun-00 533.89 234.37 266.32 579.58
18-Nov-99 313.09 229.56 253.37 321.77 10-Mar-00 520.13 224.75 253.30 660.16 29-Jun-00 496.98 232.37 263.52 558.84
19-Nov-99 312.42 229.09 253.24 324.02 13-Mar-00 509.06 222.90 251.11 651.92 30-Jun-00 509.73 234.34 267.08 564.95
22-Nov-99 305.87 228.91 254.94 316.66 14-Mar-00 491.95 218.96 246.97 609.19 3-Jul-00 517.11 236.74 269.03 584.96
23-Nov-99 300.67 226.29 252.44 309.18 15-Mar-00 468.46 224.27 253.24 595.08 5-Jul-00 486.91 232.99 264.75 530.42
24-Nov-99 310.40 228.29 254.55 314.82 16-Mar-00 483.22 234.96 264.26 607.85 6-Jul-00 489.93 234.67 266.96 554.34
26-Nov-99 327.35 228.22 254.68 315.93 17-Mar-00 469.97 235.93 265.89 621.57 7-Jul-00 509.73 238.25 271.38 574.81
29-Nov-99 324.16 226.80 253.23 310.83 20-Mar-00 479.70 234.66 265.40 596.12 10-Jul-00 515.77 237.72 270.23 571.04
30-Nov-99 320.81 223.78 249.67 301.86 21-Mar-00 496.64 240.66 272.69 591.68 11-Jul-00 518.79 238.57 270.73 555.80
1-Dec-99 335.57 225.17 252.99 307.55 22-Mar-00 489.60 241.75 273.94 646.22 12-Jul-00 535.24 240.51 272.37 573.99
2-Dec-99 332.38 227.00 254.33 321.60 23-Mar-00 477.01 246.06 281.08 636.58 13-Jul-00 547.65 240.98 273.08 588.96
3-Dec-99 336.24 230.91 259.38 325.70 24-Mar-00 483.39 246.07 281.41 637.76 14-Jul-00 557.38 243.26 275.62 613.79
6-Dec-99 344.13 229.30 257.78 337.74 27-Mar-00 488.09 245.49 280.57 646.65 17-Jul-00 578.19 243.34 276.37 627.30
7-Dec-99 345.30 227.02 255.53 330.66 28-Mar-00 496.81 242.90 277.60 624.71 18-Jul-00 538.93 240.64 272.80 598.24
8-Dec-99 351.34 226.17 254.86 327.05 29-Mar-00 487.42 243.02 279.66 591.34 19-Jul-00 531.54 238.74 271.37 574.81
9-Dec-99 359.06 226.85 255.97 317.87 30-Mar-00 464.09 239.70 275.04 570.29 20-Jul-00 546.98 240.94 274.79 567.73
10-Dec-99 355.37 228.29 258.03 313.37 31-Mar-00 459.90 241.42 275.46 585.44 21-Jul-00 540.27 238.46 271.91 536.21
13-Dec-99 345.81 227.99 257.91 312.58 3-Apr-00 428.02 242.61 277.34 542.31 24-Jul-00 528.86 235.90 268.96 532.64
14-Dec-99 334.23 226.05 256.39 291.26 4-Apr-00 423.99 240.80 274.86 529.47 25-Jul-00 522.82 237.54 271.20 547.00
15-Dec-99 324.83 227.69 259.31 299.95 5-Apr-00 416.27 239.62 272.50 562.10 26-Jul-00 515.44 233.99 267.39 512.28
16-Dec-99 348.99 228.57 260.93 312.33 6-Apr-00 457.21 241.87 275.13 572.90 27-Jul-00 466.44 233.53 268.02 470.53
17-Dec-99 353.36 228.93 261.56 316.69 7-Apr-00 482.55 244.28 277.64 605.94 28-Jul-00 444.30 228.75 262.32 474.18
20-Dec-99 344.97 228.46 260.67 330.54 10-Apr-00 453.69 242.37 276.16 578.44 31-Jul-00 482.55 230.51 264.50 492.30
21-Dec-99 351.68 230.93 263.23 346.19 11-Apr-00 435.23 241.75 276.04 560.68 1-Aug-00 492.62 231.68 264.97 473.46
37
Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx Date Philips S&P500 S&P100 Soxx
- --------- ------- ------ ------ ------ --------- ------- ------ ------ ------ --------- ------- ------ ------ ------
2-Aug-00 475.17 231.78 264.63 472.68 25-Sep-00 456.38 231.83 258.88 436.08 15-Nov-00 404.70 223.90 247.83 354.17
3-Aug-00 457.72 234.01 267.38 470.87 26-Sep-00 454.36 229.92 255.79 431.28 16-Nov-00 381.21 221.08 244.75 334.38
4-Aug-00 448.32 235.68 268.97 456.22 27-Sep-00 464.43 229.82 256.39 428.33 17-Nov-00 384.56 220.34 245.05 332.64
7-Aug-00 451.01 238.32 271.63 472.56 28-Sep-00 471.14 234.93 261.35 446.57 20-Nov-00 355.03 216.30 239.97 327.92
8-Aug-00 444.30 238.88 272.39 470.96 29-Sep-00 456.38 231.42 256.79 421.82 21-Nov-00 357.05 217.06 241.20 312.39
9-Aug-00 472.48 237.28 272.76 477.40 2-Oct-00 457.05 231.38 257.95 412.80 22-Nov-00 336.24 213.03 236.82 307.21
10-Aug-00 470.47 235.25 270.05 466.94 3-Oct-00 448.32 229.80 256.19 402.69 24-Nov-00 375.84 216.16 240.35 334.20
11-Aug-00 470.47 237.11 271.98 472.40 4-Oct-00 450.34 231.07 257.54 427.51 27-Nov-00 386.58 217.32 241.57 311.12
14-Aug-00 499.33 240.29 275.89 508.81 5-Oct-00 436.24 231.39 258.36 412.32 28-Nov-00 364.43 215.24 239.44 285.87
15-Aug-00 493.29 239.14 274.36 525.32 6-Oct-00 413.42 226.99 253.80 395.97 29-Nov-00 379.19 216.19 240.79 285.51
16-Aug-00 501.34 238.40 272.71 531.69 9-Oct-00 409.40 225.87 251.52 389.32 30-Nov-00 352.35 211.84 235.66 265.99
17-Aug-00 513.42 241.02 275.47 550.36 10-Oct-00 387.25 223.45 249.31 349.97 1-Dec-00 376.51 211.88 235.22 266.67
18-Aug-00 522.82 240.32 274.98 562.13 11-Oct-00 374.50 219.84 244.69 349.97 4-Dec-00 383.89 213.45 237.00 273.17
21-Aug-00 516.78 241.57 276.60 550.59 12-Oct-00 377.18 214.23 237.82 341.35 5-Dec-00 422.82 221.76 247.42 300.88
22-Aug-00 518.12 241.35 276.65 556.86 13-Oct-00 418.12 221.38 246.38 375.63 6-Dec-00 416.78 217.72 242.40 287.34
23-Aug-00 510.74 242.61 278.08 573.11 16-Oct-00 402.01 221.45 245.19 353.92 7-Dec-00 408.05 216.45 240.05 282.09
24-Aug-00 516.78 242.99 278.87 576.30 17-Oct-00 378.52 217.48 240.54 321.03 8-Dec-00 431.54 220.69 245.72 316.20
25-Aug-00 526.17 242.69 278.33 566.53 18-Oct-00 369.80 216.22 238.86 320.64 11-Dec-00 442.95 222.35 248.06 338.21
28-Aug-00 530.87 243.92 280.24 561.94 19-Oct-00 419.46 223.73 248.03 375.84 12-Dec-00 426.17 220.90 246.34 317.12
29-Aug-00 525.50 243.24 279.60 560.81 20-Oct-00 416.11 225.05 249.47 372.93 13-Dec-00 402.01 219.10 243.53 296.57
30-Aug-00 510.74 242.07 277.44 553.95 23-Oct-00 419.46 224.86 248.18 385.01 14-Dec-00 393.96 216.02 240.18 293.53
31-Aug-00 529.53 244.50 279.63 571.12 24-Oct-00 426.17 225.24 249.56 354.85 15-Dec-00 385.91 211.39 233.02 286.70
1-Sep-00 546.98 245.00 280.45 565.96 25-Oct-00 395.97 219.89 243.04 329.45 18-Dec-00 377.85 213.09 234.66 288.36
5-Sep-00 540.27 242.79 278.31 555.65 26-Oct-00 410.07 219.81 243.54 349.70 19-Dec-00 369.13 210.33 232.13 285.77
6-Sep-00 500.00 240.40 275.20 523.92 27-Oct-00 414.77 222.25 245.42 339.61 20-Dec-00 338.26 203.75 223.56 267.27
7-Sep-00 506.71 242.06 276.46 542.15 30-Oct-00 408.72 225.33 247.65 348.24 21-Dec-00 345.64 205.38 225.96 265.21
8-Sep-00 493.96 240.76 274.73 515.14 31-Oct-00 428.86 230.28 253.79 367.46 22-Dec-00 361.74 210.39 231.24 290.84
11-Sep-00 479.87 239.92 273.12 510.34 1-Nov-00 429.53 228.96 252.93 353.68 26-Dec-00 365.77 211.88 232.18 286.74
12-Sep-00 477.85 238.75 271.24 489.87 2-Nov-00 430.87 230.10 254.66 362.95 27-Dec-00 380.54 214.09 233.59 299.01
13-Sep-00 487.92 239.22 271.39 498.80 3-Nov-00 432.89 229.84 254.05 366.86 28-Dec-00 381.88 214.94 233.97 298.81
14-Sep-00 499.33 238.57 270.15 497.76 6-Nov-00 435.57 230.73 255.31 369.41 29-Dec-00 389.26 212.70 231.99 285.62
15-Sep-00 493.96 236.14 266.91 482.76 7-Nov-00 422.15 230.68 255.60 354.46 2-Jan-01 377.85 206.74 225.47 282.51
18-Sep-00 480.54 232.71 263.25 471.20 8-Nov-00 408.72 227.04 251.21 329.30 3-Jan-01 400.00 217.09 237.92 331.99
19-Sep-00 491.95 235.19 266.24 509.45 9-Nov-00 398.66 225.56 249.83 331.21 4-Jan-01 401.34 214.80 236.89 323.86
20-Sep-00 481.88 233.81 264.47 510.62 10-Nov-00 370.47 220.06 243.03 309.19 5-Jan-01 408.72 209.17 230.39 305.87
21-Sep-00 475.84 233.44 263.74 487.67 13-Nov-00 375.17 217.69 240.68 322.58 8-Jan-01 426.17 208.76 228.91 314.15
22-Sep-00 455.70 233.39 261.61 458.95 14-Nov-00 402.01 222.79 246.60 340.99 9-Jan-01 422.15 209.56 229.63 312.55
The number of outstanding common shares of Royal Philips Electronics
increased due to a 4-for-1 stock split in April 2000. As a result, the par value
of common shares was divided by 4 to EUR 0.25.
This was followed by a 3% share reduction program that was implemented in
the summer of 2000. This share reduction program was accomplished through the
conversion of almost all of Philips' surplus paid-in capital into nominal share
capital. The resulting adjusted nominal share capital was reduced by making a
cash distribution of EUR 1.26 per common share to all Philips' shareholders,
which amount equaled 3% of the April 18, 2000 closing price of EUR 42.05 on the
stock market of Euronext Amsterdam. Subsequently,
64 Operating and Financial Review and Prospects
38
every 100 outstanding common shares were exchanged for 97 new common
shares, each of which has a par value of EUR 0.20.
In 1999, the Company also executed an 8% share reduction program in a
similar series of steps.
The exercise of convertible personnel debentures led to a 0.3 million
increase in the number of outstanding shares in 1999 (after stock split).
The 14.9 million increase in shares outstanding at December 31, 1998 (after
stock split in 2000) was a result of the exercise of Superclub warrants and
convertible personnel debentures.
At the end of 2000, the Group held 32.2 million shares in treasury to cover
the future delivery of shares in conjunction with the 33.6 million conversion
and stock option rights outstanding at the end of 2000. At year-end 1999, 24.7
million shares were held in treasury against a 25.7 million rights overhang
(both after the stock split in 2000). It is the Company's policy to buy shares
on the open market soon after the granting of stock option rights or issuance of
convertible personnel debentures.
- -- QUANTITATIVE AND QUALITATIVE DISCLOSURES CONCERNING MARKET RISKS
RISK MANAGEMENT
The Company is exposed to the risk of changes in foreign exchange rates,
certain commodity prices and interest rates. To manage these risks, the Company
enters into various hedging transactions that have been authorized pursuant to
its policies and procedures as described below.
The Company is also exposed to two further financial risks, i.e. the credit
risk and the country risk inherent in a global business. The Company does not
purchase or hold derivative financial instruments for trading purposes. The
Company is exposed to other non-financial risks and purchases insurance to hedge
these risks where possible.
FOREIGN EXCHANGE HEDGING POLICIES
The foreign exchange risk of the Company can be divided into five
categories, namely:
1) Transaction exposures, such as both existing and forecasted sales and
purchases and payables/receivables resulting from such transactions
2) Translation exposure of investments in foreign entities (including results)
3) Exposures of non-functional-currency-denominated debt
4) Exposures of non-functional-currency-denominated marketable securities
5) Competitive exposures
Each business is required to define its functional currency consistent with
SFAS 'No. 52 Foreign Currency Translation'. The businesses must identify and
measure all exposures from material transactions denominated in currencies other
than their own functional currency. It is the Company's policy that significant
transaction exposures are covered by the businesses. It is the Company's policy
not to hedge the translation exposure.
Financing of subsidiaries is generally done in the functional currency of
the borrowing entity. If the financing currency is not the functional currency
of the business, the entity's exposure to foreign exchange risks is, in
principle, offset by derivative contracts, unless the use of these contracts is
restricted for regulatory reasons.
The Company partially hedges the foreign exchange exposure arising from
marketable securities that are available for sale.
The Company does not hedge foreign currency exposures that may arise from
competitors having different reporting currencies than the euro.
FOREIGN EXCHANGE FINANCIAL INSTRUMENTS
A sensitivity analysis shows the following results. An instantaneous 10%
strengthening or weakening of non-euro currencies against the euro from their
levels at December 31, 2000, with all other variables held constant, would
result in an estimated change in the fair value of the Company's financial
instruments of
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39
EUR 7 million, compared with EUR 425 million in 1999, mainly due to the
hedge of the Seagram securities. For the purpose of this analysis, financial
instruments consist of debt instruments, liquid assets, securities and
derivative financial instruments.
The hedges of forecasted sales and purchases account for a part of the
sensitivity calculated above. These are concluded to offset the effect of
changes in foreign currency related to forecasted transactions by the
businesses.
These forecasted transactions are not financial instruments and are not yet
recorded in the accounts of the Company. The hedges related to these forecasted
transactions are cash flow hedges. The results from the hedges currently
deferred in equity amount to a loss of EUR 12 million. The changes in the value
of these hedges are deferred in equity and released to income when the
forecasted transaction affects income. Virtually all transaction hedges that
were outstanding at December 31, 2000 were forward foreign exchange contracts
that will expire in 2001.
The foreign currency risk on outstanding external debt and intercompany
loans is covered by foreign currency forward contracts. The changes in the fair
value of these derivatives are accounted for in financial income and expenses.
The outstanding forward foreign exchange hedges related to securities at
December 31, 2000 are fair value hedges and consequently have an offsetting
effect on the value of the hedged securities. All hedges related to securities
are forward foreign exchange contracts.
COMMODITY PRICE RISK HEDGING POLICY
The Company is a purchaser of certain base metals such as copper, precious
metals and energy. It is the Company's policy to hedge all significant
transaction risks.
COMMODITY PRICE DERIVATIVES
The sensitivity analysis shows the following results. An instantaneous 10%
strengthening or weakening of all commodity prices from their levels at December
31, 2000, with all other variables held constant, would result in a change in
the fair value of the Company's financial instruments of EUR 4 million compared
with EUR 8 million at the end of 1999.
The commodity price derivatives that the Company enters into are concluded
as cash flow hedges to offset forecasted purchases. These forecasted
transactions are not financial instruments and therefore are not recorded in the
accounts of the Company. The results of these hedges, currently charged to
equity as deferred results, amount to a loss of EUR 1 million.
The changes in the value of the hedges of the forecasted transactions are
deferred in equity and released to income when the forecasted transaction
affects earnings. Virtually all contracts that were outstanding at December 31,
2000 were forward commodity contracts or futures contracts that will expire in
2001.
INTEREST-RATE HEDGING POLICY
At year-end 2000 the Company had a ratio of fixed-rate debt to total
outstanding debt of approximately 48%, compared to 73% one year ago. The Company
partially hedges the interest-rate risk inherent in the fixed-rate debt. As of
year-end 2000, the Company hedged a notional amount of usd 803 million, compared
to current outstanding US dollar-denominated fixed-rate public debt of usd 1,313
million, and none of the euro-denominated debt.
INTEREST-RATE CURRENCY DERIVATIVES
The interest-rate currency swaps hedge the Company against adverse
movements of long-term interest rates and foreign exchange rate movements. Under
these hedge contracts the Company receives fixed US dollar interest and pays
variable euro interest. These hedges are fair value hedges. In the year 2000 the
result on these hedges was a profit of EUR 26 million.
As of December 31, 2000 the majority of debt consists of bonds. Of the
nominal EUR 2,262 million of bonds outstanding, 12.7% have an embedded put
feature, which allows the investor to redeem the bonds prior to their final
maturity date.
A sensitivity analysis shows the following results. If the long-term
interest rates were to decrease instantaneously by 1% from their level of
December 31,
66 Operating and Financial Review and Prospects
40
2000, with all other variables (including foreign exchange rates) held
constant, the fair value of the long-term debt would increase by EUR 126
million. In this case the fair value of debt including the fair value of related
interest-rate swaps would increase by EUR 106 million (compared to EUR 107
million in 1999).
This increase is based on the assumption that the 'putable' bonds will be
repaid at their final maturity date. If the bondholders required payment at
their respective put dates and there was a 1% increase in interest rates, this
would reduce the market value of the long-term bonds by EUR 91 million. In this
case the fair value of debt including the fair value related to interest-rate
currency swaps would decrease by EUR 71 million (compared to EUR 88 million in
1999).
CREDIT RISK OF BANK COUNTERPARTIES
The Company invests available cash and cash equivalents with various
financial institutions. The Company is also exposed to credit risk in the event
of non-performance by counterparties with respect to derivative financial
instruments.
The Company measures on a daily basis the potential loss, should a
financial counterparty default. These worst-case scenario losses are monitored
and limited by the Company. The Company does not enter into any derivative
financial instruments to protect against default of financial counterparties.
However, the Company requires all financial counterparties with which it deals
in derivative transactions to complete legally enforceable set-off agreements
prior to trading and, whenever possible, to have a strong credit rating from
Standard & Poor's and Moody's Investor Services.
CREDIT RISK OF CUSTOMERS
Credit risk represents the loss that would be recognized at the reporting date
if counterparties failed completely to perform as contracted. As of December 31,
2000 the Company identified 3 customers with significant exposure. This exposure
amounts to EUR 291 million and ranges from EUR 50 million to EUR 150 million per
customer.
To reduce exposure to credit risk, the Company performs ongoing credit
evaluations of the financial condition of its customers, but generally does not
require collateral and does not enter into derivative transactions to mitigate
customer credit risk.
COUNTRY RISK
The Company is exposed to country risk by the very nature of running a
global business. The country risk is defined as the sum of equity of all
subsidiaries and associated companies in a country plus cross-border
intercompany loans, cross-border guarantees (unless country risk is explicitly
excluded in the guarantee), cross-border accounts receivable and cross-border
intercompany accounts. The country risk is monitored quarterly. The degree of
risk of a country is taken into account when new investments are considered. The
Company does not, however, enter into derivative financial instruments to hedge
country risk.
OTHER INSURABLE RISKS
The Philips Group is covered for financial losses by global insurance
policies.
To reduce risks, Philips has a worldwide property damage and business
interruption loss-prevention program in place. Factories are inspected on a
regular basis against predefined risk engineering standards. Status information
on the existing prevention levels is monitored centrally and presented to
financial/ industrial product division management. Inconsistencies with these
standards are reported to product division management, and budgets are made
available for further improvement of the loss-prevention levels.
OTHER MAJOR RISKS
In November 2000 the Company purchased 1.3 billion redeemable preferred
shares in Taiwan Semiconductor Manufacturing Company (a publicly listed
Taiwanese company in which the Philips Group has a substantial shareholding) for
13 billion Taiwanese dollars (EUR 458 million). The preferred shares are
redeemable in 2003. The dividend yield on these preferred shares is 3.5%. The
preferred shares have the same voting rights as TSMC's common shares. The
preferred shares are carried at cost (redemption value) in the accompanying
consolidated balance sheet. The redeemable preferred shares result in a
concentration of credit risks.
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However, based on historical results the Company is of the opinion that
TSMC will have sufficient means to redeem the preferred shares at the redemption
date.
In December 2000 Philips purchased 32 million convertible redeemable preferred
shares in LG Electronics Inc. (LGE) for 544 billion Korean won (EUR 505
million). LGE is a publicly listed Korean company with which Philips already has
the LG.Philips LCD Co. joint venture; a new joint venture in the field of CRT
business is in the process of being established. The redeemable preferred shares
will be redeemed before June 30, 2004, subject to the Korean legal requirement
of the existence of sufficient profit and retained earnings available for
distribution. The preferred shares are also convertible one year after issuance,
at Philips' option, into LGE common stock. The dividend yield on these preferred
shares is 7.5%. The preferred shares have no voting rights, unless LGE is in
arrears on dividend or redemption payments. The preferred shares are carried at
cost (redemption value) in the accompanying consolidated balance sheet. The
redeemable preferred shares result in a concentration of credit risk. However,
the Company is of the opinion that, out of the existing joint venture with LGE
(LG.Philips LCD Co.) and the new joint venture between LGE and Philips Display
Components to be established in the course of 2001, sufficient funds will flow
to LGE to enable LGE to redeem the preferred shares within the next few years.
Earlier repayment is permitted.
EURO
Philips introduced the euro as its reporting currency on January 1, 1999.
The impact of the introduction of the euro on Philips' businesses and on its
financial performance has been very limited, because the markets are still
dominated by local currencies. Management still believes that in the longer term
Philips stands to gain from the introduction of a single European currency.
- -- RISK FACTORS
Philips is a global company, which means that it is affected by economic
developments in all regions of the world.
Philips is active in more than 60 different businesses with different risk
profiles, which are geared to the business environment in which they operate and
the competitive advantage they aim to achieve.
Depending on their nature, Philips' businesses are affected by developments
in the cyclical semiconductor market, the PC industry, the car industry and the
communications industry. The professional Lighting business and Medical Systems
also depend on governmental budgets and the developments in real estate
investments.
The Company is exposed to a variety of market risks, including the effects
of changes in foreign currency exchange rates, interest rates and credit
spreads, which are further described in the section Quantitative and qualitative
disclosures concerning market risks. Mismatches between the currencies in which
sales are made and the currencies in which expenses are incurred expose the
Company's income in the case of structural devaluations or revaluations.
The Company has a relatively strong customer base in US dollar and US
dollar-related countries as compared to the origin of its production and supply
base. It is estimated that a 10% devaluation of the US dollar against the euro
would reduce income from operations by more than EUR 100 million.
In areas with major technological investments, like Semiconductors,
Components and Consumer Communications, Philips continues to build on
partnerships to share the high financial risks. Management of this growing
number of strategic alliances is a risk area in itself.
A common risk area that has priority attention is human resources. Growth
areas like Semiconductors and Components require talented people with specific
technical key competences for the realization of their plans. The ability to
recruit and retain quality staff, for which there is an increasing demand in the
market, is a critical success factor.
