Royal Philips Electronics Second Quarter July 16 th, 2007

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2 Royal Philips Electronics Second Quarter 2007 July 16 th, 2007

3 Forward Looking Statements Forward Looking Statements This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items, in particular the outlook paragraph in this report. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, levels of consumer and business spending in major economies, changes in consumer tastes and preferences, changes in law, the performance of the financial markets, pension costs, the levels of marketing and promotional expenditures by Philips and its competitors, raw materials and employee costs, changes in exchange and interest rates, changes in tax rates and future business combinations, acquisitions or dispositions and the rate of technological changes, political and military developments in countries where Philips operates and industry consolidation. Statements regarding market share, if any, including as to Philips competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated. Use of non-gaap Information In presenting and discussing the Philips Group s financial position, operating results and cash flows, management uses certain non-us GAAP financial measures. These non-us GAAP financial measures should not be viewed in isolation as alternatives to the equivalent US GAAP measure(s) and should be used in conjunction with the most directly comparable US GAAP measure(s). A discussion of the non-us GAAP measures included in this document and a reconciliation of such measures to the most directly comparable US GAAP measure(s) are contained in this document. Use of fair value measurements In presenting the Philips Group s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When a readily determinable market value does not exist, fair values are estimated using valuation models which we believe are appropriate for their purpose. They require management to make significant assumptions with respect to future developments which are inherently uncertain and may therefore deviate from actual developments. In certain cases, independent valuations are obtained to support management s determination of fair values. 3

4 Agenda Results Capital reallocation Growth Acquisitions Conclusion 4

5 Agenda Results Highlights Performance Looking ahead 5

6 Highlights EBITA amounted to EUR 389 million, or 6.4% of sales, compared with EUR 290 million, or 4.5% of sales, in Q Including a EUR 1,220 million gain on the sale of TSMC shares, net income increased to EUR 1,569 million from EUR 301 million in Q Sales totaled EUR 6,100 million, in line with Q on a comparable basis; 7% growth at the high-margin divisions. Reallocation of capital continued with the sale of a further stake in TSMC, additional share repurchases and the announcement or completion of several acquisitions, including Color Kinetics. 6

7 Agenda Results Highlights Performance Looking ahead 7

8 Summary - 2Q07 EUR million 2Q06 2Q07 Sales EBITA Financial income and expenses Results equity-accounted investees Net income from continuing operations Discontinued operations Net Income Net cash provided by operating activities Net debt : Group equity ratio 6, (89) (29) 9:91 6, , ,573 (4) 1,569 (27) (12):112 8

9 Sales to thirds by sector 2Q07 EUR million 2Q06 2Q07 % nom % comp Medical Systems 1,630 1, DAP CE 2,484 2,148 (14) (11) Lighting 1,296 1, I&EB (62) 26 GMS Group sales 6,380 6, 100 (4) 0 9

10 Sales to thirds by region 2Q07 EUR million 2Q06 2Q07 % nom % comp Europe / Africa 2,763 2, North America 1,854 1,723 (7) (2) Latin America (13) (12) Asia Pacific 1,240 1,111 (10) 5 Group sales 6,380 6,100 (4) 0 10

11 EBITA by sector 2Q07 EUR million 2Q06 2Q07 Medical Systems DAP CE Lighting Innovation & Emerging Bus. Group Mgt & Services (22) (128) (35) (61) Philips Group as % of sales

12 Cash Flow from continuing operations 2Q07 EUR million Net income Income/loss discontinued operations Depreciation / amortization / impairments Net gain on sale of assets Income from equity accounted investees Decrease in WC/other current assets Other CF from operations Gross capital investments Acquisitions/divestments/other CF before financing activities 2Q06 2Q ,569 (73) (27) (1,217) 84 (60) (169) (603) (344) 36 (29) (27) (166) (188) (89) 1,650 (284) 1,435 12

13 Fixed assets expenditures & Depreciation by sector* EUR million Gross CapEx Depreciation 2Q06 2Q07 2Q06 2Q07 Medical Systems DAP CE Lighting I&EB and GMS Group * Excluding software related capital expenditures and depreciation 13