68 Operating and Financial Review and Prospects
42
- -- CORPORATE GOVERNANCE
The Company has consistently improved its corporate governance over the
past decade by increasing transparency and accountability to its shareholders
through simplification of the corporate structure, by improving the supervision
of the Company's policies and activities, and by adopting a culture of best
practices. For further information, see pages 70 to 76 of the separate booklet
entitled 'Financial Statements'.
BUSINESS CONTROLS
The Philips Policy on Business Controls is communicated to all levels of
management. Key elements are: setting clear policies; issuing clear directives;
delegating tasks and responsibilities clearly; carrying out supervision; taking
corrective action; and maintaining highly responsive accounting systems
including an internal control system (internal accounting controls).
The Company's internal control structure follows current thinking and
practice in integrating management control over company operations, compliance
with legal requirements and the reliability of financial reporting. It makes
management responsible for implementing and maintaining effective business
controls, including internal financial controls. The effectiveness of these
controls is monitored by self-assessment and by audits performed by internal and
external auditors.
Accountability is enforced through the formal issuance of a Statement on
Business Controls by each business unit, resulting, via a cascade process, in a
statement by each product division.
Audit committees at each of the product divisions ensure adherence to the
policy and take corrective action where necessary. They are also involved in
determining the desired audit coverage. The entire process is reviewed on a
regular basis by the Corporate Audit Committee chaired by the CFO and
independently by Corporate Internal Audit. Reports on the functioning of the
process are sent to the Board of Management and the Audit Committee of the
Supervisory Board.
Key focus areas of Internal Audit are business process analysis, business
risk analysis, business controls and efficient and effective reporting to
management about root causes and solutions to process performance and control
gaps. This also includes facilitating business risk assessment workshops.
As a consequence of this revised approach, the division of tasks between
Internal Audit and external auditors will be changed from 2001 onwards as
external auditors will be more directly responsible for and involved in the
audit of basic accounting controls of all Philips entities.
BUSINESS PRINCIPLES
The Philips General Business Principles govern the Company's business
decisions and actions throughout the world, applying equally to corporate
actions and the behavior of individual employees when on company business. They
incorporate the values on which all Philips activity is or should be based, such
as business focus, integrity, fair trade, non-discrimination and equal
opportunities, and in almost all countries have been translated into the local
language. The responsibility for compliance with the Principles rests first and
foremost with the management of the business. In every country a Compliance
Officer has been appointed, and the Philips Intranet provides information on how
to contact the Compliance Officer.
The Review Committee General Business Principles supervises the practical
implementation. Where appropriate, the Review Committee makes recommendations
for additional guidelines. In 2000 the Review Committee met seven times,
discussing, among other things, the further implementation of the Principles,
the question of how to increase awareness, and reported violations.
A number of initiatives have been taken to increase awareness and improve
the implementation of the General Business Principles in the Company. For
instance, a casebook for dilemma training has been developed and distributed
throughout the organization for incorporation in management development courses.
Furthermore, following the lead of our US organization, in several countries
steps have
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been taken to introduce guaranteed-anonymity hotlines and/or mailboxes for
reporting suspected contraventions of the General Business Principles.
Considerable efforts are also being devoted to optimizing the periodic reporting
on this issue by the Company's product divisions and country organizations.
PROXY SOLICITATION
Philips is continuously striving to improve relations with its
shareholders. For instance, Philips was one of the key companies in the
establishment of the Shareholders' Communication Channel -- a pilot project of
Euronext Amsterdam, banks in the Netherlands and several major Dutch companies
to simplify contacts between a participating company and its shareholders.
As in 2000, Philips will use the Shareholders' Communication Channel to
distribute its complete Annual Report and the Agenda for the General Meeting of
Shareholders in 2001. Following recent amendments to Dutch law enabling proxy
solicitation, Philips will implement proxy solicitation in the Netherlands for
this year's General Meeting of Shareholders. In view thereof, for the General
Meeting of Shareholders on March 29, 2001 a record date for common shares (being
March 22, 2001) will apply: those persons who on March 22, 2001 hold common
shares in the Company and are registered as such in one of the registers
designated by the Board of Management for the General Meeting of Shareholders
will be entitled to participate in and vote at the meeting.
Philips is convinced of the value of the Shareholders' Communication
Channel and will continue to advocate its widespread adoption. In a broader
context, Philips is constantly striving to improve its contacts with the
financial community at large.
- -- ENVIRONMENTAL PERFORMANCE
With regard to eco-efficiency, Philips initiated a pragmatic approach in
1994 and defined measurable targets, laid down in four-year action programs. The
present program, running from 1998 until 2002, is called EcoVision, and 2000 is
the third year that Philips will report in quantitative terms on its
environmental progress on a worldwide scale by means of a dedicated Corporate
Environmental Report.
Under the EcoVision program, Green Flagships, or 'green' star products, are
developed. These are products with a better environmental performance than their
predecessors or competitors in one or more areas such as weight, energy
consumption, packaging and recyclability. The provisional results for 2000 show
that 64 Philips products were identified as Green Flagships and 44 were marketed
as such.
It should be noted that the comparability of the data given below for the
reporting period and previous years is affected by changes to the portfolio of
reporting units, changes in the methodology for determining certain data, and
enhancement of data collection systems.
Compared with the reference year 1994, Philips reduced its packaging by 14% in
2000 (9% in 1999 and 5% in 1998), close to the target of 15% packaging reduction
by year-end 2000.
Compared with the reference year 1994, energy saving improved from 24% in
1998 to 28% in 1999 and 31% in 2000. For industrial waste, savings of 56% were
realized in 2000 compared with 43% in 1999 and 27% in 1998. Water consumption
was reduced by 45%, compared with 41% in 1999 and 33% in 1998.
Of the manufacturing sites, 85% are certified and manage their activities
in accordance with the internationally accepted environmental standards ISO
14001 or EMAS (75% in 1999; 52% in 1998).
- -- INFORMATION TECHNOLOGY AND E-BUSINESS
The basic IT infrastructure for company-wide communication established in
1999 has been further improved in 2000 and enhanced with new services for secure
and reliable connections with external business partners and remote access.
Using the global communication network, a worldwide facility has been
established for the electronic distribution of software for the Philips standard
desktop environment. Building on the existing messaging infrastructure, network
application services for groupware and knowledge management have been made
available to the Philips user community.
70 Operating and Financial Review and Prospects
44
A major challenge for the coming years is to take advantage of the opportunities
offered by e-business. Philips has high performance ambitions in this new arena.
All Philips businesses and corporate departments have dedicated e-business
plans, which cover products, services, processes, people and relationships along
the integral business chain. At corporate level a cross-consumer PD cooperation
involving Philips Customer Care centers and Corporate IT has been set up to
develop and deploy a shared e-business front-end application, a Content
Management system and a common consumer database.
In general, the main focus area is business-to-business, encompassing the
integral business chain from the supply base up to and including retailing. On
the market side this means customer- and consumer-centric e-marketing,
e-retailing and e-key account management. On the supply base side it means
e-procurement and web-enabled supply. Besides business-to-business activities,
selected direct-to-consumer sales activities have been developed in various
markets around the world.
Investments have been made in the common IT infrastructure needed to support
e-business, including state-of-the-art connections to the Internet and security
services. A certification authority has been designated to authenticate Philips'
businesses and their partners in a secure and reliable way so that they can
participate in e-business transactions.
Tracking developments in markets, economies and society at large, company-wide
initiatives have been rolled out to facilitate the required change in business
culture, such as an e-business awareness program for some 10,000 staff
worldwide, which was completed in the final quarter of 2000.
- - HUMAN RESOURCES MANAGEMENT
Increasingly competitive labor markets call for a creative response to the
challenge of recruiting and retaining top talent. Scarcity of talent occurs in
many regions and across disciplines. From a regional perspective, the USA
requires specific attention, particularly because of the tense labor market
conditions in the Silicon Valley area. From a functional perspective the `war
for talent' manifests itself most clearly in the area of technical specialists.
Philips has a healthy basis for a strong competitive position on the labor
market. The technology base, compelling product portfolio and Company
performance attract talented people. This is illustrated by the growing number
of people signing up for interviews in our recruitment campaigns at universities
across the world.
Increasingly, recruitment is conducted through the Internet. A corporate
infrastructure, which ties together the various recruitment websites of product
divisions and country organizations, has been developed: the Philips Job Market.
An analysis has been carried out of the effectiveness of the corporate
Management Development architecture. Based on the outcomes, a worldwide program,
HR Excellence 2002, has been launched. The objective of this program is to
enhance the quality and coherence of the `talent pipeline' to the executive
levels in the Company.
A new remuneration policy has been established for the 600-plus Philips
Executives. This policy ensures the compensation of the Executives according to
competitive benchmarks in the various countries. One of the key features is a
stock option program, which ties the pay-out to shareholder value creation
compared to a set of peer companies. The leadership development efforts for
Executives, which started in 1999, have been intensified. For instance, an
Executive Coaching program is being rolled out in the Philips Leadership Group.
- - BUSINESS EXCELLENCE
In 2000 progress was made in rolling out the Business Excellence through Speed
and Teamwork (BEST) program throughout the Company. Building upon the
achievements already realized in quality assurance, process improvement and
customer satisfaction, BEST is giving renewed focus and impetus to the drive
towards world-class performance in all processes along the business chain.
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45
The role of speed is recognized in BEST as the fundamental driver of business
excellence. Regarding teamwork, more than 7,000 improvement teams are currently
active throughout the Company. Quality improvement competitions in various
businesses give a structure to their activities, producing very substantial
benefits not only for the Group's businesses and customers, but also in terms of
recognition and the opportunities for personal growth and self-fulfilment they
offer Philips' employees.
Management audits support and reinforce the improvement process by providing
cross-business exposure to leadership practice and by ensuring that headquarters
clearly define their added value and focus on processes as well as results.
72 Operating and Financial Review and Prospects
46
- - OUTLOOK
The Company has formulated its new performance objectives for the medium
term:
1. Sales growth of better than 10% average per annum
2. Income from operations to grow from approximately 8% of sales to 10% of
sales
3. Growth of earnings per common share of 15% on average per annum
4. Positive cash flow
Achieving these results will lead to a return on net assets (RONA) of over
30%.
For the year 2001, the Company is observing a slowdown in economic activity
in some areas of the world, particularly the USA. Furthermore, the markets
for PCs and related products and the telecom markets are showing signs of
temporary oversupply. This will cause some of the markets for Philips
products to show lower growth and higher price erosion in 2001, certainly in
the first half of the year.
We will keep capital expenditures below the level of 2000, while we continue
to support the high-growth opportunities of our businesses with a focus on
Semiconductors, Components and the digital parts of Consumer Electronics.
This will be supported by acquisitions, which may temporarily dilute earnings
until the synergies can be reached that are foreseen in these transactions.
We will continue to improve operational efficiency and devote more attention
to closer cooperation between different businesses where this creates synergy
advantages for the Company. The total effect of growth and efficiency will
keep the number of employees at about the same level.
We will continue our approach to further tighten business controls and
enhance value-based management.
Eindhoven, February 6, 2001
Board of Management
Group Management Committee
73
47
Board of Management
[Picture of Cor Boonstra]
[Picture of Gerard Kleisterlee] [Picture of Jan Hommen]
[Picture of Arthur van der Poel] [Picture of John Whybrow]
[Picture of Adri Baan]
COR BOONSTRA 1938, Dutch
President/CEO and Chairman of the Board of Management and the Group Management
Committee
Member of the Board of Management and the Group Management Committee since June
1994; Chairman and President of the Company since October 1996
GERARD KLEISTERLEE 1946, Dutch
Executive Vice-President and Chief Operating Officer
Member of the Board of Management since April 2000; Member of the Group
Management Committee since January 1999; Chief Operating Officer of the Company
and President-elect since September 2000
JAN HOMMEN 1943, Dutch
Executive Vice-President and Chief Financial Officer
Member of the Board of Management and the Group Management Committee and Chief
Financial Officer since March 1997
ADRI BAAN 1942, Dutch
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since May 1996
ARTHUR VAN DER POEL 1948, Dutch
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since May 1996; President/CEO of the Semiconductors division since
1996
JOHN WHYBROW 1947, British
Executive Vice-President
Member of the Board of Management since May 1998; member of the Group Management
Committee since April 1995; President/CEO of the Lighting division since 1995
74 Board of Management
48
Group Management Committee
The Group Management Committee is composed of the Board of Management and the
following senior officers
[Picture of Hans Barella]
[Picture of Ad Veenhof] [Picture of Guy Demuynck]
[Picture of Tjerk Hooghiemstra] [Picture of Ad Huijser]
[Picture of Jan Oosterveld]
[Picture of Arie Westerlaken] [Picture of Matt Medeiros]
AD VEENHOF 1945, Dutch
Senior Vice-President
Member of the Group Management Committee since January 1996 and President/CEO of
the Domestic Appliances and Personal Care division since 1996
HANS BARELLA 1943, Dutch
Senior Vice-President
Member of the Group Management Committee since March 1997 and President/CEO of
the Medical Systems division since 1997
GUY DEMUYNCK 1951, Belgian
Senior Vice-President
Member of the Group Management Committee since April 2000 and President/CEO of
Consumer Electronics Mainstream since 2000
JAN OOSTERVELD 1944, Dutch
Senior Vice-President
Member of the Group Management Committee since May 1998; responsible for
Corporate Strategy since 1997 and for Regions and Countries since 2000
TJERK HOOGHIEMSTRA 1956, Dutch
Senior Vice-President
Member of the Group Management Committee since April 2000; responsible for Human
Resources Management since 2000
AD HUIJSER 1946, Dutch
Senior Vice-President
Member of the Group Management Committee since
April 1999 and CEO of Philips Research since 1998
ARIE WESTERLAKEN 1946, Dutch
Senior Vice-President
Member of the Group Management Committee since May 1998, Secretary to the Board
of Management since 1997 and Chief Legal Officer since 1996
MATT MEDEIROS 1956, American
Senior Vice-President
Member of the Group Management Committee since November 2000 and President/CEO
of the Components division since 2000
75 Group Management Committee
49
Supervisory Board
[Picture of L.C.van Wachem] [Picture of K.A.L.H.van Miert]
[Picture of W.de Kleuver]
[Picture of Sir Richard Greenbury]
[Picture of L. Schweitzer] [Picture of W. Hilger]
[Picture of J-M.Hessels]
L.C.VAN WACHEM 1931, Dutch** ***
Chairman
Member of the Supervisory Board since 1993; second term expires in 2001 Former
Chairman of the Committee of Managing Directors of the Royal Dutch/Shell Group
and currently Chairman of the Supervisory Board of Royal Dutch Petroleum
Company; also member of the Supervisory Boards of Akzo Nobel, BMW and Bayer, and
member of the Board of Directors of IBM, Atco and Zurich Financial Services
W.DE KLEUVER 1936, Dutch* ***
Vice-Chairman and Secretary
Member of the Supervisory Board since 1998; first term expires in 2002 Former
Executive Vice-President of Royal Philips Electronics
PROF. K.A.L.H.VAN MIERT 1942, Belgian
Member of the Supervisory Board since 2000; first term expires in 2004
Former member of the European Commission and currently President of Nyenrode
University, member of the Supervisory Board of Wolters Kluwer, member of the
Boards of Agfa Gevaert and De Persgroep and member of the Advisory Boards of
Goldman Sachs, Rabobank and Swissair.
L.SCHWEITZER 1942, French
Member of the Supervisory Board since 1997; first term expires in 2001
Chairman and Chief Executive Officer of Renault and member of the Boards of
Pechiney, Banque Nationale de Paris and Electricite de France
PROF. W.HILGER 1929, German* **
Member of the Supervisory Board since 1990; reaches the statutory age limit in
2001
Former Chairman of the Board of Management of Hoechst and currently member of
the Supervisory Boards of Victoria Versicherung and Victoria Lebensversicherung
SIR RICHARD GREENBURY 1936, British**
Member of the Supervisory Board since 1998; first term expires in 2002
Former Chairman and Chief Executive Officer of Marks & Spencer and director of
Lloyds TSB, British Gas, ICI and Zeneca, and currently member of the Boards of
Unifi Inc. and the Electronics Boutique Plc.
J-M.HESSELS 1942, Dutch*
Member of the Supervisory Board since 1999; first term expires in 2003
Former Chief Executive Officer of Royal Vendex KBB and currently Chairman of the
Supervisory Board of Euronext and member of the Supervisory Boards of BN.com,
Laurus, Schiphol Group and Royal Vopak
* Member of the Audit Committee
** Member of the Remuneration Committee
*** Member of the Nomination and Selection Committee
76 Supervisory Board
50
Report of the Supervisory Board
PROFILE OF THE SUPERVISORY BOARD
The Supervisory Board will aim for an adequate
combination of knowledge and experience among its members in relation to the
global and multi-product character of the business of the Company.
Consequently, the Board will aim for an adequate level of experience in
marketing, manufacturing, financial, economic, social and legal aspects of
international business and government and public administration. The Supervisory
Board further aims to have available adequate experience within Philips by
having one or two former Philips executives on the Supervisory Board. In the
case of vacancies the Supervisory Board will ensure that when such persons are
recommended for appointment, these various qualifications are reflected
sufficiently.
TERM OF APPOINTMENT
Members of the Supervisory Board are appointed for a fixed
term of four years. In principle, they may be re-elected for two additional
terms of four years (for further information, see page 74 of the separate
booklet "Financial Statements").
The Supervisory Board met five times in the course of 2000. Except in matters
regarding the composition of the Supervisory Board, the Board of Management and
the Group Management Committee, as well as the remuneration and performance of
members of the Board of Management and the Group Management Committee, the
members of the Board of Management and/or the Group Management Committee were
present at our meetings to inform us on the course of business, important
decisions and the strategy of the Philips Group. A number of important matters,
such as major acquisitions, divestitures and alignments, were discussed at
length. A two-day meeting was devoted to strategy. The Audit Committee met four
times in the presence of the external auditor before the publication of the
annual and quarterly results. On behalf of the Supervisory Board and in
preparation for our decisions, this committee monitors the effectiveness of
internal financial control systems and reviews internal audit programs and their
findings. It also reviews the annual and quarterly figures and discusses the
scale and scope of the annual audit by the external auditor. Important findings
and identified risks are examined thoroughly so that appropriate measures can be
taken.
The Remuneration Committee met two times. This committee is responsible for
preparing resolutions regarding the remuneration of members of the Board of
Management and the other members of the Group Management Committee. In addition,
it advises the Supervisory Board with regard to the policy to be pursued. The
Nomination and Selection Committee held discussions four times, in particular to
fill vacancies in the Board of Management and/or the Group Management Committee.
COMPOSITION OF THE SUPERVISORY BOARD
At the General Meeting of Shareholders on March 30, 2000, Mr C.J. Oort retired
from the Supervisory Board as a consequence of reaching the statutory age limit
in 2000, while Mr K.A.L.H. van Miert was appointed to the Supervisory Board with
effect from April 1, 2000.
At the General Meeting of Shareholders on March 29, 2001, Mr W. Hilger will
retire from the Supervisory Board. Mr Hilger joined the Supervisory Board in
1990 and has been a member of the Audit Committee (since 1993) and the
Remuneration Committee (since 1997). He reaches the statutory age limit this
year. We wish to express our gratitude to Mr Hilger for his contribution to the
Company during his eleven-year term, an often turbulent period with some
difficult years, and we wish him well for the future.
In agreement with the Meeting of Priority Shareholders we will propose at the
General Meeting of Shareholders on March 29, 2001 to re-elect Messrs L.C. van
Wachem and L. Schweitzer, whose present terms end at the 2001 Annual General
Meeting of Shareholders.
COMPOSITION OF THE BOARD OF MANAGEMENT-GROUP MANAGEMENT COMMITTEE
At the General Meeting of Shareholders on March 30, 2000, Mr G.J. Kleisterlee
was appointed as member of the Board of Management and Executive Vice-President.
On August 30, 2000 it was announced that Mr C. Boonstra will retire as
President/CEO of the Company and Chairman of the Board of Management as of April
30, 2001. Since he was appointed as a member of the Board of Management (June
1994) and during the period in which he served as President and Chairman of the
Board of Management
77 Report of the Supervisory Board
51
(from October 1996), Mr Boonstra successfully accomplished major assignments. In
particular, we are grateful for his contribution to the increased focus of the
Company's activities, resulting in regained financial health and credibility
with the investment world. This has significantly increased shareholder value.
In agreement with the Meeting of Priority Shareholders we will propose at the
General Meeting of Shareholders to elect Mr Kleisterlee as the successor to Mr
Boonstra.
In the course of 2000, Messrs N.J. Bruijel (January 1) and F. Bok (April 1)
retired as members of the Group Management Committee. With effect from April 1,
2000, Messrs T. Hooghiemstra and G.J.M. Demuynck have been appointed as members
of the Group Management Committee and Senior Vice-Presidents of the Company.
With effect from November 1, 2000, Mr M.T. Medeiros has been appointed as a
member of the Group Management Committee and Senior Vice-President of the
Company. Mr A. Baan will retire as Executive Vice-President and member of the
Board of Management on March 30, 2001. We wish to thank him for all his efforts
on behalf of the Company.
FINANCIAL STATEMENTS
The financial statements of Koninklijke Philips Electronics N.V. for 2000, as
presented by the Board of Management, have been audited by KPMG Accountants
N.V., independent public auditors. Their report appears on page 69 of the
separate booklet entitled `Financial Statements'. We have approved these
financial statements and recommend that you adopt them in accordance with the
proposal of the Board of Management and likewise adopt the proposal to declare a
dividend of EUR 0.36 per common share.
Eindhoven, February 6, 2001
The Supervisory Board
78 Report of the Supervisory Board
[Pages 79 to end intentionally omitted.]
52
ANNUAL REPORT 2000
FINANCIAL STATEMENTS
[Philips Logo]
PHILIPS
[Pages 1 and 2 intentionally omitted.]
ACCOUNTING POLICIES
The consolidated financial statements are prepared on a basis consistent with
generally accepted accounting principles in the Netherlands ("Dutch GAAP").
Historical cost is used as the measurement basis unless otherwise indicated.
ACCOUNTING CHANGES
In order to further align Philips' accounting policies under Dutch GAAP with
US GAAP requirements, product development and process development costs, which
previously had been included in inventories, are now charged to expense as
incurred. In line with Dutch GAAP, the relevant costs included in the January 1,
2000 balance sheet - an amount of EUR 241 million, net of taxes - were charged
directly to stockholders' equity. This change did not materially impact income
for the year 2000.
NEW ACCOUNTING PRONOUNCEMENTS
The Company chose to adopt Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for derivative instruments and hedging activities", as of
January 1, 2000, and SFAS No. 138, an amendment of SFAS No. 133, as of July 1,
2000. At the date of initial application all derivative instruments were
recognized as either assets or liabilities and measured at fair value.
Differences between previous carrying amounts and the fair values are reported
as gains or losses in net income or in other reserves under stockholders'
equity, as appropriate. The impact of the transition adjustment in the opening
balance sheet was a credit of EUR 58 million on equity and a loss of EUR 5
million on current year earnings. In sofar as hedging relationships were
established anew and the hedged items were recognized as either
assets/liabilities or as firm commitments, the resulting adjustments of the
carrying amounts of the hedged items have been recognized as offsetting gains
and losses for the risk being hedged.
Effective January 1, 2000, SEC Staff Accounting Bulletin ("SAB") 101, "Revenue
recognition in financial statements', has been applied. The application of SAB
101 did not materially impact sales and revenue recognition.
PRESENTATION CHANGES
Beginning in 1999, results from divestitures, other than segments of business,
are reported as income from continuing operations and no longer as extraordinary
items. This presentation is in line with recent developments in international
accounting and is fully aligned with US GAAP. Furthermore, interest on
provisions for pensions has been included in income from operations instead of
financial income and expenses. Prior years have not been reclassified.
A pro forma presentation of the 1998 figures in accordance with the methodology
used for 2000 and 1999 has been provided in a footnote on the face of the income
statement and in the notes to the consolidated financial statements. Certain
other reclassifications have been made to conform prior-years' data to the
current presentation.
ACCOUNTING POLICIES 3
53
Consolidation principles
The consolidated financial statements include the accounts of Koninklijke
Philips Electronics N.V. ("Royal Philips Electronics") and companies that are
effectively controlled. Minority interests are disclosed separately in the
consolidated statements of income and in the consolidated balance sheets.
Intercompany transactions and balances have been eliminated.
Investments in companies in which Royal Philips Electronics does not effectively
control the financial and operating decisions, but does exert significant
influence, are accounted for by the equity method. Generally, significant
influence is presumed to exist if at least 20% of the voting stock is owned. The
Company's share of the net income of these companies is included in results
relating to unconsolidated companies in the consolidated statements of income.
Investments in companies in which Royal Philips Electronics does not exert
significant influence are carried at cost or, if a long-term impairment exists,
at lower net realizable value.
Reporting currencies
Beginning in 1999, Philips' financial statements are reported in euros.
Previously presented financial statements denominated in Dutch guilders have
been translated into euros using the irrevocably fixed conversion rate
applicable since January 1, 1999 for all periods presented (EUR 1 = NLG
2.20371). Management believes that the data denominated in euros reflect the
same trends as previously reported. Philips' financial data may not be
comparable to those of other companies that also report in euros if these other
companies previously reported in a currency other than the Dutch guilder.
Foreign currencies
The financial statements of foreign operations are translated into euros. Assets
and liabilities are translated using the exchange rates on the respective
balance sheet dates. Income and expense items are translated based on the
average rates of exchange for the periods involved. The resulting translation
adjustments are charged or credited to stockholders' equity. Cumulative
translation adjustments are recognized as income or expense upon disposal of a
segment of business.
The functional currency of foreign operations is generally the local currency,
unless the primary economic environment requires the use of another currency.
However, when foreign operations conduct their business in economies considered
to be highly inflationary, they record transactions in a designated functional
currency instead of their local currency.
Gains and losses arising from the translation or settlement of
foreign-denominated monetary assets and liabilities into the local currency are
recognized in income in the period in which they arise. However, currency
differences on intercompany loans which have the nature of a permanent
investment, are accounted for as translation differences directly in
stockholders' equity.
4 ACCOUNTING POLICIES
54
Derivative financial instruments
The Company uses derivative financial instruments principally in the management
of its foreign currency risks and to a more limited extent for interest rate and
commodity price risks. Applying SFAS No. 133 and SFAS No. 138, the Company
measures all derivative financial instruments based on fair values derived from
market prices of the instruments or from option pricing models, as appropriate.
Gains or losses arising from changes in the fair value of the instruments are
recognized in the income statement for the period in which they arise to the
extent that the derivatives have been designated as a hedge of recognized assets
or liabilities, or to the extent that the derivatives have no hedging
designation or are ineffective. The gains and losses on the designated
derivatives substantially offset the changes in the values of the recognized
hedged items, which are recognized also as gains and losses in the income
statement.
Changes in the fair value of a derivative that is highly effective and that is
designated and qualifies as a fair value hedge, along with the loss or gain on
the hedged asset or liability or unrecognized firm commitment of the hedged item
that is attributable to the hedged risk, are recorded in earnings.
Changes in the fair value of a derivative that is highly effective and that is
designated and qualifies as a cash flow hedge are recorded in other reserves,
until earnings are affected by the variability in cash flows of the designated
hedged item. Changes in the fair value of derivatives that are highly effective
as hedges and that are designated and qualify as foreign currency hedges are
recorded in either earnings or other reserves, depending on whether the hedge
transaction is a fair value hedge or a cash flow hedge.
The Company also formally assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or cash flows of hedged
items. When it is determined that a derivative is not highly effective as a
hedge or that it has ceased to be a highly effective hedge, the Company
discontinues hedge accounting prospectively. Any ineffectiveness is recognized
in financial income and expenses.
Cash and cash equivalents
Cash and cash equivalents include all cash balances and short-term highly liquid
investments with an original maturity of three months or less that are readily
convertible into known amounts of cash. They are stated at face value.
Securities
Securities designated as available for sale are carried at the lower of cost or
market value. Gains or losses, if any, are recorded in financial income and
expenses. Securities hedged under a fair value hedge are remeasured for the
changes in the fair value that are attributable to the risk which is being
hedged.
Receivables
Receivables are carried at face value, net of allowances for doubtful accounts.
5
55
Inventories
Inventories are valued at the lower of cost or market value less advance
payments on work in process. The cost of inventories comprises all costs of
purchase, costs of conversion and other costs incurred bringing the inventories
to their present location and condition. The costs of conversion of inventories
include direct labor, fixed and variable production overheads, taking into
account the stage of completion.
In 1999 and prior years, product development and process development costs were
included in inventories.
The cost of inventories is determined using the first-in, first-out (FIFO)
method. Provision is made for obsolescence.
Other non-current financial assets
Loans receivable are carried at face value, less a provision for doubtful
accounts. Investments in companies for which sale is restricted for a period of
one year or more are accounted for at cost, being the fair value upon receipt of
the shares.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation.
Assets manufactured by the Company include direct manufacturing costs,
production overheads and interest charges incurred during the construction
period. Government grants are deducted from the cost of the related asset.
Depreciation is calculated using the straight-line method over the expected
economic life of the asset. Depreciation of special tooling costs is based on
the expected future economic benefit of these tools. Gains and losses on the
sale of property, plant and equipment are included in other business income.
Intangible assets
Intangible assets, including goodwill arising from acquisitions, are amortized
using the straight-line method over their estimated economic lives, not to
exceed twenty years. In-process Research and Development (R&D) is written off
immediately upon acquisition. Patents and trademarks acquired from third parties
are capitalized and amortized over their remaining lives.
Effective January 1, 1999, the Company adopted the Statement of Position ("SOP")
98-1 issued by the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants. SOP 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use", requires companies
to capitalize certain costs relating to the development and purchase of software
for internal use and to amortize these costs over the estimated useful life of
the software.
Costs of research and development are expensed in the period in which they are
incurred.
Impairment of intangible and tangible fixed assets
The Company accounts for impairments of intangible and tangible fixed assets in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This
statement requires that intangible and tangible fixed assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to undiscounted future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of, are reported at the lower of the carrying amount or fair value less
costs to sell.
6 ACCOUNTING POLICIES
56
Provisions
The Company recognizes provisions for liabilities and losses which have been
incurred as of the balance sheet date and for which the amount is uncertain but
can be reasonably estimated. Additionally, the Company records provisions for
losses which are expected to be incurred in the future, but which relate to
contingencies that exist as of the balance sheet date.
The provision for restructuring relates to the estimated costs of planned
reorganizations that have been approved by the Board of Management and publicly
announced before the year-end, and which involve the realignment of certain
parts of the industrial and commercial organization.
When such reorganizations require discontinuance and/or closure of lines of
activities, the anticipated costs of closure or discontinuance are included in
restructuring provisions. Provisions are stated at face value, with the
exception of certain long-term provisions, such as certain environmental
provisions, provisions for postretirement benefits (including pensions) and
severance payments in certain countries where such payments are made in lieu of
pension benefits; those provisions are stated at the present value of the future
obligations.
Debt and other liabilities
Debt and liabilities other than provisions are stated at face value. However,
loans which are hedged under a fair value hedge are remeasured for the changes
in the fair value that are attributable to the risk which is being hedged.
Revenue recognition
Sales are recognized as revenue when they are realized or realizable and earned,
which is considered to occur at the time the Company has substantially
accomplished what it must do to be entitled to the benefits represented by the
revenues. In addition, there should be persuasive evidence of a sales
arrangement with the client, the price is fixed or determinable and collection
is reasonably assured. Normally, this situation exists when the product or
merchandise is delivered or services are rendered to customers, or a sales
transaction has otherwise occurred. Recognized sales are net of sales taxes,
customer discounts, rebates and similar charges. Service revenue is recognized
over the contractual period or as services are rendered. Revenues from long-term
contracts are recognized in accordance with the percentage - of - completion
method. Provision for estimated contract losses, if any, is made in the period
that such losses are determined. Royalty income is recognized on an accrual
basis. The most important revenue processes in relation to royalty income are
payments as a percentage of sales and fixed amounts per product sold. Government
grants, other than those relating to assets, are recognized as income as
qualified expenditures are made.
Financial income and expenses
Interest income and interest expense are recognized on an accrual basis.
7
57
Income taxes
Income tax expense is based on pre-tax financial accounting income. Deferred tax
assets and liabilities are recognized for the expected tax consequences of
temporary differences between the tax bases of assets and liabilities and their
reported amounts. Measurement of deferred tax assets and liabilities is based
upon the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Deferred tax assets, including assets arising from loss carryforwards, are
recognized if it is more likely than not that the asset will be realized.
Deferred tax assets and liabilities are not discounted.
Deferred tax liabilities for withholding taxes are recognized in situations
where the income of subsidiaries is to be paid out as dividends in the near
future, and in the case of undistributed earnings of minority shareholdings.
Changes in tax rates are reflected in the period that includes the enactment
date.
Benefit accounting
The Company accounts for the cost of pension plans and postretirement benefits
other than pensions substantially in accordance with SFAS No. 87, "Employers'
Accounting for Pensions" and SFAS No. 106, "Postretirement Benefits other than
Pensions" respectively. Most of the Company's defined-benefit plans are funded
with plan assets that have been segregated and restricted in a trust to provide
for the pension benefits to which the Company has committed itself.
When plan assets have not been segregated by the Company or in such cases in
which the Company is required to make additional pension payments, the Company
recognizes a provision for such amounts.
Pension costs primarily represent the increase in actuarial present value of the
obligation for pension benefits based on employee service during the year and
the interest on this obligation in respect of employee service in previous
years, net of the expected return on plan assets.
In the event that at any date the accumulated benefit obligation, calculated as
the present value of the benefits attributed to employee service rendered prior
to that date and based on current and past compensation levels, would be higher
than the market value of the plan assets or the existing level of the pension
provision, the difference is immediately charged to income.
In certain countries the Company also provides postretirement benefits other
than pensions to various employees. The cost relating to such plans consists
primarily of the present value of the benefits attributed on an equal basis to
each year of service, interest cost on the accumulated postretirement benefit
obligation, which is a discounted amount, and amortization of the unrecognized
transition obligation. This transition obligation is being amortized through
charges to earnings over a twenty-year period beginning in 1993 in the USA and
in 1995 for all other plans.
8 ACCOUNTING POLICIES
58
Stock-based compensation
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with Dutch GAAP, which is also in conformity with US
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees". The Company has adopted the pro forma disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation".
Discontinued operations
Any gain or loss from disposal of a segment of a business (product sector)
together with the results of these operations until the date of disposal are
reported separately as discontinued operations. The financial information of a
discontinued segment of business is excluded from the respective captions in the
consolidated financial statements and related notes.
Extraordinary income and losses
Beginning in 1999, extraordinary items include transactions which occur
infrequently and are unrelated to the ordinary and typical activities of the
Company.
Prior to 1999, extraordinary items included income or losses arising from the
disposal of a line of activity or closures of substantial production facilities
within a segment of business as well as significant gains or losses from
disposals of interests in unconsolidated companies.
Cash flow statements
Cash flow statements have been prepared under the indirect method in accordance
with Dutch GAAP, which is in conformity with the requirements of SFAS No. 95,
"Statement of Cash flows" and the amendment, SFAS No. 104. Cash flows resulting
from hedges are in the same category as the hedged items. Cash flows in foreign
currencies have been translated into euros using the average rates of exchange
for the periods involved. Cash flows resulting from the acquisition or sale of
securities are reported under cash flow from investing activities.
Dividend distribution
The proposed dividend distribution from current-year earnings to shareholders,
which is subject to approval by the General Meeting of Shareholders, is recorded
when such approval is received.
Use of estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements in order to conform with generally accepted accounting principles.
Actual results could differ from those estimates.
9
59
CONSOLIDATED STATEMENTS OF INCOME OF THE PHILIPS GROUP
FOR THE YEARS ENDED DECEMBER 31
in millions of euros unless otherwise stated 1)
2000 1999 1998 2)
------- ------- -------
Sales 37,862 31,459 30,459
Direct cost of sales (28,692) (24,502) (24,121)
------- ------- -------
GROSS INCOME 9,170 6,957 6,338
Selling expenses (4,960) (4,337) (4,381)
General and administrative expenses (1,298) (1,212) (1,132)
Other business income 1,526 388 190
Restructuring charges (157) (45) (330)
------- ------- -------
2 INCOME FROM OPERATIONS 4,281 1,751 685
3 Financial income and expenses 1,988 32 (312)
------- ------- -------
INCOME BEFORE TAXES 6,269 1,783 373
4 Income taxes (570) (336) (41)
------- ------- -------
INCOME AFTER TAXES 5,699 1,447 332
5 Results relating to unconsolidated companies 3,970 409 39
------- ------- -------
GROUP INCOME 9,669 1,856 371
6 Minority interests (67) (52) 170
------- ------- -------
INCOME FROM CONTINUING OPERATIONS 9,602 1,804 541
7 DISCONTINUED OPERATIONS
Income from discontinued operations
(less applicable income taxes of EUR 75 million) - - 210
Gain on disposal of discontinued operations
(no tax effect) - - 4,844
8 EXTRAORDINARY ITEMS-NET - (5) 458
------- ------- -------
9 NET INCOME 9,602 1,799 6,053
1) The consolidated financial statements have been prepared in euros.
Amounts previously reported in Dutch guilders are now reported in euros
using the irrevocably fixed conversion rate which became effective on
January 1, 1999 (EUR 1 = NLG 2.20371). See the notes to the consolidated
financial statements.
2) The 1998 results presented in line with the 2000 and 1999 presentation
would result in income from operations of EUR 1,195 million, financial
income and expenses of EUR 253 million (a loss), income from continuing
operations of EUR 1,009 million and extraordinary items of EUR 10 million
net (a loss). Net income would remain unchanged. See the notes to the
consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial
statements.
10 CONSOLIDATED STATEMENTS OF INCOME OF THE PHILIPS GROUP
FOR THE YEARS ENDED DECEMBER 31
60
Earnings per share
2000 1999 1) 1998 1)
------------- ------------- -------------
Weighted average number of common shares outstanding
(after deduction of treasury stock) during the year 1,312,859,102 1,378,040,952 1,440,224,304
BASIC EARNINGS PER COMMON SHARE IN EUROS:
Income from continuing operations 7.31 1.31 0.38
Income from discontinued operations - - 0.15
Gain on disposal of discontinued operations - - 3.36
Extraordinary items-net - - 0.31
------------- ------------- -------------
NET INCOME 7.31 1.31 4.20
DILUTED EARNINGS PER COMMON SHARE IN EUROS:
Income from continuing operations 7.24 1.30 0.37
Income from discontinued operations - - 0.15
Gain on disposal of discontinued operations - - 3.34
Extraordinary items-net - - 0.31
------------- ------------- -------------
NET INCOME 7.24 1.30 4.17
Dividend paid per common share in euros (from prior-year profits) 0.30 0.25 0.23
1) Previously reported figures restated for 4-for-1 stock split
11
61
CONSOLIDATED BALANCE SHEETS OF THE PHILIPS GROUP
AS OF DECEMBER 31
in millions of euros unless otherwise stated
The consolidated balance sheets are presented before appropriation of profit
Assets
2000 1999
------ ------
CURRENT ASSETS
Cash and cash equivalents 1,089 2,331
10 Securities 111 1,523
11 Receivables:
- Accounts receivable-net 5,905 5,274
- Accounts receivable from unconsolidated companies 56 52
- Other receivables 539 755
- Prepaid expenses 306 372
------- -------
6,806 6,453
12 Inventories 5,279 4,566
------ ------
Total current assets 13,285 14,873
NON-CURRENT ASSETS
5 Unconsolidated companies:
- Investments 4,793 2,060
- Loans 535 31
------- -------
5,328 2,091
13 Other non-current financial assets 3,747 340
14 Non-current receivables:
- Accounts receivable-net 143 185
- Accounts receivable from unconsolidated companies 3 -
- Other receivables 157 67
- Prepaid expenses 2,410 2,074
------- -------
2,713 2,326
15 Property, plant and equipment:
- At cost 20,265 18,302
- Less accumulated depreciation (11,224) (10,970)
------- -------
9,041 7,332
16 Intangible assets-net 4,427 2,822
------ ------
Total non-current assets 25,256 14,911
------ ------
TOTAL 38,541 29,784
The accompanying notes are an integral part of these consolidated financial
statements.
12 CONSOLIDATED BALANCE SHEETS OF THE PHILIPS GROUP
AS OF DECEMBER 31
62
Liabilities and stockholders' equity
2000 1999
------ ------
CURRENT LIABILITIES
Accounts and notes
payable:
- Trade creditors 4,250 3,619
- Unconsolidated companies 5 13
------ ------
4,255 3,632
17 Accrued liabilities 3,701 3,841
18 19 Short-term provisions 969 1,056
20 Other current liabilities 862 789
21 23 Short-term debt 1,743 577
------ ------
Total current liabilities 11,530 9,895
NON-CURRENT LIABILITIES
22 23 Long-term debt 2,284 2,737
18 19 Long-term provisions 2,522 2,062
------ ------
Total non-current 4,806 4,799
liabilities
24 Commitments and contingent liabilities
GROUP EQUITY
6 Minority interests 469 333
25 Stockholders' equity:
Priority shares, par value EUR 500 per share:
Authorized and issued: 10 shares
Preference shares, par value EUR 0.20 per share:
Authorized: 3,249,975,000 shares
(749,995,000 shares par value EUR 1 in 1999)
Issued: none
Common shares, par value EUR 0.20 per share:
Authorized: 3,250,000,000 shares
(750,000,000 shares par value EUR 1 in 1999)
Issued: 1,316,070,392 shares (1,356,315,244 shares in 1999) 263 339
Treasury: 32,175,659 shares (24,714,704 shares in 1999)
Share premium 7 1,631
Other reserves 11,864 10,988
Undistributed profit for the year 9,602 1,799
------ ------
21,736 14,757
------ ------
TOTAL 38,541 29,784
13
63
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE PHILIPS GROUP
FOR THE YEARS ENDED DECEMBER 31
in millions of euros
2000 1999 1998
------ ------ ------
Cash flows from operating activities:
NET INCOME 9,602 1,799 6,053
Adjustments to reconcile net income to net cash provided by operating
activities:
Income from, and net gain on disposal of, discontinued operations - - (5,054)
Depreciation and amortization 2,320 1,853 1,890
Net gain on sale of investments (6,384) (491) (728)
Income from unconsolidated companies (net of dividends received) (1,187) (410) (31)
Minority interests (net of dividends paid) 56 38 (173)
(Increase) decrease in working capital (1,069) (469) 272
(Increase) decrease in non-current receivables (510) (32) 43
Increase (decrease) in provisions 386 (87) (177)
Other items (218) (288) 45
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,996 1,913 2,140
Cash flows from investing activities:
Purchase of intangible assets (software) (140) (200) -
Capital expenditures on property, plant and equipment (3,170) (1,662) (1,634)
Proceeds from disposals of property, plant and equipment 178 286 240
Proceeds from the sale of securities, net of hedging activities 848 158 -
Purchase of other non-current financial assets (560) (119) (68)
Proceeds from other non-current financial assets 63 67 132
Purchase of businesses (3,209) (2,993) (867)
Proceeds from sale of interests in businesses 3,586 629 756
------ ------ ------
NET CASH USED FOR INVESTING ACTIVITIES (2,404) (3,834) (1,441)
------ ------ ------
CASH FLOWS BEFORE FINANCING ACTIVITIES 592 (1,921) 699
Cash flows from financing activities:
Increase (decrease) in short-term debt 734 (257) (74)
Principal payments on long-term debt (325) (563) (565)
Proceeds from issuance of long-term debt 203 103 194
Effect of other financial transactions - - 114
Treasury stock transactions (578) (38) (157)
Capital repayment to shareholders (1,673) (1,490) -
Dividends paid (399) (361) (326)
------ ------ ------
NET CASH USED FOR FINANCING ACTIVITIES (2,038) (2,606) (814)
------ ------ ------
CASH USED FOR CONTINUING OPERATIONS (1,446) (4,527) (115)
Effect of changes in exchange rates and consolidations on cash positions 204 305 30
Net cash from discontinued operations - - 5,241
Cash and cash equivalents at beginning of year 2,331 6,553 1,397
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR 1,089 2,331 6,553
------ ------ ------
The accompanying notes are an integral part of these consolidated financial
statements.
14 CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE PHILIPS GROUP
FOR THE YEARS ENDED DECEMBER 31
64
Supplemental disclosures to consolidated statements of cash flows:
2000 1999 1998
------ ------ ------
(Increase) decrease in working capital:
Increase in accounts receivable and prepaid expenses (513) (534) (133)
(Increase) decrease in inventories (979) 46 (60)
Increase in accounts payable and accrued expenses 423 19 465
------ ------ ------
(1,069) (469) 272
Net cash paid during the year for:
Interest 167 129 244
Income taxes 266 222 200
Additional common stock issued upon conversion of
long-term debt 13 29 25
Net gain on sale of investments:
Cash proceeds from the sale of investments 4,675 1,140 1,128
Book value of these investments (875) (649) (400)
Non-cash gains 2,584 - -
------ ------ ------
6,384 491 728
Non-cash investing and financing information:
Assets received in lieu of cash 2,589 11 1,698
------ ------ ------
Treasury stock transactions:
Shares acquired (682) (139) (323)
Exercise stock options/warrants/convertible personnel debentures 104 101 166
For a number of reasons, principally the effects of translation differences and
consolidation changes, certain items in the statements of cash flows do not
correspond to the differences between the balance sheet amounts for the
respective items.
The consolidated financial statements have been prepared in euros.
Amounts previously reported in Dutch guilders are now reported in euros using
the irrevocably fixed conversion rate which became effective on January 1, 1999,
(EUR 1 = NLG 2.20371).
See the notes to the consolidated financial statements.
15
65
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY OF THE PHILIPS GROUP
in millions of euros unless otherwise stated
number of shares* issued,
--------------------------- paid-up share other treasury
outstanding issued capital premium reserves shares total
BALANCE AS OF DECEMBER 31, 1997 1,431,797,964 1,459,108,464 1,655 1,789 6,081 (371) 9,154
Issued upon exercise of:
- - Convertible debentures 323,388 3 22 25
- - Stock options (7) (7)
- - Warrants 14,547,444 17 39 56
Net income for the year 6,053 6,053
Dividend paid (326) (326)
Treasury stock transactions (53) (152) (205)
Translation differences and other changes (190) (190)
- ----------------------------------------- ------------- ------------- ----- ------ ------ ---- ------
BALANCE AS OF DECEMBER 31, 1998 1,442,760,868 1,473,979,296 1,672 1,824 11,587 (523) 14,560
Issued upon exercise of:
- - Convertible debentures 276,324 2 27 29
- - Stock options 80 (11) (11)
Net income for the year 1,799 1,799
Dividend paid (361) (361)
Treasury stock transactions (55) 28 (27)
8% share reduction (117,940,456) (1,333) (184) 27 (1,490)
Translation differences and other changes 258 258
- ----------------------------------------- ------------- ------------- ------ ------ ------ ---- ------
BALANCE AS OF DECEMBER 31, 1999 1,331,600,540 1,356,315,244 339 1,631 13,255 (468) 14,757
Change in accounting policy:
- - Product/process development costs
previously included in inventories (241) (241)
- - Derivatives (FAS 133) 58 58
Issued upon exercise of:
- - Convertible debentures 458,356 6 7 13
Net income for the year 9,602 9,602
Dividend paid (399) (399)
Treasury stock transactions (23) (555) (578)
3% share reduction (40,703,208) (76) (1,630) (8) 41 (1,673)
Translation differences and other changes 197 197
- ----------------------------------------- ------------- ------------- --- ----- ------ ---- ------
BALANCE AS OF DECEMBER 31, 2000 1,283,894,733 1,316,070,392 263 7 22,448 (982) 21,736
* - As from May 28, 1999, the par value of Philips' common shares changed
from NLG 10 to EUR 1 per share. The 1999 share reduction program was
executed in May/June 1999.