14 Inventories as % of MAT sales Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

15 Net debt : group equity ratio EUR billion Group equity (in billion EUR) Net debt (in billion EUR) Stockholders equity per share (in EUR) Q04 4Q05 4Q06 1Q07 2Q07 Ratio 1:99 (5):105 (10):110 (10):110 (12):112 15

16 Medical Systems EUR million unless otherwise stated Key figures Sales % sales growth comp. EBITA EBITA as % of sales EBIT EBIT as % of sales NOC Employees (FTEs) 2Q06 1, ,387 31,261 1Q07 2Q07 1, ,272 33,033 Sales per region 2Q07 Emerging markets North America 50% Latin America 3% Europe/ Africa 31% Asia Pacific 16% 1, ,188 32,463 Emerging Financial performance In Q2, equipment order intake picked up after a sluggish first quarter, growing 12% compared to Q on a currency-comparable basis. Growth was driven by all businesses except CT and Cardiovascular X-Ray, which continued to suffer from a softening of the US market, including the impact of the Deficit Reduction Act. Comparable sales grew 4% compared to Q2 2006, thanks to strong growth at Patient Monitoring, Cardiac Care, Customer Services and General X- Ray, partially offset by declines at CT and MedQuist. EBITA profitability improved from 12.9% in Q to 13.2%, mainly due to higher results at Patient Monitoring, Cardiac Care, Customer Services and X-Ray, offset by lower CT earnings. EBIT was impacted by a EUR 35 million non-cash impairment of MedQuist-related goodwill. The increase in net operating capital and employee numbers is mainly attributable to the consolidation of Intermagnetics in Q Looking ahead Purchase-accounting and integration-related charges for Intermagnetics are expected to be approximately EUR 15 million per quarter for the remainder of 2007 (of which EUR 5 million will impact EBITA). 16

17 DAP EUR million unless otherwise stated Key figures Financial performance Sales % sales growth comp. EBITA EBITA as % of sales EBIT EBIT as % of sales NOC Employees (FTEs) North America 18% Asia Pacific 20% Latin America 8% Europe/ Africa 54% 2Q06 1Q07 2Q , ,240 10, ,297 10,059 Sales per region 2Q07 Emerging markets Emerging Sales grew 14% on a comparable basis compared to Q2 2006, led by double-digit growth at Shaving & Beauty and Domestic Appliances, where Kitchen Appliances in particular showed strong growth driven by its innovative product range and the healthy living initiative. Geographically, sales growth was especially strong in emerging markets. EBITA increased from EUR 60 million in Q to EUR 84 million, primarily due to the higher sales level. The increase in net operating capital and number of employees compared to Q was almost entirely attributable to the integration of Avent in September Looking ahead DAP plans to launch new, innovative products (mainly at Shaving and Oral Healthcare) in the second half of 2007, supported, in line with its business model, by significant investments in advertising and promotion. The focus on emerging markets will continue. 17

18 Consumer Electronics EUR million unless otherwise stated Key figures Financial performance Sales % sales growth comp. EBITA EBITA as % of sales EBIT EBIT as % of sales NOC Employees (FTEs) Latin America 11% North America 20% Asia Pacific 15% 2Q06 1Q07 2Q07 Europe/ Africa 54% 2, ,677 2,208 (6) ,947 2,148 (11) ,499 Sales per region 2Q07 Emerging markets Emerging Consumer Electronics sales amounted to EUR 2,148 million, a comparable decline of 11% compared to Q2 2006, a quarter in which sales were buoyed, particularly at Connected Displays, by the high sell-in ahead of soccer s FIFA World Cup. Despite the lower sales, EBITA increased slightly, both in value and as a percentage of sales. Margin pressure at Connected Displays caused in part by the impact of the transition to a new product range was more than offset by higher EBITA at Entertainment Solutions and Home Network. Net operating capital increased to EUR 254 million, compared to EUR 5 million in Q2 2006, mainly driven by the DLO acquisition in Peripherals & Accessories and a higher receivables position at the end of the quarter. Looking ahead Driven by new product introductions, sales in the second half of 2007 are set to exceed the weaker, post-world Cup sales in Q3 and Q4 of last year, underpinning the full-year EBITA target of 3%. 18