- Share data in this report are based on the number of shares
outstanding after the 4-for-1 stock split which was effected on April
14, 2000; prior-year data have been restated accordingly.
- On May 29, 2000, the Extraordinary General Meeting of Shareholders
adopted the 2000 share reduction program, which became effective
August 1, 2000, and which reduced the number of outstanding shares by
approximately 40 million, or 3%, and changed the par value of Philips'
common shares from EUR 0.25 to EUR 0.20 per share.
The consolidated financial statements have been prepared in euros.
Amounts previously reported in Dutch guilders are now reported in euros
using the irrevocably fixed conversion rate which became effective on
January 1, 1999 (EUR 1 = NLG 2.20371).
See the notes to the consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial
statements.
16 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY OF THE PHILIPS GROUP
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
all amounts in millions of euros unless otherwise stated
INTRODUCTION
The financial statements of Koninklijke Philips Electronics N.V. ("Royal Philips
Electronics"), the parent company of the Philips Group, are included in the
statements of the Philips Group. Therefore the unconsolidated statements of
income of Royal Philips Electronics only reflect the net after-tax income of
affiliated companies and other income after taxes.
PRESENTATION OF FINANCIAL STATEMENTS
The current balance sheet presentation is somewhat different from the one used
under Dutch regulations and is more in line with common practice in the United
States in order to accommodate the expectations of foreign - mainly US -
shareholders. Under the current format, the order of presentation of assets and
liabilities is based on the degree of liquidity.
RECLASSIFICATIONS
In order to provide comparable financial information for 1998 fully in
conformity with the 2000 and 1999 presentation, items previously reported under
extraordinary items and financial income and expenses have been reclassified to
income from operations and results relating to unconsolidated companies, as
reflected in the following table:
1998
-----------------------------------
after as
reclassification published
Income from operations 1,195 685
Financial income and expenses (253) (312)
----- -----
Income before taxes 942 373
Income taxes (142) (41)
----- -----
Income after taxes 800 332
Results relating to unconsolidated companies:
- - Share in results 39 32
- - Results related to divestments - 7
Minority interests 170 170
----- -----
Income from continuing operations 1,009 541
Discontinued operations 5,054 5,054
Extraordinary items-net (10) 458
----- -----
Net income 6,053 6,053
Income from continuing operations per common share 0.70 0.38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP 17
67
1 ACQUISITIONS AND DIVESTITURES
A summary of the most significant acquisitions and divestitures during 2000 is
given below.
LG ELECTRONICS
In view of the existing relationship with LG Electronics Inc. (LGE) (a publicly
listed Korean company with which Philips already has the LG.Philips LCD joint
venture) and the intended new joint venture in the cathode ray tube (CRT)
business, in December 2000 Philips purchased 32 million convertible redeemable
preferred shares in LGE, for 544 billion Korean won (EUR 505 million). The
redeemable preferred shares will be redeemed before June 30, 2004, subject to
the Korean legal requirement of the existence of sufficient profit and retained
earnings available for distribution. The preferred shares are also convertible
one year after issuance, at Philips' option, into LGE common stock. The dividend
yield on these preferred shares is 7.5%. The preferred shares have no voting
rights, unless LGE is in arrears on dividend or redemption payments. The
preferred shares are carried at cost (redemption value) in the accompanying
consolidated balance sheet. The redeemable preferred shares result in a
concentration of credit risk. However, the Company is of the opinion that out of
the existing joint venture, LG.Philips LCD, and the new joint venture with LGE
(expected to be established in the course of 2001) sufficient funds will flow to
LGE to enable LGE to redeem the preferred shares within the next few years.
However, earlier repayment is permitted.
TSMC preferred stock
In November 2000, the Company purchased 1.3 billion redeemable preferred shares
in Taiwan Semiconductor Manufacturing Company (a publicly listed Taiwanese
company in which the Philips Group has a substantial shareholding) for 13
billion Taiwanese dollars (EUR 458 million). The preferred shares are redeemable
in 2003. The dividend yield on these preferred shares is 3.5%. The preferred
shares carry the same voting rights as TSMC's common shares. The preferred
shares are carried at cost (redemption value) in the accompanying consolidated
balance sheet. The redeemable preferred shares result in a concentration of
credit risks. However, based on historical results, the Company is of the
opinion that TSMC will have sufficient means to redeem at the redemption date.
ADAC
In December 2000, Philips acquired substantially all of ADAC Laboratories'
common stock for USD 18.50 per share for each outstanding share. The total
purchase price approximates EUR 483 million, of which approximately EUR 437
million was paid through December 31, 2000. The balance sheet of ADAC, a medical
systems business, has been included in the Company's consolidated balance sheet
as of December 31, 2000. The cost of the acquisition was allocated on the basis
of the fair value of the assets acquired and the liabilities assumed. Based on
an independent appraisal, EUR 241 million was assigned to specific intangible
assets acquired, including purchased technology, in-process R&D, the value of
the customer base and the value of the existing workforce. Of this amount, EUR
44 million, representing the value of in-process R&D that had not yet reached
technological feasibility and had no alternative future use, was charged to
expense as of the date of acquisition. An amount of EUR 257 million,
representing the excess of cost over the fair value of the net assets acquired,
has been recorded as goodwill. Goodwill and other intangibles are being
amortized over their useful lives, which average approximately 13 years.
18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
68
MEDQUIST
During 2000, in a series of transactions, Philips acquired approximately 71% of
the outstanding shares in MedQuist, a provider of electronic medical
transcription services in the United States, for a total aggregate cash purchase
price of EUR 1,339 million. The cost of the acquisition was allocated on the
basis of the fair value of the assets acquired and liabilities assumed. Based
upon independent appraisal, EUR 207 million was assigned to specific intangible
assets acquired, including the value of the customer base and the existing
workforce. An amount of EUR 1,097 million, representing the excess of cost over
the fair value of the net assets acquired, has been recorded as goodwill.
Goodwill and other intangibles are being amortized over their useful lives,
which average approximately 15 years. The results of operations for MedQuist
have been included in the Company's consolidated financial statements as from
July 1, 2000.
OPTIVA
In October 2000, Philips acquired all of the outstanding shares of Optiva
Corporation, the manufacturer of the Sonicare toothbrush, at a cost of
approximately EUR 291 million. The cost of the acquisition was allocated on the
basis of the fair value of the assets acquired and liabilities assumed. Based
upon independent appraisal, EUR 99 million was assigned to specific intangible
assets acquired, including patents and trademarks and the value of the
workforce. Additionally, EUR 182 million, representing the excess of cost over
the fair value of the net assets acquired, has been recorded as goodwill. The
intangible assets are being amortized over their estimated useful lives, which
average approximately 14.5 years. As from October 1, 2000, the results of
operations for Optiva have been included in the Company's consolidated financial
statements.
Philips has changed the name of Optiva into Philips Oral Healthcare with effect
from 2001.
MICRUS
In June 2000, Philips purchased IBM's MiCRUS 8-inch wafer fab in the USA, a
semiconductor activity, for which the results of operations have been included
in the consolidated financial statements as from June 1, 2000. The acquisition
price was approximately EUR 378 million, of which approximately EUR 228 million
was paid through December 31, 2000. Based on independent appraisal,
approximately EUR 367 million was assigned to the fixed assets acquired and EUR
11 million was assigned to the value of the existing workforce.
ATOS ORIGIN
In October 2000, Philips and Atos of France, a leading European IT services
provider, merged Atos and Origin, Philips' IT services subsidiary. Under this
transaction, Philips received 21.3 million newly issued Atos shares based on
Atos' closing price on August 25, 2000 of EUR 122 per share, representing 48.7%
of the shares in the combined entity Atos Origin.
Additionally, Philips received two tranches of warrants, each representing
approximately 2.4 million Atos Origin shares. These warrants may be exercised in
the event the weighted average share price of Atos Origin exceeds EUR 156 per
share for twelve consecutive business days within 20 months following the
closing date for the first tranche, and EUR 208 per share within 32 months for
the second tranche. As from October 1, 2000, Philips no longer consolidated
Origin as a separate division, but will, under the equity method of accounting,
include its share in Atos Origin's earnings in results relating to
unconsolidated companies from January 1, 2001 onwards. Due to Atos Origin's
different reporting cycle, Philips' share can only be accounted for on a
three-month-delay basis. The Company adjusted its investment in Origin to equal
its share of the post-transaction merged equity of Atos Origin, based on
Philips' accounting policies, resulting in a gain of EUR 1,072 million, which is
included in other business income.
Philips limited its voting rights to 35% and agreed to reduce its stake in Atos
Origin below 35% (directly or indirectly) within two years after the closing
date.
19
69
AC&M
In May 2000, Philips reached agreement with Yageo Corporation of Taiwan to sell
its AC&M (Advanced Ceramics & Modules) business to Yageo Corporation. The
transaction was completed in August 2000, and the Company received cash proceeds
of EUR 658 million and recognized a gain, net of cost of disposal, of EUR 309
million which is included in other business income (net of taxes EUR 247
million). Sales and income related to this business included in the consolidated
statement of income for 2000 totaled EUR 239 million and EUR 41 million
respectively.
AGILENT
In November 2000, the Company announced an agreement to acquire Agilent
Technologies' Healthcare Solutions Group (HSG), a medical systems business, for
USD 1.7 billion. The transaction is expected to close early in 2001, subject to
customary regulatory approvals and other closing conditions.
LG ELECTRONICS AND PHILIPS DISPLAY COMPONENTS
In November 2000, Philips and LG Electronics of South Korea announced the
signing of a Letter of Intent through which the companies will merge their
respective cathode ray tube (CRT) businesses in a new joint venture. Under the
terms of the agreement, LG and Philips will share equal control of the joint
venture. The transaction is expected to close in the first half of 2001, subject
to customary regulatory approvals. The new joint venture will be required to
contribute USD 1.1 billion in cash to LGE to close the difference in valuation
of the net assets contributed.
THE MOST SIGNIFICANT ACQUISITIONS AND DIVESTITURES DURING 1999 AND 1998 WERE AS
FOLLOWS:
LG. PHILIPS LCD CO., LTD
With effect from July 1, 1999, Philips and LG Electronics of South Korea
finalized a manufacturing joint venture agreement, creating a world-leading
supplier of Active Matrix Liquid Crystal Displays (AMLCDs).
Philips acquired a 50 per cent stake in LGE LCD business for EUR 1.7 billion and
accounts for the investment using the equity method. The cost of the acquisition
was allocated on the basis of the fair value of the assets acquired and
liabilities assumed. The excess of the Company's investment over its underlying
equity in the recognized net assets, commonly referred to as goodwill under
Dutch GAAP, is EUR 1.3 billion. Goodwill and other intangibles are being
amortized over their estimated useful lives, which average 15 years.
VLSI TECHNOLOGY, INC.
In June 1999, the Company acquired all of the outstanding shares of VLSI
Technology (VLSI), a semiconductor business, at a cost of EUR 1.1 billion, which
included EUR 0.1 billion of assumed debt. The results of operations for VLSI
have been included in the Company's consolidated financial statements from the
date of acquisition. The cost of the acquisition was allocated on the basis of
the fair value of the assets acquired and liabilities assumed. Based upon
independent appraisal, EUR 342 million was assigned to specific intangible
assets acquired, including purchased technology, in-process R&D, patents and
trademarks, and the value of the existing workforce. Of this amount, EUR 48
million, representing the value of in-process R&D that had not yet reached
technological feasibility and had no alternative future use, was charged to
expense as of the date of acquisition. An amount of EUR 305 million,
representing the excess of cost over the fair value of the net assets acquired,
has been recorded as goodwill. Goodwill and other intangibles are being
amortized over their useful lives, which average approximately 7 years.
20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
70
ORIGIN B.V.
In June 1999, the Company acquired an additional 10% interest in Origin at a
cost of EUR 124 million. Philips then owned approximately 98% of Origin's
stockholders' equity. Goodwill resulting from the acquisition totaled EUR 107
million and had a useful life of 7 years.
CONVENTIONAL PASSIVE COMPONENTS
Under an agreement signed on September 27, 1998, Philips sold its Conventional
Passive Components activities to an affiliate of Compass Partners International
on January 14, 1999. Net assets were therefore no longer consolidated as of
December 31, 1998, but included under unconsolidated companies. However, sales
and income for 1998 have been included in the consolidated Group accounts of
that year.
In the first quarter of 1999, the transfer price of EUR 358 million was received
and the gain of EUR 169 million recognized.
PHILIPS CONSUMER COMMUNICATIONS
Effective September 27, 1998, Philips and Lucent Technologies terminated their
joint venture, Philips Consumer Communications (PCC).
Philips, which owned 60% of the venture, and Lucent, which owned 40%, each
regained control of the assets originally contributed. The joint venture was
formed on October 1, 1997.
Income from operations for 1998 included losses relating to the unwinding of the
joint venture, including a write-down of obsolete inventories (EUR 159 million)
and the subsequent restructuring of the PCC activities that were returned to
Philips (EUR 216 million).
ATL ULTRASOUND, INC
ATL Ultrasound was acquired on October 2, 1998, for EUR 732 million in cash. ATL
Ultrasound is a leading company in the high-performance ultrasound market.
Included in the purchase price for ATL was goodwill of EUR 176 million,
in-process R&D of EUR 182 million and other identifiable intangible assets
amounting to EUR 228 million. Goodwill and other intangible assets are
capitalized and amortized over 12 years and an average of 10 years respectively.
In-process R&D was charged to expense at the date of acquisition.
PHILIPS CAR SYSTEMS
In December 1997, Philips and Mannesmann VDO signed a contract for the sale of
Philips Car Systems to Mannesmann. Under the agreement, the first tranche (EUR
460 million) of the transfer price was received in the first quarter of 1998,
while additional payments of EUR 31 million were received in 1998 for
subsequently transferred activities. A final tranche of EUR 128 million was
received in March 2000. The total net gain of EUR 379 million was recognized
under extraordinary items in 1998.
21
71
2 INCOME FROM OPERATIONS
Depreciation and amortization
Included in income from operations is depreciation of property, plant and
equipment and amortization of intangible assets.
2000 1999 1998
----- ----- -----
Depreciation of property, plant and equipment 1,789 1,525 1,563
Amortization of goodwill relating to consolidated
companies 173 95 54
Amortization of other intangible assets 201 70 -
Amortization of patents and trademarks 10 6 2
Write-off of in-process R&D 44 68 202
----- ----- -----
2,217 1,764 1,821
Depreciation of property, plant and equipment includes an additional write-off
in connection with the retirement of property, plant and equipment amounting to
EUR 19 million in 2000 (1999: EUR 17 million, 1998: EUR 15 million). In 2000,
additional depreciation costs relating to write-downs of EUR 42 million (1999:
EUR 40 million, 1998: EUR 67 million) arising from restructuring projects were
reported in the income statement, in the separate line item restructuring
charges. The total amount of depreciation and amortization in 2000 includes EUR
5 million arising from impairment (1999: EUR 41 million, 1998: EUR 250 million).
Amortization of goodwill relating to consolidated companies and other intangible
assets in 2000 includes an impairment loss of EUR 35 million with respect to
Voice Control Systems within the sector Consumer Electronics. Furthermore,
amortization of intangible assets increased in the year 2000 because of the new
acquisitions in 2000 and full-year amortization relating to the 1999
acquisitions.
Research and development
Expenditures for research and development activities amounted to EUR 2,766
million, representing 7.3% of sales (1999: EUR 2,284 million, 7.3% of sales;
1998: EUR 2,048 million, 6.7% of sales).
These expenditures are included in direct cost of sales.
Salaries and wages
2000 1999 1998
----- ----- -----
Salaries and wages 7,631 6,910 6,878
Pension costs (445) (42) 188
Other social security and similar charges:
- - Required by law 1,009 958 981
- - Voluntary 261 190 162
----- ----- -----
TOTAL 8,456 8,016 8,209
See note 19 to the financial statements for further information on pension
costs.
22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
72
Employees
The average number of employees during 2000 was 231,161 (1999: 230,016, 1998:
252,680).
The number of employees by category is summarized as follows:
2000 1999 1998
---------------------------------
beginning end average ** average average
of year* of year
Production 122,989 125,421 124,473 126,622 146,249
Research & Development 22,099 22,884 22,201 21,104 20,657
Other 61,866 48,636 60,484 62,443 64,494
------- ------- ------- ------- -------
Permanent employees 206,954 196,941 207,158 210,169 231,400
Temporary employees 19,964 22,488 24,003 19,847 21,280
------- ------- ------- ------- -------
TOTAL 226,918 219,429 231,161 230,016 252,680
* including changes in consolidation at January 1, 2000
** (de)consolidation changes have not been taken into consideration in
determining the average number of employees
The number of employees at year-end 2000 decreased by 7,489 as compared to the
beginning of the year. This includes a decrease of 10,621 relating to
consolidation changes.
Remuneration of the Board of Management and Supervisory Board
Board of Management
Remuneration and pension costs relating to the members of the Board of
Management amounted to EUR 4,442,733 (1999: EUR 9,412,000, 1998: EUR
11,711,000). The costs for former members of the Board of Management, which
relate to pension charges, amounted to EUR 1,350,000 (1999: EUR 1,470,000, 1998:
EUR 7,638,000).
In 2000, the present members of the Board of Management were granted 500,000
stock option rights (1999: 440,000* stock options, 1998: 1,543,600* stock
options). At year-end 2000, the members of the Board of Management held
1,911,200 stock option rights (year-end 1999: 1,480,000*) at a weighted average
exercise price of EUR 20.05 (year-end 1999: EUR 12.71*).
See note 26 to the financial statements for further information on stock options
and pages 70-75 for further information on individual remuneration and interests
in stock options and Philips shares.
* After stock split in 2000
Supervisory Board
The remuneration of the members of the Supervisory Board amounted to EUR 376,637
(1999: EUR 414,000, 1998: EUR 377,000); former members received no remuneration.
The annual remuneration for individual members is EUR 40,840 and for the
Chairman EUR 74,874. Additionally, the membership of committees of the
Supervisory Board is compensated by an amount of EUR 4,538 per year per
committee. At year-end 2000 the present members of the Supervisory Board held no
stock options.
For further information on individual remuneration and interests in Philips
shares, see pages 73-75.
23
73
Other business income
Other business income consists of amounts not directly related to the production
and sale of products and services.
Included is EUR 1,429 million relating to the net gain from the disposal of
business interests (1999: EUR 257 million, 1998: EUR 37 million), primarily the
gain arising from the Atos Origin merger (EUR 1,072 million) and the gain on the
sale of AC&M (EUR 309 million) in 2000 and Conventional Passive Components (EUR
169 million) in 1999. Other business income also includes gains of EUR 48
million from the sale of fixed assets (1999: EUR 71 million, 1998: EUR 74
million) and various smaller items.
Restructuring charges
The fast-changing environment in which Philips operates requires rapid
adjustments in the organizational structure, product portfolio, etc. Management
continuously monitors various projects to improve the performance of the
operations.
The following table presents the changes in the restructuring provision from
December 31, 1997 to December 31, 2000:
Type of costs balance additions utilized releases balance
December 31, December 31,
1997 1998
Write-down of assets 41 192 (203) - 30
Personnel costs 189 124 (118) (20) 175
Other costs 96 33 (61) (8) 60
--- --- ---- --- ---
Total 326 349 (382) (28) 265
Type of costs balance additions utilized releases balance
December 31, December 31,
1998 1999
Write-down of assets 30 40 (46) (11) 13
Personnel costs 175 71 (116) (46) 84
Other costs 60 12 (33) (21) 18
--- --- ---- --- ---
Total 265 123 (195) (78) 115
Type of costs balance additions utilized releases balance
December 31, December 31,
1999 2000
Write-down of assets 13 52 (33) (10) 22
Personnel costs 84 125 (115) (27) 67
Other costs 18 26 (24) (9) 11
--- --- ---- --- ---
TOTAL 115 203 (172) (46) 100
24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
74
The additions to the restructuring provision in 2000 affected the income
statement as follows:
write
down write
fixed down personnel other total
assets inventories costs costs additions
------ ----------- --------- ----- ---------
Lighting 27 4 31
Consumer Electronics 3 18 6 27
Components 17 8 53 12 90
DAP 1 1 7 4 13
Origin 15 15
Miscellaneous 21 2 23
Unallocated 1 3 4
------ ----------- --------- ----- ---------
Philips Group 42 10 125 26 203
The projects initiated in 2000 will ultimately reduce direct labor by
approximately 3,900 persons and indirect labor by approximately 1,100 persons.
Releases of surplus provisions amounted to EUR 46 million and were caused by
changes in the original plans.
The remaining prior-year provisions available at December 31, 2000 relate
primarily to personnel costs. The Company expects to make cash expenditures of
approximately EUR 75 million in 2001 with existing restructuring programs. All
existing programs will be completed by the end of 2001.
In 1999, the total restructuring charges to income amounted to EUR 123 million,
comprising EUR 71 million for personnel costs, of which EUR 35 million related
to Lighting, EUR 29 million to Miscellaneous, EUR 6 million to Components and
EUR 1 million to Consumer Electronics for a total headcount reduction of
approximately 1,500 persons, of whom 1,100 were direct labor and 400 indirect
personnel.
The 1999 charge also included EUR 40 million for asset write-downs, mainly in
Components and Lighting. Of this amount, EUR 4 million related to write-down of
inventories, primarily in Components. The restructuring charge for fixed-asset
write-downs came to EUR 36 million and related to Components, Lighting and
Miscellaneous. The write-downs are based on the discounted cash flow method.
Other costs totaled EUR 12 million, largely relating to Lighting, Components and
Miscellaneous.
Releases of surplus provisions in 1999 amounted to EUR 78 million and were
caused by changes in the original plans.
25
75
3 FINANCIAL INCOME AND EXPENSES
2000 1999 1998
----- ----- -----
Interest income 99 133 77
Interest expense (266) (262) (321)
----- ----- -----
TOTAL INTEREST EXPENSE (NET) (167) (129) (244)
Income from securities officially quoted 2,217 117 -
Gains from non-current financial assets 13 44 36
Foreign exchange gains (losses) (86) 7 (40)
Miscellaneous financing costs 11 (7) (5)
Interest on provisions for pensions - - (59)
----- ----- -----
TOTAL 1,988 32 (312)
Income from securities officially quoted in 2000 includes the gain on the sale
of JDS Uniphase shares for an amount of EUR 1,207 million.
Additionally, it includes the gain on the exchange of Seagram shares for Vivendi
Universal shares, amounting to EUR 966 million, net of a US dollar hedge.
Furthermore, dividends received from Seagram of EUR 32 million are also
included.
The corresponding results for 1999 include the gain on the sale of JDS Uniphase
shares (see note 10).
Gains (losses) from non-current financial assets in 1999 mainly related to
dividends received on Seagram shares, whereas the 1998 results mainly reflect
the gain on the sale of the equity investment in Flextronics of EUR 27 million.
Interest on provisions for pensions has been reclassified from financial income
and expenses to income from operations with effect from 1999.
26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE PHILIPS GROUP
76
4 INCOME TAXES
Tax on income from continuing operations amounted to EUR 570 million in 2000
(1999: EUR 336 million, 1998: EUR 41 million). In 2000, there were no taxes on
extraordinary items, compared to a EUR 2 million benefit in 1999 and a EUR 96
million expense in 1998.
The amount of income tax allocated to stockholders' equity relates to a benefit
because of results arising from stock option transactions of EUR 11 million
(1999: EUR 23 million; 1998: EUR 51 million), a charge because of deferred
results on hedge transactions of EUR 85 million (1999: benefit of EUR 102
million; 1998: nil) and a benefit of EUR 107 million with respect to the
accounting change related to inventories.