19 Lighting EUR million unless otherwise stated Key figures Financial performance Sales % sales growth comp. EBITA EBITA as % of sales EBIT EBIT as % of sales NOC Employees (FTEs) Latin America North 7% America 18% Asia Pacific 25% 2Q06 1Q07 2Q07 Europe/ Africa 50% 1, ,652 46,652 1, ,441 53,308 1, ,578 53,500 Sales per region 2Q07 Emerging markets Emerging Sales amounted to EUR 1,464 million, a 6% comparable increase compared to Q2 2006, driven by the continuing strong growth of energy-efficient lighting solutions, particularly in Europe and Asia. Recently-acquired Partners in Lighting International the European leader in home luminaires reported sales of EUR 102 million and incurred purchaseaccounting-related charges of EUR 14 million, EUR 11 million of which impacted EBITA. Despite the EUR 11 million PLI-related charges and restructuring charges of EUR 7 million, EBITA increased by EUR 12 million, mainly at Lamps and Luminaires, supported by the ongoing growth in Green-Switch lighting solutions. Looking ahead Restructuring, acquisition-related and other incidental charges are expected to amount to EUR 10 million in Q Lighting expects to complete the acquisition of Color Kinetics in Q3 2007, further enhancing its LED portfolio and IP position in solid-state lighting solutions. 19

20 Innovation & Emerging Businesses EUR million unless otherwise stated Key figures Sales % sales growth comp. EBITA EBITA as % of sales EBIT EBIT as % of sales NOC Employees (FTEs) 2Q06 1Q07 2Q (8) (22) (5.5) (26) (6.5) , (30) (15.2) (34) (17.3) 753 7, (35) (23.2) (39) (25.8) 931 7,783 Sales per region 2Q07 Emerging markets North America 34% Latin America 4% Asia Pacific 23% Emerging Financial performance Corporate Technologies / Incubators Corporate Technologies EBITA declined compared to Q due to higher investments in the Healthcare and Lifestyle Incubators and lower license revenues. CHS and Others Sales at Consumer Healthcare Solutions grew 15% on a comparable basis, driven by Lifeline. The EBITA of CHS was in line with Q as ongoing investments in business expansion offset operational margin in the quarter. The EBITA of Corporate Investments declined slightly compared to Q due to various incidental charges at businesses within its portfolio. Looking ahead Europe/ Africa 39% The divestment of Power Solutions is expected to be completed by the end of Q The EBITA run-rate for the first half of the year is expected to continue in Q3 and Q4. 20

21 Group Management & Services EUR million unless otherwise stated Key figures Financial performance Sales % sales growth comp. Corporate and Regional Costs Global brand campaign Service units, Pensions and Other EBITA EBIT NOC Employees (FTEs) 2Q06 1Q07 2Q07 36 (7) (74) (22) (32) (128) (128) 994 7, (33) (2) (10) (45) (45) 432 6, (38) (29) 6 (61) (61) 574 6,960 Corporate & Regional Costs showed a considerable decline compared to Q This is attributable to ongoing cost savings, the incidental nature of last year's FIFA World Cup-related expenses and implementation costs related to compliance with the Sarbanes-Oxley Act. Compared to Q2 2006, the higher investment in the global brand campaign is wholly due to a slightly different seasonal spending pattern. Pension costs were lower than in Q in a number of countries, notably the Netherlands. Looking ahead Investments in the global brand campaign are expected to be approximately EUR 30 million in Q3. Restructuring charges of EUR 15 million related to the simplification of the regional and country management structures are expected in the second half of Pension costs for Group Management & Services are expected to be approximately EUR 25 million for the full year

22 Agenda Results Highlights Performance Looking ahead 22

23 Looking ahead information in the 2Q quarterly report on July 16, I Medical Systems The effect of purchase-accounting and integration-related charges for Intermagnetics are expected to be approximately EUR 15 million per quarter for the remainder of 2007 (of which EUR 5 million will impact EBITA). Domestic Appliances and Personal Care DAP plans to launch new, innovative products (mainly at Shaving and Oral Healthcare) in the second half of 2007, supported, in line with its business model, by significant investments in advertising and promotion. The focus on emerging markets will continue. Consumer Electronics Driven by new product introductions, sales in the second half of 2007 are set to exceed the weaker, post-world Cup sales in Q3 and Q4 of last year, underpinning the full-year EBITA target of 3%. Lighting Restructuring, acquisition-related and other incidental charges are expected to amount to EUR 10 million in Q Lighting expects to complete the acquisition of Color Kinetics in Q3 2007, further enhancing its LED portfolio and IP position in solid-state lighting solutions. 23