The components of income before taxes are as follows:
2000 1999 1998
----- ----- ------
Netherlands 4,620 479 330
Foreign 1,649 1,304 43
----- ----- -----
INCOME BEFORE TAXES 6,269 1,783 373
The components of income tax expense are as follows:
Netherlands:
Current taxes 120 45 1
Deferred taxes 277 35 90
----- ----- -----
397 80 91
Foreign:
Current taxes 349 229 100
Deferred taxes (176) 27 (150)
----- ----- -----
173 256 (50)
----- ----- -----
INCOME TAX EXPENSE FROM CONTINUING
OPERATIONS 570 336 41
Philips' operations are subject to income taxes in various foreign jurisdictions
with statutory income tax rates varying from 16% to 45%, which causes a
difference between the weighted average statutory income tax rate and the
Netherlands' statutory income tax rate of 35%.
27
77
A reconciliation of the weighted average statutory income tax rate as a
percentage of income before taxes and the effective income tax rate is as
follows:
2000 1999 1998
------ ------ ------
Weighted average statutory income tax rate 34.2 33.3 30.7
Tax effect of:
Utilization of previously unrecognized loss
carryforwards (2.5) (10.6) (93.0)
New loss carryforwards not recognized 1.4 5.0 57.4
Changes in the valuation of other deferred taxes (0.3) 5.4 16.7
Released valuation allowance (2.6) (9.4) --
Exempt income and non-deductible expenses (19.2) (4.0) 18.1
Tax incentives and other (1.9) (0.9) (18.8)
----- ----- -----
Executive tax rate 9.1 18.8 11.1
Deferred tax assets and liabilities
Deferred tax assets and deferred tax liabilities are as follows:
2000 1999
------------------- -------------------
assets liabilities assets liabilities
------ ----------- ------ -----------
Intangible fixed assets 80 (400) 100 (20)
Property, plant and equipment 240 (310) 250 (230)
Inventories 240 (40) 90 (30)
Receivables 80 (20) 80 (80)
Provisions:
- -- Pensions 100 (110) 90 (100)
- -- Restructuring 50 -- 30 --
- -- Guarantees 10 -- 20 --
- -- Other 510 (10) 620 (210)
Other assets 40 (440) 151 (310)
Other liabilities 120 (63) 90 (226)
----- ------ ----- ------
Total deferred tax assets/liabilities 1,470 (1,393) 1,521 (1,206)
----- ------ ----- ------
Net deferred tax position 77 315
Tax loss carryforwards (including tax
credit carryforwards) 1,579 2,026
Valuation allowances (1,215) (1,663)
------ ------
NET DEFERRED TAX ASSETS 441 678
28 Notes to the consolidated financial statements of the Philips Group
78
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. In order to fully realize
the deferred tax asset, the Company will need to generate future taxable income
in the countries where the net operating losses were incurred. Based upon the
level of historical taxable income and projections for future taxable income
over the periods in which the deferred tax assets are deductible, management
believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the existing valuation allowances at
December 31, 2000.
The valuation allowance for deferred tax assets as of December 31, 2000 and 1999
was EUR 1,215 million and EUR 1,663 million respectively. The net change in the
total valuation allowance for the years ended December 31, 2000 and 1999 was a
decrease of EUR 448 million and a decrease of EUR 275 million respectively.
At December 31, 2000, operating loss carryforwards expire as follows:
Total 2001 2002 2003 2004 2005 2006/2010 later unlimited
---- ---- ---- ---- ---- --------- ----- ---------
4,440 60 40 280 80 100 320 570 2,990
The Company also has tax credit carryforwards of EUR 140 million, which are
available to offset future tax, if any, and which expire as follows:
Total 2001 2002 2003 2004 2005 2006/2010 later unlimited
---- ---- ---- ---- ---- --------- ----- ---------
140 18 4 18 3 2 5 40 50
Classification of the deferred tax assets and liabilities takes place at a
fiscal entity level as follows:
2000 1999
---- ----
Deferred tax assets grouped under non-current receivables 916 947
Deferred tax liabilities grouped under provisions (475) (269)
---- ----
441 678
An amount of EUR 441 million (1999: EUR 358 million), included in deferred tax
assets of EUR 916 million, is expected to be realized within one year.
Classification of the income tax payable and receivable is as follows:
2000 1999
---- ----
Income tax receivable grouped under non-current receivables 89 20
Income tax receivable grouped under current receivables 24 92
Income tax payable grouped under current liabilities (613) (484)
The amount of the unrecognized deferred income tax liability for temporary
differences, totaling EUR 254 million (1999: EUR 170 million), relates to
unremitted earnings in foreign Group companies, which are considered to be
permanently re-invested. Under current Dutch tax law, no additional taxes are
payable. However, in certain jurisdictions, withholding taxes would be payable.
29
79
5 RESULTS RELATING TO UNCONSOLIDATED COMPANIES
Results relating to unconsolidated companies in 2000 primarily consist of
Philips' share in the operating results of LG.Philips LCD Co. in Korea (50%) and
Taiwan Semiconductor Manufacturing Co. (22.5% in common stock).
Also included are the losses from the ongoing development costs of digitized
street maps incurred by Navigation Technologies Corporation (NavTech).
The results for 2000 include several one-time gains. A gain of EUR 680 million
was recorded in conjunction with issuance of shares by TSMC at a price in excess
of the Company's per share carrying value.
Additionally, the sale of ASM Lithography shares in June 2000 resulted in a gain
of EUR 2,595 million. Furthermore, the exchange of Philips' approximately 33%
equity interest in Beltone Electronics Inc. for shares of GN Great Nordic A/S
resulted in a gain of EUR 122 million.
Philips' remaining 7.2% investment in ASML and 3.3% investment in GN Great
Nordic were reclassified to securities and other non-current financial assets
respectively (see notes 10 and 13).
Philips' share in the results of Atos Origin (48.7%) will be recorded under
results relating to unconsolidated companies as from January 1, 2001 onwards.
Due to Atos Origin's different reporting cycle, Philips' share will be accounted
for on a three-month-delay basis.
In 1999, results primarily consisted of Philips' share in the operating results
of LG.Philips LCD Co. (50%) in Korea (in 1999 for 6 months only), Taiwan
Semiconductor Manufacturing Co. (26.7%) and ASM Lithography (23.9%). Also
included are the losses incurred by Navigation Technologies Corporation
(NavTech) and the non-recurring gain from the sale of part of the shares of
NavTech.
In 1998, an amount of EUR 7 million resulting from the sale of participations in
various companies was also included.
Investments in, and loans to, unconsolidated companies
The changes during 2000 are as follows:
total investments loans
----- ----------- -----
Balance as of January 1, 2000 2,091 2,060 31
Changes:
Acquisitions/additions 2,320 1,688 632
Sales/redemptions (197) (141) (56)
Share in income 1,333 1,417 (84)
Dividend received (150) (150) --
Changes in consolidation -- (12) 12
Translation and exchange rate differences (69) (69) --
----- ----- -----
BALANCE AS OF DECEMBER 31, 2000 5,328 4,793 535
Loans to unconsolidated companies include redeemable preferred shares of TSMC,
in the amount of EUR 421 million, which are presented as "additions".
Included in "share in income" is a charge of EUR 84 million (1999: EUR 49
million, 1998: EUR 1 million) representing amortization of the excess of the
Company's investment over its underlying equity in the net assets of
unconsolidated companies, commonly referred to as goodwill under Dutch GAAP
(EUR 79 million arising from the acquisition of LG.Philips LCD Co.).
30 Notes to the consolidated financial statements of the Philips Group
80
The investments in unconsolidated companies at December 31, 2000 include EUR 215
million (1999: EUR 28 million) for companies accounted for under the cost
method, of which EUR 3 million (1999: EUR 2 million) represents dividends
received.
The total book value of investments in, and loans to, unconsolidated companies
is summarized as follows:
2000 1999
------ ------
LG.Philips LCD Co. 832 656
Taiwan Semiconductor Manufacturing Co. 2,553 1,021
ASM Lithography -- 146
Atos Origin 1,449 --
Other 494 268
----- -----
TOTAL 5,328 2,091
The aggregate fair values of Philips' shareholdings in TSMC and Atos Origin,
based on quoted market prices at December 31, 2000, were EUR 6.7 billion (1999:
EUR 10.8 billion) and EUR 1.6 billion respectively.
Summarized financial information for the Company's equity investments in
unconsolidated companies on a combined basis is presented below:
January-December
-------------------
2000 1999
------ ------
Net sales 9,039 5,633
Income before taxes 2,572 1,254
Income taxes (4) (124)
----- -----
Income after taxes 2,568 1,130
Net income 2,594 1,097
Total share in net income of unconsolidated
companies recognized in the consolidated
statements of income 1,333 412
December 31,
--------------------
2000 1999
------ ------
Current assets 5,080 3,866
Non-current assets 16,609 6,150
------ ------
21,689 10,016
Current liabilities (4,123) (1,595)
Non-current liabilities (3,427) (2,615)
------ ------
Net asset value 14,139 5,806
Investments in and loans to unconsolidated
companies included in the consolidated
balance sheet 5,328 2,091
31
81
6 MINORITY INTERESTS
The share of third-party minority shareholders in Group income totaled EUR 67
million in 2000. In 1999, minority interest amounted to EUR 52 million, in
contrast to 1998, when third-party shareholders absorbed EUR 170 million of the
net losses incurred by Group companies, principally the losses at PCC (dissolved
October 1998).
Minority interests in consolidated companies, totaling EUR 469 million (1999:
EUR 333 million), are based on the third-party shareholding in the underlying
net assets. The increase in 2000 is mainly attributable to the acquisition of
MedQuist, in which the third-party share is 29% at December 31, 2000. On the
other hand, Philips acquired the remaining 20% share in Hosiden and Philips
Display Corp. (HAPD) from Hosiden Corporation of Japan.
7 DISCONTINUED OPERATIONS
In December 1998, Philips completed the sale of all of its 75% shareholding in
PolyGram N.V. ("PolyGram"), to The Seagram Company Ltd. ("Seagram"). Philips
received EUR 5,233 million in cash and 47,831,952 Seagram shares, representing
approximately 12% of the outstanding Seagram shares. The sale of PolyGram
resulted in a gain of EUR 4,844 million, or EUR 3.36 per share, free of taxes.
The results of PolyGram have been classified as discontinued operations in the
accompanying financial statements.
PolyGram recorded sales of EUR 4,818 million in 1998 through the date of its
sale. Philips' share in net income of PolyGram in 1998 amounted to EUR 210
million, which is included under income from discontinued operations.
8 EXTRAORDINARY ITEMS-NET
2000 1999 1998
---- ---- ----
Extraordinary gains -- -- 589
Extraordinary losses -- (7) (35)
Taxes -- 2 (96)
--- --- ----
TOTAL -- (5) 458
There were no extraordinary items in 2000.
Extraordinary losses in 1999 (EUR 7 million) resulted from the early redemption
of debt.
Extraordinary items in 1998 totaled EUR 458 million, comprising the sale of
Philips Car Systems (gain of EUR 379 million) and the sale of the
Optoelectronics unit as well as various other items (gain of EUR 79 million),
partially offset by a loss on the early redemption of debt (EUR 15 million).
Accumulated translation differences in 1998 relating to the disposed businesses
reduced the gains on disposals by EUR 5 million. Those translation differences
were previously accounted for directly within stockholders' equity.
32 Notes to the consolidated financial statements of the Philips Group
82
9 EARNINGS PER SHARE
The earnings per share data have been calculated in accordance with SFAS No. 128
"Earnings per Share" as per the following schedule:
2000* 1999** 1998***
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF SHARES(1) 1,312,859,102 1,378,040,952 1,440,224,304
BASIC EPS COMPUTATION
- -- Income from continuing operations available to
holders of common shares 9,602 1,804 541
- -- Income from discontinued operations -- -- 210
- -- Gain on sale of discontinued operations -- -- 4,844
- -- Extraordinary items-net -- (5) 458
------------- ------------- -------------
NET INCOME AVAILABLE TO HOLDERS OF COMMON SHARES 9,602 1,799 6,053
DILUTED EPS COMPUTATION
- -- Income from continuing operations available to
holders of common shares 9,602 1,804 541
- -- Plus interest on assumed conversion of convertible
debentures, net of taxes 1 -- 1
------------- ------------- -------------
- -- Income available to holders of common shares 9,603 1,804 542
- -- Income from discontinued operations -- -- 210
- -- Gain on sale of discontinued operations -- -- 4,844
- -- Extraordinary items-net -- (5) 458
------------- ------------- -------------
NET INCOME AVAILABLE TO HOLDERS OF COMMON SHARES
PLUS EFFECT OF ASSUMED CONVERSIONS 9,603 1,799 6,054
WEIGHTED AVERAGE NUMBER OF SHARES(1) 1,312,859,102 1,378,040,952 1,440,224,304
Plus shares applicable to:
- -- Options 9,961,410 6,954,752 8,043,692
- -- Convertible debentures 3,717,651 4,230,552 3,808,496
--------- --------- ---------
Dilutive potential common shares 13,679,061 11,185,304 11,852,188
------------- ------------- -------------
ADJUSTED WEIGHTED AVERAGE NUMBER OF SHARES(1) 1,326,538,163 1,389,226,256 1,452,076,492
EARNINGS PER SHARE(1):
- -- Basic earnings 7.31 1.31 4.20
- -- Diluted earnings 7.24 1.30 4.17
- ------------
* par value EUR 0.20
** par value EUR 1
*** par value NLG 10
(1) Previously reported figures restated for 4-for-1 stock split
33
83
\
10 SECURITIES
Included in securities are investments in equity securities which have been
designated as available for sale (immediately available or within a period of
one year) relating to shares of JDS Uniphase, ASML and, for 1999, Seagram. All
are carried at the original acquisition price of the shares and are presented in
the table below:
2000 1999
------------------------------------- -----
number book market book
of shares value value value
----------- ----- ------ -----
JDS Uniphase 10,477,168 61 463 120
Seagram -- -- -- 1,403
ASML 30,000,000 50 726 --
---- ----- -----
BALANCE AS OF DECEMBER 31 111 1,189 1,523
During 2000 and 1999 a portion of the JDS Uniphase shares was sold (see note 3).
In December 2000, Philips exchanged its Seagram shares for Vivendi Universal
shares, which have been classified under other non-current financial assets (see
note 13).
At December 31, 1999, the ASML shareholding was included in unconsolidated
companies. Due to the sale of 69 million shares during 2000 the remaining shares
were designated as available for sale and have been reclassified to securities.
11 RECEIVABLES
Trade accounts receivable include installment accounts receivable of EUR 69
million (1999: EUR 13 million).
Discounted drafts of EUR 8 million (1999: EUR 22 million) have been deducted.
Income taxes receivable (current portion) totaling EUR 24 million (1999: EUR 92
million) are included under other receivables.
The changes in the allowance for doubtful accounts are as follows:
2000 1999 1998
------ ------ ------
Balance as of January 1, 278 186 155
Additions charged to income 59 198 179
Deductions from allowance* (182) (118) (125)
Other movements** 26 12 (23)
---- ---- ----
BALANCE AS OF DECEMBER 31, 181 278 186
- ------------
* Write-offs for which an allowance was previously provided
** Including the effect of translation differences and consolidation changes
34 Notes to the consolidated financial statements of the Philips Group
84
12 INVENTORIES
Inventories are summarized as follows:
2000 1999
------ ------
Raw materials and supplies 1,638 1,694
Work in process 1,125 801
Finished goods 2,627 2,220
Advance payments on work in process (111) (149)
----- -----
TOTAL 5,279 4,566
The changes in the reserve for obsolescence of inventories are as follows:
2000 1999 1998
---- ---- ----
Balance as of January 1, 630 735 526
Additions charged to income 302 242 469
Deductions from reserve (243) (392) (277)
Other movements* 65 45 17
---- ---- ----
BALANCE AS OF DECEMBER 31, 754 630 735
- ------------
* Including the effect of translation differences and consolidation changes
Product development and process development costs, capitalized in inventories
for an amount of EUR 348 million (net of taxes EUR 241 million) at December 31,
1999, are excluded from January 1, 2000 onwards.
13 OTHER NON-CURRENT FINANCIAL ASSETS
The changes during 2000 are as follows:
restricted
security liquid
total investments loans assets
------- ----------- ----- ----------
Balance as of January 1, 2000 340 125 136 79
Changes:
Exchange of current assets 2,793 2,793 -- --
Acquisitions/additions 766 638 64 64
Sales/redemptions (180) (1) (179) --
Value adjustments (3) (3) -- --
Translation and exchange differences (38) (41) 3 --
Changes in consolidation 69 -- 69 --
- ------------------------------------ ----- ----- ----- -----
BALANCE AS OF DECEMBER 31, 2000 3,747 3,511 93 143
----- ----- ----- -----
Accumulated total of write-downs
included in the book value 24 4 20 --
In December 2000, Philips exchanged its Seagram shares for Vivendi Universal
shares, a strategic investment, receiving 0.8 share in Vivendi Universal for
each Seagram share. The share ownership will strengthen the Company's
opportunities for a long-term relationship.
In view of the existing relationship with LG Electronics Inc. of Korea and the
intended new joint venture in the field of CRT business, the Company invested an
amount of EUR 505 million in a convertible redeemable preferred share issue by
LG Electronics Korea (see note 1).
Acquisition of security investments also includes 6,822,165 shares in GN Great
Nordic (EUR 132 million) received in exchange for the Company's equity position
in Beltone Electronics Inc. (see note 5). Philips is restricted from selling
these shares until 2003, a period of three years from the acquisition date.
Other security investments include EUR 111 million of shares that are not
available for sale or redemption (1999: EUR 117 million).
35
85
14 NON-CURRENT RECEIVABLES
Non-current receivables include receivables with a remaining term of more than
one year and the non-current portion of income taxes receivable totaling EUR 89
million (1999: EUR 20 million). Prepaid expenses in 2000 include prepaid pension
costs of EUR 1,469 million (1999: EUR 1,065 million) and deferred tax assets of
EUR 916 million (1999: EUR 947 million).
15 PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment and the changes during 2000 were
as follows:
Property, plant and equipment
prepayments
land machinery and no longer
and and other construction productively
total buildings installations equipment in progress employed
------- --------- ------------- ------------ ------------ ------------
Balance as of January 1, 2000:
Cost 18,302 3,787 10,995 2,659 814 47
Accumulated depreciation (10,970) (1,774) (7,105) (2,055) -- (36)
------- ------ ------ ------ ------ ------
Book value 7,332 2,013 3,890 604 814 11
Changes in book value:
Capital expenditures 3,170 221 1,567 402 980 --
Retirements and sales (153) (49) (65) (26) (13) --
Depreciation (1,784) (143) (1,259) (374) (2) (6)
Write-downs due to impairment (5) (3) -- (2) -- --
Translation differences 285 76 191 39 (21) --
Changes in consolidation 196 (27) 110 131 (17) (1)
------- ------ ------ ------ ------ ------
Total changes 1,709 75 544 170 927 (7)
Balance as of December 31, 2000:
Cost 20,265 3,821 11,804 2,840 1,741 59
Accumulated depreciation (11,224) (1,733) (7,370) (2,066) -- (55)
------- ------ ------ ------ ------ ------
BOOK VALUE 9,041 2,088 4,434 774 1,741 4
Land is not depreciated.
The expected service lives as of December 31, 2000 were as follows:
Buildings from 14 to 50 years
Machinery and installations from 5 to 10 years
Other equipment from 3 to 5 years
36 Notes to the consolidated financial statements of the Philips Group
86
16 INTANGIBLE ASSETS
The changes during 2000 were as follows:
goodwill
-----------------------------
relating relating
to to
consolidated unconsolidated other
total companies companies* software intangibles
------- ------------ -------------- -------- -----------
Balance as of January 1, 2000:
Acquisition cost 3,221 1,029 1,334 232 626
Accumulated amortization (399) (260) (51) (27) (61)
----- ----- ----- ----- -----
Book value 2,822 769 1,283 205 565
Changes in book value:
Reclassifications (273) (180) (42) (15) (36)
Acquisitions 2,070 1,581 3 139 347
Amortization and write-downs (512) (173) (84) (86) (169)
Translation differences 57 9 2 6 40
Changes in consolidation 263 -- -- 5 258
----- ----- ----- ----- -----
Total changes 1,605 1,237 (121) 49 440
Balance as of December 31, 2000:
Acquisition cost 5,219 2,295 1,294 368 1,262
Accumulated amortization (792) (289) (132) (114) (257)
----- ----- ----- ----- -----
BOOK VALUE 4,427 2,006 1,162 254 1,005
- ------------
* Represents the excess of the Company's investment over its underlying
equity in the net assets of the unconsolidated companies
The final appraisal value of other intangibles in a number of last year's
acquisitions, resulted in an adjustment to the amount originally assigned on a
provisional basis. The reallocation of the purchase price to other intangibles
and goodwill is reflected under "reclassifications".
Goodwill relating to consolidated companies of EUR 1,581 million arose from the
following acquisitions: MedQuist, Optiva, ADAC and several smaller items (see
note 1).
The amount of other intangibles acquired (EUR 347 million) includes the amounts
paid for in-process R&D of EUR 44 million relating to the ADAC acquisition,
which amount was charged directly to the 2000 income statement. In-process R&D
for 1999 amounted to EUR 68 million (1998: EUR 202 million). Additionally,
acquisitions include other specific intangible assets acquired in
above-mentioned transactions, such as purchased technology, patents and
trademarks, the value of the customer base and the value of the assembled
workforce (see note 1).
Amortization of goodwill relating to unconsolidated companies totaling EUR 84
million (1999: EUR 49 million, 1998: EUR 1 million) was not included in income
from operations but was charged to results relating to unconsolidated companies.
The amortization periods as of December 31, 2000 were as follows:
Goodwill from 5 to 15 years
Software average 3 years
Other intangibles from 3 to 15 years
37
87
17 ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
2000 1999
------ ------
Salaries and wages payable 546 522
Income tax payable 613 484
Accrued holiday rights 232 234
Accrued pension costs 38 131
Commissions, freight, interest and rent payable 389 392
Other liabilities 1,883 2,078
----- -----
TOTAL 3,701 3,841
Other liabilities in 1999 include an amount of EUR 228 million, representing the
deferred payment in connection with the acquisition of the 50% share in
LG.Philips LCD Co., of which EUR 142 million was paid in 2000.
18 PROVISIONS
Provisions are summarized as follows:
2000 1999
------------------------ ----------------------
Long-term Short-term Long-term Short-term
--------- ---------- --------- ----------
Pensions (see note 19):
- -- Defined-benefit plans 900 68 901 92
- -- Other postretirement benefits 385 47 268 88
Post-employment benefits 79 17 71 27
Deferred tax liabilities (see note 4) 282 193 209 60
Restructuring (see note 2) 20 80 30 85
Obligatory severance payments 129 57 119 87
Replacement and guarantees 74 354 58 353
Other provisions 653 153 406 264
----- ----- ----- -----
TOTAL 2,522 969 2,062 1,056
Obligatory severance payments
The provision for obligatory severance payments covers the Company's commitment
to pay employees a lump sum upon reaching retirement age, or upon the employee's
dismissal or resignation. In the event that a former employee has died, the
Company may have a commitment to pay a lump sum to the deceased employee's
relatives.
Replacement and guarantees
The provision for replacement and guarantees reflects the estimated costs of
replacement and free-of-charge services that will be incurred by the Company
with respect to products sold.
Other provisions
Other provisions include provisions for expected losses on existing
projects/orders totaling EUR 38 million (1999: EUR 28 million), for employee
jubilee funds totaling EUR 115 million and environmental provisions of EUR 202
million (1999: EUR 205 million).