24 Looking ahead information in the 2Q quarterly report on July 16, II Innovation & Emerging Businesses The divestment of Power Solutions is expected to be completed by the end of Q The EBITA run-rate for the first half of the year is expected to continue in Q3 and Q4. Group Management & Services Investments in the global brand campaign are expected to be approximately EUR 30 million in Q3. Restructuring charges of EUR 15 million related to the simplification of the regional and country management structures are expected in the second half of Pension costs for Group Management & Services are expected to be approximately EUR 25 million for the full year Outlook Our performance in the second quarter of 2007 confirms that we are on track to achieve our targets EBITA of at least 7.5% in 2007 and 5-6% average annual sales growth. We expect to see an upturn in sales growth in the second half of the year, boosted by a strong order pipeline at Medical Systems, the ongoing impact of Green-Switch at Lighting and a number of exciting new product launches in our consumer businesses. We will continue our value-creating management of capital, focusing on further acquisitions consistent with our strategic direction and on returning cash to shareholders. We are confident that 2007 will be a year of continued top and bottom-line growth for Philips. 24

25 Agenda Results Capital reallocation Growth Acquisitions Conclusion 25

26 Acceleration of capital reallocation Medical Systems Lighting Domestic Appliances Consumer Electronics grow lower risks Target EBITA margins between 12-16% Target EBITA margin of ~ 3% M&A Semiconductors Financial stakes reduce cash shareholders 26

27 Financial assets: Cash generated from sale of participations EUR million Total Sale securities Sale Atos Origin shares ,106 NAVTEQ ,604 TSMC 770 3,156 ** 3,926 LG.Philips LCD FEI Semiconductors (NXP) 7,059 * 7,059 Total 2,107 3,261 7,213 3,156 * Excluding the recorded income tax expense which has yet to be paid ** First two parts of announced program to sell down stake in TSMC completed. Tender offer by TSMC still to come in ,737 27

28 Financial assets: Cash utilization EUR million Acquisition Stentor Acquisition Witt Biomedical Acquisition Lifeline Acquisition Intermagnetics Acquisition Lumileds Acquisition PLI Acquisition Color Kinetics Acquisition Avent Extra funding pensions (UK&US) Share repurchase program Dividend EUR 4.0 billion buy-back program Total , , ** ,367 6, ,633 3,369 Total * Still to be completed ** Excl. acquisitions of Bodine, Power Sentry, TIR and announced acquisitions of Health Watch and DLO because amounts were small Color: Healthcare, Lighting & DAP * * 4, % % 7, % 13,053 28

29 Major investments number shares rounded in millions % ownership July 11 th, 2007 in EUR m. Quoted Market value LG.Philips LCD ,005 TSMC 2, ,416 TPV Non-quoted Book value NXP Total 8,413 1 Economic ownership 29

30 Share Repurchase Program over Second Trading Line : EUR 494 million executed by end of June EUR 1,633 million share repurchase program for capital reduction to complete the return of EUR 4 billion to shareholders Executed over a Second Trading Line ( STL ) to enable Philips to buy back from holders who are tax exempt or able to achieve tax compensation On this trading line, shares will be purchased off exchange exclusively by Philips and settled net of 15% dividend withholding tax Trades on the STL shall include a transaction cost reimbursement of 1.0% Most trades have been from shareholders who sell small clips of shares and subsequently repurchase these over the ordinary trading line 16 million shares repurchased for EUR 494 million by end of June (22 million shares for EUR 692 million as of 11 July) Cumulative Repurchases STL in EUR million Jan-May EUR million June Shares million Conditions to trade Position to reclaim/offset dividend taxes Transactions of at least 10,000 shares Daily maximum: lower of 1,500,000 shares and 15% of daily trading volume (ordinary trading line) For more information: ABN AMRO: Rogier de la Rambelje

31 Agenda Results Capital reallocation Growth Acquisitions Conclusion 31

32 Quarterly sales growth y-o-y % (2) (4) Group comparable Medical, DAP & Lighting comparable Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Annual target av. 5-6%