The changes in the provisions for post-employment benefits, obligatory severance
payments, replacement and guarantees and other provisions are as follows:
Balance as of January 1, 2000 1,385
Changes:
Additions 705
Utilization (574)
-----
BALANCE AS OF DECEMBER 31, 2000 1,516
38 Notes to the consolidated financial statements of the Philips Group
88
19 PENSIONS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Employee pension plans have been established in many countries in accordance
with the legal requirements, customs and the local situation in the countries
involved. The majority of employees in Europe and North America are covered by
defined-benefit plans. The benefits provided by these plans are based primarily
on employees' years of service and compensation near retirement.
In addition to providing pension benefits, the Company provides other
postretirement benefits, primarily retiree healthcare benefits, in certain
countries.
Contributions are made by the Company, as necessary, to provide assets
sufficient to meet the benefits payable to defined-benefit pension plan
participants. These contributions are determined based upon various factors,
including legal and tax considerations as well as local customs. The Company
funds certain defined-benefit pension plans and other postretirement benefit
plans as claims are incurred. The projected benefit obligation, accumulated
benefit obligation and fair value of plan assets for defined-benefit pension
plans with accumulated benefit obligations in excess of plan assets were EUR 138
million, EUR 120 million and EUR 85 million respectively as of December 31, 2000
(1999: EUR 340 million, EUR 318 million and EUR 278 million respectively).
Provided is a table with a summary of the changes in the pension benefit
obligations and defined pension plan assets for 2000 and 1999, and a
reconciliation of the funded status of these plans to the amounts recognized in
the consolidated balance sheets.
Also provided is a table with a summary of the changes in the accumulated
postretirement benefit obligation and plan assets for 2000 and 1999, and a
reconciliation of the obligation to the amount recognized in the consolidated
balance sheets.
39
89
2000 1999 2000 1999
------ ------ ------ ------
pension benefits postretirement benefits
------------------- -----------------------
BENEFIT OBLIGATION
Benefit obligation at beginning of year 17,731 17,526 580 519
Service cost 366 424 13 13
Interest cost 1,090 977 43 35
Employee contributions 32 35 -- --
Actuarial (gains) and losses 401 (612) 13 16
Plan amendments 73 (109) 2 3
Settlements (191) (205) -- (4)
Curtailments (9) (2) (7) (2)
Changes in consolidation (204) 144 8 1
Benefits paid (940) (889) (47) (40)
Exchange rate differences 156 483 24 37
Miscellaneous 18 (41) 3 2
------ ------ ------ ------
BENEFIT OBLIGATION AT END OF YEAR 18,523 17,731 632 580
PLAN ASSETS
Fair value of plan assets at beginning of
year 23,799 19,622 14 16
Actual return on plan assets (130) 4,419 2 2
Employee contributions 32 35 -- --
Employer contributions (215) (37) 3 3
Settlements (125) (193) -- --
Curtailments (2) -- -- --
Changes in consolidation (235) 187 4 --
Benefits paid (855) (798) (6) (4)
Exchange rate differences 228 577 -- (3)
Miscellaneous 8 (13) -- --
------ ------ ------ ------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR 22,505 23,799 17 14
Funded status 3,982 6,068 (615) (566)
Unrecognized net transition (asset)
obligation (140) (283) 136 167
Unrecognized prior service cost 192 61 7 6
Unrecognized net (gain) loss (3,571) (5,905) 40 37
------ ------ ------ ------
NET BALANCES 463 (59) (432) (356)
Classification of the net balances is as
follows:
- -- Prepaid pension costs under
non-current receivables 1,469 1,065
- -- Accrued pension costs under accrued
liabilities (38) (131)
- -- Provisions for pensions under
provisions (968) (993)
------ ------
463 (59)
The weighted average assumptions underlying the pension computation were as
follows:
2000 1999
---- ----
Discount rate 6.0% 6.1%
Rate of compensation increase 3.4% 3.4%
Expected return on plan assets 7.0% 7.0%
40 Notes to the consolidated financial statements of the Philips Group
90
The components of net periodic pension costs of major defined-benefit plans were
as follows:
2000 1999 1998
------ ------ ------
Service cost-benefits earned during the period 366 424 364
Interest cost on the projected benefit obligation 1,090 977 933
Expected return on plan assets (1,535) (1,353) (1,113)
Net amortization of unrecognized net transition assets (98) (100) (94)
Net actuarial gain recognized (231) (13) (56)
Amortization of prior service cost 21 14 27
Settlement (gain) loss (106) 8 (26)
Curtailment loss 1 -- --
Minimum pension liability (gain) loss (23) (29) 46
------ ------ ------
NET PERIODIC PENSION COST (515) (72) 81
The Company also sponsors defined-contribution and similar-type plans for a
significant number of salaried employees. The total cost of these plans amounted
to EUR 70 million in 2000 (1999: EUR 30 million, 1998: EUR 166 million).
The components of the net periodic cost of postretirement benefits other than
pensions are:
2000 1999 1998
---- ---- ----
Service cost-benefits earned during the period 13 13 11
Interest cost on accumulated postretirement benefit
obligation 43 35 33
Expected return on plan assets (2) (2) --
Amortization of unrecognized transition obligation 13 13 14
Net actuarial loss recognized 1 2 --
Curtailment cost 22 9 --
Settlement gain -- (5) --
--- --- ---
NET PERIODIC COST 90 65 58
The accumulated postretirement benefit obligation was determined using a
weighted average discount rate of 7.0% (1999: 6.6%), an assumed compensation
increase, where applicable, of 4.6% (1999: 4.8%), and an expected return on plan
assets, where applicable, of 11.7% (1999: 12.8%). For measurement purposes, the
rate of increase in per capita healthcare costs is assumed to be on average 8.3%
for 2000, reaching 5% by the year 2004. Healthcare cost trend assumptions have a
significant effect on the amounts reported for other postretirement benefits.
Increasing the assumed healthcare cost trend rate by 1 percentage point would
increase the accumulated postretirement benefit obligation as of December 31,
2000 by approximately EUR 67 million and increase the net periodic
postretirement benefit cost for 2000 by EUR 5 million. Conversely, decreasing
the assumed healthcare cost trend by 1 percentage point would decrease the
accumulated postretirement benefits as of December 31, 2000 by approximately EUR
55 million and decrease the net periodic postretirement benefit cost for 2000 by
EUR 4 million.
41
91
20 OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows:
2000 1999
------ ------
Advances received from customers on orders not covered by work in
process 168 147
Other taxes including social security premiums payable 375 389
Other short-term liabilities 319 253
----- -----
TOTAL 862 789
21 SHORT-TERM DEBT
2000 1999
------ ------
Short-term bank borrowings 1,140 383
Other short-term loans 130 98
Current portion of long-term debt 473 96
----- -----
TOTAL 1,743 577
During 2000, the weighted average interest rate on the bank borrowings was 5.7%
(1999: 5.5% and 1998: 6.5%).
22 LONG-TERM DEBT
average
remaining
range of average rate amount due in due after due after term
interest rates of interest outstanding 2001 2001 2005 (in years)
-------------- ----------- ----------- ------ --------- --------- ----------
Convertible debentures 2.4 2.4 105 -- 105 -- 4.0
Other debentures 5.6 - 8.8 7.4 2,249 431 1,818 998 6.4
Private financing 2.5 - 5.8 3.5 2 -- 2 -- 5.8
Bank borrowings 2.5 - 13.4 6.3 181 15 166 22 4.0
Liabilities arising from finance lease
transactions 5.0 - 6.3 5.3 48 17 31 1 3.8
Other long-term debt 5.1 - 7.0 5.5 172 10 162 42 3.1
----- ----- ----- ----- -----
TOTAL 7.0 2,757 473 2,284 1,063
Corresponding data previous year 6.8 2,833 96 2,737 1,278
The following amounts of long-term debt as of December 31, 2000 are due in the
next five years:
2001 473
2002 274
2003 269
2004 363
2005 315
-----
1,694
Corresponding amount previous year 1,555
Of the total long-term debt outstanding, a portion amounting to EUR 473 million
which falls due in 2001, is included in short-term debt.
In 1999 a certain amount of debt was repaid prior to maturity, resulting in
payment of a redemption premium of EUR 7 million, which was classified as an
extraordinary item (see note 8).
42 Notes to the consolidated financial statements of the Philips Group
92
In the Netherlands, Philips issues personnel debentures with a 5-year right of
conversion into common shares of Royal Philips Electronics. Personnel debentures
which were issued after December 31, 1998 may not be converted within a period
of 3 years after the date of issue. These personnel debentures are available to
most permanent employees and are purchased by them with their own funds. The
personnel debentures issued on or before December 31, 1998 are redeemable on
demand, but in practice are considered to be a form of long-term financing. The
personnel debentures become non-convertible debentures at the end of the
conversion period. At such time, they will be reported as other long-term debt.
At December 31, 2000, an amount of EUR 105 million (1999: EUR 77 million) of
personnel debentures was outstanding, with an average conversion price of EUR
23.21 and an average interest rate of 2.4%. The conversion price varies between
EUR 6.82 and EUR 49.50, with various conversion periods ending between January
1, 2001 and December 31, 2005.
Philips had two "putable" US dollar bonds outstanding at year-end 2000, which
amount to EUR 288 million (1999: EUR 266 million), for which the investor may
require prepayment at one specific month during the lifetime of the respective
bond. The average remaining tenor of long-term debt was 5.9 years, compared to
5.4 years in 1999, assuming that investors require payment at the relevant put
dates. However, assuming that the "putable" bonds will be repaid at final
maturity dates, the average remaining tenor at the end of 2000 was 8.4 years,
compared to 7.4 years at the end of 1999.
At the end of 2000, the Group had long-term committed and undrawn credit lines
available of EUR 2.5 billion, unchanged from a year earlier. The commitment fees
amounted to EUR 2 million.
23 SECURED LIABILITIES
Certain portions of long-term and short-term debt have been secured by
collateral (see table below):
collateral
---------------------------
amount of tangible
the debt fixed assets other assets
-------- ------------ ------------
Institutional financing 31 43 107
Other debts 14 35 --
---- ---- ----
TOTAL 45 78 107
Previous year 55 51 110
43
93
24 COMMITMENTS AND CONTINGENT LIABILITIES
Long-term operating lease commitments totaled EUR 614 million in 2000 (1999: EUR
810 million). These leases expire at various dates during the next 40 years. The
payments which fall due in connection with these obligations during the coming
five years are:
2001 108
2002 180
2003 173
2004 50
2005 21
Guarantees given with regard to unconsolidated companies and third parties
amounted to EUR 805 million (1999: EUR 290 million). The amount of conditional
liabilities was EUR 9 million (1999: EUR 27 million).
Royal Philips Electronics and certain of its Group companies are involved as
plaintiff or defendant in litigation relating to such matters as competition
issues, commercial transactions, product liability, participations and
environmental pollution. On the basis of information received to date, the Board
of Management believes that this litigation will not materially affect Royal
Philips Electronics' financial position and results of operations.
During 1999 the Company entered into agreements for the construction of the
first phase of the High Tech Campus in the Netherlands. Upon completion of the
first phase, the buildings will be leased to Philips until 2007. Commitments
have been entered into, and a guarantee has been issued, for all present and
future monetary payment obligations of the lessee, Philips Electronics Nederland
B.V., with a maximum amount of EUR 130 million. The actual contingent liability
outstanding at year-end from this guarantee is EUR 26 million (1999: EUR 10
million), which is the amount spent so far. The first lease payments are
anticipated to be due as from 2001, when the first premises will become
available for use.
25 STOCKHOLDERS' EQUITY
Stock split
On March 30, 2000, the General Meeting of Shareholders authorized a 4-for-1
stock split executed on April 10, 2000. All references in the consolidated
financial statements and notes to the consolidated financial statements to
number of shares, per share amounts and stock option plan data have been
restated to reflect the split.
Share reduction program
Both share capital and the share premium account have been influenced by the
share reduction program of 2000, which was adopted by the Extraordinary General
Meeting of Shareholders in May 2000 and completed in August 2000. The first step
involved a EUR 1,630 million increase of Philips' share capital and a
corresponding reduction of the share premium account, with an increase in the
par value of Philips' outstanding common shares (after 4-for-1 stock split) to
EUR 1.454 from EUR 0.25 per share. The second step was a reduction of the par
value of the common shares to EUR 0.194 and the return of EUR 1.26 (per share)
of share capital to the shareholders in cash (total amount of share capital
returned: EUR 1,673 million). The third step was to increase the par value of
shares by EUR 0.006 to EUR 0.20, resulting in a share capital consolidation (97
"new" shares for 100 "old" shares = 3% reduction).
In 1999, the Company also executed an 8% share reduction program in a similar
series of steps.
44 Notes to the consolidated financial statements of the Philips Group
94
Priority shares
There are ten priority shares.
The issuance of shares or rights to shares, cancellation of shares, amendments
to the Articles of Association and the liquidation of the Company need approval
of the priority shareholders.
Preference shares
The "Stichting Preferente Aandelen Philips" has been granted the right to
acquire preference shares in the Company.
Option rights
The Company has granted stock options on shares of Royal Philips Electronics at
original exercise prices equal to market prices of the shares at the date of
grant (see note 26).
Other reserves
Royal Philips Electronics' shares which have been repurchased and are held in
treasury for the delivery upon exercise of options and convertible personnel
debentures are accounted for in stockholders' equity under other reserves.
Treasury shares are recorded at cost, representing the market price on the
acquisition date.
In order to reduce potential dilution effects, a total of 15,027,513 shares were
acquired during 2000 at an average market price of EUR 45.40 per share, totaling
EUR 682 million, and a total of 6,573,730 shares were delivered at an average
exercise price of EUR 18.94. A total of 32,175,659 shares were being held by
Group companies as of December 31, 2000 (1999: 24,714,704 shares after stock
split), acquired at an aggregate cost of EUR 982 million.
A net deferred foreign-exchange hedge loss (net of taxes) of EUR 29 million
(1999: EUR 161 million loss) is included under other reserves.
The changes are as follows:
Balance as of January 1, 2000 (161)
Adjustments due to transition rules 58
Net change in hedging transactions (403)
Recognition into earnings 577
Translation differences (100)
Changes in consolidation --
-----
BALANCE AS OF DECEMBER 31, 2000 * (29)
- -------------
* Estimated net amount expected to be reclassified into earnings within the
next 12 months: EUR 29 million.
At the beginning of the year 2000 the opening balance of the deferred foreign
exchange hedges has been adjusted with a correction due to the introduction of
SFAS No. 133. In the course of the year the deferred position was affected by
substantial movements in the deferred foreign exchange results related to
securities. Before the end of the year the majority of these results were
recognized into earnings.
45
95
26 STOCK-BASED COMPENSATION
The Company has granted stock options on its common shares to members of the
Group Management Committee, Philips Executives and certain non-executives. The
purpose of the stock option plans is to align the interests of management with
those of shareholders by providing additional incentives to improve the
Company's performance on a long-term basis, thereby increasing shareholder
value. Under the Company's plans, options are granted at fair market value on
the date of grant. Exercise of all options is restricted by the Company's rules
on insider trading.
In 2000, fixed stock options and performance (variable) stock options were
granted under the Corporate Philips Stock Option Plan 2000.
Under this plan, options are granted for ten years, with a three-year
restriction period during which no options can be exercised. The actual number
of performance stock options that will be eligible for vesting will be
determined based upon Total Shareholder Return of Philips, as defined in
comparison with a peer group of multinationals over a three-year period.
In prior years, options were issued with terms of either five or ten years, all
vesting within two or three years from grant.
US dollar-denominated stock options are granted to employees in the USA only.
During the year, the Company established an employee stock purchase plan in the
USA. Under the terms of this plan, substantially all employees in the USA are
eligible to purchase a limited number of shares of Philips stock, through
payroll withholdings, at a price equal to the lower of 85% of the closing price
at the beginning or end of quarterly stock purchase periods. A total of 4,034
shares were sold in 2000 under the plan at a price of EUR 36.13.
The shares subject to the stock option and stock purchase plans are covered by
shares held in treasury.
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, no compensation has been recorded for the fixed stock
options granted, nor for the stock purchase plan. Additionally, no compensation
cost was recognized for the performance stock options granted in 2000 due to the
market value of the shares as at December 31, 2000.
The pro forma net income, calculated as if the fair value of the options granted
to option holders would have been considered as compensation costs, is as
follows:
2000 1999(1) 1998(1)
------ ------- -------
Net income:
- -- As reported 9,602 1,799 6,053
- -- Pro forma 9,515 1,775 6,034
Basic earnings per share:
- -- As reported 7.31 1.31 4.20
- -- Pro forma 7.25 1.29 4.19
Diluted earnings per share:
- -- As reported 7.24 1.30 4.17
- -- Pro forma 7.17 1.28 4.16
- ------------
(1) Previously reported figures restated for 4-for-1 stock split
46 Notes to the consolidated financial statements of the Philips Group
96
As noted above, the actual number of performance stock options that are
ultimately eligible to vest is dependent upon Total Shareholder Return of
Philips, as defined in comparison with a peer group of multinationals over a
three-year period. To the extent that the number of stock options that
ultimately vest differs from the assumptions underlying the pro forma results
presented above, future pro forma net income will be adjusted. Pro forma net
income may not be representative of that to be expected in future years.
In accordance with SFAS No. 133, the fair value of stock options granted is
required to be based upon a theoretical statistical option valuation model. In
actuality, since the Company's stock options are not traded on any exchange,
employees can receive no value nor derive any benefit from holding these stock
options without an increase in the market price of Philips' stock. Such an
increase in stock price would benefit all shareholders commensurately.
The fair value of the Company's 2000, 1999 and 1998 option grants was estimated
using a Black-Scholes option pricing model and the following assumptions:
2000 1999 1998
------ ------ ------
(EUR-denominated)
Risk-free interest rate 5.06% 3.19% 4.16%
Expected dividend yield 0.7% 1.2% 1.4%
Expected option life 4 yrs 4 yrs 3 yrs
Expected stock price volatility 46% 37% 36%
2000 1999 1998
------ ------ ------
(USD-denominated)
Risk-free interest rate 6.26% 5.32% 5.30%
Expected dividend yield 0.9% 1.2% 1.4%
Expected option life 5 yrs 5 yrs 5 yrs
Expected stock price volatility 43% 37% 34%
The assumptions were used for these calculations only and do not necessarily
represent an indication of management's expectations of future development.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
47
97
The following table summarizes information about the stock options outstanding
at December 31, 2000:
Fixed option plans
options outstanding options exercisable
---------------------------------------------------- ----------------------------------
weighted
number average number weighted
outstanding exercise remaining exercisable average exercise
at Dec. 31, price per contractual at Dec. 31, price per
2000 share life (years) 2000 share
---------- -------------- ------------ ----------- ----------------
(price in EUR) (price in EUR)
1996 595,200 6.61-7.53 0.3 595,200 7.41
1997 2,184,000 9.19-19.43 1.3 2,184,000 12.25
1998 2,225,800 11.57-21.02 2.2 2,113,800 16.76
1999 3,872,400 15.76-23.01 3.2 -- --
2000 3,427,750 42.03-53.75 9.3 -- --
(price in USD) (price in USD)
1998 1,594,436 12.94-23.59 7.3 810,673 17.13
1999 2,467,645 21.98-35.34 8.3 691,490 23.30
2000 3,802,922 36.65-49.71 9.4 -- --
---------- ----------
20,170,153 6,395,163
Variable plans
(price in EUR) (price in EUR)
2000 3,426,350 42.03-53.75 9.3 -- --
(price in USD) (price in USD)
1993-1994 240,584 2.75-6.89 2.0 240,584 2.91
1995-1997 1,320,448 7.50-14.20 4.0 1,320,448 7.80
2000 3,802,922 36.65-49.71 9.4 -- --
---------- ----------
8,790,304 1,561,032
48 Notes to the consolidated financial statements of the Philips Group
98
A summary of the status of the Company's stock option plans as of December 31,
2000, 1999 and 1998 and changes during the years then ended is presented below:
Fixed option plans
2000 1999(1) 1998(1)
----------------------- ----------------------- -----------------------
weighted weighted weighted
average average average
exercise exercise exercise
(price in (price in (price in
shares EUR) shares EUR) shares EUR)
---------- --------- ---------- --------- ---------- ---------
Outstanding at the beginning of the year 13,261,600 14.27 15,376,800 11.61 21,162,000 7.80
Granted 3,445,850 43.52 3,983,400 16.22 5,267,600 16.30
Exercised (4,172,484) 13.56 (6,062,600) 8.47 (11,052,800) 6.55
Forfeited (229,816) 11.61 (36,000) 9.19 -- --
---------- ---------- ----------
Outstanding at the end of the year 12,305,150 22.75 13,261,600 14.27 15,376,800 11.61
Weighted average fair value of options granted
during the year in EUR 17.42 4.76 3.89
(price in USD) (price in USD) (price in USD)
Outstanding at the beginning of the year 4,996,988 20.66 2,484,600 17.34 -- --
Granted 4,015,797 42.25 2,914,700 23.12 2,507,600 17.90
Exercised (665,900) 19.06 (295,644) 17.52 -- --
Forfeited (481,882) 32.76 (106,668) 20.47 (23,000) 18.34
---------- ---------- ----------
Outstanding at the end of the year 7,865,003 31.17 4,996,988 20.66 2,484,600 17.34
Weighted average fair value of options granted
during the year in USD 18.38 8.55 6.13
Variable plans
2000 1999(1) 1998(1)
----------------------- ----------------------- -----------------------
weighted weighted weighted
average average average
exercise exercise exercise
(price in (price in (price in
shares EUR) shares EUR) shares EUR)
---------- --------- ---------- --------- ---------- ---------
Outstanding at the beginning of the year -- -- -- -- -- --
Granted 3,445,850 43.52 -- -- -- --
Exercised -- -- -- -- -- --
Forfeited (19,500) 42.92 -- -- -- --
---------- ---------- ----------
Outstanding at the end of the year 3,426,350 43.53 -- --
Weighted average fair value of options granted
during the year in EUR 17.42 -- --
(price in USD) (price in USD) (price in USD)
Outstanding at the beginning of the year 2,787,200 7.14 4,804,736 6.95 7,276,152 6.58
Granted 4,015,797 42.25 -- -- -- --
Exercised (1,174,348) 7.28 (1,904,648) 6.62 (1,599,440) 4.74
Forfeited (264,695) 36.09 (112,888) 7.99 (871,976) 7.91
---------- ---------- ----------
Outstanding at the end of the year 5,363,954 31.97 2,787,200 7.14 4,804,736 6.95
Weighted average fair value of options granted
during the year in USD 18.38 -- --
- ------------
(1) Previously reported figures restated for 4-for-1 stock split
49
99
27 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Concentrations of credit risk
Credit risk represents the loss that would be recognized at the reporting date
if counterparties failed completely to perform as contracted. As of December 31,
2000, the Company identified 3 customers with significant exposure. This
exposure amounts to EUR 291 million in total and ranges from EUR 50 million to
EUR 150 million per customer. To reduce exposure to credit risk, the Company
performs ongoing credit evaluations of the financial condition of its customers
but generally does not require collateral.
The Company invests available cash and cash equivalents with various financial
institutions.
The Company is also exposed to credit risks in the event of non-performance by
counterparties with respect to derivative financial instruments. The Company
does not enter into any derivative financial instruments to protect against
default of financial counterparties. However, the Company requires all financial
counterparties with which it deals in derivative transactions to complete
legally enforceable set-off agreements prior to trading and, whenever possible,
to have a strong credit rating from Standard & Poor's and Moody's Investor
Services. It is our policy to conclude financial transactions, where possible,
under an ISDA master netting agreement. Wherever possible, cash is invested and
financial transactions are concluded with financial institutions with strong
credit ratings.
Derivative instruments and hedging activities
The Company is exposed to the risk of changes in foreign exchange rates, certain
commodity prices and interest rates. To manage these risks, the Company enters
into various hedging transactions that have been authorized pursuant to its
policies and procedures as described below. The Company does not purchase or
hold derivative financial instruments for trading purposes.
50 Notes to the consolidated financial statements of the Philips Group
100
Foreign exchange risk
In the normal course of business, the Company is exposed to foreign exchange
risk in the following areas:
o Transaction exposures, such as both existing and forecasted sales and
purchases and payables/receivables resulting from such transactions;
o Translation exposure of investments in foreign entities (including
results);
o Exposures of non-functional-currency-denominated debt;
o Exposures of non-functional-currency-denominated securities.
The Company periodically enters into derivative contracts to offset significant
exposures from transactions such as sales and purchases of products and
machines, including certain forecasted amounts, denominated in currencies other
than the functional currency. Generally, the contracts are for a maximum of 12
months. Typically, these derivatives are accounted for as cash flow hedges. It
is the Company's policy not to hedge the translation exposure. Gains and losses
from such contracts are included in income from operations.
Financing of subsidiaries is generally done in the functional currency of the
borrowing entity. If the financing currency is not the functional currency of
the business, the entity's exposure to foreign exchange risks is, in principle,
hedged, unless this is restricted for regulatory reasons.
The hedges related to external debt and intercompany loans are covered by
foreign currency forward contracts. The changes in the fair value of these
hedges are accounted for in financial income and expenses and will substantially
be offset. All hedges related to debt and intercompany loans are forward foreign
exchange contracts or cross-currency basis swaps.
The Company partially hedges the foreign exchange exposure arising from
securities that are available for sale. The forward foreign exchange hedges
related to securities outstanding at December 31, 2000, are fair value hedges
and consequently have an offsetting effect on the value of the hedged
securities. All hedges related to securities are forward foreign exchange
contracts.
Gains and losses on the derivatives are included in financial income and
expenses.
51
101
Commodity price risk
The Company is a purchaser of certain base metals such as copper, precious
metals and energy. The Company maintains a commodity-price risk management
strategy that uses derivative instruments to minimize significant, unanticipated
earnings fluctuations caused by commodity-price volatility. The commodity-price
derivatives that the Company enters into are concluded as cash flow hedges to
offset forecasted purchases. Gains and losses recognized in earnings are
included in income from operations.
Interest-rate risk
The Company partially hedges the interest-rate risk inherent in the external
debt. As of year-end 2000, the Company hedged a notional amount of EUR 803
million, compared to current outstanding denominated fixed-rate public debt of
EUR 1,313 million.
The euro-denominated debt was not hedged.
The interest-rate currency swaps hedge adverse movements of long-term interest
rates and foreign exchange rate movements. Under these hedge contracts, the
Company receives fixed US dollar interest and pays variable euro interest. These
interest rate hedges are fair value hedges. Changes in fair value on these
derivatives are presented in financial income and expenses.
As of December 31, 2000, the majority of debt consists of bonds.
Of the EUR 2,262 million of bonds outstanding, 12.7% have an embedded put
feature, which allows the investor to redeem the bonds prior to their final
maturity date.
In accordance with the transition provisions of SFAS No. 133, the Company
recorded a net of tax cumulative effect-type adjustment credit of EUR 58 million
in accumulated other reserves to recognize at fair value all derivatives that
are designated as cash flow hedging instruments.
At December 31, 2000, the Company had EUR 29 million (1999: EUR 161 million
loss) of net deferred losses on derivative instruments, net of tax, in
stockholders' equity. The Company expects that virtually the entire balance will
be reclassified into earnings in 2001.
52 Notes to the consolidated financial statements of the Philips Group
102
Fair value of financial assets and liabilities
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation methods.
The estimates presented are not necessarily indicative of the amounts that the
Company could realize in a current market exchange or the value that will
ultimately be realized by the Company upon maturity or disposition.
Additionally, because of the variety of valuation techniques permitted under
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments",
comparisons of fair values between entities may not be meaningful. The use of
different market assumptions and/or estimation methods may have a material
effect on the estimated fair value amounts.
December 31, 2000 December 31, 1999
---------------------- ----------------------
carrying estimated carrying estimated
amount fair value amount fair value
-------- ---------- -------- ----------
Assets:
Cash and cash equivalents 1,089 1,089 2,331 2,331
Securities 111 1,189 1,523 3,686
Accounts receivable-current 6,500 6,500 6,081 6,081
Other financial assets 3,747 3,631 340 340
Accounts receivable-non-current 303 269 252 231
Derivative instruments 423 423 (139) (130)
Liabilities:
Accounts payable (4,255) (4,255) (3,632) (3,632)
Debt (4,027) (4,061) (3,314) (3,427)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
Cash, accounts receivable and accounts payable
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Cash equivalents
The fair value is based on the estimated aggregate market value.
Securities
The fair value of equity investments is based on quoted market prices.
Other financial assets
For other financial assets, fair value is based upon the estimated market
prices.
Debt
The fair value is estimated on the basis of the quoted market prices for certain
issues, or on the basis of discounted cash flow analyses based upon Philips'
incremental borrowing rates for similar types of borrowing arrangements with
comparable terms and maturities.
Derivative instruments
The fair value is the amount that the Company would receive or pay to terminate
the derivative instruments, considering currency exchange rates and remaining
maturities.
53
103
28 APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED
STATES OF AMERICA
The accounting policies followed in the preparation of the consolidated
financial statements differ in some respects from those generally accepted in
the United States of America.
To determine net income and stockholders' equity in accordance with generally
accepted accounting principles in the United States of America (US GAAP),
Philips has applied the following accounting principles:
o Under US GAAP, divestitures which cannot be regarded as discontinued
segments of business must be included in income from continuing operations.
Under Dutch GAAP, prior to 1999, certain material transactions such as
disposals of lines of activities, including closures of substantial
production facilities, were accounted for as extraordinary items, whereas
under US GAAP they would have been recorded in income from operations.
o In 2000, Philips reported a credit to net income of EUR 16 million (versus
a credit of EUR 62 million in 1999 and charges of EUR 34 million in 1998)
because the excess amount of the accumulated benefit obligation over the
market value of the plan assets or the existing level of the pension
provision in certain Company pension plans was lower than in the preceding
two years. For US GAAP purposes, when recording the additional minimum
liability, a portion of this amount is capitalized as an intangible asset
and the remaining balance is charged to equity, net of applicable taxes.
o In 1999 and prior years, certain product development and process
development costs were included in inventories under Dutch GAAP. In order
to further align Philips' accounting principles under Dutch GAAP with US
GAAP, effective January 1, 2000, such costs are recorded as a period
expense when incurred.
o Under Dutch GAAP, securities available for sale are valued at the lower of
cost or net realizable value. Under US GAAP they are valued at market
price, unless such shares are restricted by contract for a period of one
year or more, and unrealized holding gains or losses with respect to
securities available for sale are credited or charged to stockholders'
equity.
o Prior to the year 2000, under Dutch GAAP, the results of foreign-exchange
contracts relating to hedges of securities, when sale is restricted for a
period of one year or more, were deferred to stockholders' equity (EUR 90
million). Under US GAAP, changes in the value of these forward exchange
contracts are reported in income. On January 1, 2000, the Company adopted
SFAS No. 133 as its accounting policy for derivative instruments for both
Dutch GAAP and US GAAP. However, the resulting cumulative effect of change
in accounting principle is EUR 58 million gain for Dutch GAAP and is EUR 32
million loss for US GAAP because of the differences in accounting for
derivatives which existed prior to adoption of SFAS No. 133.
54 Notes to the consolidated financial statements of the Philips Group
104
o Philips reported a charge to income from operations of EUR 329 million for
restructuring in its 1998 financial statements. With regard to a portion of
this restructuring, EUR 40 million (EUR 23 million net of taxes), the plans
had not been communicated to employees until early 1999 and, accordingly,
this portion was recorded under US GAAP as a charge in 1999.
o Under US GAAP, consolidation of majority-owned entities is not permitted if
minority interest holders have the right to participate in operating
decisions of the entity. Although Philips owned 60% of the Philips Consumer
Communications joint venture, under US GAAP the venture with Lucent
Technologies could not be consolidated but was accounted for under the
equity method.
o Under Dutch GAAP, catalogues of recorded music, music publishing rights,
film rights and theatrical rights belonging to PolyGram (which was sold in
1998) were written down to the extent that the present value of the
expected income generated by the acquired catalogues was below their book
value. Under US GAAP the rights were initially amortized over a maximum
period of 30 years. As a result of the sale of PolyGram, the cumulative
amortization has been credited to the gain on disposal in 1998 income under
US GAAP.
o Under Dutch GAAP, goodwill arising from acquisitions prior to 1992 was
charged directly to stockholders' equity. Under US GAAP, goodwill arising
from acquisitions, including those prior to 1992, is capitalized and
amortized over its useful life up to a maximum period of 20 years. As a
result of the sale of PolyGram, the related goodwill has been fully
amortized and charged to the gain on disposal in 1998 income under US GAAP.
o Under Dutch GAAP, funding of NavTech's activities is accounted for as
results relating to unconsolidated companies (2000: EUR 71 million, 1999:
EUR 44 million, 1998: EUR 61 million) whereas under US GAAP these amounts
have to be included in income from operations as research and development
costs.
o Under Dutch GAAP, the excess of the Company's investment over its
underlying equity in the net assets of unconsolidated companies has been
classified as goodwill under intangible fixed assets, whereas under US GAAP
it would be included in investments in unconsolidated companies.
o During the year ended December 31, 2000, the Company recognized gains on
divestitures which totaled EUR 1,381 million. Under Dutch GAAP, these gains
are classified in the consolidated statement of income as other business
income, which is included as part of income from operations, whereas under
US GAAP, such gains are not classified in income from operations.
55
105
Reconciliation of net income according to Dutch GAAP versus US GAAP
2000 1999 1998
------ ------ ------
Income from continuing operations as per the
consolidated statements of income 9,602 1,804 541
Cumulative effect of a change in accounting principle in
2000 and reclassification of extraordinary items under
Dutch GAAP 5 -- 474
----- ----- -----
9,607 1,804 1,015
Adjustments to US GAAP (net of taxes):
Additional minimum liabilities under SFAS No. 87 (16) (62) 34
Reversal of capitalized development costs in inventories -- (12) (40)
Reversal of provisions for restructuring -- (23) 23
Reversal of deferred hedge result on securities -- (90) --
Adjustments to unconsolidated companies, net (14) -- --
Other items -- (22) (7)
----- ----- -----
INCOME FROM CONTINUING OPERATIONS IN ACCORDANCE
WITH US GAAP BEFORE DISCONTINUED OPERATIONS,
EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 9,577 1,595 1,025
Income from discontinued operations -- -- 210
Gain on disposal of discontinued operations -- -- 4,681
Extraordinary items -- net -- (5) (16)
Cumulative effect of a change in accounting for
derivative instruments and hedging activities, net 85 -- --
----- ----- -----
NET INCOME IN ACCORDANCE WITH US GAAP 9,662 1,590 5,900
Basic earnings per common share in EUR(1):
Income from continuing operations 7.30 1.16 0.71
Income from discontinued operations -- -- 0.15
Gain on disposal of discontinued operations -- -- 3.25
Extraordinary items -- net -- (0.01) (0.01)
Cumulative effect of a change in accounting 0.06 -- --
NET INCOME 7.36 1.15 4.10
Diluted earnings per common share in EUR(1):
Income from continuing operations 7.22 1.15 0.70
Income from discontinued operations -- -- 0.15
Gain on disposal of discontinued operations -- -- 3.22
Extraordinary items -- net -- -- (0.01)
Cumulative effect of a change in accounting 0.06 -- --
NET INCOME 7.28 1.15 4.06
- ------------
(1) Previously reported figures restated for 4-for-1 stock split
56 Notes to the consolidated financial statements of the Philips Group
106
In addition to the reconciliation of net income, "comprehensive income" is
required to be reported under US GAAP.
Comprehensive income is defined as all changes in the equity of a business
enterprise during a period, except investments by, and distributions to, equity
owners. Accordingly, comprehensive income consists of net income and other items
that are reflected in stockholders' equity on the balance sheet and have been
excluded from the income statement. Such items of other comprehensive income
include foreign currency translation adjustments, the change in the fair value
of certain derivatives qualifying for hedge treatment, certain pension
liability-related losses and unrealized holding gains and losses on securities
available for sale.
Statement of comprehensive income
2000 1999 1998
------ ------ ------
Net income in accordance with US GAAP 9,662 1,590 5,900
Other comprehensive income (net of taxes):
Cumulative effect of a change in accounting for
derivative instruments and hedging activities (32) -- --
Translation differences 65 419 (194)
Deferred results on derivatives 132 (71) 15
Minimum pension liability adjustment -- 43 (49)
Unrealized holding gains (losses) on securities
available for sale (1,191) 2,131 32
- ----------------------------------------------- ------ ------ ------
COMPREHENSIVE INCOME IN ACCORDANCE WITH US GAAP 8,636 4,112 5,704
Reconciliation of stockholders' equity according to Dutch GAAP versus US GAAP
2000 1999
------ ------
Stockholders' equity as per the consolidated
balance sheets 21,736 14,757
Equity adjustments that affect net income:
Intangible assets relating to additional liabilities
under SFAS No. 87 13 29
Reversal of capitalized development costs in inventories -- (241)
Unconsolidated companies (14) --
Equity adjustments not affecting net income under US GAAP:
Unrealized holding gains on securities available for sale 972 2,163
- ---------------------------------------------------------- ------- ------
STOCKHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP 22,707 16,708
Translation differences as included in stockholders' equity (868) (991)
Changes in unrealized holding gains on securities available for sale in 2000
primarily relate to the sale of Seagram shares and the partial sale of Uniphase
shares during the year 2000, which resulted in realized gains included in
Philips' net income under Dutch GAAP for the year 2000.
57
107
Philips Consumer Communications
Effective September 27, 1998, Philips and Lucent Technologies terminated their
joint venture, Philips Consumer Communications (PCC). Philips, which owned 60%
of the venture, and Lucent, which owned 40%, each regained control of the assets
originally contributed. The joint venture was formed on October 1, 1997. Philips
has accounted for its investment in the PCC/Lucent joint venture on a
consolidated basis, whereas according to US GAAP the joint venture is accounted
for under the equity method.
Income from operations for 1998 included losses relating to the unwinding of the
joint venture, including a write-down of obsolete inventories (EUR 159 million)
and the subsequent restructuring of the PCC activities that were returned to
Philips (EUR 216 million).
Summarized financial information for the PCC joint venture, included in Philips'
consolidated financial statements in previous years, is as follows:
9 months 1998
-------------
Sales 1,376
Loss from operations (349)
Loss before income taxes (350)
Net loss (219)
Net cash used for operating activities (378)
Net cash used for investing activities (48)
Net cash provided by financing activities 395
29 INFORMATION RELATING TO PRODUCT SECTORS AND GEOGRAPHIC AREAS
In order to improve financial transparency to Philips' shareholders and the
financial community at large, the Board decided in 2000 that separate results
will be published for all divisions. As a consequence, the following 9 segments
are distinguished: Lighting, Consumer Electronics, Domestic Appliances and
Personal Care, Components, Semiconductors, Medical Systems, Origin
(deconsolidated from October 1, 2000 onwards), Miscellaneous and Unallocated.
Lighting
Philips is a leader in the world lighting market. A wide variety of applications
are served by a full range of incandescent and halogen lamps, automotive lamps,
high-intensity gas-discharge and special lamps, QL induction lamps, fixtures,
ballasts, lighting electronics and batteries.
Consumer Electronics
This division markets a wide range of products in the following areas: video
products (Consumer TV, Institutional TV, VCR, TV-VCR, DVD Video), audio products
(audio systems, portable products, speaker systems), computer monitors (CRT- and
LCD-based), consumer communications (mobile phones, cordless digital phones,
fax), remote control systems, set-top boxes, broadband networks, business
communications systems and speech processing.
The Consumer Electronics sector includes 9 months of operations of the
PCC/Lucent joint venture in 1998. For further details, please refer to note 28.
Domestic Appliances and Personal Care
This division markets a wide range of products in the following areas: male
shaving & grooming (shavers, trimmers, etc.), body beauty and care (depilators,
hair dryers, suncare, electric toothbrushes, skincare, thermometers, etc.), food
and beverage (mixers, coffee makers, toasters, etc.) and home environment care
(vacuum cleaners, air cleaners, steam irons, fans, etc.).
58 Notes to the consolidated financial statements of the Philips Group
108
Components
Philips Components is a leading supplier of display, storage and other key
components. It produces a wide range of products such as picture tubes (for TV
and monitors), LCDs, passive components, magnetic products and modules for
optical storage.
Semiconductors
Philips Semiconductors is a major supplier of integrated circuits (ICs) and
discrete semiconductors to the consumer electronics, telecommunications,
automotive, PC and PC peripherals industries.
Medical Systems
Philips is among the top three makers of systems for diagnostic imaging, based
on x-ray, computed tomography, magnetic resonance and ultrasound technologies.
It also provides consultancy services, information management, training and
technical services to its customers in the healthcare sector.
Origin
Origin is a global IT service company delivering systems and a full range of
services that facilitate total business solutions for clients. It is represented
in more than 30 countries. In October 2000, Philips sold its 98% interest in
Origin to Atos and received a 48.7% interest in Atos Origin. This investment is
accounted for under the equity method. As a result of the merger, as from
October 1, 2000, Philips no longer consolidated Origin as a separate division
but will include its share of Atos Origin's earnings in results relating to
unconsolidated companies beginning January 1, 2001, with a delay of three
months.
Miscellaneous
This sector comprises not only various ancillary businesses, including Philips
Enabling Technologies Group (formerly Philips Machinefabrieken and FEI Company,
but also various (remaining) activities that have been sold, discontinued,
phased out or deconsolidated in earlier years, such as, in 1998, Philips Media,
Philips Car Systems, Superclub and ASM Lithography.
The costs of basic research and patents are included in the Miscellaneous
sector.
Unallocated
The sector Unallocated includes general and administrative expenses in the
corporate center and the country organizations.
For a description of the various product divisions included in the product
sectors, please refer to the relevant section of the separate booklet entitled
`Management Report'.
The sales volumes of the various business activities and the associated income
from operations by product sector and by geographic area are set forth in the
following tables. Segment revenues represent the total of sales to third parties
('sales') and sales of products and services between the product sectors
('intersegment revenues').
Included in segment revenues by geographic area is the total revenue from
worldwide sales to third parties and unconsolidated companies by consolidated
companies located within that geographic area ('sales'), as well as the total
value of sales to consolidated companies in other geographic areas
('interregional revenues').
The transfer prices charged for all intersegment (including interregional) sales
are based on the arm's length principle as set forth in internationally accepted
transfer pricing policies and guidelines.
59
109
Product sectors
2000
-----------------------------------------------------------------------------------
results
relating
sales (to income as a % of to
third segment (loss) from segment unconsolidated
parties) revenues Ebita operations revenues companies
---------- -------- ------- ----------- --------- --------------
Lighting 5,052 5,097 677 668 13.1 (33)
Consumer Electronics 14,683 14,852 420 374 2.5 (4)
DAP 2,107 2,130 292 287 13.5 --
Components 4,562 6,332 570 569 9.0 211
Semiconductors 5,879 6,812 1,451 1,346 19.8 1,151
Medical Systems 3,031 3,047 308 169 5.5 (3)
Origin 717 1,164 1,089 1,063 91.3 (2)
Miscellaneous 1,831 1,882 (105) (113) (6.0) 2,647
Unallocated -- -- (79) (82) 3
------ ------ ------ ------ ------
TOTAL 37,862 41,316 4,623 4,281 3,970
INTERSEGMENT REVENUES (3,454)
------
SALES 37,862
INCOME FROM OPERATIONS
AS A % OF SALES 11.3
1999
-----------------------------------------------------------------------------------
results
relating
sales (to income as a % of to
third segment (loss) from segment unconsolidated
parties) revenues Ebita operations revenues companies
---------- -------- ------- ----------- --------- --------------
Lighting 4,548 4,597 609 602 13.1 (1)
Consumer Electronics 12,436 12,602 276 258 2.0 (1)
DAP 1,791 1,817 221 220 12.1 --
Components 3,754 5,325 289 286 5.4 187
Semiconductors 3,796 4,557 716 614 13.5 259
Medical Systems 2,493 2,495 219 181 7.3 (9)
Origin 1,056 1,735 125 97 5.6 --
Miscellaneous 1,585 1,705 (78) (94) (5.5) (25)
Unallocated (411) (413) (1)
------ ------ ------ ------ ------
Total 31,459 34,833 1,966 1,751 409
Intersegment revenues (3,374)
------
Sales 31,459
Income from operations
as a % of sales 5.6
1998
-----------------------------------------------------------------------------------
results
relating
sales (to income as a % of to
third segment (loss) from segment unconsolidated
parties) revenues Ebita operations revenues companies
---------- -------- ------- ----------- --------- --------------
Lighting 4,453 4,504 601 595 13.2 4
Consumer Electronics 12,364 12,524 (443) (447) (3.6) 2
DAP 1,746 1,769 200 199 11.2 --
Components 3,814 5,259 46 44 0.8 (10)
Semiconductors 3,212 3,963 769 765 19.3 110
Medical Systems 1,950 1,957 152 (49) (2.5) (12)
Origin 1,059 1,654 77 59 3.6 --
Miscellaneous 1,861 2,069 (67) (82) (4.0) (46)
Unallocated (392) (399) (9)
------ ------ ------ ------ ------
Total 30,459 33,699 943 685 39
Intersegment revenues (3,240)
------
Sales 30,459
Income from operations
as a % of sales 2.2
60 Notes to the consolidated financial statements of the Philips Group
110
Geographic areas
2000
-----------------------------------------------------------------
sales (to income as a % of
third segment (loss) from segment
parties) revenues Ebita operations revenues
---------- -------- ------- ----------- ---------
Netherlands 1,696 16,001 2,424 2,395 15.0
Europe excl. Netherlands 15,271 20,084 860 851 4.2
USA and Canada 9,565 11,889 488 186 1.6
Latin America 2,285 2,054 60 59 2.9
Africa 271 167 3 3 1.8
Asia 8,774 14,613 808 807 5.5
Australia and New Zealand 433 (20) (20) (4.6)
------ ------ ------ ------
TOTAL 37,862 65,241 4,623 4,281
INTERREGIONAL REVENUES (27,379)
------
SALES 37,862
INCOME FROM OPERATIONS AS A % OF SALES 11.3
1999
-----------------------------------------------------------------
sales (to income as a % of
third segment (loss) from segment
parties) revenues Ebita operations revenues
---------- -------- ------- ----------- ---------
Netherlands 1,619 12,452 546 513 4.1
Europe excl. Netherlands 13,039 16,600 619 611 3.7
USA and Canada 7,918 9,310 255 82 0.9
Latin America 1,862 1,642 (40) (41) (2.5)
Africa 229 107 1 1 0.9
Asia 6,346 11,188 584 584 5.2
Australia and New Zealand 446 424 1 1 0.2
------ ------ ------ ------
Total 31,459 51,723 1,966 1,751
Interregional revenues (20,264)
------
Sales 31,459
Income from operations as a % of sales 5.6
1998
-----------------------------------------------------------------
sales (to income as a % of
third segment (loss) from segment
parties) revenues Ebita operations revenues
---------- -------- ------- ----------- ---------
Netherlands 1,653 11,089 449 446 4.0
Europe excl. Netherlands 13,015 16,430 648 638 3.9
USA and Canada 7,462 8,572 (254) (473) (5.5)
Latin America 2,089 2,013 (204) (205) (10.2)
Africa 270 126 (1) (1) (0.7)
Asia 5,556 10,013 311 287 2.9
Australia and New Zealand 414 419 (6) (7) (1.6)
------ ------ ------ ------
Total 30,459 48,662 943 685
Interregional revenues (18,203)
------
Sales 30,459
Income from operations as a % of sales 2.2
61
111
Product sectors
2000
--------------------------------------------------------------------------------
net total
total operating liabilities long-lived capital
assets capital excl. debt assets expenditures depreciation
------ --------- ----------- ---------- ------------ ------------
Lighting 2,944 1,903 947 1,383 258 171
Consumer Electronics 5,366 1,867 3,436 778 324 280
DAP 1,131 752 379 564 96 77
Components 5,532 2,062 1,499 3,273 660 343
Semiconductors 8,501 4,572 1,283 4,233 1,631 692
Medical Systems 3,982 2,821 1,157 2,429 58 47
Origin 1,449 -- -- -- 18 43
Miscellaneous 1,421 441 832 430 125 92
Unallocated 8,215 (61) 2,776 378 -- 44
------ ------ ------ ------ ------ ------
TOTAL 38,541 14,357 12,309 13,468 3,170 1,789
1999
--------------------------------------------------------------------------------
net total
total operating liabilities long-lived capital
assets capital excl. debt assets expenditures depreciation
------ --------- ----------- ---------- ------------ ------------
Lighting 2,849 1,875 849 1,275 176 161
Consumer Electronics 4,683 1,677 2,905 791 261 245
DAP 777 459 314 256 76 67
Components 5,179 2,078 1,151 3,197 259 364
Semiconductors 5,188 3,194 928 2,917 622 467
Medical Systems 1,840 1,023 807 640 41 38
Origin 683 240 415 275 56 68
Miscellaneous 1,545 628 820 441 85 98
Unallocated 7,040 (1,016) 3,191 362 86 40
------ ------ ------ ------ ------ ------
Total 29,784 10,158 11,380 10,154 1,662 1,548
1998
--------------------------------------------------------------------------------
net total
total operating liabilities long-lived capital
assets capital excl. debt assets expenditures depreciation
------ --------- ----------- ---------- ------------ ------------
Lighting 2,607 1,764 810 1,194 191 173
Consumer Electronics 4,287 1,540 2,613 674 321 289
DAP 747 449 293 246 98 72
Components 3,112 2,070 932 1,865 299 357
Semiconductors 3,106 1,905 557 1,584 437 455
Medical Systems 1,677 936 736 597 36 31
Origin 572 147 367 184 69 63
Miscellaneous 1,470 650 727 463 106 124
Unallocated 10,575 212 2,729 321 77 51
------ ------ ------ ------ ------ ------
Total 28,153 9,673 9,764 7,128 1,634 1,615
62 Notes to the consolidated financial statements of the Philips Group
112
Main countries
2000
---------------------------------------------------------------------------------
sale (to net
third total operating long-lived capital
parties) assets capital assets expenditures depreciation
-------- --------- ----------- ---------- ------------ ------------
Netherlands 1,696 8,593 2,932 1,885 638 369
United States 9,126 8,802 5,820 5,051 573 349
Germany 3,272 1,644 128 672 194 132
France 2,333 2,749 222 474 205 120
United Kingdom 2,179 951 526 337 89 61
China (incl. Hong Kong) 2,683 2,113 783 814 295 156
Other countries 16,573 13,689 3,946 4,235 1,176 602
------ ------ ------ ------ ------ ------
TOTAL 37,862 38,541 14,357 13,468 3,170 1,789
1999
---------------------------------------------------------------------------------
sale (to net
third total operating long-lived capital
parties) assets capital assets expenditures depreciation
-------- --------- ----------- ---------- ------------ ------------
Netherlands 1,619 7,740 2,151 1,811 435 370
United States 7,535 5,139 2,839 2,476 249 228
Germany 2,727 1,558 86 632 134 147
France 1,962 1,118 164 392 92 113
United Kingdom 2,281 1,041 607 321 55 53
China (incl. Hong Kong) 2,023 1,570 635 635 91 123
Other countries 13,312 11,618 3,676 3,887 606 514
------ ------ ------ ------ ------ ------
Total 31,459 29,784 10,158 10,154 1,662 1,548
1998
---------------------------------------------------------------------------------
sale (to net
third total operating long-lived capital
parties) assets capital assets expenditures depreciation
-------- --------- ----------- ---------- ------------ ------------
Netherlands 1,653 11,863 2,778 1,633 404 343
United States 7,164 3,518 1,538 1,167 155 189
Germany 2,777 1,536 669 698 143 250
France 2,092 1,130 158 410 76 129
United Kingdom 1,931 907 504 298 60 64
China (incl. Hong Kong) 1,878 1,273 517 574 124 96
Other countries 12,964 7,926 3,509 2,348 672 544
------ ------ ------ ------ ------ ------
Total 30,459 28,153 9,673 7,128 1,634 1,615
63
113
[Pages 64 through 69 intentionally omitted.]