33 Creating growth opportunities in healthcare, lifestyle and technology Innovation Emerging Markets Growth Acquisitions Market driven Brand perception 33

34 Becoming a more market driven organization Continued roll out of Sense and Simplicity moving Philips to rank 48 from 53 last year and 65 in 2004 on the Interbrand list Medical Systems most customer-driven for the 2nd year in the USA Key Account Management under International Retail Board resulting in 25% growth with top 6 accounts, representing sales of EUR 2.5 billion Named International Supplier of the Year by WalMart Philips Lighting (US) named Best of the Best for Marketing by National Association of Distributors 34

35 Innovation drives growth Group revenues from new products 60% 51% 53% 40% 40% +28% +4% 20% 25% +60% 0%

36 Brand strength Deployment of brand strategy sustained competitive investment behind brand campaign developing and airing product-based advertising resulting in improved brand rankings Creating conditions to deliver brand promise by embedded filters in all key processes we ensure that everything we do is designed around a relevant end-user insight easy to experience technologically advanced Go-to-market approach direct resources to areas with most potential growth Further develop marketing organization attract marketing talent increased focus on business development to support innovation projects 36

37 Emerging markets Sales in emerging markets Q Emerging 28% Philips Group Emerging Emerging Emerging Emerging 15% 35% 32% 36% Medical DAP CE Lighting 37

38 Comparable growth and EBITA targets Medical % EBITA Annual avg. target Target % Target % Comp. sales growth % Annual avg. target 6% DAP 15% ~15% 11% 7% Lighting 11% ~12% 8% 6% CE 3% ~ 3% 5% * 2006 Target Annual avg. target Total Group 5% > 7.5% 6% 5 6% * No target disclosed 38

39 Agenda Results Capital reallocation Growth Acquisitions Conclusion 39

40 Guiding principles for acquisitions 1 Growth opportunities in our high margin, more predictable businesses 2 No or time-limited margin dilution 3 Quality of management 4 Clear commercial, clinical, and technology synergies 5 Complementary position 6 Strong market position 7 Integration strategy part of acquisition decision 8 Walk-away price set at discussion start 9 A good alliance is an alternative to acquisition Value Creation 40

41 Stentor: World-class in healthcare IT Purchase price EUR 194 million Acquired August 5, 2005 and fully integrated within 5 months 2006 isite order intake totaled 230 million order volume grew 87% over full year 2005 (pre + post acquisition) included 28 mln of new orders in international markets 2007 isite order volume will grow by 15% to 265 mln 43 mln in new orders expected from international markets 2006 sales grew by 41% Projected 2007 sales growth is 57% Financial performance is ahead of original plans Expansion into EMEA and APAC is gaining momentum with 32 deals to date spanning Europe, Israel, South Africa, UAE, Australia & Brazil 41

42 Intermagnetics: Magnetic Resonance Imaging Purchase price EUR 993 million Acquired November 9, 2006 Approximately 4 points additional growth in Philips MRI market share within 3 years Improved supply chain cost, 3-5 margin points Acceleration time-to-market by approx % Rationalize business footprint of Philips MR business Growing coils & monitoring business using our global reach Positioning for future, expands PMS s portfolio with a leading position in MR compatibles patient monitors Take advantage of the new magnet technology 42

43 Witt Biomedical: World leader in Hemodynamic Reporting Purchase price EUR 110 million Acquired April 27, 2006 and positioned Philips as the #1 global provider of fully integrated Cath Labs 2006 order intake grew by 34% 2006 sales grew by 10% Performance level is well ahead of original plans Philips now ranked as number 1 in Hemodynamic Reporting with no position prior to acquisition Expansion via direct selling into Europe and Asia is underway Order intake outside the USA was up substantially in Q versus Q Mid-year KLAS report ranked Philips #1 in Cardiology Hemodynamics 43