PROPOSED DISTRIBUTION OF INCOME OF ROYAL PHILIPS ELECTRONICS
Pursuant to article 35 of the Articles of Association, EUR 9,140 million of the
income for the financial year 2000 shall be retained by way of reserve. A
proposal will be submitted to the General Meeting of Shareholders to declare a
dividend of EUR 0.36 per common share from the remaining income (EUR 462
million).
CORPORATE GOVERNANCE OF THE PHILIPS GROUP
General
Koninklijke Philips Electronics N.V. (the `Company') is the parent company of
the Philips Group. Its shares are listed on the stock market of Euronext
Amsterdam, the New York Stock Exchange, the London Stock Exchange and several
other stock exchanges.
The management of the Company is entrusted to the Board of Management under the
supervision of the Supervisory Board. The activities of the Philips Group are
organized in product divisions, which are responsible for the worldwide business
policy. Philips has more than 200 production sites in over 25 countries and
sales and service outlets in some 150 countries. It delivers products, systems
and services in the fields of lighting, consumer electronics and communications,
domestic appliances and personal care, components, semiconductors, medical
systems, business electronics and information technology. The Company's
activities are grouped in nine sectors: Lighting, Consumer Electronics, Domestic
Appliances and Personal Care, Components, Semiconductors, Medical Systems,
Origin (deconsolidated from October 1, 2000 onwards), Miscellaneous and
Unallocated. The statutory list of all subsidiaries and affiliated companies,
prepared in accordance with the relevant legal requirements (The Netherlands
Civil Code, Book 2, Articles 379 and 414), forms part of the notes to the
consolidated financial statements and is deposited at the office of the
Commercial Register in Eindhoven, the Netherlands (file no. 1910).
In recent years the governance of the Company and the Philips Group has been
improved, in particular in respect of the supervisory function, the rights of
shareholders and transparency. These improvements were in response to
developments in the international capital markets, such as the United States,
where the Company's shares have been traded since 1962 and listed on the New
York Stock Exchange since 1987. Philips also generally endorses the
recommendations of the Committee of the Amsterdam Exchanges of October 1997 on
best practices in corporate governance.
Remuneration of the Board of Management and Supervisory Board
GENERAL POLICY
The objective of the remuneration policy for members of the Board of Management
is in line with that for Philips Executives within the Philips Group, i.e. to
attract, motivate and retain highly qualified executives who improve the
performance of the Company. In order to maintain a competitive remuneration
package for Board-level executive talent, benchmarking against comparable
companies is carried out systematically.
The remuneration package consists of a base salary, an annual incentive in the
form of a cash bonus, and a long-term incentive in the form of stock options.
70 Other information regarding Royal Philips Electronics
114
BASE SALARY
Base salaries are based on a functional salary system. The functional scale
salary levels are adapted annually to developments in the market. Each year, on
the proposal of the Remuneration Committee, the Supervisory Board decides on a
possible salary increase for the individual members of the Board of Management.
Progression of the salary of an individual Board of Management member to his
functional salary level is usually over a 3-year period from appointment. This
progression, in conjunction with a market-related adjustment of salary levels,
resulted -- for Board members who were in office for the whole year -- in a
13.8% increase in salaries compared with 1999.
ANNUAL INCENTIVE
Each year, a bonus can be earned: in principle, up to a maximum of 50% of the
annual base salary. The Remuneration Committee may decide to grant a higher
bonus percentage if special targets are realized. The bonus criteria and the
targets for the members of the Board of Management are determined annually by
the Remuneration Committee of the Supervisory Board. Targets are set at a
challenging level and are partly linked to the Philips Group results and partly
to the businesses for which the member of the Board of Management has direct
responsibility. The bonus pay-out depends on the degree to which targets were
met in the preceding financial year.
The bonuses paid in 2000 were higher than in 1999 as a consequence of the 1999
operating results as compared to 1998.
LONG-TERM INCENTIVE
Long-term incentives for members of the Board of Management are provided through
Philips' stock option plans. These plans align the interests of shareholders and
members of the Board of Management.
Acting on the advice of the Remuneration Committee, the Supervisory Board has
the discretionary power to grant Royal Philips Electronics stock options to
members of the Board of Management. The conditions attached to the stock options
have to be decided each year by the Supervisory Board.
For details of the plan, see page 46.
In 2000, 50% of the granted stock options has been awarded as fixed options and
50% has been awarded as performance options, linked to the long-term performance
of the Company.
REMUNERATION
The total remuneration and related costs (in euros) of the members of the Board
of Management in 2000 can be specified as follows:
2000 1999
---------- ---------
Salaries 3,758,811 3,575,000
Bonuses 2,242,922 1,619,000
Other payments -- 1,095,000
---------- ---------
6,001,733 6,289,000
Pension charges * (1,559,000) 3,123,000
---------- ---------
Total 4,442,733 9,412,000
* The negative amount of pension charges in 2000 is mainly due to reduced
periodic pension costs related to pensions funded by the Dutch Philips Pension
Fund, whereas pension charges in 1999 were influenced by payments related to
former members of the Board of Management.
71
115
The cash remuneration in euros of the individual members of the Board of
Management was as follows:
2000 1999
------------------------------------ ---------------------------------------------------
salary bonus* total salary bonus* other total
--------- --------- --------- --------- --------- --------- ---------
C. Boonstra 907,560 900,300 1,807,860 794,115 363,024 1,157,139
J.H.M. Hommen 612,603 432,906 1,045,509 589,914 200,571 790,485
A. Baan 612,603 218,382 830,985 521,847 83,344 605,191
A.P.M. van der Poel 612,603 318,327 930,930 521,847 133,109 654,956
J.W. Whybrow 612,603 302,671 915,274 521,847 229,763 751,610
G.J. Kleisterlee (April-December) 400,839 400,839
--------- --------- --------- --------- --------- --------- ---------
Subtotal 3,758,811 2,172,586 5,931,397 2,949,570 1,009,811 3,959,381
--------- --------- --------- --------- --------- --------- ---------
D.G. Eustace 70,336 70,336 136,134 113,445 249,579
Other former members 489,705 495,754 1,094,518 2,079,977
--------- --------- --------- --------- --------- --------- ---------
Total 3,758,811 2,242,922 6,001,733 3,575,409 1,619,010 1,094,518 6,288,937
* The bonuses paid are related to the level of performance achieved in the
previous year.
The table below gives an overview of the interests of the members of the Board
of Management under the stock option plans of Royal Philips Electronics (numbers
adjusted for stock split in 2000).
number of options amounts in euros
----------------------------------------------------- --------------------
share
as of granted exercised as of price on
Jan. 1, during during Dec. 31, exercise exercise expiry
2000 2000 2000 2000 price date date
--------- -------- --------- --------- -------- --------- ----------
C. Boonstra 240,000 240,000 9.19 13.02.2002
120,000 120,000 15.76 11.02.2004
-- 120,000a) 120,000a) 42.03 17.02.2010
J.H.M. Hommen 480,000 480,000 9.19 13.02.2002
80,000 80,000 16.45 12.02.2003
80,000 80,000 15.76 11.02.2004
-- 80,000a) 80,000a) 42.03 17.02.2010
A. Baan b) 80,000 60,000 20,000 16.45 52.37 12.02.2003
80,000 80,000 15.76 11.02.2004
-- 80,000a) 80,000a) 42.03 17.02.2010
A.P.M. van der Poel 80,000 40,000 40,000 16.45 46.13 12.02.2003
80,000 80,000 15.76 11.02.2004
-- 80,000a) 80,000a) 42.03 17.02.2010
J.W. Whybrow 80,000 80,000 -- 16.45 43.47 12.02.2003
80,000 80,000 15.76 11.02.2004
-- 80,000a) 80,000a) 42.03 17.02.2010
G.J. Kleisterlee 27,200c) 27,200c) 7.53 25.02.2001
12,000c) 12,000c) 9.19 13.02.2002
12,000c) 12,000c) 16.45 12.02.2003
60,000c) 60,000c) 15.76 11.02.2004
-- 60,000a/c) 60,000a/c) 42.03 17.02.2010
--------- ------- ------- ---------
Total 1,591,200 500,000 180,000 1,911,200
a) 50% fixed options and 50% performance-related options
b) Mr Baan's interests in Philips securities, including stock options, are
held by an independent trustee, having exclusive discretionary power to
take investment decisions. The terms thereof comply with internal rules and
those of the Securities Board of the Netherlands.
c) awarded before date of appointment as a member of the Board of Management.
72 Other information regarding Royal Philips Electronics
116
The Supervisory Board and the Board of Management have decided to adjust upwards
the exercise price of all options granted to, but not yet exercised by, members
of the Board of Management as of May 29, 1999 by EUR 0.437 and as of July 31,
2000 by EUR 0.021 per common share in connection with the 8% share reduction
program and the 3% share reduction program effected mid-1999 and mid-2000
respectively. This increase is not incorporated in the above table.
PENSIONS
The pensions are mainly funded by Philips Pension Fund. The Company can also
grant additional pension benefits. The by-laws of Philips Pension Fund apply,
with the proviso that the pensionable age has been set at 60. If members of the
Board of Management continue in the employment of the Company until the age of
62 or later, the pension payments are postponed accordingly. Because the
retirement age is different from the date of commencement of the state pension,
the pension scheme provides for a temporary payment in order to compensate for
the adverse effect. The Board of Management members' own contribution comprises
4% of EUR 56,414 and 6% of the difference between the gross pensionable salary
minus the franchise and the above mentioned amount of EUR 56,414.
The vested pension benefits of individual members of the Board of Management are
as follows:
increase
in accrued accumulated
ultimate pension annual pension
age at retirement during as at
31-12-2000 age 2000 31-12-2000
---------- ---------- ---------- --------------
(EUR) (EUR)
C. Boonstra 62 63 14,521 157,021
J.H.M. Hommen 57 62 19,652 73,915
A. Baan 58 62 12,575 342,857
A.P.M. van der Poel 52 62 12,575 216,727
J.W. Whybrow 53 62 12,575 307,479
G.J. Kleisterlee 54 62 9,256 207,791
SUPERVISORY BOARD
During 2000 the individual members of the Supervisory Board received, by virtue
of the positions they held, the following remuneration (in euros):
2000 1999
------------------------------------- ------------------------------------
member member
ship committees total ship committees total
------- ---------- ------- ------- ---------- -------
EUR EUR EUR EUR EUR EUR
L.C. van Wachem 74,874 9,076 83,950 74,874 7,941 82,815
W. de Kleuver 40,840 9,076 49,916 40,840 7,941 48,781
W. Hilger 40,840 9,076 49,916 40,840 9,076 49,916
C.J. Oort (Jan./March) 20,420 1,134 21,554 40,840 4,538 45,378
L. Schweitzer 40,840 -- 40,840 40,840 -- 40,840
R. Greenbury 40,840 4,538 45,378 40,840 3,403 44,243
J-M. Hessels 40,840 3,403 44,243 40,840 -- 40,840
K.A.L.H. van Miert 40,840 -- 40,840 -- -- --
------- ------ ------- ------- ------ -------
340,334 36,303 376,637 319,914 32,899 352,813
Former members -- -- -- 57,857 3,404 61,261
------- ------ ------- ------- ------ -------
340,334 36,303 376,637 377,771 36,303 414,074
73
117
SUPERVISORY BOARD MEMBERS' AND BOARD OF MANAGEMENT MEMBERS' INTERESTS IN
PHILIPS SHARES
Members of the Supervisory Board and of the Board of Management are not allowed
to take any interests in derivative Philips securities.
number of shares
---------------------------------
as of as of
December 31, January 1,
2000 2000*
------------ ----------
L.C. van Wachem 17,848 18,400
L. Schweitzer 1,070 1,104
C. Boonstra 54,320 --
J.W. Whybrow 1,070 1,104
* After 4-for-1 stock split and before 3% share reduction in 2000
The above statement does not specify ownership of convertible personnel
debentures, which are held under a scheme that since 1998 has no longer been
applicable to the members of the Board of Management.
BOARD OF MANAGEMENT AND SUPERVISORY BOARD
The Board of Management is responsible for the effective management of the
business. It is required to keep the Supervisory Board informed of developments,
to consult it on important matters and to submit certain important decisions to
it for its prior approval. The Board of Management consists of at least three
members (currently six), who are elected for an indefinite period by the General
Meeting of Shareholders. Individual data on the members of the Board of
Management are printed on page 74 of the separate booklet entitled `Management
Report'. The President is appointed by the General Meeting of Shareholders.
Members of the Board of Management may be suspended by the Supervisory Board and
the General Meeting of Shareholders and dismissed by the latter. The
remuneration of the members of the Board of Management is determined by the
Supervisory Board upon a proposal from the President and on the advice of the
Remuneration Committee of the Supervisory Board.
The Supervisory Board is independent of the Board of Management and is
responsible for supervising both the policies of the Board of Management and the
general direction of the Group's business. It is also required to advise the
Board of Management. The Supervisory Board consists of at least five members
(currently seven). They elect a Chairman, Vice-Chairman and Secretary from their
midst. The Board has three permanent committees: an Audit Committee, a
Remuneration Committee and a Nomination and Selection Committee. These
committees advise the plenary Supervisory Board. The Supervisory Board has
adopted Rules of Procedure to consolidate its own governance rules. The profile
for the Supervisory Board's composition and additional data on the individual
members are given on page 76 of the separate booklet entitled `Management
Report'. Members of the Supervisory Board are appointed by the General Meeting
of Shareholders for fixed terms of four years, and may be re-elected for two
additional four-year terms. In exceptional cases, however, the Supervisory Board
and the Meeting of Priority Shareholders may deviate from this rule. At the
latest, members retire upon reaching the age of 72. Members of the Supervisory
Board may be suspended or dismissed by the General Meeting of Shareholders.
Their remuneration is fixed by the General Meeting of Shareholders.
74 Other information regarding Royal Philips Electronics
118
The appointment of the members of the Board of Management and the Supervisory
Board by the General Meeting of Shareholders is upon a binding recommendation
from the Supervisory Board and the Meeting of Priority Shareholders. However,
this binding recommendation may be overruled by a resolution of the General
Meeting of Shareholders taken by a majority of at least 2/3 of the votes cast
and representing more than half of the issued share capital.
GROUP MANAGEMENT COMMITTEE
The Group Management Committee consists of the members of the Board of
Management, certain Chairmen of product divisions and certain key officers.
Members other than members of the Board of Management are appointed by the
Supervisory Board. The task of the Group Management Committee, the highest
consultative body within Philips, is to ensure that business issues and
practices are shared across the Company and to define and implement common
policies.
GENERAL MEETING OF SHAREHOLDERS
A General Meeting of Shareholders is held at least once a year to discuss and
resolve on the report of the Board of Management, the annual accounts with
explanation and appendices, the report of the Supervisory Board, any proposal
concerning dividends or other distributions, and any other matters proposed by
the Supervisory Board, the Board of Management, the Meeting of Priority
Shareholders or shareholders in accordance with the provisions of the Company's
Articles of Association. This meeting is held in Eindhoven, Amsterdam, Rotterdam
or The Hague no later than six months after the end of the financial year.
Meetings are convened by public notice and mailed to registered shareholders.
Extraordinary General Meetings may be convened by the Supervisory Board or the
Board of Management if deemed necessary and must be held if the Meeting of
Priority Shareholders or shareholders jointly representing at least 10% of the
outstanding capital make a written request to that effect to the Supervisory
Board and the Board of Management specifying in detail the business to be dealt
with. The agenda of the General Meeting shall contain such business as may be
placed thereon by the Board of Management, the Supervisory Board or the Meeting
of Priority Shareholders. Requests from shareholders for items to be included on
the agenda will be honored, provided that such requests are made to the Board of
Management and the Supervisory Board by shareholders representing at least 1% of
the Company's outstanding capital at least 60 days before a General Meeting of
Shareholders and provided that the Board of Management and the Supervisory Board
are of the opinion that such requests are not detrimental to the serious
interests of Philips.
The main powers of the General Meeting of Shareholders are to appoint, suspend
and dismiss members of the Board of Management and the Supervisory Board, to
adopt the financial statements and to discharge the Board of Management and the
Supervisory Board from responsibility for performing their respective duties for
the previous financial year, to adopt amendments to the Articles of Association
and proposals to dissolve or liquidate the Company, to issue shares or rights to
shares, to restrict or pass pre-emptive rights of shareholders and to repurchase
or cancel outstanding shares. Following common practice, the Company each year
requests limited authorization to issue (rights to) shares, to pass pre-emptive
rights and to repurchase shares.
75
119
MEETING OF PRIORITY SHAREHOLDERS AND THE DR. A.F. PHILIPS-STICHTING
There are ten priority shares. Eight are held by the Dr. A.F. Philips-Stichting,
with Messrs F.J. Philips and H.A.C. van Riemsdijk each holding one. The
self-electing Board of the Dr. A.F. Philips-Stichting consists of the Chairman
and the Vice-Chairman and Secretary of the Supervisory Board, certain other
members of the Supervisory Board, and the President of the Company. At present,
the Board consists of Messrs L.C. van Wachem, W. de Kleuver, J-M. Hessels,
K.A.L.H. van Miert and C. Boonstra.
A Meeting of Priority Shareholders is held at least once a year, at least thirty
days before the General Meeting of Shareholders. Approval of the Meeting of
Priority Shareholders is required for resolutions of the General Meeting of
Shareholders regarding the issue of shares or rights to shares, the cancellation
of shares, amendments to the Articles of Association, and the liquidation of the
Company. Acting in agreement with the Supervisory Board, the Meeting also makes
a binding recommendation to the General Meeting of Shareholders for the
appointment of members of the Board of Management and the Supervisory Board,
which can be overruled by the General Meeting of Shareholders as set out before.
MEETING OF HOLDERS OF PREFERENCE SHARES AND THE STICHTING PREFERENTE
AANDELEN PHILIPS
The authorized share capital of the Company consists of ten priority shares,
3,250,000,000 ordinary shares and 3,249,975,000 preference shares. The Stichting
Preferente Aandelen Philips (`the Foundation') has been granted the right to
acquire preference shares in the Company. The mere notification that the
Foundation wishes to exercise its rights, should a third party ever seem likely
to gain a controlling interest in the Company, will result in the preference
shares being effectively issued. The Foundation may exercise this right for as
many preference shares as there are ordinary shares in the Company outstanding
at that time. The object of the Foundation is to represent the interests of the
Company, the enterprises maintained by the Company and its affiliated companies
within the Philips Group, such that the interests of Philips, those enterprises
and all parties involved with them are safeguarded as effectively as possible,
and that they are afforded maximum protection against influences which, in
conflict with those interests, may undermine the autonomy and identity of
Philips and those enterprises, and also to do anything related to the above ends
or conducive to them.
The members of the self-electing Board of the Foundation are Messrs J.R. Glasz,
H.B. van Liemt, W.E. Scherpenhuijsen Rom, L.C. van Wachem and C. Boonstra. As
Chairman of the Supervisory Board and the Board of Management respectively,
Messrs Van Wachem and Boonstra are members of the Board ex officio. Mr Boonstra
is not entitled to vote. The Board of Management of the Company and the Board of
the Stichting Preferente Aandelen Philips declare that they are jointly of the
opinion that the Stichting Preferente Aandelen Philips is independent of the
Company as required by the Listing Requirements of Euronext Amsterdam N.V.'s
stock market.
76 Other information regarding Royal Philips Electronics
[Pages 77 to end intentionally omitted.]