44 Consumer healthcare market Purchase price EUR 682 million, Lifeline & Health Watch Lifeline is an acquisition that has created a platform for building a consumer healthcare market By acquiring Health Watch, we add to this platform and Philips can spread its fixed cost over a wider customer base while boosting demand for its products through its increased network of healthcare distributors sales expected to be approximately USD 220 million*, which is more than 15% organic growth over 2006 and represents an acceleration of the growth achieved in Number of subscribers of Medical Alert services is now in excess of 680,000. The growth is based on: increase in the subscriber base increase in average monthly income per subscriber sales synergies expected from the brand and from the introduction of the Philips remote patient monitoring product and service offers into the Lifeline channel R&D investment increased to stimulate further growth * Including Health Watch for 8 months of operations 44

45 Avent: Growth in Health & Wellness Purchase price EUR 689 million DAP s larger presence in Emerging Markets provides growth opportunities for Avent 37% DAP 63% 21% Avent North America/ Western Europe Growth/ISO Avent s regional strengths provides growth opportunity for existing Philips M&CC business Avent 79% Philips Mother & Child Care Large overlap in major components of cost structure of Avent provides cost synergy opportunities. 20% 45% 2% 15% Western Europe North America Growth/ISO Integration into Philips sales organizations, in particular in emerging markets, progressing according to plan, now completed for 70%. growth acceleration expected over the coming year. 35% Advert. & Promotion Raw materials Components Freight 83% 56% overlap in cost structure DAP / Avent 45

46 Philips + Lumileds: A powerful combination Total purchase price EUR 873 million Lumileds will launch superior Luxeon platforms from combining their significant LED capabilities with the rich knowledge of Philips about phosphors, manufacturing processes and lighting technology. Underscoring its technological leadership, Philips Lumileds announced in March 2007 the launch of LUXEON Rebel power LEDs with new packaging technology that will dramatically reduce the size of LEDs (footprint 75% smaller than other surface-mount LEDs) and enable new approaches to solid-state lighting design. Lumileds is expected to grow sales annually by 25% at an EBITA target of 25%. Demand for applications in cell phone camera flash, automotive, LCD Backlighting, and general lighting are the main growth opportunities. In June 2007 Philips acquired TIR Systems, a Canada-based leading supplier of SSL modules for high-quality white light for a total purchase price of EUR 53 Mln. TIR Systems holds a patent portfolio that will strengthen Philips IP position and give us a leadership position in SSL modules in the high- and mid-end segments of this market. 46

47 PLI: Leading European Consumer Luminaire player Purchase price EUR 561 million The acquisition of PLI is a strategic move to enter new market segment for Philips Lighting: Consumer Luminaires Sales for 2007 is expected to be around EUR 420 million (full year basis) with a recurring EBITA above 12% LED content in Consumer Luminaires will grow driven by consumers needs in the area of energy efficiency and ambiance creation The acquisition generates the following synergies: Combining Philips Leadership in LED with PLI's competence to quickly address market and consumer lifestyle trends Regional expansion by leveraging Philips' global reach and resources Leveraging of sales channels The acquisition positions Philips Lighting to become the global industry shaper in the consumer LED application market 47

48 Color Kinetics: Leading SSL Luminaire player Offer price EUR 592 million not yet completed Offer price corresponds to a Color Kinetics enterprise value of approximately EUR 516 million Combination strengthens Philips LED portfolio, technology base and intellectual property position Complementary technological expertise in combination with Philips global infrastructure will fuel growth. Builds on Lumileds and TIR Systems acquisitions in the sector. With Color Kinetics, Philips will become also a leader in the North American SSL luminaires market, therefore establishing a strong presence in all aspects of the SSL value chain Acquisition will further enhance Philips position to lead the future global shift to more energy-efficient lighting solutions, using LED sources 48

49 Agenda Results Capital reallocation Growth Acquisitions Conclusion 49

50 2007 Management Agenda Maintain annual average sales growth of 5-6% and achieve above 7.5% EBITA Continue to redeploy capital in a disciplined way through value creating acquisitions, share buy back and dividends Drive a culture of superior customer experience by delivering on the brand promise and implement the Net Promoter Score measure in the company. Be an exciting place to work and bring employee engagement to high performance benchmark level within 2-3 years. 50

51 Summary Simplified portfolio of world-class businesses built around a strong brand Focus on market driven Innovation provides basis for growth across the portfolio Focus on high margin products & markets Grow via acquisitions when value is created Creating Shareholder Value Leverage the brand Continue to improve the predictability of results Continue to focus on cash flow 51

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